Saturday, July 11, 2009

Gee! GE

So what's going on at Synthes? Since David Paul left to start Globus Medical, the Arbeitsgemeinschaft fur Osteosynthesfragen, has never been the same (excuse my German or is it Swiss Deutsch). What happened to this once stoic guardian of the orthopaedic trauma and spine world? The recent Norian indictment raises tremendous questions regarding the current management team and the climate in our industry. Even though Synthes has an estimated market cap of $8 billion (I hope I am not being too generous Hansjoerg) the "old girl" is starting to show some wear and tear.

As Mr. Wyss begins to approach his golden years, one has to wonder whom has the fire power to buy this company? Someone once commented that a monkey could run Synthes and it still would be profitable. Based on this company's marketshare in Trauma, Spine, Maxillofacial, Biologics, and Power Tools that assessment was probably correct. In addition, just look at the "monkeys" that are currently running this company.

Hansjoerg Wyss has to be in his mid 70's, and regardless of someone's education, money or power, those of you that know the Spine Blogger know how I feel about Septuagenarians in politics or running a company. The mind starts to go and life begins to pass you by. Hansjoerg has turned the overall management of the company to his nephew ( a big mistake, but what can you say about nepotism). At this point in his life, he should enjoy playing tennis, flying his Lear Jet, drinking wine at the Halter Ranch and occasionally pinching a young woman's derriere (not necessarily in that order).

So who can buy Synthes? There is only one company that has the capital and leverage; GE Healthcare. A $17 billion dollar unit of General Electric with products in the following clinical specialties, Cardiology, ENT, Oncology, General Surgery, Urology and Orthopaedics this would compliment their portfolio. In addition, this company needs to stimulate its image. Ever since Neutron Jack left, the company has floundered.

The question then becomes, what would the multiple be? In all likelihood somewhere in the area of 3-5X. This would allow Wyss to endow his beloved Harvard, the Sierra Club, and take care of his immediate family.

GE Trauma? GE Spine? GE Maxillofacial? Sounds nice! Let's wait and see, time loves a hero!


  1. Although your prediction is interesting, I don't think Synthes is for sale, or will be in the forseeable future. It is too inbred and parochial to bring in outsiders from GE or anywhere else. I think management would rather run it into the ground than sell out. Just my 2c.

    There are definitely are chinks in the Synthes armor. The Norian ordeal is a major distraction at best. Their stronghold market, academic medical centers, has buckled under a full assault from MSD. There are some holes in their product line where they used to be absolutely comprehensive.

    By the way, this is a great blog! Keep up the good work.

  2. GE?! =Great Enterprise, being the largest recipient of taxpayer bailout...

  3. Bonefix you are absolutely correct, it was reported that GE was the recipient of the largest bailout in the form of a bank bailout, defense contracts, and even GE Healthcare stands to benefit. The Healthcare division was awarded two contracts that were at a maximum value of $63 million a year over a ten year period. Regardless, what we all think they still would be the ideal buyer of Synthes. But as SpineDoc states: Synthes has so many convoluted relationships it may not make any sense right now. One thing we know for sure Hansjoerg Wyss will never take his company public in the US because he would then have to divulge his real worth to the SEC and the IRS. Until then, Tee 'em high and let 'em fly.