Globus Medical (GMED) Closes Alphatec Buyout, Stock Gains

Globus Medical, Inc. (NYSE:GMED) , a medical devices company specializing in musculoskeletal implants, recently completed the acquisition of Alphatec Holdings, which was announced in July. Headquartered in Carlsbad, CA, Alphatec is a publicly traded medical device company that provides spinal fusion technologies and spinal devices.

Following the announcement, shares of Globus Medical rallied 2.1% to close at $23.97. However, a thorough analysis of the current market trends reveal that the sentiments are not impressive for Globus Medical as it represents a modest one-year return of 2.5%, much lower than the S&P 500’s 13.4% over the same time frame. However, we believe that the recent development will to-some-extent help the company overcome the current unfavorable situation.

Post the closing of Alphatec buyout for $80 million in cash, Globus Medical has gained complete control over Alphatec’s international operations and distributor sales channel. Earlier, the company also agreed to extend a 5-year senior secured credit facility of up to $30 million to Alphatec to support their working capital needs.

Globus Medical is highly optimistic about this deal which according to the company will meaningfully boost its international expansion. The company allying with Alphatech, should gain access to Alphatech’s existing markets in Japan and foray into other emerging markets. In this regard we note that Globus Medical recorded an 8.1% year-over-year increase in international sales in the just-reported second quarter of fiscal 2016.

Management is also quite hopeful, as the purchase is expected to be ‘marginally accretive’ in 2017 and represent incremental adjusted earnings of up to 8 cents per share in 2018 and beyond.

Our Take

A glimpse at the global trends reveals that the spinal implants and devices market is expected to reach a worth of $15.7 billion by 2020, growing at a CAGR of 5.6%, as per Markets And Markets.

Buoyed by such trends, we believe Alphatec would help Globus Medical gain traction and fortify its market position.

Zacks Rank and Key Picks

Currently, Globus Medical has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include Natus Medical Inc. (NASDAQ:BABY) , Masimo Corporation (NASDAQ:MASI) and IDEXX Laboratories Inc. (NASDAQ:IDXX) . Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).

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