Wright Medical Divests OrthoRecon Business

Arlington, Tenn.-based Wright Medical Group Inc. is getting rid of its OrthoRecon business. MicroPort Medical BV has agreed to acquire the business for $290 million payable in cash at closing, which is expected to occur by the end of the third quarter or early in the fourth quarter of 2013.

Wright’s OrthoRecon business consists of hip and knee implant products. The unit generated global revenue of approximately $269 million in 2012. Some of its established brands are Dynasty and Conserve hips, Profemur modular stems, Superpath minimally invasive hip surgical instrumentation, and Advance and Evolution medial-pivot knee implants. According to industry research, the worldwide hip and knee reconstruction market is approximately $14 billion in 2012. In addition, the China hip and knee implant market is estimated to be approximately $1.3 billion by 2018 and is growing at approximately 17 percent per year.

“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. In addition, as a smaller, high-growth extremities company with breakthrough biologic opportunities, we will now be able to devote our full resources and attention on accelerating growth opportunities in this area, including improving sales productivity, extending the global reach and penetration of our products in key international markets, and seeking to gain U.S. regulatory approval for Augment bone graft. We believe this will enhance our ability to create significant shareholder value.”

During a conference call held on June 20, executives were asked why they decided to sell the OrthoRecon business now, after having spent a considerable amount of effort in recent months to build it up.

“Things were getting better in the OrthoRecon business, and I think that is one of the things that made this an attractive asset at this time,” said Palmisano. “If you go back 12 months, this was not an attractive asset … we still were in this spiral of losing customers due to all the compliance issues, and we didn’t have a clear strategy to turn that around. As we got into this year, I think that things started to get a lot better, and that is one of the reasons I think that this transaction materialized. And I think it materialized at a very fair value.”

After closing, the OrthoRecon business will continue to be headquartered in Arlington, Tenn., and Ted Davis, who is currently president of Wright’s OrthoRecon business, will lead the MicroPort Orthopedic business.

The transaction is subject to customary closing conditions, including MicroPort shareholder approval and receipt of regulatory clearances.

Wright’s extremities segment, which includes foot and ankle, biologics and upper extremity, generated global revenues of approximately $214 million in 2012. Following the divestiture, Wright Medical officials predict accelerated growth of the company’s foot and ankle business.

MicroPort is based in Shanghai, China. The company makes medical devices for the cardiovascular, diabetes, electrophysiology and spine segments among others.