WARNING: The tightening is beginning.
The ortho market environment has just flipped because of the macro financial market changes in play.
Earlier, I wrote about the leverage problem that many orthos struggle with. Now it’s going to hurt.
My opinion is that the Bioventus backoff from the CartiHeal acquisition is the “canary in the coal mine” for orthos starting in May 2022.
This is the start of de-leveraging for most orthopedic device companies. The easy money is gone. New debt is more expensive. The IPO market is closing. Up rounds are getting more rare. VC returns are down. Labor is becoming more expensive. The stock price of unprofitable companies is suffering – ATEC, SIBN, SRGA, SPNE, CFMS, NUVA.
No longer can unprofitable public companies tap into their stock for easy capital.
5 Predictions for remainder of 2022
1/M&A deals will slow down.
2/Deal multiples will be lower.
3/Stock prices of unprofitable ortho companies will be lower.
4/The IPO market will be closed for some time.
5/For many orthos, there will be a hunt for working capital and a race towards profitability.
1/Companies near profitability, should find a way to reach “break even” now!
2/Companies should find ways to squeeze out more sales with less expenses. Operating leverage will be key.
3/Companies that currently have an open fund raising round should keep it open as long as possible.
What do you think?
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