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M&A deals are at a decade-low level across medtech and orthopedics. Only six orthopedic acquisitions have been announced this year, far fewer than the nearly 30 acquisitions completed in 2023.
ORTHOWORLD Senior Market Analyst Mike Evers noted that M&A volume has decreased by 40% since 2021. “It’s worth noting that some of the most active buyers in orthopedics are coming off or are in the middle of very large acquisitions and integrations,” he said. “That can depress deal volume a bit.”
Three companies among the top 10 most active players in M&A activity from 2016 to September 2024 have completed deals this year. Their efforts to expand product offerings are worth noting in a landscape that’s expected to remain relatively quiet into 2025.
Stryker
The largest company in orthopedics generated $10.3 billion in orthopedic sales in 2023. Its trauma and sports medicine businesses accounted for 23% and 8% of sales, respectively. In July, Stryker bought Artelon, a soft tissue fixation company, to bolster its sports medicine business and some of its applications in foot and ankle. Last month, Stryker acquired 4WEB Medical’s Osteotomy Truss System (OTS) and Ankle Truss System (ATS) to expand its foot and ankle portfolio.
“Stryker is strong in sports medicine and foot and ankle in terms of growth, but both of those segments have gotten a lot more competitive in recent years,” Evers said. “I see this as a way for Stryker to keep pace at the forefront of those markets.”
Stryker CEO Kevin Lobo said that the company has a very active deal pipeline. “It’s always hard to predict exactly which deals will land, but we have a very strong balance sheet now and we’re going to put it to work,” he added.
This month, Stryker completed the acquisition of Vertos Medical, adding a provider of interventional pain management solutions to its $1.2 billion spine portfolio. The deal could signal where orthopedic companies will look to allocate investment dollars moving forward, according to Marc Viscogliosi, Principal of Viscogliosi Brothers, a full life cycle investor, and Chairman & CEO at Spine BioPharma.
At the recent North American Spine Society’s annual meeting, Viscogliosi noted that funding in the spine segment is focused on lower-risk, later-stage investments where revenue growth is already apparent or positive cash flow has become crucial. He also said investing companies are increasingly interested in interventional treatments and pointed to Stryker’s acquisition of Vertos Medical as an example.
“Orthopedic companies that truly want to move the needle on clinical outcomes, and innovation must intervene earlier in the disease progression,” Viscogliosi said.
Enovis
The company has been active in M&A activity to improve its joint replacement and foot and ankle business. Enovis finished 2023 with $695 million in orthopedic revenue and finalized the $846 million purchase of LimaCorporate earlier this year. It was Enovis’ ninth transaction since 2020, and it’s expected to push the company above annual earnings of $1 billion.
“With big acquisitions come new challenges, but M&A has been a staple of our growth composition,” said Louie Vogt, Group President of Reconstructive at Enovis.
Evers noted that major deals typically cause some level of disruption at the acquiring company. “We saw some channel consolidation in Q1 and some noise happening during the integration of Enovis and LimaCorporate,” he said. “But Enovis is strong at M&A integration, so I expect them to get that worked out in short order.”
Enovis acquired LimaCorporate’s SMR and PRIMA shoulder systems as part of its strategy to grow its shoulder replacement portfolio. Continued investment in high-tech solutions will also play a significant part in the company’s long-term plans.
“It’s clear that enabling technology is going to be important to shoulder surgeons going forward,” Enovis CEO Matt Trerotola said. “Guidance is a tremendous solution when you’re operating in the shoulder’s constrained space.”
Evers noted that transactions for technology assets account for 26% of the deals made by the most active companies over the past eight years, about 11% higher than the volume for the overall orthopedic market.
Smith+Nephew
Smith+Nephew’s 2023 orthopedic sales surpassed $3.7 billion, and its $1.5 billion in sports medicine revenue ranked it second in the segment.
Smith+Nephew’s sports medicine business was boosted in the first half of 2024 by two acquired products: REGENETEN and AGILI-C. REGENETEN improves the repair of full-thickness rotator cuff repair. It was acquired from Rotation Medical in 2017. The company added to its sports medicine portfolio with this year’s acquisition of CartiHeal, developer of AGILI-C, a novel technology for knee cartilage regeneration. Smith+Nephew identified the product as one of the company’s “next generation” growth drivers.
“Our REGENETEN bioinductive implant was key to the expansion of our sports medicine portfolio and will remain an important focus in 2024, with increasing market penetration and the development of new applications,” said Deepak Nath, Smith+Nephew CEO. “We also added a new opportunity with the acquisition of CartiHeal.”
Slow Times Ahead
Leaders at the largest and most acquisitive companies in orthopedics say they’re looking to acquire companies and doing the work to make deals happen, according to Evers. However, he said that viable acquisition targets need one of two qualities: immediately accretive to revenue and margins or highly differentiated technology.
“Much of the currently available assets are emitted in that criteria,” Evers added, “so I think M&A volume is going to remain low over the next few months and into next year.”
