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Updated: 07-Jan-25 14:17 ET
Stryker strikes a deal to acquire Inari Medical, bolstering its neurotechnology business (SYK)
Medical device company Stryker (SYK) has struck a deal to acquire Inari Medical (NARI) for $80/share in an all-cash transaction valued at $4.9 bln, sending shares of NARI skyrocketing higher, while SYK drifts lower on the M&A news. Near the end of yesterday's session, speculation began swirling that a deal could be imminent after Reuters reported that SYK was closing in on an acquisition of NARI, which launched the stock higher. Excluding yesterday's gains, the $80/share purchase price represents a hefty premium of about 61% from last Friday's unaffected price.
Although SYK isn't issuing any new equity or debt to finance the transaction, the lofty valuation that it's paying for NARI may not be sitting too well with shareholders, especially since NARI has posted four consecutive quarterly losses. Based on NARI's FY24 revenue guidance of $601.5-$604.5 mln, SYK is paying roughly 8.1x expected FY24 sales. For a point of comparison, NARI competitor Penumbra (PEN) was trading with a trailing P/S of about 7x prior to today's M&A fueled gains.
Beyond the high price tag, though, the addition of NARI looks like a good fit for SYK.
Although SYK isn't issuing any new equity or debt to finance the transaction, the lofty valuation that it's paying for NARI may not be sitting too well with shareholders, especially since NARI has posted four consecutive quarterly losses. Based on NARI's FY24 revenue guidance of $601.5-$604.5 mln, SYK is paying roughly 8.1x expected FY24 sales. For a point of comparison, NARI competitor Penumbra (PEN) was trading with a trailing P/S of about 7x prior to today's M&A fueled gains.
Beyond the high price tag, though, the addition of NARI looks like a good fit for SYK.
- NARI, a fellow medical device company, manufactures products that treat deep vein thrombosis (DVT) and pulmonary embolisms (PE). The company's product portfolio complements SYK's neurotechnology business well, which focuses more on stroke treatment with products such as implants, stents, sealants. According to SYK, venous thromboembolism impacts up to 900,000 people in the U.S. alone each year, so its total addressable market will expand considerably with the addition of NARI.
- High costs have weighed on NARI's profitability -- operating expenses jumped by 34% in Q3 -- but the company's growth has been solid. In each of the past four quarters, revenue growth has been in the low-20% range and the company's FY24 guidance implies that trend will continue with growth of 21.5% projected for Q4. Furthermore, SYK should be able to attain some cost synergies as it integrates the much smaller NARI into its operations.
- The acquisition of NARI provides SYK with another growth catalyst to go alongside its recent platform launches. Specifically, the company is expected to launch its Pangea Plating system in the Orthopedics segment later this year, while the LIFEPAK 35 defibrillator and monitor is seeing strong interest with sales beginning to ramp.
Overall, we believe that NARI is a good strategic fit for SYK. While we would have liked to have seen more color regarding the financial implications of the deal in today's press release, SYK did state that it will provide the expected impacts to 2025 financial results during the Q4 earnings call on January 28.
