In Orthopedics, Playing From Strength

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...