In Orthopedics, Playing From Strength

At an otherwise quiet American Academy of Orthopedic Surgeons meeting, the biggest news was Smith & Nephew's acquisition of pain specialist Oratec Interventions. Times have never been better in orthopedics, and the Smith & Nephew deal raises the question whether the industry is about to see a period of robust deal-making.

By far, the biggest news at an otherwise quiet American Academy of Orthopedic Surgeons (AAOS) meeting this year was Smith & Nephew PLC 's announced acquisition of pain management specialist Oratec Interventions Inc. [See Deal] At $12.50 a share, or around $310 million, the deal was rich, though not as rich as the once-high-flying Oratec and its investors might have dreamed it would be. Indeed, one of the few companies to successfully launch a medical device IPO two years ago [See Deal], Oratec's stock soared after its public offering only to crash, tumbling from near $80 immediately before its lock-out period ended. Oratec was trading at around $6 just prior to Smith & Nephew's bid.

In a conservative industry like orthopedics, Smith & Nephew's move raised some eyebrows. Some long-time industry executives questioned how much...

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