2013 Medtech M&A Review: A Lot of M&A Movement in Orthopedics (MDDI Online)
List of Recent Mergers and Acquisitions
This year saw several important acquisitions in the orthopedics sector.
The largest transaction in the very active orthopedic device area was Stryker’s proposed acquisition of publicly held Mako Surgical Corp. for $1.65 billion (13x revenues and 183% over the value of Mako on the day before the transaction was announced). Mako produces orthopedic surgical systems and knee and hip implants for treating early- to mid-stage osteoarthritis, and its key product is the RIO surgical system, which includes a robotic arm that assists surgeons to precisely insert orthopedic implants.
With Mako under its umbrella, Stryker will be able to use its own implants with Mako’s RIO system, thereby broadening the adoption of RIO while defending itself as the orthopedic products of competitor. The pioneering company in robot-guided surgical procedures is publicly held Intuitive Surgical, whose da Vinci Surgical System has gained mainstream acceptance. It is estimated that in 2012 there were 400 da Vinci surgeries. The growth potential for robot-assisted surgeries is believed to be great, as only 2% of surgeries worldwide were robot-assisted last year. Also, robot-assisted procedures have the potential to benefit patients, hospitals, insurance companies, and other healthcare payors because they may reduce costs by shortening hospital stays and recovery time and reducing the level of medication and rehabilitation.
Earlier in 2013, Stryker acquired Trauson Holdings Co., China’s largest provider of pelvic reconstruction plates and other products used in trauma surgery, with which Stryker has had a manufacturing relationship since 2007. The $764-million (11.7x sales of $65 million) price tag was probably influenced by the estimate that orthopedic implant sales in China will almost double, reaching $2.7 billion, by 2015.
Another orthopedics transaction was private equity and venture capital firm Frazier Healthcare’s acquisition of Orthotic Holdings, a group of several orthopedic companies primarily in the foot and ankle area. The deal, put together with the backing of another private equity firm, marks the second time Frazier has tripped into the foot and ankle space. A few years ago, it backed Ascension Orthopedics, which it sold to Integra Life Sciences in 2011. The lower-extremity market is among the fastest growing orthopedic segments because obesity and diabetes, which are becoming increasingly common in the United States, often lead to foot and ankle medical problems.
In another orthopedics deal, Wright Medical Group acquired publicly held BioMimetic Therapies, a producer of several existing and in-development protein-based therapeutic products primarily used for bone and tissue surgical repair and regeneration, for $190 million plus milestones of another $190 million upon FDA approval and achieving certain revenue milestones. It is estimated that surgical bone repair and feet and ankle fusion procedures represent a $300-million market in the United States. Tthe transaction combines BioMimetic’s breakthrough biologics platform and pipeline with Wright’s established sales force and product portfolio, which should accelerate growth in Wright’s extremities business.
Wright also announced an agreement in October to acquire Biotech International, a privately held orthopedic extremities company based in France. The proposed price is $80 million—$55 million in cash and $20 million in Wright common stock at closing, plus an additional $5 million based on achieving milestones in 2014 and 2015.
Wright, which has strived recently to increase its focus on the rapidly growing foot and ankle market, divested its OrthoRecon operation, focused on the hip and knee implant market. The buyer was Microport Scientific Corp., a China-based manufacturer of minimally invasive and interventional surgery products, and the price was $290 million (approximately 1.1x sales of $269 million).
Biomet fell into the 2013 orthopedic M&A scene with the acquisition of LANX, a privately held company with a portfolio of minimally invasive spine surgery products including its highly acclaimed ASPEN minimally invasive fusion system and Timberline Lateral Approach fusion system. The transaction should be a nice fit with Biomet’s spine products operation, which has been experiencing growth.
Zimmer, another major orthopedic player kicked up its position in the orthopedic implant and surgical business with the acquisition of Knee Creations, the developer of Subchondroplasty, a proprietary next-generation knee treatment surgical procedure designed to counter post surgical fluid buildup in a patient’s bone marrow.
Clyde A. Burkhardt is senior managing director of HT Capital Advisors LLC (New York City), a private investment banking firm. He leads HT Capital Advisors’ groups focusing on the medical device, healthcare services, and precision component industries. Contact Burkhardt at cburkhardt@htcapital.com.