Smith & Nephew has struck a deal to buy the extremity orthopaedics business of Integra LifeSciences for $240 million.
The takeover, which the companies disclosed Tuesday, will give Smith & Nephew control of a portfolio of shoulder replacement products and other devices that generated revenues of $90 million last year.
- Smith & Nephew aims to increase that figure, while growing its existing extremities business, by leveraging the sales force and distributors Integra built up to compete with rivals such as Zimmer Biomet and Stryker takeover target Wright Medical.
Smith & Nephew has made a string of acquisitions in recent years, snapping up companies including Osiris Therapeutics and Tusker Medical as part of a push to leverage its existing commercial footprint to sell more products. The acquisition of orthopaedic assets from Integra continues that effort, while also expanding Smith & Nephew’s commercial capabilities.
The takeover covers Integra’s Titan Reverse Shoulder System and a range of other devices, implants and instruments used in the replacement of shoulders and reconstruction of bones in the hand, wrist, elbow, foot and ankle. Smith & Nephew sees the products as complementary to its existing range of orthopaedic products, which generated sales of $2.2 billion last year.
Smith & Nephew has data showing the U.S. market for such upper and lower extremity devices is growing at 6% to 7% per year. In trying to grow at or above that rate, Smith & Nephew will make use of the commercial channel Integra built up to sell its devices.
The channel, which is focused on the U.S. but also covers Canada and Europe, includes a specialized sales force and distributors. In total, 300 Integra employees who work out of a facility in Texas and a surgeon training site in France will transfer to Smith & Nephew. The U.K.-based medtech expects to give the sales team a new product to promote in 2022, when Integra’s new shoulder replacement system is expected to launch.
In the near term, the acquired assets could face challenges. Sales of Integra’s orthopaedic devices fell 49% in the second quarter amid the deferral of procedures due to COVID-19. The pandemic could act as a headwind in the months to come, too, although Integra identified its upper and lower extremity group as a subunit of the orthopaedics business that improved sequentially during the second quarter.
Talking to analysts on a quarterly results conference call in July, Smith & Nephew CEO Roland Diggelmann noted the potential for the pandemic to create opportunities to buy “some distressed assets.”
After closing the deal, Smith & Nephew will find itself in competition with many of the companies that its existing orthopaedics business already squares off against. Zimmer Biomet, Stryker and Wright Medical are among the companies active in the extremities market.
Integra strengthened its presence in the extremities market in 2015 when it bought ankle and toe devices Tornier. Now, Integra has decided its future lies elsewhere, with CEO Peter Arduini framing the divestiture as a way for the company to increase its focus on neurosurgery, surgical instrumentation and regenerative medicine.