Integra Lifesciences announced a definitive agreement to divest its Extremity Orthopedics business to Smith+Nephew for $240 million in cash. In connection with the transaction, Integra will pay $41.5 million to the Consortium of Focused Orthopedists (CFO) relating to agreements between Integra and CFO for the development of shoulder replacement products. Integra anticipates that the deal will close at or near the end of 2020 and not materially impact financial results for the year.
Integra’s Extremity Orthopedics business generated $90 million in 2019 and $32.7 million in 1H20 sales, but the company struggled to get it on track in recent years. Sales declined in the three consecutive years between 2017 and 2019. COVID’s cancellation of elective procedures significantly impacted the business as well, with a -26.6% decline in 1H20 compared to the prior year. For 3Q20, the company expects declines between -5% and -15%.
Smith+Nephew gains entry into the shoulder and ankle replacement segments through the transaction. The full portfolio includes devices, implants and instruments for shoulder replacement as well as hand, wrist, elbow, foot and ankle reconstruction. The Extremity Orthopedics R&D pipeline includes a next-generation shoulder replacement system with a 2022 commercial launch date.
The transaction complements SNN's existing focus on ASC/outpatient settings, and may partially be a countermove to DJO’s proposed acquisition of Stryker’s STAR total ankle and, more indirectly, Stryker’s purchase of Wright Medical. Despite its size, SNN operates below scale in both trauma and extremities compared to its peers. Through this acquisition, Smith+Nephew expands its portfolio and secures a segment-specialized sales channel in the U.S., Canada and Europe. SNN expects the business to deliver double-digit growth and be slightly dilutive to profit in 2021 and 2022.