One company's challenge is another company's opportunity. Integra LifeSciences is hoping to offload its extremity orthopedic business to Smith & Nephew for $240 million in cash.
The sale is expected to close around the end of the year and includes Integra’s upper and lower extremity orthopedics product portfolio, including ankle and shoulder arthroplasty, and hand and wrist product lines. The business being divested generated revenues of $90 million in 2019 and about $32.7 million dollars during the first six months of 2020.
"While the multiple on the sale is not as high as investors would have hoped, we like the divestiture from the perspective that it should allow [Integra] to focus on areas where there is actually the potential to drive meaningful growth," said Ryan Zimmerman, a medtech analyst at BTIG. "Investors had long questioned why [Integra] continued to participate in the extremity orthopedics market given it was sub-scale and lacked navigation and pre-planning technology, and as pure-play companies continued to iterate and take share."
The analyst noted that Integra made efforts to enhance the portfolio with acquisitions and development agreements.
"But in removing this business, we think the OTT portfolio can get back to [high single digit] growth driven by regenerative technologies where [Integra] is a top five share company," Zimmerman wrote in a report Tuesday.
Integra President and CEO Peter Arduini said Smith & Nephew's strong focus in orthopedics will enable the business to expand its reach and scale, while allowing the team to thrive in a new environmet. As for Integra, Arduini said the divestiture will increase the Princeton, New Jersey-based company's focus in neurosurgery, surgical instrumentation, and regenerative medicine. The sale will also move Integra closer to achieving its long-term growth and profitability targets, he said.
The transaction includes the sale of Integra’s upper and lower extremity orthopedics product portfolio, including ankle and shoulder arthroplasty and hand and wrist product lines.