Conmed's New Acquisition Is 'Door-Opener' For Orthopedic Surgery Business, This Analyst Says

  • Earlier today, CONMED Corporation CNMD agreed to acquire privately held Biorez Inc for $85 million and up to $165 million in commercial-based milestones.
  • Biorez commercializes its BioBrace implant, a bioinductive scaffold used to reinforce soft tissue where weakness exists and promote soft tissue healing. 
  • Needham says that in the near term, Biorez is expected to be accretive to revenue growth and gross margins (Biorez's gross margin is >80% vs. CNMD's 2022E gross margin of ~55%).
  • "In addition to becoming a significant growth driver over time, we expect BioBrace to function as a "door-opener" or "halo product" in CNMD's Orthopedic Surgery business, similar to AirSeal and Buffalo Filter in its General Surgery business," Needham writes.
  • The analyst has lowered the price target of CONMED from $127 to $123, with an unchanged Buy rating.
  • Management estimates its leverage post-acquisition will be in the low-5x range. 
  • Assuming ~$15 million in 2024 revenue, the company is paying a ~5.7x (with no milestones) to 16.7x (with the full milestones) 
  • EV/sales vs. Nedham's small/mid-cap growth comp group trading at a 2022 EV/sales multiple of 6.0x. 
  • 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 - $3.45 as the deal will be ~$0.10-0.15 dilutive to both 2022 and 2023 EPS. 
  • Price Action: CNMD shares are up 0.74% at $98.29 during the market session on the last check Tuesday.
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