Smith & Nephew buys skin substitute maker for $660M
- Smith & Nephew announced Tuesday it has agreed to pay $660 million to acquire Osiris Therapeutics to expand its presence in the fast-growing regenerative medicine market. The company also announced it is acquiring Brainlab's orthopaedic joint reconstruction business in an effort to boost its digital surgery and robotic assets.
- Osiris sells products including skin, bone graft and cartilage substitutes, generating $102 million in revenue for the nine months ended September 2018, an increase of 18.7% over a year earlier. The company has two principal products: Grafix, designed to treat hard-to-heal wounds, and Stravix, for use as a surgical wrap to support soft tissue repair.
- The Brainlab deal includes its joint reconstruction digital workflow tools and orthopaedic sales team. Smith & Nephew and Brainlab will develop new applications for orthopaedic reconstruction together and will potentially expand to other surgical areas.
Smith & Nephew, which struggled with weak revenue growth last year amid declining sales in its arthroscopy and advanced wound bioactives units, is moving on its strategy of striking deals to gain access to markets adjacent to its current business lines.
In January, the London-based medical device company completed the acquisition of Ceterix Orthopaedics, which sells a system to repair complex meniscal tears. Rumors swirled last month that Smith & Nephew was in talks with spinal surgery device company NuVasive about a possible deal worth more than $3 billion.
Smith & Nephew said the acquisition of Osiris will immediately accelerate its wound management business and pave the way for innovations in additional indications and channels. Smith & Nephew’s advanced wound devices unit, a relatively small part of its overall business, saw 11% sales growth in the fourth quarter.
The U.S. skin substitutes market is currently worth $900 million a year and is growing at an annual rate of 7%, Smith & Nephew said. It expects the Grafix and Stravix products, which accounted for more than 70% of Osiris’ revenue in the first nine months of 2018, to continue to generate double-digit growth in the medium term.
The Grafix skin substitute is a cryopreserved placental membrane intended for application directly to acute and chronic wounds, including those with exposed bone and tendon. In October 2018, Osiris launched Grafix PL PRIME, which can be stored at room temperature. Stravix is a cryopreserved placental tissue designed for use as a cover or wrap to support soft tissue repair in a range of surgical applications.
Osiris, based in Columbia, Maryland, also produces BIO bone matrix for bone repair and Cartiform, an allograft for articular cartilage repair. Both products are currently distributed by third parties.
The deal is expected to close in the second quarter. Smith & Nephew expects the transaction to be accretive to its adjusted earnings per share beginning in 2020. The company said Osiris’ 360 employees are expected to join Smith & Nephew upon completion of the acquisition.
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