Smith & Nephew (S&N) announced on March 12, 2019 that it has agreed to acquire Osiris Therapeutics for $660MM with the deal expected to close Q219. However, the deal could be in question as a group of Osiris shareholders is suing to block the acquisition. The lawsuit disputes Cantor Fitzgerald’s discounted cash flow analysis, saying it does not adequately reflect Osiris’s future growth prospects, and is based on growth rates that are about half of what Osiris has experienced in recent years, resulting in a valuation that is too low. The acquisition would add the Osiris’s Grafix and Stravix product lines to S&N’s ailing Advanced Wound Bioactives portfolio. If allowed to proceed, the acquisition would solidify S&N’s leadership in wound biologics and changes the competitive landscape in the Advanced Wound Care market.
S&N’s CEO, Namal Nawana, has been at the helm for less than a year, and is quickly demonstrating that the Company’s Advanced Wound Management (AWM) business is a priority for him. Currently, S&N’s AWM business accounts for 26% of its overall business with Orthopedic and Sports Medicine & ENT accounting for the remainder. And yet, Wall Street analysts continue to ask whether S&N should spin-off its AWM business, as its call points and avenue to market are so different from the orthopedic business...