Orthopedic devices maker
Wright Medical Group
) recently reported that it had concluded its take over of
BioMimetic Therapeutics. This deal will amalgamate Wright
Medical's strong sales team and product lineup with BioMimetic's
biologics offering pipeline.
On Nov 19, 2012, Wright Medical revealed its intention to take
over BioMimetic Therapeutics for an initial cash payment of $190
million to be followed by subsequent milestone outflows up to
another $190 million. However, this will only be triggered if the
Augment Bone Graft technology receives FDA nod.
BioMimetic placed, in June 2012, a responsive Premarket
Approval (PMA) modification in response to the FDA's request for
more data. Wright Medical expects a final regulatory decision
during the timeframe between Apr 2013 and Jan 2014. Should the
Augment Bone Graft receive the regulatory nod, it will be a new
protein therapeutic substance to enter the market after many
Including the effect of BioMimetic, Wright Medical's sales
band stands in the neighborhood of $485 million to $495 million
for 2013. The deal adversely affects earnings per share by about
32 cents to 34 cents resulting in loss per share in the range of
26 cents to 34 cents (including stock based compensation expense)
for 2013. Free cash flow is expected in the range of nil to $5
Orthopedics is one of the largest medical device market
segments worldwide. Lukewarm demand is exacerbated by pricing
pressure particularly in Europe. In particular, the
reconstructive market fundamentals (pricing and volume) have
languished in the recent past but are showing signs of recovery.
The joint replacement market has been hit by patient deferral of
elective procedures, leading to weak demand for hip and knee
Pricing compressions on hips, knees and spine products, which
have impaired the performances of certain orthopedic companies in
the past, remain a key concern at the macro level. We note Wright
Medical's inadequacy to post sales growth in recent times.
Our views on the company are moderated by intense competition
from larger players and pricing pressure. Wright Medical
competes with much bigger names such as
). The stock carries a Zacks Rank #3 (Hold).
Wright Medical carries a Zacks Rank #3 (Hold).
) carry a Zacks Rank #2 (Buy) and are expected to do well.
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