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Stryker Will Divest Total Ankle Business to get FTC Blessing for Wright Medical Acquisition
November 3, 2020
The Federal Trade Commission will require medical device companies Stryker Corp. and Wright Medical Group N.V. to divest all assets related to Stryker’s total ankle replacements and finger joint implant products to remedy concerns that Stryker’s proposed $4 billion acquisition of Wright will harm competition in those markets.
Under the terms of the consent agreement, the companies will divest Stryker’s total ankle replacements and finger joint implants businesses to DJO Global, Inc.
The FTC’s complaint alleges that the acquisition as proposed would likely result in substantial competitive harm to consumers in the U.S. markets for total ankle replacements and finger joint implants. As suppliers of close substitutes in both markets, Michigan-based Stryker and Dutch company Wright respond to competition from each other with improved products, better service, and lower prices. By eliminating this direct and substantial head-to-head competition, the proposed acquisition likely would allow the combined firm to exercise market power unilaterally, resulting in less innovation and higher prices for consumers, according to the complaint.
Total ankle replacements are used to treat end-stage ankle arthritis, reducing pain while maintaining or increasing ankle motion. According to the complaint, Wright and Stryker are the largest and the third-largest suppliers of total ankle replacements in the United States. Without a remedy, the merged company would control approximately 75 percent of the U.S. market for total ankle replacements.
Finger joint implants are used to treat advanced osteoarthritis in the hand, after other, less invasive options have failed. According to the complaint, Wright and Stryker are two of only three significant suppliers for finger joint implants in the United States. Without a remedy, the combined company would control more than half of the U.S. market for finger joint implants.
Under the proposed consent agreement, Stryker and Wright must divest all assets associated with Stryker’s total ankle replacements and finger joint implants to DJO Global, allowing it to become an independent, viable, and effective competitor in these markets. According to the FTC, California-based DJO Global has an established track record in the medical device industry and is well positioned to restore the competition that otherwise would be lost through the proposed acquisition. Under the proposed order, Stryker is required to supply DJO Global with transition assistance, and to act as an intermediary supplier until DJO Global obtains FDA approval to be the legal manufacturer of the divested products.
As explained in the accompanying analysis to aid public comment, the proposed order appoints Justin Menezes, of Mazars LLC, as monitor, and it allows the Commission to appoint a divestiture trustee in the event that the companies fail to divest the products as required.
Commission staff worked closely with counterparts at the UK Competition and Markets Authority to analyze the proposed transaction and proposed remedy.
See Full Press Release at the Source: FTC Requires Medical Device Companies Stryker Corp. and Wright Medical Group N.V. to Divest Assets to Preserve Competition | Federal Trade Commission
Original Source: Federal Trade Commission
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