MicroPort’s Wright Bid Creates New Ortho Player

Article preview from IN VIVO - July, 2013

 Wright Medical’s decision to sell its hip and knee business wasn’t entirely unexpected. The buyer, the Chinese company MicroPort, may have surprised some, but changes in orthopedics and the device industry as a whole could make such deals more common.

MicroPort’s Wright Bid Creates New Ortho Player

Article preview from IN VIVO - July, 2013

Wright Medical Group Inc.’s decision to sell its hip and knee joint business shouldn’t really have surprised anyone.  CEO Robert Palmisano – in the eyes of one Wall Street analyst – is a “money maker” who has generated significant returns for investors by guiding businesses like eye company IntraLase Corp. and peripheral vascular player ev3 Inc. into the arms of larger strategic acquirers, Abbott Laboratories Inc.’s Abbott Medical Optics Inc. (then called Advanced Medical Optics) and Covidien Ltd., respectively. Wright watchers say Palmisano had set a similar course for Wright when he joined as CEO in 2011. Early on, he divided the company into two distinct businesses, one focusing on the high-growth extremities sector and the other centered on the low-growth large joint sector. Given the divergent fates of the two sectors, it wasn’t difficult to guess which business was on the way out.

The time was right for Wright. Palmisano, in a conference call, told analysts the company has made "significant progress" in building out its extremities business. The company late last year acquired BioMimetic Therapeutics Inc. for $183 million (with earn-outs that could double that), giving Wright a recombinant human platelet-derived growth factor that could reinforce surgical bone repair in foot and ankle fusion procedures. (The graft, Augment, still requires FDA approval.)

Moreover, Wright had made strides in righting its OrthoRecon ship, which had fallen upon some troubled times. Hip and knee sales began to turn around, and Wright had just launched WrightDirect, an unproven but promising new strategy to sell large joints at a lower price. The program attempts to cut costs by removing, or at least de-emphasizing, the sales representative. The divestiture, Palmisano said, would enable Wright to enhance shareholder value by devoting “our full resources and attention to accelerating growth opportunities in this area, including improving our sales force productivity in foot and ankle, extending the global reach and penetration of our products in key international markets, and seeking US regulatory approval for Augment bone graft.” Palmisano told analysts Wright medical had "several suitors" for its OrthoRecon business.

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