ANNOUNCEMENTS
We take a look at a wild past week in Foot and Ankle as another acquisition took place – ConMed acquired In2bones. We will review the details of that deal and give our take on how that will potentially unfold in the future.
In addition, we will handicap some of the most eligible acquisition targets that remain in Foot and Ankle. We include a quick recap of the Q1 earning reports released earlier this week by Treace Medical and Paragon 28 which unfortuanley were followed by a 30% hit to their respective stock prices.
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Thank you very much for reading, we are extremely grateful for all of our FANs!
Sincerely,
Big Foot
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This week we have:
- Golden Sawbone of the Week - Social Media
- Who is Next to Go? Derby Style.
- Access Past FAN Newsletters
- PodiatryMeetings.com Calendar of Events
- AOFAS Meetings Updated Listing
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GOLDEN SAWBONE OF THE WEEK
Social Media Edition
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This week’s winner has really stepped up his Instagram account in recent weeks. In addition to some Aston Martin's, follwers will find trauma disasters and other complex foot reconstructions.
Congrats to Dr. Anish Kadakia for winning this week’s Golden Sawbone Award.
View his page HERE and give him a follow if you dig it like we do!
His FEATURED POST involves a limb salvage case with an 8cm tibial defect, thanks for the explanation and rational. Great work!
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Another acquisition strikes in foot and ankle as ConMed agrees to purchase In2Bones for $145m with a bonus escalator of $110m over a 4-year term if certain sales growth metrics are met. It is unclear how much debt In2Bones has on its books, so final payday numbers for investors and the executive team in currently unknown.
The sale price came in right at 4X - 2021 annual sales of $36.1m. Amazing that Alan Tayor has done it again! Taylors previous exit was back in 2014 when his company, Solana Surgical, sold for $90m to Wright Medical. The same crew came back and did it again, congrats to him and his team of loyal executives, managers, distributors and KOL’s. Amazing work!
Ok, now let’s dig into this a little bit. While the upfront deal may have netted Taylor and team some cash, I predict this will be anything but easy for ConMed to turn this into a winner in the long run for two reasons:
1) In2Bones product line is mediocre at best.
2) ConMed is not equipped organizationally to handle this transition
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THE PRODUCTS
In2Bones has been for sale since the day it was born. Solana Surgical, Taylor’s previous company, sold in a little over 2 and a half years from its inception. That company had unique products at the time (sterile packed nitinol staples and allograft hammertoes) and In2bones doesn’t have much in terms of difference making products. J and J clearly kicked the tires on In2Bones and elected to choose a smaller, more innovative line with more perceived upside in CrossRoads for an estimated $220m.
The Quantum Total Ankle, while still unproven, is the only product that In2Bones offers that may have some unique product value aside from their Reference Silastic Toe Implant. The rest of the line is a mixed bag of “me too” products that could be seen as incomplete in terms of sizing. The options are not up to par compared to what is offered by the competition when it comes to mildly complex reconstructions and trauma in foot and ankle.
The sterile packed nature of the products may have some future value in the ASC setting, but it has yet to be adopted by most of the market when it comes to plating. When sterile packaged everything becomes in vogue, you can bet the big boys will be prepared. On the positive side, strategically ConMed could use this line as a play to help bundle their sports products to better compete against Arthrex. I’m not sure it gets the job done, but at least they have some ammunition to start the conversation.
DISTRIBUTION CHALLENGES
ConMed’s sales force is made up of a combination of independent distributors and W2 employees. It seemed company strategy was moving towards W2 across the US, but this acquisition complicates that if the goal is to retain and grow the 36m in previous years sales by 20% this year. In2Bones is entirely distributor based and most of them, are 100% extremity focused with multiple lines. If the big In2Bones distributors choose to follow the product line to ConMed, they will expect the foot and ankle sports line offered by ConMed to go to them. This could play very well for those pockets of the country where In2Bones has some share. ConMed has an excellent and under the radar line of F&A sports products.
The big issue will be the distributors who leave and decide to take that business with them. It happened with Soloana in 2014, where most of the business was consultant driven. That business disappeared within a year and the deal was not great for Wright Medical, but at least they got some cornerstone products for the future to make up for the loss in sales. The $110m tail clause built into this sale, protects ConMed and will motivate the In2Bones team to keep this together and make it work.
ConMeds strength in Orthopedics is Sports Medicine, Sports Biologics (MTF) and Capital (Hall Power). Reps and distributors dedicated to selling sports will gladly take a foot and ankle line, but it is not that easy. Foot and Ankle has become extremely specialized. Asking sports med reps to compete in Foot and Ankle with bottom tier products will be an uphill battle. Integration between the sports and foot and ankle distributors will be tough. It is unknown if there are enough sales dollars to support two specialized sales teams in most geographies. Without focus, the foot and ankle business will die. Integration friction is a concern with any acquisition, and this one will be no different. There will be different rules for different teams all over the country which does not bode well for sales force continuity and most likely morale.
