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OrthoPediatrics' Latest Deal Pegged As Defensive Acquisition

Image courtesy of Cagkan Sayin / Alamy Stock Photo Two connected puzzle pieces with "M&A" printed across them, representative of OrthoPediatrics and Pega Medical M&A
The pediatric orthopedics company plans to acquire Pega Medical in a deal valued at $33 million.

OrthoPediatrics, a company recently identified as one of the 25 most attractive medtech M&A targets, has inked a $33 million deal to acquire Pega Medical. Both companies are focused on developing orthopedic solutions for pediatric patients.

Ryan Zimmerman, a medtech analyst at BTIG, said the deal would not only bolster OrthoPediatrics' growth, but would serve as a defensive acquisition that prevents others in the space from gaining scale.

"We always believed Pega would make for an acquisition candidate for anyone looking to establish a presence in pediatric orthopedics," Zimmerman wrote in a June 14 report. "[OrthoPediatrics] benefits by blocking others from gaining a foothold and can run Pega's products through its massive sales infrastructure."

The deal, which is expected to close within the next few weeks, would be comprised of $31 million in cash and $2 million in stock. OrthoPediatrics said it recently increased its line of credit with Squadron Capital from $25 million to $50 million, and plans to use $31 million from the expanded credit facility to finance the acquisition.

Mike Matson, a medtech analyst at Needham & Co., noted in a June 14 report that Pega Medical is one of two prive pure-play pediatric orthopedics companies that he's aware of, with the other being Wishbown Medical. He said this deal should help OrthoPediatrics increase its presence in the market.

The Fassier-Duval Telescopic Intramedullary System, designed for patients suffering from osteogenesis imperfecta and other bone deformities, is one of Pega's key products.

"Similar to OrthoPediatrics, the Pega organization has been focused exclusively on addressing unmet needs for children whose lives have been impacted by musculoskeletal disorders and diseases," David Bailey, CEO of OrthoPediatrics, said. "Their product offerings include novel technologies to treat some of the most unique conditions in pediatric orthopedics. We are grateful for the leadership and vision of the Pega team, and founder Ariel Dujovne in particular. I am looking forward to building on his legacy and our shared cause of helping even more kids with orthopedic conditions."

In a May 5 report, Matson noted that OrthoPediatrics has multiple growth drivers: ApiFix and Orthex, new product launches internationally, and a large procedure backlog.

The ApiFix was a gold winner in the 2022 Medical Design Excellence Awards for the category of implant and tissue replacement products. The ApiFix procedure offers select adolescent idiopathic scoliosis patients a less invasive, motion-preserving option for achieving curve correction – without the permanence of fusion. The majority of correction occurs intraoperatively while the self-adjusting ApiFix system accommodates patient growth or additional correction post-operatively.

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