“Similar to OrthoPediatrics, the Pega organization has been focused exclusively on addressing unmet needs for children whose lives have been impacted by musculoskeletal disorders and diseases. Their product offerings include novel technologies to treat some of the most unique conditions in pediatric orthopedics,” OrthoPediatrics CEO David Bailey said in a news release.
Warsaw, Indiana–based OrthoPediatrics will buy Pega Medical for an upfront cash payment of $31 million — as well as $2 million in stock that includes certain restrictions for three years. To help finance the transaction, OrthoPediatrics has successfully increased its line of credit with Squadron Capital from $25 million to $50 million.
Also today, OrthoPediatrics increased its full-year 2022 revenue guidance range to $125 million–128 million, a 27– 31% increase. On an organic basis, excluding Pega Medical and the recently acquired MD Orthopaedics, OrthoPediatrics is reiterating its full-year revenue guidance range of $118–121 million, representing 20–23% growth.
Analysts were mostly positive about the news. BTIG analyst Ryan Zimmerman thought the sales price is fair, with Pega bringing in $6 million in annual revenue.
We further believe the acquisition of Pega serves not just to bolster growth but as a defensive acquisition that prevents others in the space from gaining scale,” Zimmerman said. “We always believed Pega would make for an acquisition candidate for anyone looking to establish a presence in pediatric orthopedics. KIDS benefits by blocking others from gaining a foothold and can run Pega’s products through its massive sales infrastructure.
Truist analysts described the purchase as “another interesting deal that deepens KIDS’ moat as the specialist in pediatric orthopedics and adds an interesting growth driver to the company’s portfolio.”
KIDS shares were down more than 1% to $39.88 by midday trading today. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was down slightly.
