New Conmed Acquisition Opens Door to Orthopedic Surgery Business, Analyst Says

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  • Earlier today, CONMED Company CNMD agreed to acquire a private company Biorez Inc. for $85 million and up to $165 million in business milestones.
  • Biorez is marketing its BioBrace implant, a bioinductive scaffold used to reinforce soft tissues in cases of weakness and promote soft tissue healing.
  • Needham indicates that in the near term, Biorez should contribute to revenue growth and gross margins (Biorez gross margin is >80% compared to CNMD’s 2022E gross margin of approximately 55%).
  • “In addition to becoming a significant growth driver over time, we expect BioBrace to function as a ‘gate opener’ or ‘halo product’ in CNMD’s orthopedic surgery business, similar to AirSeal and Buffalo Filter in its general surgery business,” writes Needham. .
  • The analyst lowered CONMED’s price target from $127 to $123, with a buy rating unchanged.
  • Management believes that its leverage after the acquisition will be in the low 5x range.
  • Assuming revenue of around $15 million in 2024, the company pays around 5.7x (without milestones) to 16.7x (with full milestones)
  • EV/sales versus Nedham’s Small/Mid Cap Growth Group trading at an EV/sales multiple of 6.0x in 2022.
  • CONMED expects the acquisition to add approximately $1 million in revenue to its recently provided FY22 revenue guidance.
  • The company expects FY22 Adjusted EPS of $3.25 to $3.45, as the deal will be approximately $0.10 to $0.15 dilutive for 2022 and 2023 EPS.
  • Price action: Shares of CNMD were up 0.74% at $98.29 in Tuesday’s last check trading session.
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