July 2021

Yesterday (29 Jul 2021), Bioventus and Misonix jointly announced an M&A. This deal is particularly significant in the advanced wound care (AWC) space for three reasons: The combined entity will be a “new” relatively large advanced wound care player (though similar to Misonix pre-deal, not necessarily with AWC as its sole focus). This is also part of a trend whereby companies (including mega-sized ones) have been realizing that to focus on wound healing is not only a huge opportunity, but also a space they may already be playing in without even being fully aware of it. M&A consolidation in the AWC space resumes, after an inorganic growth hibernation period, mostly related to Covid-19 uncertainty. I’ll end this post by highlighting the key questions that I think the combined Bioventus-Misonix entity will need to carefully consider, which will drive their success in AWC (if they choose to make that space a focus for their growth) in the years ahead.   The potential creation of a new large AWC player? On yesterday’s joint conference call, Bioventus CEO Ken Reali highlighted the potential for cross-pollination between the customers and care settings of the respective companies. He also cited significant diversity and scale across a range of care settings, geographies, and therapeutic areas…with leading technologies and specialized sales forces, serving a $15B total addressable market across the hospital, ambulatory surgical center, and office care settings.” He also pointed to orthopedics, lower extremity, and neurosurgery as key focus areas that will be served by the combined entity, as well as the ability to service new customers and realize cost synergies. Bioventus’ core solutions and markets are largely focused on orthobiologics, and include HA (hyaluronic acid) for osteoarthrtitis, ultrasound bone growth / fracture treatment and rehab, non-pharmaceutical nerve pain relief, and others. Misonix has regenerative medicine cellular and tissue product (CTP) solutions for wound and related indications, with the traditional core of its portfolio being its neXus ultrasonic platform. neXus (the instrument attachments are BoneScalpel, SonicOne and SonaStar) is used across multiple surgical and wound indications–mostly cutting / removing bone, tumor, nonviable soft tissue, and other ortho-plastics needs. More recently, they also added Sequel for external fixation. On the joint call, Misonix CEO Stavros Vizirgianakis noted, “We believe we can enable new proprietary procedural solutions with the Bioventus portfolio,” and also spoke to the ability of Bioventus to accelerate Misonix’s international growth. Integra Lifesciences, Organogenesis, Smith & Nephew, and Wright Medical (acquired by Stryker in late 2020) are illustrative examples of firms who have in recent years begun to increasingly blur the lines between advanced wound care / tissue regeneration and orthobiologics / orthopaedic hardware / sports medicine. On this point, it is important to note: There exist differences in approach depending on whether the “core” of the company is embedded in AWC / tissue regeneration, branching out to the ortho / sports med world, as opposed to the other way around. Typically, such companies still maintain separate commercial teams–in many cases all the way up to the senior management level, highlighting how tricky it can be to leverage wound care and ortho-plastics / foot and ankle call point synergies without neglecting the vast number of other specialties and decision makers involved in wound healing. These include: internal medicine, endocrinology, vascular, and nursing–as well as the often neglected yet critical administrative / managerial decision makers that are responsible for everything from clinical outcomes management, to clinical-operational flow, to reimbursement, to staffing / competencies, and in many cases full P&L responsibility of the program. The most successful companies who leverage AWC / tissue regeneration competencies to drive ortho-plastics / ortho-biologics results (and vice versa) have developed competencies and allocated resources to address all of the above. “The ‘New’ Bioventus” as presented on yesterday’s call is below: While Misonix had been organized by surgical (~54% of revenue) and wound (~46% of revenue) divisions, the combined entity will be structured as follows: Pain Treatments: Comprised of Bioventus and Bioness (acquired in Mar 2021) existing product lines Restorative Therapies: Biovenuts and Bioness bone rehab, together with Misonix soft tissue debridement and CTP portfolio; This is where wound care will sit as well. Surgical Solutions: Bioventus bone grafting products, together with Misonix’s bone cutting solutions, as well as the the Misonix neXus console / control unit itself. Broadly speaking, the proposed new structure makes sense. Indeed, Bioventus’ primary objective is and should be to maximize their stakeholder value and results overall–not necessarily to become a top global wound care player. Yet with their expected $170M 2021 revenue within the combined Restorative Therapies business unit, that is a non-trivial part of the AWC market–even if they expect it to make up just 34% of their total 2021 revenue. Should AWC become a priority, it may benefit from additional refocus and structuring, together with any future inorganic growth ambitions. But for an initial post-deal structure, it indeed strikes a reasonable balance between wound care and the more traditional segments.   Trend: Medtech firms “bleeding” into wound care, whether intentionally or unintentionally We need to appreciate that most companies miscalculate–or perhaps it’s more fair to use the term “oversimplify” the AWC medtech market. Depending on the source, you may see the TAM (total addressable market) for AWC listed in the $2 to $50B range. Generally speaking, I think $5 to 15B is about right, but this really depends on the specific context and analysis being considered. But to be clear: Any company involved in the creation, resection, repair, implant, infection management, perfusion, protection, stimulation, closure, and/or support of most tissue types, is to some extent involved in the business of wound healing. Whether resecting a tumor, performing reconstructive surgery, postpartum care, or placing a stoma, orthopaedic fixator, or vascular access port, when clinicians and medtech solutions “touch” (physically or figuratively) one or more of the phases of healing, they are intentionally or unintentionally involved int he advanced wound care space. If you’re looking to further deepen your understanding of this point, It’s covered in