Zimmer Biomet Expands Foot and Ankle Portfolio with $1.1 Billion Paragon 28 Acquisition

Zimmer Biomet, a leading orthopedic device manufacturer, has announced plans to acquire Paragon 28, a specialist in foot and ankle implants, for $1.1 billion. The strategic move is set to bolster Zimmer's presence in the growing ambulatory surgery center (ASC) market and reshape its product portfolio.

Acquisition Details and Strategic Rationale

The acquisition, expected to close in the first half of 2025, aims to capitalize on the increasing shift of orthopedic procedures to ASCs. Zimmer Biomet CEO Ivan Tornos highlighted the potential for cross-selling opportunities, noting that Paragon 28 currently has limited presence in the ASC space.

CFO Suky Upadhyay revealed that the combined sports medicine, extremities, and trauma segment will surpass Zimmer's $2 billion hip business in size and growth rate. The deal is projected to be immediately accretive to revenue growth but approximately 3% dilutive to adjusted earnings per share in the first year.

Impact on Financial Performance and Market Position

Zimmer Biomet reported solid financial results for Q4 and full-year 2024:

• Q4 sales reached $2.02 billion, a 4.3% year-over-year increase
• Full-year 2024 sales totaled $7.68 billion, up 3.8% from 2023
• Q4 net income was $239.4 million, down from $419.2 million in the previous year
• 2024 net income stood at $903.8 million, compared to $1.02 billion in 2023

The company forecasts revenue growth of 1% to 3.5% for 2025, with the Paragon 28 acquisition expected to play a significant role in future performance.

ASC Market Opportunity and Integration Plans

Orthopedic companies are increasingly focusing on ASCs as a growth driver, with Zimmer projecting that 40% to 60% of all orthopedic cases will shift to these centers within the next three to five years. Currently, nearly 20% of Zimmer's U.S. sales come from ASCs.

Tornos emphasized the importance of foot and ankle procedures in ASCs, citing "very beneficial reimbursement" that Zimmer is not currently capitalizing on. The company plans to retain Paragon 28's management team, including CEO Albert DaCosta, and expects minimal disruption to the existing salesforce.

Despite the significant investment, Zimmer maintains a strong balance sheet, leaving room for potential future acquisitions. However, the immediate focus will be on successfully integrating Paragon 28 into the company's operations.