Wright Medical Acquires Cartiva for $435M

Posted on August 27, 2018

Wright Medical ($WMGI) announced that they have entered into a definitive agreement to acquire private orthopaedic medical device company, Cartiva, for $435 million in cash.

Cartiva’s lead product, a Synthetic Cartilage Implant (SCI) for treating arthritis at the base of the great toe, received U.S. Premarket Approval (PMA) in July 2016. With this acquisition, Wright increased their 2018 full-year guidance as they expect Cartiva's revenues to be approximately $35 million, which represents approximately 50% growth over 2017.

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Cardiva's SCI is composed of a biocompatible, durable, low-friction organic polymer that functions similarly to natural cartilage and can be implanted in about 35 minutes.  Unlike fusion, Cartiva reduces joint pain without sacrificing the foot’s natural movement and retains mobility and range of motion.  Due to a less restrictive rehabilitation protocol, Cartiva patients typically return to function and activities of daily living faster than patients who undergo a fusion procedure.  Additional regulatory approvals have been obtained in Canada, EU, Brazil, Chile and Australia.

Robert Palmisano, Wright’s president and chief executive officer, commented, “We are delighted to add Cartiva’s technology, including its Synthetic Cartilage Implant, the first and only PMA product for the treatment of great toe osteoarthritis, to our market-leading lower extremities portfolio.  Supported by compelling clinical performance and the only product of its kind backed by Level I clinical evidence, Cartiva is experiencing rapid commercial adoption and is well positioned for future growth as it addresses large markets with significant unmet needs.  We believe this technology is a perfect fit for our Lower Extremities business and adds a differentiated product that addresses a common condition that is treated by most foot and ankle surgeons and has strong patient demand.” 

Palmisano continued, “In addition to the excellent strategic fit, the transaction is financially compelling, as the combination of high gross margins, very low instrument and inventory investment and limited infrastructure to be integrated, make the transaction attractive from a projected return on investment standpoint.  We also expect the combination to be approximately 100 basis points accretive to our pro forma revenue growth rate and approximately 100 basis points accretive to adjusted EBITDA margins in 2019.  Our core foot and ankle business has continued to gain momentum throughout the third quarter, and we expect this acquisition to further accelerate our growth prospects in this part of our business.”

Timothy Patrick, Cartiva’s president and chief executive officer added, “We are delighted to have found an excellent strategic buyer in Wright, a company that shares our commitment to technological leadership and that is a leader in foot and ankle with a demonstrated track record of commercializing breakthrough technologies.  We believe that Wright, with its 300-plus direct foot and ankle sales organization in the U.S. and its large international organization, as well as its expertise in medical education and product development, is the ideal partner to realize the full potential of our SCI technology.  We look forward to an exciting future as part of Wright Medical.” 

With increased competition in the Foot & Ankle space, Wright believes Cardiva's technology will help further accelerate growth in their Extremities business.