Globus Medical (GMED) Completes NuVasive Merger Agreement
Globus Medical Inc. GMED recently announced that it has successfully closed the previously announced merger with NuVasive. The combined firm will offer one of the most extensive selections of musculoskeletal procedural solutions, enabling technology to influence the care continuum for surgeons and patients.
The deal's closing has brought together two major players in the growing musculoskeletal space currently valued at $50 billion. It combines Globus Medical's and NuVasive's complementary spine and orthopedic solutions and enabling technologies to create one of the industry's most comprehensive, innovative offerings.
Transaction Details
As per the financial terms of the agreement announced earlier, which was unanimously approved by the boards of directors of both companies (dated February 9, 2023), NuVasive shareholders are supposed to receive 0.75 of a share of Globus Medical Class A common stock for each share of NuVasive common stock owned at the closing of the transaction.
Following the close of the transaction, NuVasive shareholders shall own approximately 28% of the combined company, and Globus Medical shareholders shall own approximately 72% on a fully diluted basis.
As part of the transaction's closure and by the merger agreement with NuVasive, Globus Medical approved the increase in the number of directors on its board from eight to eleven.
Our Take: A Strategic Deal
We note that NuVasive has been witnessing declining prices for its products due to increasing competition in the spine market; pricing pressure experienced by hospital customers from managed care organizations, insurance providers and other third-party payers; and increased market power of hospital customers due to the consolidation of the medical device industry.
Conversely, Globus Medical’s spine business is in a more balanced position amid the ongoing health crisis. The company’s U.S. Spine business has maintained an uptrend in the past few quarters. The segment is gaining from product launches, competitive recruiting and pull-through from robotics.
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In such a situation, Globus Medical and NuVasive combine their complementary global scale, enhanced commercial reach, extensive orthopedic and spine product portfolios for product development, increasing operational capabilities and committing to surgeon education. The transaction has solid financial credentials for wealth generation and appealing upside revenue potential.
Industry Prospects
Per a report by Research and Markets, the global musculoskeletal diseases market is valued at $57.4 billion mark in 2017 and is estimated to grow at a CAGR of more than 5.5% by 2023.
Considering the market opportunities, the latest deal is well thought-off.
Progress Within Musculoskeletal Business
During second-quarter 2023, Globus Medical’s Musculoskeletal Solutions revenues were up 9.7% year over year. Growth was led primarily by the company’s spine and trauma businesses performances.
Further, U.S. spine grew 6% in Q2 with notable gains across our product portfolio in biologics, MIS and pedicle screws, and 3D-printed implants. This above-market growth is driven by competitive rep productivity and robotic pull-through.
Price Performance
In the past year, GMED’s shares have declined 6.9% against the industry’s rise of 6.5%.
Zacks Rank and Key Picks
Globus Medical currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Quanterix QTRX and SiBone SIBN. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics’ stock has risen 19.9% in the past year. Earnings estimates for Haemonetics have increased from $3.56 to $3.74 in 2023 and $3.96 to $4.07 in 2024 in the past 30 days. It currently carries Zacks Rank #1.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.39%. In the last reported quarter, it posted an earnings surprise of 38.16%.
Estimates for Quanterix’s 2023 loss per share have narrowed from $1.19 to 97 cents in the past 30 days. Shares of the company have increased 167.5% in the past year against the industry’s decline of 1.7%. It currently carries Zacks Rank #2 (Buy).
QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
Estimates for SiBone’s2023 loss have narrowed from $1.42 to $1.27 per share in the past 30 days. Shares of the company have increased 31% in the past year compared with the industry’s rise of 1.9%. It currently carries Zacks Rank #2 (Buy).
SIBN’s earnings beat estimates in all the trailing four quarters, the average surprise being 20.37%. In the last reported quarter, SiBone delivered an earnings surprise of 26.83%.
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