Stryker Expands in Spine with Surgical Dynamics

01 Jun 2002

With so much interesting technology in the spine market today, valuations are sky high. Stryker's $135 million deal for Surgical Dynamics raises eyebrows for its low price. But if it isn't the boldest move in spine, Stryker's deal could very turn out to be a very good one, as the company gains an important foothold in the spinal cage market.

On the face of it, Stryker Corp. 's purchase of spinal cage company Surgical Dynamics Inc. doesn't seem all that impressive [See Deal]. After all, Surgical Dynamics has been on the market with no takers for years, almost since the day its parent United States Surgical (now a division of Tyco Healthcare Group ) was acquired by Tyco International Ltd. in 1998 [See Deal]. And certainly foremost among the concerns of any potential acquirers had to be both the patent litigation that Surgical Dynamics was facing and, more generally, the disappointing fall-off of the spinal cage market beginning in the late 1990s. Indeed, Stryker's purchase price of $135 million pales before the valuations put on other innovative spinal companies: one month after its IPO, Kyphon Inc. 's market cap stood at $650 million [See Deal], while Oratec Interventions Inc. fetched $310 million in its recent deal with Smith & Nephew PLC [See Deal].