Symmetry Medical (SMA), which supplies instruments to orthopedic device makers, reported that it has completed the prior reported takeover of the surgical instruments unit of Codman & Shurtleff, Inc. (Codman), a Johnson & Johnson (JNJ) enterprise.
In the first quarter of 2012, Symmetry will absorb Codman’s surgical instrument product line into its hospital direct setup, Specialty Surgical Instrumentation (“SSi”). The integrated direct general surgical instruments operation will be called Symmetry Surgical, which will have more than $100 million in yearly revenues.
The company stated that its forthcoming product line will offer one of the widest arrays of offerings in the $1 billion business of general surgical instruments. In addition, Symmetry Surgical will benefit from diversified sales, better gross margin and other advantages.
The company provided guidance for 2012. Following the takeover, Symmetry forecasts sales in a band of $410 million and $425 million. The takeover is expected to be significantly accretive to adjusted earnings per share and breakeven on a GAAP basis.
Symmetry is the largest OEM provider of orthopedic implants and instruments to orthopedic devices manufacturers. Its major customers include Johnson & Johnson’s DePuy, Stryker (SYK) and Zimmer Holdings (ZMH).
Symmetry Medical’s “Total Solutions” approach has differentiated it from its rivals and provided a substantial growth opportunity. Most of its customers are expanding outsourcing, realizing the benefits of a “One-stop shop” solution that allows them to focus their efforts on marketing and R&D.
Symmetry is investing in revamping its management structure and enhancing customer collaboration, which should support growth. Moreover, the company should benefit from higher demand for its solutions as its major customers ramp up spending and accelerate product launches.
However, Symmetry still faces price and procedure volume pressure on the orthopedic front. Also, the company’s high spending may continue to weigh on its bottom line. Currently we are Neutral on Symmetry Medical. The stock retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.
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