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Integra Closes Codman Buyout, Strengthens Neurosurgery Arm

Zacks Equity Research
Updated

Integra LifeSciences Holdings Corporation IART has finally come up with the news of completing Codman Neurosurgery business acquisition from Johnson & Johnson JNJ. This development was expected at the heels of last month’s major asset divestment initiative by the company. The whopping $1.045 billion purchase has been considered a major breakthrough for Integra as it will provide the company with global reach in Neurosurgery, thus connoting the core expertise within the company’s Specialty Surgical Solutions.

Integra expects to complete the said asset divestment soon that forms part of certain closing conditions toward the Codman acquisition. Notably, Integra has signed a definitive agreement to sell the company’s certain neurosurgery assets to healthcare products and services provider, Natus Medical Incorporated BABY, for a total deal value of $47.5 million.

The company has also decided to sell the global Camino ICP monitoring product line, including its San Diego manufacturing facility, to Natus Medical. Additionally, Natus will get hold of the U.S. rights related to Integra’s fixed pressure shunts as well as the U.S. rights to Codman’s DURAFORM dural graft implant, standard EVD catheters and CSF collection systems.

Earlier, while announcing the set of divestitures to Natus, Integra had discussed its imminent financial impact. Per the company, in 2016, approximately $50 million of revenues were earned from the neurosurgery product lines associated with these divestitures. Taking net of divestitures and the Codman acquisition into account, the company on a preliminary basis, estimated fourth-quarter 2017 revenue contribution of approximately $60-$65 million. For full-year 2018, Integra expects Codman Neurosurgery to contribute between $290 million and $300 million in revenue and net of divestitures.

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Overall, the Codman Neurosurgery business is anticipated to remain accretive toward Integra’s 2018 adjusted earnings per share and contribute at least 22 cents. However, for full-year 2017, Integra expects minimal contribution from Codman Neurosurgery to adjusted earnings per share.

Integra LifeSciences Holdings Corporation Price and Consensus

Integra LifeSciences Holdings Corporation Price and Consensus | Integra LifeSciences Holdings Corporation Quote

Per Integra, Codman Neurosurgery’s existing portfolio and new product pipeline in advanced hydrocephalus, neuro-critical care and electrosurgery are going to complement the acquirer’s leading products and pipeline in tissue ablation, dural repair and cranial stabilization. Post the closure of this buyout, the consolidated portfolio will offer complete solutions for neurosurgery and the scale to invest as well as bring in new technologies to the table for patients worldwide.

Notably, per a report by Radiant Insights, the global neurosurgery market is projected to witness an estimated CAGR of around 10-12% during 2015-2019. Taking into consideration this huge growth prospect, we believe, Integra’s initiative to strengthen foothold in this particular niche area is well-timed.

Overall, Integra has been consistently trading above the broader industry in the last six months. The stock has rallied 22.3% year to date, thus substantially outperforming the industry’s 13% gain during the period.

Zacks Rank & Other Key Pick

Integra currently carries a Zacks Rank #2 (Buy). Another top-ranked medical stock is IDEXX Laboratories, Inc. IDXX, also carrying the same bullish Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX Laboratories has a positive earnings surprise of 9.3% over the last four quarters. The stock has roughly surged 37.5% over a year.

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Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
Natus Medical Incorporated (BABY) : Free Stock Analysis Report
 
IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
 
Integra LifeSciences Holdings Corporation (IART) : Free Stock Analysis Report
 
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