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Wright Medical Group to Acquire Cartiva for $435 Million

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Aug. 28 2018, Published 2:18 p.m. ET

Acquisition deal

On August 27, Wright Medical Group (WMGI) entered into an agreement with Cartiva to acquire Cartiva’s outstanding equity for $435.0 million in cash. Cartiva is an orthopedic medical device company that specializes in the treatment of osteoarthritis of the toe. 

Cartiva’s lead product is a synthetic cartilage implant for the treatment of arthritis at the base of the big toe. In July 2016, the FDA granted premarket approval (or PMA) to Cartiva’s synthetic cartilage implant.

Wright Medical expects Cartiva’s net revenues in fiscal 2018 to reach ~$35.0 million, which represents 50.0% year-over-year growth. Wright Medical Group expects the acquisition of Cartiva to close by the fourth quarter.

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Wright Medical raises financial guidance

In light of its strong third-quarter performance so far, Wright Medical (WMGI) has raised its financial guidance for fiscal 2018. Wright Medical Group previously expected its fiscal 2018 net revenues to reach $808.0 million–$820.0 million. On August 27, Wright Medical Group raised and narrowed its net revenue guidance for fiscal 2018 to $812.0 million–$822.0 million. This revenue guidance doesn’t include the impact of the Cartiva acquisition.

Wright Medical Group expects its net sales for fiscal 2019 to increase ~$47.0 million due to the Cartiva acquisition. WMGI also expects this acquisition to boost its non-GAAP EPS and cash flow. Wright Medical Group comprises ~0.13% of the iShares Russell 2000 ETF’s (IWM) portfolio holdings.

Analysts’ recommendations

Of the 15 analysts tracking Wright Medical Group in August, eight recommended a “strong sell.” Six analysts recommended a “buy” rating, and one analyst recommended a “hold.”

On August 28, Wright Medical Group had a consensus 12-month target price of $32.07. This target price represents an ~14.7% return on investment over the next 12 months.

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