Leading medical technology developer, Integra LifeSciences Holdings Corporation IART, has inked a definitive agreement to buy all of the outstanding shares of TEI Biosciences, Inc. and TEI Medical, Inc. for $312 million in cash.
The acquisition, which is expected to complete in the third quarter of 2015, will expand Integra's reconstructive surgery and regenerative wound care product offerings by including the complementary technology platform – PriMatrix Dermal Repair Scaffold – within Integra’s portfolio. It will also provide a significant boost to Integra’s growth objectives for 2015 and beyond.
According to the company, the inclusion of TEI is a major strategic step forward for both Integra’s channel and international expansion priorities. It will expand Integra’s sales force by adding around 125 sales representatives and managers. This will support the anticipated increase in market demand and drive growth in the operating room, burn centers and wound care clinics. The inclusion will also provide a new sales base in the attractive adjacent markets of regenerative technology, specifically abdominal wall repair and plastic and reconstructive surgery.
Integra believes the benefits will jointly make way for attractive operating margins, which will allow the company to invest further in the combined regenerative wound care technology platform and strengthen its commercial channel.
In 2014, TEI generated $63.5 million in revenues with a gross margin of 80%. Preliminarily, Integra expects the revenues earned from this acquisition to increase in high single digits in the first full year after closing. Further detailed guidance, including expectations for 2015 financial performance, will be provided during Integra’s second quarter earnings release in late July.
Our Take
While working on the tax-free spin-off of its loss-making Spine and orthobiologics business (expected to complete on Jul 1, 2015), Integra is simultaneously focusing on its core profitable business segments viz. specialty surgical solutions, orthopedics and tissue technologies, which include reconstructive surgery and regenerative wound care. We believe, the array of acquisitions at the company, the latest being that of TEI, support the company’s three-pillar strategy to optimize, execute and accelerate growth.
Currently, Integra is looking at expansion through inorganic means with quick and profitable integration of new products and businesses. In Jan 2015, the company added the Foot and ankle product portfolio of Metasurg. Late last year, Integra purchased a portfolio of 4,000 surgical instruments of the MicroFrance and Xomed manual ENT and laparoscopic instrumentation product lines from medical device major Medtronic, Inc. MDT.
Currently, Integra carries a Zacks Rank #2 (Buy). Some other well-ranked stocks in the Med-Biomed/Generic industry are Affymetrix Inc. AFFX and Gilead Sciences Inc. GILD. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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