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CONMED (CNMD) to Expand Orthopedic Portfolio With Buyout

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CONMED Corporation (CNMD - Free Report) recently announced that it has closed the buyout of privately-held In2Bones Global Inc. It is important to mention that on May 4, 2022, CONMED inked a deal to acquire In2Bones Global on a cash-free, debt-free basis for cash consideration of $145 million on completion and an additional $110 million in growth-based earnout payments over four years.

Memphis, TN-based In2Bones Global is a developer, manufacturer and distributor of medical devices globally used for treating disorders and injuries of the upper and lower extremities. The company's all-inclusive product portfolio includes implants, fracture systems, biologics and related hardware.

The completion of this transaction is likely to boost the Orthopedic Surgery business.

Financial Impact of the Transaction

In 2021, In2Bones Global recorded revenues of $36.8 million at around 80% gross margins and is anticipated to deliver double-digit revenue growth on an ongoing basis. CONMED projects the buyout to add about $20 million to its revenues in the second half of 2022.

The buyout is estimated to be slightly accretive to adjusted EBITDA in 2022, accretive in the single-digit millions in 2023, and in the double-digit millions after that. With respect to adjusted earnings per share, the transaction is anticipated to be between 5 cents and 10 cents dilutive to both the remainder of 2022 and full-year 2023 and accretive thereafter.  

Significance of the Buyout

Per management at CONMED, the buyout is a natural strategic expansion of its Orthopedic portfolio. Given the expertise shown by the leadership team, extensive sales channel and broad portfolio, In2Bones Global presents a great platform for CONMED to move into the extremities market.

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Apart from this, In2Bones Global is a robust complement to CONMED’s already existing international platform.

Market Prospects

Per a report by Grand View Research, the global orthopedic devices market was worth $40.9 billion in 2021 and is anticipated to expand at a CAGR of 3.1% from 2022 to 2030. Rising incidences of orthopedic disorders, an increase in the number of road accidents and a growing aging population are factors attributable to this market’s growth. Hence, this transaction is well-timed for CONMED.

Notable Development

In May 2022, the company reported better-than-expected first-quarter 2022 earnings. It witnessed strong performance across its Orthopedic and General Surgery units while delivering sales growth in both its domestic and overseas markets. Per management, the company displayed strength and agility despite a tough operating environment on account of the resurgence in COVID-19 cases during January and February.

Price Performance

Shares of the Zacks Rank #5 (Strong Sell) company have lost 29.5% in a year’s time compared with the industry’s decline of 9.4%.

Stocks to Consider

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Masimo Corporation (MASI - Free Report) and ShockWave Medical, Inc. (SWAV - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.6%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 1.1%. The company’s earnings yield of 11.4% compares favorably with the industry’s (0.8%).

Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy).

Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 22.3%. The company’s earnings yield is 3.8% against the industry’s (8.5%).

ShockWave Medical surpassed earnings estimates in all of the trailing four quarters, the average surprise being 189.9%. The company currently sports a Zacks Rank #1.

ShockWave Medical’s earnings growth rate for 2022 is estimated at 807.7%. The company’s earnings yield of 0.9% compares favorably with the industry’s (8%).