Wright Medical Group
) recently revealed a definitive agreement for a business
combination of the two companies. The deal will mesh BioMimetic's
line-up of biologic offerings with Wright's range of orthopedic
products and its strong sales set up.
BIOMIMETIC THER (BMTI): Free Stock Analysis
WRIGHT MEDICAL (WMGI): Free Stock Analysis
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As per the terms, the deal has a possible value of about $380
million for BioMimetic shareholders, or $12.97 per share, based
on Wright's finishing price on November 16, 2012. Every share of
BioMimetic will be converted into an upfront payment of 0.2482
share of Wright common stock and a cash component of $1.50. This
payment stream values BioMimetic at about $190 million ($6.47 per
Each share of BioMimetic will also fetch a marketable Contingent
Value Right, which gives the owner an extra cash stream of up to
$6.50 per share. This amount may be paid following BioMimetic's
receipt of approval from the Food and Drug Administration (FDA)
for its Augment Bone Graft and upon accomplishment of some sales
The deal should materialize in the first quarter of the coming
year subject to BioMimetic shareholder approval and standard
closing clauses. The agreement has gotten the uniform approval of
the board of directors of both companies.
Wright believes that the deal will dilute adjusted EBITDA till
the second year post-FDA authorization for Augment Bone Graft and
then turn accretive. Wright will provide more data on the fiscal
impact of the deal after the closure.
BioMimetic is dedicated to creating regenerative medicinal
offerings which facilitate repair of musculoskeletal injuries
with a protein therapy offering called Augment Bone Graft. This
product is facing late stage review at the FDA as a substitute
for autologous bone graft in ankle and foot procedures. Should
the offering receive FDA approval, it will be the first
clinically established protein therapy to enter the orthopedics
business in the last 10 years or so.
Wright's focus on niche technologies lends some support amid
economic cyclicality. Moving forward, revenue growth will be
supported by new product launches. Moreover, new deals in
extremities are expected to bolster growth in this segment. The
company's restructuring initiatives should also boost future
Our views on Wright are moderated by intense competition from
larger players and pricing pressure. Wright competes with much
bigger names such as Zimmer Holdings (ZMH), Stryker (SYK) and
Smith & Nephew (SNN). Moreover, the company remains exposed
to procedure volume headwind. Our Neutral recommendation is
supported by a short-term Zacks #3 Rank (Hold).