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Orthopedic M&A Shine in 2022

Image courtesy of Cirque desprit / Alamy Stock Photo knee (1).jpg
Starting slow, the year ramped up with a new tech boom and M&A in spades.

While the start of 2022 brought uncertainty in the orthopedics space due to a drop off in the demand as facilities canceled or delayed elective procedures, the sector has since made significant strides. M&A and development of new technologies has led activities in orthopedics.

The impact of the COVID-19 pandemic and multiple variant waves was felt across the sector, with fewer scheduled surgeries impacting demand for devices, and shortages of healthcare workers making scheduling procedures more difficult.

COVID-19 Poses Challenges in Patient Care

The year began with challenges, like when in January Stryker’s business was impacted by the COVID-19 Omicron variant. The reduced capacity for hospital rooms as well as staffing issues at hospitals led to the company missing consensus on earnings per share (EPS of $2.71 compared to consensus of $2.72). During the quarter, the company’s Mako Surgical Robotics remained a bright point with notable earnings.

The summer also brought difficulty for ZimVie, a spine and dental spinoff of Zimmer Biomet, when the company reduced its 2022 sales outlook from $915 to 930 million, replacing its prior forecast of $1 billion. Shares of ZimVie fell by 11% on release of the news. Earnings per share were adjusted from $2.10 - $2.30 to $1.80 - $2.00. The company was launched out of Zimmer Biomet in early 2021.

Different Face of M&A in 2022

M&As remained an active strategy in 2022, with differing deal structures. The year’s major deals included an acquisition of CrossRoads Extremity Systems by Depuy Synthes, adding to the latter’s foot and ankle surgery portfolio. Depuy, part of Johnson & Johnson purchased CrossRoads from HealpointCapital for an undisclosed amount.

Depuy’s purchase comes on the heels of late 2021 news from J&J that the company will be splitting its medical device and pharmaceutical business from its business in consumer products. The division is expected to be finished by the end of 2023. HealpointCapital’s other divisions were also recently sold: Stryker acquired OrthoSpace, Henry Schein acquired BioHorizons, and Smith & Nephew acquired Blue Belt Technologies.

At mid-year 2022, ortho company Conformis shared news of its multi-year deal with healthcare performance improvement firm, Vizient. Through the deal, Conformis will have access to Vizient’s members, which include community hospitals, pediatric care centers, academic medical centers, health delivery networks, and nonacute healthcare facilities. The collaboration also builds on the concept that customized total knee replacements reduce costs overall compared to off-the-shelf implants as there is typically a speedier recovery and less need for revision.

Fall brought further M&A action with an all-stock merger of Orthofix and SeaSpine to form a new company that brings improvements for both players. Orthofix is expected to improve the quality of its spinal implant, biologics, and technology by combining with SeaSpine while the latter will have greater access to funding. The yet unnamed combined company was projected to have revenues upward of $690 million, followed by $1 billion by the end of 2025.  In 2021, SeaSpine purchased 7D Surgical for $100 million in cash and stock to add 7D’s machine-vision registration platform to SeaSpine’s surgical workflow offerings.

Digital Focus for Advancements

Stryker took a different route with its 2022 M&A, turning to growing its digital presence with the $3.09 billion acquisition of Vocera Communications. Vocera manages clinical communications, secure texts, notifications and alarm, analytics, and patient care experience. The company’s tools are aimed at reducing caregiver overload and eventual burnout.

New technologies and approaches debuted in 2022, many with a digital and customized patient care focus. Medtronic’s spine division advanced its position in minimally invasive surgery in 2022 with the launch of new spine implants, planning software, and robotic systems among other offerings. Among its new technologies, the Catalyft expandable interbody system offers a new design that is easier to insert. The system is indicative of a trend toward a focus on surgical procedures, devices that can be customized, and a focus on integrated systems.

Zimmer Biomet upped its tech offerings in the space with rollout of the WalkAI artificial intelligence-based program that predicts outcomes down the line for patients. The algorithm uses data on a patient’s mobility to create a model of what their walking speed will be 90 days following surgery. The AI-powered predictor works with the company’s mymobility Care Management Platform. WalkAI is expected to be one of many Zimmer Biomet AI solutions, part of its ZBEdge technology suite.

Late in 2022, Stryker strengthened its additive manufacturing capabilities with the opening of a 3D printing facility at the company’s manufacturing hub in Ireland. The facility also houses Stryker’s AMagine Institute which leads all additive manufacturing and related innovation for the company. AMagine also carries products through to launch and scaling.

TAGS: Business
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