Zimmer Biomet executives expect the company’s planned $1.1 billion acquisition of Paragon 28 to give the company a larger presence in the growing market for procedures at ambulatory surgery centers (ASC).
Zimmer announced plans last week to buy the company, which makes foot and ankle implants.
The deal is expected to close in the first half of 2025.
Combined with Paragon 28, Zimmer’s sports medicine, extremities and trauma segment will be larger than its $2 billion hip business, and will grow faster than its hip and knee segments, CFO Suky Upadhyay told investors on Thursday.
The purchase is expected to be immediately accretive to revenue growth, and about 3% dilutive to adjusted earnings per share this year, Upadhyay added.
Zimmer CEO Ivan Tornos said the purchase will offer more opportunities at ASCs, “where foot and ankle procedures carry a very beneficial reimbursement that we're not capitalizing on today.”
Currently, Paragon 28 doesn't have much of a presence in the ASC space, Tornos said, providing opportunities for cross-selling with Zimmer’s customers.
Orthopedics companies have looked to ASCs, a type of outpatient surgery center, for future growth as insurers cover more procedures in that setting. Zimmer has forecast that 40% to 60% of all cases in orthopedics will move to ASCs within the next three to five years. Nearly 20% of Zimmer’s U.S. sales currently come from ASCs, Tornos said.
Tornos plans to bring over Paragon 28’s management team, including CEO Albert DaCosta, and also expects little disruption to its salesforce, noting that Zimmer does not have a dedicated sales team for foot and ankle.
Future purchases
After the Paragon 28 purchase, Zimmer will still have a “very strong balance sheet,” giving the company the option to pursue future deals, Upadhyay said.
“The firepower is there,” Tornos said. “What we want to do right now is to integrate Paragon 28 into the company, prove to everyone that we can do this type of deal with minimal disruption, and then we'll think about the next deal when it's time to think about the next deal.”
For 2025, Zimmer forecast revenue growth in a range of 1% to 3.5%.
