Osiris’ main products include a skin substitute and surgical wrap derived from placental tissue. (daizuoxin/iStock/Getty Images Plus)
Smith & Nephew has moved to absorb regenerative medicine developer Osiris Therapeutics in a $660 million deal that the company hopes will expand and accelerate its wound care business.
Osiris’ portfolio includes bone graft, cartilage and skin substitutes—including its main growth drivers Grafix and Stravix, which accounted for more than 70% of the company’s sales in the first nine months of 2018.
Both derived from cryopreserved placental tissues, Grafix is intended to replace skin after being directly applied to deep acute and chronic wounds, while Stravix is used as a surgical wrap to support soft tissue repairs in a range of procedures. Last October, Osiris launched Grafix PL PRIME, a lyopreserved product that can be stored at room temperature.
Smith & Nephew said it expects the two lead products to maintain double-digit growth over the next few years, and estimate the overall U.S. skin-substitute market to be worth about $900 million with 7% annual growth.
“Grafix offers a compelling new option for managing hard to heal wounds and Stravix expands our tissue repair portfolio,” Simon Fraser, Smith & Nephew’s president of advanced wound management, said in a statement. “We will drive synergies across products from common call points and increased access to our wider customer base.”
Osiris Therapeutics—named after the Egyptian god known for ruling over the underworld, but for resurrection as well—was named one of FierceBiotech’s rotten tomatoes last year, after four former high-level executives were found guilty of misleading investors and overstating the company’s performance.
Former CEO Lode Debrabandere, former CFO Philip Jacoby, former VP of finance Gregory Law and former CBO Bobby Montgomery were said by the SEC to have lied to auditors by inflating the company’s income by just over $1 million in 2015—centered on sales of its Ovation bone matrix product—and artificially building confidence in its stock.
The Columbia, Maryland-based Osiris settled the charges in 2017 without admitting or denying the allegations and received a $1.5 million penalty. Jacoby pleaded guilty and was fined $10,000.
According to Smith & Nephew, $19 in cash will be paid for each Osiris share, representing a 37% premium over a weighted, 90-day average price of the company’s stock. The two expect the transaction to close in the second quarter of this year, with Osiris’ 360 employees joining Smith & Nephew.
Separately, Smith & Nephew announced that it was also acquiring the orthopedic joint reconstruction business of Brainlab, based in Munich, which has developed digital workflow tools spanning pre-operative planning, surgical navigation and post-op evaluation. Financial details were not disclosed.
The acquisition and strategic collaboration will be focused on R&D into digital surgery and augmented reality—initially focused on orthopedic reconstruction and sports medicine, before potentially expanding to other surgical specialties, the company said in a statement. The transaction also includes Brainlab’s orthopedic sales force, which will be integrated into Smith & Nephew’s commercial robotics organization.