The Wright Medical Group merger with Tornier has the orthopedic device industry buzzing, heralded as a smart move for Wright Medical's business.
The $3.3 billion merger was driven by portfolio diversification and geographic expansion, which could contribute to its success. Other major mergers this year in the orthopedic device space have been focused more on the tax inversion strategy, which is under scrutiny by lawmakers.
However, Wright Medical and Tornier have taken a different route to create a mid-size orthopedic company focused just on extremities and biologics. The new company could command a 50 percent share of the global total ankle replacement market, according to GlobalData Analyst Linda Tian, MSc.
"Wright and Tornier's lower extremity portfolios overlap, as both companies have a multitude of plating systems for fixation, as well as strong TAR lines for arthroplasty," she said. "For example, both Tornier's Salto Talaris/Salto system and Wright's INBONE system are widely adopted to the global TAR market."
The merger's outlook is promising, according to Ms. Tian, but there is stiffer competition in the upper extremities arena.
"The newly-formed orthopedic juggernaut of Zimmer and Biomet will easily usurp the shoulder replacement market with an approximate 30 percent share," she said. "Together with DePuy Synthes' long-term leading position, this could limit Wright and Tornier's success in upper extremities"
However, Tornier has conducted an FDA investigational device exemption trial on its stemless shoulder platform, which is expected to gain approval in mid-2015.
"This raises the possibility of Tornier maintaining its competitive advantage in the shoulder reconstruction space," said Ms. Tian.
Leadership at Wright and Tornier expect the new business will generate 40 percent of revenue from the lower extremities portfolio, 38 percent revenue from upper extremities and 12 percent from sports medicine. The rest of the revenue will come from Tornier's large joints.