In Orthopedics, Playing From Strength
At an otherwise quiet American Academy of Orthopedic Surgeons meeting, the biggest news was Smith & Nephew's acquisition of pain specialist Oratec Interventions. Times have never been better in orthopedics, and the Smith & Nephew deal raises the question whether the industry is about to see a period of robust deal-making.
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J&J's aggressive moves in orthopedics has industry executives nervous, most recently about its purchases of artificial disk maker Waldemar Link and biomaterials expert Orquest. The Link valuation (J&J is paying $325 million upfront, plus earn-outs) isn't quite as high as some earlier orthopedics deals, but it is still comparatively substantial. With Link and Orquest under its roof, J&J is poised to assume market leadership in the traditional orthopedics markets and also in spine.
Following significant consolidation in 1998, orthopedic industry executives are bracing for more deal-making. A handful of deals in 1999 suggest continued consolidation, but the modesty of the deals also implies that consolidation is unlikely at such an aggressive pace.
ArthroCare believes its new approach to tissue removal represents a quantum leap forward in arthroscopy and can be used in other clinical markets. But dogged by a perception that it didn't know what it wanted to do--it talked about new opportunities before it could act on them--ArthroCare now has to convince investors that it can deliver on its promises.