Zimmer Holdings, Inc. is offering to divest itself of some knee and elbow brands to get European regulators off the dime and approve their acquisition of Biomet, Inc.
Zimmer Offers to Divest Some Knees and Elbows in Europe
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“Remedy Package”
On December 4, 2014, the company said it has offered the European Commission (EC) a “remedy package” to help get the deal done. According to a company statement, the package addresses “discrete concerns” identified by the European regulators in their preliminary assessment of the proposed acquisition of Biomet.
Divestitures
The package includes “the divestiture of one unicompartmental knee brand and one elbow brand in the European Economic Area (EEA) and one total knee brand in two EEA countries. The EC will market-test the proposed remedy package in the coming days. In parallel, the EC has ‘stopped the clock’ on its review of the proposed merger.”
The company says it continues to be “encouraged by the substantial” progress of the regulatory process and still expects to close the deal in the first quarter of 2015. The deal is still waiting for the expiration of the Hart-Scott-Rodino Act waiting period in the U.S. and approval from Japan’s Fair Trade Commission.
On November 18, 2014, Zimmer announced it had agreed to extend the European deadline by a “limited number of days, ” and provide the European regulators with additional information.
In October when the Europeans announced they wanted to investigate the proposed deal further, Wells Fargo analyst Larry Biegelsen said that, according to his consultant, the review was likely to be resolved through divestitures. The likely areas of divestiture, according to Biegelsen, were unicompartmental knees and shoulders, given the high combined market share.
EU – U.S. Coordination
BofA Merrill Lynch analyst Bob Hopkins said back in October that the possibility remains that the FTC could comment soon, but “conversations with FTC experts suggest FTC and EU regulators will likely coordinate the investigation to the extent permissible in order to reach agreement on any potential conditions placed on the deal. Coordination between the U.S. and EU could potentially push out the FTC ruling into early next year.”
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This is a fascinating development. In my practice we've seen similar outcomes with the revised protocol. The key differentiator seems to be patient selection criteria. Has anyone else noticed the correlation with BMI thresholds?
Great point. I'd push back slightly on the conclusion, the sample size in the cited study is too small to draw population-level inferences. That said, the directional signal is compelling and worth a larger RCT.
We implemented a similar approach last year. Early results are promising but we're still gathering 12-month follow-up data. Happy to share our protocol if anyone is interested.
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