Conmed's New Acquisition Is 'Door-Opener' For Orthopedic Surgery Business, This Analyst Says - Conmed (NYSE:CNMD)

Earlier today, CONMED Corporation CNMD agreed to acquire privately held Biorez Inc for $85 million and up to $165 million in commercial-based milestones.
Biorez commercializes its BioBrace implant, a bioinductive scaffold used to reinforce soft tissue where weakness exists and promote soft tissue healing.
Needham says that in the near term, Biorez is expected to be accretive to revenue growth and gross margins (Biorez's gross margin is >80% vs. CNMD's 2022E gross margin of ~55%).
"In addition to becoming a significant growth driver over time, we expect BioBrace to function as a "door-opener" or "halo product" in CNMD's Orthopedic Surgery business, similar to AirSeal and Buffalo Filter in its General Surgery business," Needham writes.
The analyst has lowered the price target of CONMED from $127 to $123, with an unchanged Buy rating.
Management estimates its leverage post-acquisition will be in the low-5x range.
Assuming ~$15 million in 2024 revenue, the company is paying a ~5.7x (with no milestones) to 16.7x (with the full milestones)
EV/sales vs. Nedham's small/mid-cap growth comp group trading at a 2022 EV/sales multiple of 6.0x.
CONMED expects the acquisition to add approximately $1 million in revenue to its recently provided FY22 revenue guidance.
The company expects FY22 adjusted EPS of $3.25 - $3.45 as the deal will be ~$0.10-0.15 dilutive to both 2022 and 2023 EPS.
Price Action: CNMD shares are up 0.74% at $98.29 during the market session on the last check Tuesday.

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