Stryker Corporation (SYK), the leading medical device provider in the global orthopedics market, announced its second acquisition after MAKO Surgical Corp. However, the news failed to impress investors as the stock price slipped 0.7% yesterday.
SYK decided to buy Irvine, CA-based Patient Safety Technologies (PSTX) in order to utilize Patient Safety’s device to lessen the risk of surgical sponges being left in patients after surgery. The deal is locked at $120 million.
Stryker will pay $2.22 per share for Patient Safety, which reflects a fat 50% premium of its closing price on Dec 30. The deal is approved by the PSTX Board of Directors and is expected to close in the first quarter of 2014.
Stryker completed its acquisition of MAKO Surgical for $1.65 billion last month. The acquisition of MAKO will allow SYK to get hold of the latter’s advanced robotic arm technology known as Robotic Arm Interactive Orthopedic System, or RIO. The technology helps orthopedic surgeons in performing knee and hip joint replacement surgeries.
Stryker is excited about inheriting MAKO’s robotic technology as the company believes it has long-term potential for human joint reconstruction. It is worth to note in this context that MAKO’s pioneering RIO system has not been widely adopted as it should be due to inadequate training and marketing efforts. As a result, SYK intends to fill up this gap by utilizing its efficient marketing and training system and gain a competitive edge in the stagnant hip-and-knee replacement market.
Secondly, Stryker can proceed with the further implant development for MAKO’s technologies utilizing its R&D capabilities. MAKO lack resources compared to Stryker in developing implants for its systems. Therefore, the acquisition clearly bridges this gap and enables SYK to meet the wider joint reconstruction needs.
Currently, Stryker retains a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical products industry include NanoString Technologies, Inc. (NSTG) and LeMaitre Vascular, Inc. (LMAT), both with a Zacks Rank #2 (Buy).