BONEZONE

DEC 2016

Published by ORTHOWORLD Inc., BONEZONE delivers strategic sourcing & product commercialization solutions to orthopaedic device company decision makers and their partners.

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80 BONEZONE • December 2016 O RTHOWORLD's M&A Activity database logged 46 transactions by December 1, already ahead of 2015's whole-year total of 36. A variety of company types are represented (OEM, Supplier, Distributor, Private Equity), and the disclosed values range from $10 million to $1 billion. Several transactions afford the acquiring company the abil- ity to boost their reach in multiple market segments. Ortho- biologics and spine remained the frontrunners for volume of activity, while nontraditional products like surgical assistance (robotics, navigation) and hospital solutions (outcomes track- ing, telecommunication) are new areas of growth. All of the companies in ORTHOWORLD's top five (DePuy Synthes, Zimmer Biomet, Stryker, Smith & Nephew and Medtronic, ranked by estimated orthopaedic revenue) were acquirers in 16 transactions combined, through the first 11 months of 2016. DePuy Synthes acquired BioMedical Enterprises, filling a key portfolio gap in elective foot and ankle surgery—bringing along products for hand and wrist, DBM and allograft, too. BME's products are integrating into DePuy's trauma portfo- lio, a declared segment of strategic focus for the company. Zimmer Biomet has logged the most transactions so far this year (seven). First, let's look at Cayenne Medical and LDR. Cayenne's lineup includes soft tissue repair and reconstruc- tion products for knee, shoulder and extremities, as well as the Mirror Partial Knee replacement, for which preliminary study results indicated short-term outcomes equivalent to the most ideal uni knee results published at that time. While LDR provides a solid differentiated spine product portfolio with limited overlap, the primary attractor was the Mobi-C artificial cervical disc: the base for future cross-selling opportunities. By ORTHOWORLD estimates, Arthroscopy/Soft Tissue Repair and Spine were ZBH's smallest 2015 revenue seg- ments, at 2% and 4% of that year's orthopaedic revenue, respectively. The five remaining transactions for ZBH weren't focused on devices, but rather services or therapies or post-acute applications complementary to orthopaedic segments. To wit: • CD Diagnostics: The Synovasure diagnostic test for periprosthetic joint infection, a complement to the Signature Solutions suite to support value-based healthcare. (Periprosthetic fracture occurs around components or implants of a total hip replace- ment; treatment most often requires surgery.) • Clinical Graphics: 3D imaging/ROM simulation technology, especially pertinent in treating hip condi- tions that benefit from early intervention, like femoro- acetabular impingement and dysplasia. ZBH expects that joint preservation, which falls under its Arthros- copy/Soft Tissue Repair portfolio, will be a significant growth driver. (Clinical Graphics also offers a report to simulate the kinematics of fractured shoulder joints, and is developing a shoulder instability report.) • Compression Therapy Concepts: DVT prevention devices (simple, straightforward, post-surgical care) • Medtech ROSA: Robotics and navigation to sup- port accuracy and repeatability in spine procedures (and CMF, and potentially other anatomical sites in the future) • RespondWell: Telerehabilitation technology, designed to provide personalized, clinician-supervised post- surgical physical therapy in a patient's home Stryker is next, with five transactions year to date. (This doesn't include the non-ortho-specific purchases.) The company expects its M&A cadence for the next five years to be similar to that of the previous five, which included purchases of Mako Surgical, Memometal Technologies, Orthovita, Pivot Medical, Small Bone Innovations, Trauson and certain spine assets from Vertiflex. So far in 2016, Stryker has bolstered Arthroscopy/Soft Tissue Repair, Spine and custom Joint Replacement: • BD's vertebroplasty and vertebral augmentation prod- ucts: Expanding their VCF footprint, complementing Stryker Instruments' Interventional Spine business and further strengthening their Neurotechnology brand • Instratek: staple and hammertoe implants and mini- mally invasive soft tissue recession instrumentation for foot, ankle and upper extremity procedures • Ivy Sports Medicine: Minimally invasive meniscal repair, including CMI, the only FDA-approved colla- gen meniscus implant on the market • Safewire: Products that support minimally invasive spine surgery • Stanmore Implants: patient-specific and off-the-shelf implant systems for limb salvage Smith & Nephew took on two acquisitions early in the year: Blue Belt Technologies and Piramal's BST-CarGel assets. BUSINESS CRITICAL Close-up: 2016 M&A Transactions Julie A. Vetalice ORTHOWORLD

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