VB website – https://www.vbllc.com
I am going to share thoughts on this interesting acquisition. I don’t have any inside information and I could be completely wrong, but this is what I see.
In a move that caught many by surprise, Stryker has decided to divest its spine division to Viscogliosi Brothers, LLC (VB). Here’s my take on what this could mean for the future of spine care, investment, and market dynamics.
Stryker’s Perspective
Stryker’s decision to sell off its spine division is, in my view, a strategic masterstroke. The company has been posting impressive growth across its other divisions, boasting an 11% annual revenue increase on a $22 billion business. However, the spine division has been somewhat of a laggard, with stagnant growth on a $700 million revenue stream, essentially pulling down the overall performance. This sale echoes Zimmer Biomet’s (ZB) past decisions to spin off its spine and dental divisions, which were also underperforming segments.
VB’s Bold Move
From VB’s angle, this acquisition marks what could be their most significant play in PE-like deal to date. How they managed to pull off the financial leverage for such a deal is beyond me, but it’s an audacious and commendable move.
I’m predicting that VB might have shelled out around $900M for Stryker’s spine business (this is just an educated guess). Their strategy? To integrate this with their existing spine ventures under the umbrella of VB Spine LLC.
VB already has a spine-related portfolio that includes:
- Centinel Spine, Motion-preservation and disc arthroplasty solutions, thriving with around $90 million in cervical disc business.
- SpineBiopharma, Non-surgical, non-opioid pain relief.
- Companion Spine, Minimally invasive spine solutions
- Woven Orthopedic Technologies, Enhanced fixation for compromised bone scenarios.
- Diamond Orthopedic, Better screw technology with lower insertion and higher pullout strengths.
Plus, they’re likely to bring in new acquisitions. The endgame here seems to be a roll-up strategy, culminating in an IPO when market conditions are ripe, possibly late 2025 or early 2026. If my prediction holds, this could yield a 2x to 3x return on their investment, showcasing VB’s savvy in the spine device sector.
Challenges Ahead
However, it’s not all smooth sailing. The integration of sales forces from different companies, each with its own culture and systems, will be messy. VB will have to navigate:
- Sales Integration: Combining sales teams from Stryker Spine with those from other VB ventures is no small feat. This will require strategic alignment and possibly some restructuring.
- Product Mix: Managing a diverse product portfolio from multiple acquisitions with different call patterns will be complex. Ensuring that these products complement rather than compete with each other will be crucial.
- Distribution: The sales and distribution challenge might overshadow the product integration issues, given the scale and varied market presence of these companies.
Conclusion
In conclusion, while VB has taken on a significant challenge with this acquisition, the potential for a lucrative IPO and the consolidation of the spine market under their banner is an intriguing prospect. The spine industry could see a new titan emerge if VB navigates these waters successfully.
Well done, VBs. Let’s watch this space for what could be one of the most exciting developments in the orthopedic and spine sector in the coming years.
THE FORMAL PRESS RELEASE
Stryker (NYSE:SYK), a global leader in medical technologies, announced today a definitive agreement to sell its U.S. spinal implants business to Viscogliosi Brothers, LLC, a family-owned investment firm specializing in the neuro-musculoskeletal space, to create a newly formed company called VB Spine, LLC.
“We believe that the spinal implants business, with its comprehensive portfolio and strong sales channel, will thrive as an independent company,” said Kevin A. Lobo, Chair and Chief Executive Officer, Stryker. “With dedicated resources and a focused strategy, the business will be well positioned to succeed as part of Viscogliosi Brothers.”
After closing, VB Spine will become a strategic partner to Stryker with exclusive access to Mako Spine and Copilot for use with VB Spine’s implants in spine procedures. The transaction will enhance the focus of both Stryker and VB Spine to meet the needs of customers and their patients and is expected to achieve faster growth and deliver greater value for all stakeholders.
“We have long admired Stryker for its comprehensive spine portfolio, incredible talent, and strong culture,” said Marc, John and Anthony Viscogliosi, Co-Founders of Viscogliosi Brothers, LLC. “We see a tremendous opportunity to provide the focus, surgeon-centric innovation, and commercial execution needed to grow the business and further impact patient lives and outcomes.”
The definitive agreement also includes a binding offer to acquire Stryker’s spinal implants business in France, subject to required consultations with employees and/or employee representatives. The sale of Stryker’s spinal implants business in other international markets is anticipated, pending satisfaction of legal and regulatory requirements, including any required consultations. The transaction is expected to close in the U.S. in the first half of 2025, subject to customary closing conditions. Stryker’s U.S. spinal implants business and VB Spine will continue to operate as separate entities and proceed with business as usual until the transaction closes.
In connection with the transaction, Barings, LLC is an investor and financial partner to Viscogliosi Brothers.
About Stryker
Stryker is a global leader in medical technologies and, together with our customers, we are driven to make healthcare better. We offer innovative products and services in MedSurg, Neurotechnology and Orthopaedics that help improve patient and healthcare outcomes. Alongside our customers around the world, we impact more than 150 million patients annually. More information is available at www.stryker.com.
About Viscogliosi Brothers
Viscogliosi Brothers is a family-owned New York City-based family office dedicated to driving growth and innovation in the neuro-musculoskeletal industry. Established in 1999, the firm focuses on identifying and building groundbreaking innovations in healthcare, aiming to address unmet clinical needs, enhance patient outcomes, and drive cost efficiency in the healthcare system. Since its inception 26 years ago, Viscogliosi Brothers has founded, financed, operated and grown 42 businesses with operations and distribution across more than 80 countries. These businesses have positively impacted millions of patients with cutting-edge innovations in healthcare. The firm has led the transformation of multiple businesses in the spine industry specifically including: Spine Solutions, Spine Next, Paradigm Spine, Simplify Medical, Centinel Spine, Companion Spine, Spine BioPharma and Woven Orthopedics Technologies, among others. For more information, visit https://www.vbllc.com/.