This morning K2M, Inc. announced that it has agreed to be acquired by Stryker Corporation for $1.4 billion 27% premium over the pre-announcement market value.
K2M, which had revitalized the complex spine and deformity markets and became a leader in the minimally invasive sector of the spinal implant market, reported sales of $258 million for 2017 and, according to the consensus of Wall Street analysts, is expected to generate $290 million in 2018, a12% rate of growth.
The Remarkable K2M Story
K2M was founded by two surgeons and two brothers.
The “K” in K2M is Dr. John Kostuik, former President of North American Spine Society (NASS), Scoliosis Research Society, (SRS) and Chief of Orthopedics at Johns Hopkins. In his 69th year and contemplating life after academia he sat down with one of his former fellows, Tom Errico, M.D., and said; “Tom, I’m looking for something to do.”
Dr. Errico thought about it, asked a few questions then strung together these five fateful words: “Maybe we should start a company.”
Physicians starting companies is not really a good idea. It’s like putting sharp objects in the hands of businessmen. Nine times out of ten they’ll hurt themselves. But Drs. Kostuik and Errico de-risked their notion by calling a friend—the former CEO of American Osteomedix and sales executive for Interpore Cross, Aesculap and Synthes Spine, Eric Major.
Eric, like Kostuik, was also looking for something to do.
Eric Major had just sold his supplier of VCF (vertebral compression fracture) products to Interpore Cross. So he knew a thing or two about starting, running and selling businesses. In those days spine was a hot area for investment. Lots of entrepreneurs were throwing up shingles offering spinal implant products for sale.
But Kostuik and Errico didn’t want to start a spine business like other guys. They had something else in mind. Eric Major (later with his brother Lane Major) liked what they heard.
In the early days of the company, surgeon advisors outnumbered employees.
Throughout its development, the company has placed a premium on education, training and impactful innovation.
The company’s first product launch was a top-loading spinal system featuring off-axis screw height adjustment and offering a complete array of screws, rod connectors, and hooks, coupled with easy-to-use instrumentation.
One surgeon who’d used K2M’s products wrote this on an anonymous blog a year ago: “The system is incredible. I am a deformity surgeon and I ‘gave it a go’ to see what all the talk was about. I thought I would use it once and that it would be a joke. How wrong I was. It is incredibly powerful and fast. I can do monster reductions very quickly, far easier than the previous system that I used. I had to do a revision using my old system last week—what a nightmare. It reminded me what a frame-shift this pedicle screw is.”
That system and the ones that followed revitalized the deformity sector of the spine market. In recent years K2M has fully embraced the 3D printing revolution and introduced a steady stream of novel and highly differentiated spinal implants.
What’s Next
Once the purchase is final, K2M will become a wholly owned subsidiary of Stryker Corporation and Eric Major, K2M’s Chairman, Chief Executive Officer, and President will become Stryker Spine’s new President.
“Joining Stryker will be a very exciting next chapter for our global team and surgeon customers around the world,” said K2M Chairman, Chief Executive Officer, and President Eric D. Major. “Stryker’s established leadership in the orthopedic and neurosurgical market, combined with K2M’s culture of innovation and leadership in complex spine and minimally invasive solutions, represent a powerful opportunity for Stryker to strengthen its leadership in the $10 billion global spine market”.
“This acquisition underscores our commitment to the spinal market, which is the largest segment of Orthopaedics with significant unmet needs,” stated Kevin A. Lobo, Chairman and Chief Executive Officer, Stryker. “We believe K2M will significantly enhance our presence with surgeons, patients and employees in both the spine and related neurotechnology markets.”
The proposed transaction is expected to close late in the fourth quarter of 2018.
