Dive Brief:
- Stryker announced Thursday it completed the acquisition of privately held Israeli company OrthoSpace for $110 million upfront with future milestone payments of up to $110 million.
- The deal gives Stryker InSpace, described as a biodegradable sub-acromial spacer capable of realigning the natural biomechanics of the shoulder in the case of massive irrepairable tears of the rotator cuff, a group of four muscles in the shoulder connected to the upper arm by tendons.
- The technology is CE marked but is currently an investigational device in the U.S.
Dive Insight:
The deal is Stryker's second reported acquisition of 2019. Last month, the medtech scooped up cryoablation technology maker Arrinex to add a treatment for chronic rhinitis to its growing ear, nose and throat division, continuing its M&A momentum from the fourth quarter of 2018, which among other deals saw Stryker close a $1.4 billion buyout of spinal surgery device maker K2M.
Nearly 2 million people in the U.S. seek treatment for acute or degenerative rotator cuff injuries each year, with incidence rising with age, according to the American Academy of Orthopaedic Surgeons. Depending on severity, injuries can be managed with medication, physical therapy or steroid injections, or through surgical treatment, which typically involves reattaching the tendon to the head of the upper arm bone.
Conversely, the InSpace technology uses a balloon system to disable friction between bones, potentially reducing pain and enabling faster recuperation compared to other surgical treatments, OrthoSpace says. The company touts the device can be implanted in a minimally invasive outpatient procedure. Johnson & Johnson and Smith & Nephew are among former investors in the startup.
OrthoSpace is currently studying InSpace in the U.S. in patients 40 years or older with full-thickness rotator cuff tears who have failed non-operative treatments. The company said outside the U.S., the technology has been used in more than 20,000 patients in 30 countries.
"The acquisition of OrthoSpace is highly complementary to our existing portfolio and aligns with Stryker's focus on investing in sports medicine," Andy Pierce, president of the company's MedSurg group, said in a statement. The MedSurg group's divisions posted growth rates between 9% and 12% last quarter, backed by new product launches.
Stryker said the transaction is expected to have an immaterial impact to net earnings in 2019. The company forecasted fiscal 2019 organic revenue growth of 6.5% to 7.5% on its January earnings call.
