Zacks_Analysts' Blog : Stryker Closes Concentric Buy - Analyst Blog

Orthopedic giant Stryker (SYK) has completed its takeover of privately-held stroke intervention products maker Concentric Medical Inc. for $135 million. The deal was announced on August 31.

California-based Concentric makes minimally-invasive products for treating acute ischemic stroke (“AIS”). Its products include devices for removing blood clots in patients with AIS. Concentric’s next-generation clot removal product (Trevo Retriever) is currently undergoing clinical evaluation in the U.S. The entity is expected to generate revenues in excess of $30 million in 2011.

The acquisition will provide Stryker access to the fast-growing acute ischemic stroke market across the U.S., Europe and Japan. The addition of Concentric’s offerings will enable the Michigan-based company to offer complete interventional stroke care to patients globally. The transaction is expected to be neutral to Stryker’s earnings per share for 2011.

Under pressure from sustained pricing and procedure volume issues in its core replacement hips and knees businesses, Stryker is actively pusuing acquisitions. The company is expanding its product portfolio by acquiring complementary businesses leveraging a solid balance sheet.

The $1.5 billion acquisition of Boston Scientific’s (BSX) neurovascular assets has enabled Stryker to diversify its portfolio. Moreover, the acquisitions of rival Orthovita and Memometal Technologies have reinforced the company’s position in key market segments.

We believe that Stryker is well placed for growth driven by new product launches, acquisitions and an improving hospital capital spending backdrop. However, the company remains exposed to stiff competition and implant pricing and elective procedure volume still remains headwinds. Our long-term Neutral recommendation on the stock is backed by a short-term Zacks #3 Rank (Hold).