Integra LifeSciences Holding Corporation IART recently completed its ACell acquisition deal. Per the financial terms of the deal, the company made an upfront cash payment of $300 million, subject to price adjustment. Integra has also agreed to make a cash payment of an additional $100 million upon the achievement of certain revenue growth targets.

Announced in December 2020, this buyout is part of the company’s efforts to focus on expanding its capabilities in the growing field of regenerative tissue technology.

ACell at a Glance

ACell is a Columbia, MD-based regenerative medicine firm. The company develops, manufactures and markets products for medical and veterinary applications. The company’s product portfolio includes porcine urinary bladder matrix platform technology, MatriStem UBM.

ACell generated revenues of $100.8 million in 2019, reflecting 13% growth from the year-ago period.

The acquisition is expected to remain accretive to Integra’s revenue growth and adjusted gross margins. Further, it is expected to remain neutral to the company’s adjusted EPS in the first year and will remain accretive, thereafter. In the third year, the transaction will exceed the company’s cost of capital.

The acquisition will strengthen Integra’s orthopedics and tissue segment by adding ACell’s proprietary technologies and innovative products.  The buyout will help fill a gap as ACell’s product portfolio is based on a unique porcine urinary bladder matrix (UBM) platform technology, Matristem, which aims to help the body in restoring natural tissue while minimizing scarring.

ACell is also going to provide an added advantage to Integra Life by offering Cytal wound matrix for healing acute and chronic wounds. Another product offered is Gentrix surgical matrix, indicated for use in surgical reinforcement of soft tissue and hernia repair.

ACell is a good strategic fit for Integra, as it adds a differentiated porcine matrix to its portfolio of bovine-derived engineered collagen, human amniotic tissue and acellular dermal matrices. It will also allow the company to leverage its existing infrastructure, especially to drive sales and margin expansion.

Industry Prospects

Per a report by Allied Market Research, the global regenerative medicine market was valued at $5,444 million in 2016, and is estimated to reach $39, 325 million by 2023 at a CAGR of 32.2%. The emergence of the stem cell technology, the untapped potential of nanotechnology, the increase in chronic diseases and trauma emergencies, and the advancement in monitoring devices and surgical technologies are the factors driving market growth.

Integra’s Strategic Focus on Profitable Segments

The buyout of ACell came close on the heels of the company’s divestment of its non-profitable Extremity Orthopedics business to London-based Smith & Nephew earlier this month. This divestment included Integra’s upper and lower extremity orthopedics product portfolio, including ankle and shoulder arthroplasty and hand and wrist product lines.

With this, the company intends to successfully capitalize on its core products and technologies in neurosurgery surgical instrumentation and regenerative medicine space. This will help the company to get closer to achieving its long-term growth and profitability targets.

Price Performance

Shares of Integra have gained 20.1% in the past year compared with industry’s growth of 24%.

Zacks Rank and Key Picks

Integra currently carries a Zack Rank #3 (Hold).

Some better-ranked stocks from the broader medial space include AdaptHealth Corp. AHCOQuidel Corporation QDEL, and Meridian Bioscience Inc. VIVO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

AdaptHealth has a projected long-term earnings growth rate of 720%.

Quidel has a projected long-term earnings growth rate of 25%.

Meridian Bioscience has a projected long-term earnings growth rate of 13%.

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