Zimmer Biomet Acquiring LDR

Zimmer Biomet (ZBH) entered into a definitive agreement to acquire LDR for US $37/share in cash, for a transaction valued at ~$1.0BB. The deal is expected to close in 3Q16.

Combining the companies would yield significant global muscle to distribute and cross-sell complementary product portfolios addressing cervical disc, minimally invasive surgery and complex spine, coupled with biologics.

Zimmer Biomet gains access to LDR’s Mobi-C® cervical disc replacement and the MIVo™ platform to support lumbar and cervical fusion. ZBH leadership acknowledged Mobi-C as the door-opener for cross-selling sales opportunities, moving forward. Presently, Mobi-C is the only cervical disc that is FDA-approved for one?level and two?level indications. (Medtronic’s cervical disc, Prestige LP, is expected to receive FDA approval for a two-level indication within the company’s FY17.)

LDR was one of the remaining pure-play spine companies with 2015 revenue over $100MM, having reported sales of $164.5MM for that year. (Other pure-players left in that group include Alphatec, K2M and Spineart.) For 1Q16, LDR reported global Mobi-C sales growth of +28.8% vs. 1Q15, with U.S. growth +36% year-over-year. LDR estimates that ~180MM U.S. lives are covered for the one-level Mobi-C procedure, and >50MM for the two-level.

During an interview for the Fast-Growing Companies in Spine report, Christophe Lavigne, President and CEO of LDR, told ORTHOWORLD that cervical disc will be one of the biggest opportunities in the spine market in the next five years, in light of rising procedure volumes and increased reimbursement for the treatment. This was reiterated by leadership in the acquisition conference call, noting a minimum $500MM potential market opportunity for cervical disc in the U.S. alone.

Lavigne and Patrick Richard, Executive Vice President and General Manager of LDR, will stay in leadership positions following the acquisition. LDR will be combined with Zimmer Biomet’s Spine & CMF segment, to be led by Adam Johnson, Zimmer Biomet Group President, Spine, CMF and Thoracic, and Dental. LDR brings just under 70 direct sales reps to the mix.

ZBH will complement its spine headquarters in Broomfield, Colorado—the former Lanx location—by maintaining a significant presence in LDR’s technology hubs of Austin, Texas and Troyes, France.

ORTHOWORLD estimates placed 2015 global spine sales at just under $8.5 billion, led by Medtronic, DePuy Synthes and Stryker, with NuVasive and Globus Medical rounding out the top five. The combination of Zimmer Biomet + LDR would place ZBH just outside of that group. (It is important to note that ORTHOWORLD estimates for spine exclude orthobiologics revenue.)

In 2014, ORTHOWORLD estimated Zimmer’s share of the spine market to be 2%; the company nearly doubled its spine revenue upon acquiring Biomet. The inclusion of LDR would place ZBH’s spine market share at 5%.

This is the second strategic acquisition announcement from Zimmer Biomet for 2016, following its closure on Cayenne Medical in mid-2Q16 to support growth in arthroscopy/soft tissue repair.

Sources: Zimmer Biomet, Inc.; ORTHOWORLD Inc.