Integra LifeSciences Holding Corporation IART recently inked a definitive deal to acquire Columbia MD-based regenerative medicine firm, ACell Inc. The buyout came close on the heels of the company’s agreement to divest its non-profitable Extremity Orthopedics business to London-based Smith & Nephew SNN in September.

Both deals indicate the company’s efforts to focus on expanding its capabilities in the growing field of regenerative tissue technology.

Financial Terms of the Deal

Integra agrees to pay an upfront cash payment of $300 million, subject to price adjustment and a cash payment of an additional $100 million upon the achievement of certain revenue growth.

Notably, the buyout is anticipated to be concluded in the first quarter of 2021 following regulatory approvals and satisfaction of customary conditions.

The transaction 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.

ACell at a Glance

ACell works in regenerative medicine. ACell 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.

Significance of the Acquisition

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, noting that 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 & trauma emergencies, and the advancement in monitoring devices and surgical technologies are the factors driving market growth.

Price Performance

Shares of Integra have gained 14.1% in the past year compared with industry’s growth of 18.8%.

Zacks Rank and Key Picks

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

Two better-ranked stocks from the broader medical space include Cantel Medical Corp. CMD and Hologic Inc. HOLX, each carrying a Zacks Rank # 1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

Cantel Medical has a projected long - term growth rate of 9%.

Hologic has a projected long - term growth rate of 18.10%

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