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Stryker Buys Israel-Based OrthoSpace, Strengthens MedSurg

Zacks

In a bid to strengthen its surgical portfolio for sports medicine, Stryker Corporation SYK recently announced that it has acquired Israel-based OrthoSpace, Ltd.

Stryker paid $110 million in cash up front, and agreed to pay another $110 million in future upon completing potential milestones. Notably, the transaction is likely to have no impact on net earnings 2019.

More About OrthoSpace

OrthoSpace specializes in the development and commercialization of simple-to-implant, biodegradable balloon systems for the orthopedic market. The company’s first major product is InSpace, which has the CE mark and is currently marketed in Europe, Latin America and Asia (30 countries). The technology has been used by more than 20,000 patients as of now. However, the platform is currently under clinical study and not approved for use in the United States.


Stryker’s MedSurg Likely to Get a Boost

We expect the latest development to fortify Stryker’s MedSurge segment in the global orthopedic space. The segment already consists of surgical equipment, surgical navigation systems, endoscopic and communications systems, patient handling and emergency medical equipment, and reprocessed and remanufactured medical devices. This apart, the segment comprises medical device products used in various medical specialties.

Not to forget, MedSurg reported sales of $1.72 billion in the fourth quarter of 2018, up 8.9% year over year. Sales at the segment increased 11.1% on a constant-currency basis. Per management, the segment grew 10% organically in the quarter, led by strong Endoscopy, Instruments and Medical performances.

Orthopedic Market Prospects Bright

Per Grand View Research, the global orthopedic devices market value was $36.1 billion in 2017. This is anticipated to expand at a CAGR of 3.1% over the 2018-2026 period.

A strong international presence and an acquisition-driven strategy are working in favor of the stock. Over the past year, this Zacks Rank #2 (Buy) stock has rallied 15.3% compared with the industry’s 6.7% growth. Also, the company has outperformed the S&P 500’s 1.7% rally. Stryker has an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters by average of 2.2%.

Notably, this trend of consecutive beats underlines the company’s operating efficiency.

Stryker Corporation Price and Consensus

Stryker’s Acquisition Profile at a Glance

Stryker has been following an acquisition-driven strategy to boost growth. Last month, the company acquired Arrinex, a California-based medical device company, which is expected to boost the company’s Neurotechnology & Spine business.

In recent times, the company acquired K2M Group Holdings for approximately $1.4 billion. K2M is likely to provide Stryker’s Spine unit with a highly complementary and innovative product portfolio, which includes minimally invasive offerings. In fact, in the fourth quarter of 2018, the acquisition drove Stryker’s Neurotechnology & Spine segment.

Last year, Stryker announced the acquisitions of HyperBranch Medical Technology and Invuity Inc. Notably, both the deals are likely to boost the company's Neurotechnology & Spine unit.

The company also acquired SafeAir AG, a Swiss medical device company. Notably, this buyout boosts Stryker's comprehensive surgical smoke evacuation portfolio.

Stryker acquired Entellus Medical, Inc, which is expected to enable physicians to conveniently perform a broad range of ENT procedures.

Want More From theMedTech Industry?

Other top-ranked stocks from the MedTech space are ABIOMED, Inc. ABMD, IDEXX Laboratories, Inc. IDXX and Wright Medical Group N.V. WMGI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABIOMED’s long-term expected earnings growth rate is projected at 27.7%.

IDEXX Laboratories delivered a positive earnings surprise in each of the trailing four quarters, the average being 7.2%.

Wright Medical Group has long-term expected earnings growth rate of 11.3%.

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