Greatbatch Completes QiG Spin-Off; Nuvectra Begins Trading

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Greatbatch, Inc. GB recently announced the completion of the spin-off of its subsidiary, QiG Group. The new entity, known as Nuvectra Corporation, has already begun trading under the symbol 'NVTR' on Nasdaq.

The spin-off of QiG Group will help the company to focus on its core operations and allocate its resources in a more efficient manner. This, in turn, should propel significant organic growth over the long term. Additionally, post spin-off, management expects a reduction in operating expenses of $12 million to $16 million on an annualized basis. This will help improve the bottom line in the quarters ahead.

The Algovita Spinal Cord Stimulation (SCS) System, used for the treatment of persistent intractable pain in the trunk/torso and/or limbs is Nuvectra's first FDA-approved product. The product has already been approved in the U.S. and European markets and will be manufactured by Greatbatch under a long-term supply agreement.

The Algovita SCS System has already enhanced Nuvectra's product portfolio and will help it to compete in the domestic market. However, the company is expected to face competition from St. Jude Medical's (STJ) Proclaim Elite SCS System, which is currently available in the U.S.

Greatbatch, meanwhile, is focused on improving its own product suite and expanding its business. This October, the company took over privately-owned Lake Region Medical for about $1.73 billion in cash and stock.

The deal is expected to significantly boost the combined company's product portfolio which will allow it to operate on a much larger scale across different geographies. Meanwhile, the joint entity is likely to employ more than 9,000 individuals worldwide and will operate in the U.S., Latin America, Europe and Asia Pacific.

The acquisition is also anticipated to provide significant operating synergies, which will, in turn, boost earnings. In fact, management at Greatbatch expects the acquisition to help adjusted earnings per share achieve double-digit growth rate in 2016. Post that, it is expected to be even more accretive.

Additionally, net annual synergy for operating profit is expected at around $25 million in 2016 and is also likely to increase to at least $60 million by 2018. The combined company is also poised to generate significant cash flow, which will help improve its financial flexibility.

Zacks Rank and Key Picks

Currently, Greatbatch has a Zacks Rank #4 (Sell). Better-ranked stocks in the medical space are Abiomed ABMD , CryoLife CRY and Luminex LMNX . All the stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Business , Investing , Stocks
Referenced Symbols: LMNX , ABMD , CRY ,

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