USA – Globus Medical Inc has made an acquisition offer to NuVasive Inc, a US manufacturer of equipment for minimally invasive spine surgery with a market value of US$3 billion, according to Reuters and Bloomberg.
Both media outlets cited people familiar with the matter during their reports.
The proposed merger would hasten consolidation in the spine surgery market, where smaller players are turning to mergers and acquisitions to compete with the likes of Johnson & Johnson, Medtronic Plc, and Zimmer Biomet Holdings Inc.
Globus, a provider of implantable devices and instruments used in spinal and orthopedic surgeries, recently made an indicative cash-and-stock offer to NuVasive.
A deal could give both companies more clout and bargaining power with hospitals, where their products are sold.
According to Truist analysts Samuel Brodovsky and David Rescott, if the deal goes through, it will create one of the largest players in the spine space, with a 17% market share.
Consequently, NuVasive has struggled with the impact that healthcare staffing shortages and lower demand for elective surgery have had on its sales. Its shares are down 2% year to date, compared to a 10% increase in Globus Medical’s shares.
Profit not guaranteed
However, J.P. Morgan analysts cautioned that previous orthopedic takeovers failed to generate returns.
Analysts cited J&J’s 2012 acquisition of Synthes, Zimmer’s 2015 and 2016 acquisitions of Biomet and LDR, and Stryker’s 2018 acquisition of K2M as examples of how difficult it is to make spine deals work.
According to the analysts, J&J “failed to stem share loss,” while Zimmer is experiencing “continued declines several years out” and Stryker had a difficult first year despite its integration expertise.
Whether or not Globus-NuVasive merger, could defy the trend remains speculative. Analysts at J.P. Morgan cited NuVasive’s differentiated technologies, such as its X360 anterior procedural solutions, as examples of how it could add value to Globus.
Analysts, however, see “significant overlap in the core implant portfolio as well as on the navigation and robotics sides.”
Globus attributed the growth of its enabling technology unit to its ExcelsiusGPS robot, which saw a 124% increase in sales in the third quarter. NuVasive has its own robotic system, Pulse.
“Within NuVasive’s portfolio, we see the Pulse system and Simplify Cervical Disc as two of the company’s larger growth drivers over the next several years, and believe that both could be appealing to Globus,” Brodovsky and Rescott wrote in a published report.
While J&J has a number of robotic systems, J.P.Morgan analysts question whether “it makes sense for Globus to support a platform that overlaps so much with its existing one.”
Since large integrations can be messy, Truist analysts believe the deal is unlikely, because Globus Medical has a track record of executing smaller transactions and growing organically.