CONCLUSION
ConMed surpassed 1 billion in sales last year, so a move of this nature is somewhat low risk, but one that does come with some obvious questions. Overall, I see this deal as a move that ConMed made because debt at this time is still cheap. The cost of the deal in relation to the potential gains, must have outweighed the negatives. The executives at ConMed see an opportunity to enter the foot and ankle market and expand their product offering for future expansion. Perhaps In2Bones has a pipeline of game changing technology that needed funding to see the light of day, who knows. The next couple years will be interesting to see how this plays out. Congrats again to In2Bones and good luck moving forward to ConMed.
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WHO'S NEXT TO GO? DERBY STYLE. |
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In the spirit of a very exciting Kentucky Derby this past weekend, let’s handicap the next company that will be purchased. The companies we are going to be handicapping are the companies with moderately complete foot and ankle lines with the exception of Treace which was included based on sales volume. Companies like Ossio, Artelon, and Subchondral Solutions have been excluded from this exercise.
The Favorites
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Novastep’s product mix has a little more innovation than In2Bones, but they feel like they are cut from the same cloth in terms of quality and objective to be sold off quickly. The company has a very confusing management and product development structure. Certain products are owned by Novastep, others are sold under their umbrella but owned by another organization. That seems to be a red flag and I assume one of the reasons why In2Bones went ahead of Nova Step.
That being said, Novastep has made strides in the hot MIS market and has some Ortholucent Technology that offers differentiation from the competition. They seem to be a value play for a smaller or mid-level company looking to get into foot and ankle, similar to ConMed. They wouldn’t come with massive financial risk assuming the products and some of the distributor talent moves with the company.
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Treace and Paragon 28: 10 to 1
Both Treace and P28’s stocks were crushed after this week’s seemingly positive Q1 earnings reports. Both stocks were down approx. 30% in a 5 day span. Here are the numbers as of the close of market yesterday (TREACE = $12.93) and (P28 = $12.76) each lost around $7 per share.
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There are two, top 5 Orthopedic Companies without any real presence in Foot and Ankle – Zimmer Biomet and Medtronic. I am not a finance guy, but these companies must have the money to purchase Paragon 28 and could use what P28 has to offer - a ready-made, plug and play business unit. As a competitor, you are praying Zimmer buys Novastep and not P28, but I am not sure Novastep makes any sense for Zimmer. Paragon 28 only goes in a blockbuster, not sure if Zimmer is ready to pull the trigger but it would make sense.
Merger perhaps? Paragon teams with Skeletal Dynamics then goes in a massive deal to one of these guys. A smaller version of the Wright Tornier marriage from 5 years ago…who knows?
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Treace did around $95 million in 2021 and has 2022 revenue guidance of $128m to $133m all mainly from one product and one procedure...INSANE.
Here are some notes from their Q1 reporting call last week:
- 5,278 lapiplasty kits sold at and average selling price of $5,503
- Direct Sales force were responsible by 63% of sales
- 1901 Active Lapiplasty Users
- Goal of 150 quota carrying direct reps by the end of 2022
Treace goes on to say the bunion market is approximately $5.5 billion and there are 1.1 million potential bunion candidates annually of which 450,000 undergo bunion surgery. This market is huge but, as we have reported, everyone is coming after Treace. MIS has become hot as well. For Treace to sustain they will need to continue to innovate. They will need to expand into other indications, as well as continue to successfully develop their W2 sales force to be a in position to be acquired down the line. Are bunions juicy enough for a company to take a shot on Treace?
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Estimated 2021 Sales = $27 million
We touched on Medline last week at being a possible target if new management doesn’t see the synergy of Medline Unite with the core focus of the business.
Out of these 3 long shots, Medline would be the first pick off the board in terms of product breath and market strategy. The team at Medline Unite are all very experienced and in this for the long haul.
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Estimated 2021 Sales = $13 million
Vilex acquired the Hintegra Hinterman Seris H2 Prothesis and has a handful of product launches scheduled for the back half of 2022 and the beginning of 2023.
With offices in McMinnville, TN and Park City, UT, the company has some upside and private equity money to help grow for the future. They will be one to watch as an acquisition play in the next couple years.
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Estimated 2021 Sales = 10.5 million
Extremity Medical has recommitted to foot and ankle development through the hiring of Steve Haddad as Chief Medical Officer. Haddad has experience in product development and the Lyons brothers are no strangers to exits.
With some renewed focus and a revamped product line, Extremity could make some noise in foot and ankle in the near future.
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PodiatryMeetings.com Calendar
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This resource has an extensive amount of information for meeting opportunities where you can earn your required continuing education credits.
Click below to access the extensive meeting calendar.
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AOFAS Upcoming Meetings & Courses |
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July 7-9, 2022
September 14-17, 2022 | Québec City, Canada
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About Foot and Ankle News & Contact Information
Foot and Ankle News is curated roundup of the most impactful news for Foot and Ankle Doctors, Rep’s, and Exec’s delivered weekly directly to your inbox.
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All of our posts from our weekly email newsletter can be found at www.footandanklenews.com. Our newsletter goes out to over 12,000 foot and ankle surgeons and industry professionals across the country. The articles are created by a group of volunteers and freelance industry insiders. If you you would like to contact us or have an article or topic you would like to share, please submit it to: footandanklenews@gmail.com
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