Wright Medical to Sell Hip Implants Business

Wright's OrthoRecon business generated about USD 269 million in revenue for 2012 and proceeds from the sale will be used to further growth in its extremity ankle and biologic segment. Wright has cited OrthoRecon's falling revenues and profitability, which could explain the low sales multiple.

The deal could accelerate the formation of a market for cheaper, older hip and knee products, thereby putting other ortho firms under pricing pressure. What remains of Wright would be more concentrated on its biologics, led by its recombinant bone graft Augment, and its foot and ankle business, which increased by 14% in 2011. Wright intends to use these net proceeds to fund transition costs of USD 25–35 million and the remainder to fund growth opportunities for its Extremities and Biologics business and pay certain retained liabilities of the OrthoRecon business.

“Over the last 18 months, we have made significant progress in transforming our business to dramatically accelerate growth in our foot and ankle business, build a growing, global OrthoRecon business, and significantly improve cash flow,” said Robert Palmisano, president and CEO of Wright Medical. “This next step in our transformation should enable both businesses to flourish as separate, global companies focused in their unique market space with strong management teams that will position them for continued success.”

The worldwide hip and knee reconstruction market was estimated at approximately USD 14 billion in 2012. The China Hip and Knee implant market alone is estimated to reach approximately USD 1.3 billion by 2018, representing a growth rate of approximately 17% per year.

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