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Stryker for Inari Medical makes the rounds; Prepare for a bevy of M&A rumors

AInvestMonday, Jan 6, 2025 4:12 pm ET
2min read

Stryker Corporation (SYK) is reportedly in advanced talks to acquire Inari Medical (NARI) in a deal that could be announced as early as this week, according to a Reuters report. The transaction, if finalized, would value Inari at approximately $3.8 billion and represents a strategic move for Stryker to expand its portfolio in the venous disease treatment space. Shares of NARI surged 30% on the news, jumping from $48 to $65, reflecting investor optimism over the potential synergies of the deal and broader expectations of increased M&A activity under the new, business-friendly administration.

Inari Medical specializes in developing innovative medical devices for the treatment of venous thromboembolism, including deep vein thrombosis (DVT) and pulmonary embolism (PE). These conditions represent significant and underpenetrated markets, particularly in the U.S., with Inari's emerging therapies targeting chronic venous disease, small vessel thrombosis, and dialysis access management. With an estimated total addressable market (TAM) of $4 billion in these areas, Inari presents a compelling growth opportunity for Stryker.

For Stryker, acquiring Inari would bolster its offerings in the thrombectomy device market and allow it to better compete in the fast-growing space of venous disease treatments. The acquisition would align with Stryker's broader strategy of expanding its footprint in high-growth areas within medical technology. This deal also reflects Stryker's commitment to diversifying its portfolio into adjacent markets with strong long-term growth prospects, leveraging Inari’s innovative pipeline and established presence in the U.S. healthcare market.

The potential deal has ignited speculation of further M&A activity in the sector, particularly as the new administration is perceived as more business-friendly. Investors are expecting deregulation and tax policies that could create a favorable environment for consolidation, making the Stryker-Inari discussions a potential catalyst for broader dealmaking in the healthcare space. As a result, the sharp rally in NARI shares could fuel rumors and price movements for other small to mid-cap medical technology companies in the coming weeks.

Despite the optimism, the transaction could face regulatory scrutiny, particularly given the heightened focus on competitive dynamics in healthcare. However, analysts believe the deal is more likely to pass regulatory hurdles given Inari’s relatively niche focus and the complementary nature of its product portfolio with Stryker's. Furthermore, Stryker’s diversification into the venous disease space is unlikely to raise significant antitrust concerns, which should ease the approval process.

The valuation of the deal, at around $3.8 billion, reflects a premium for Inari’s high growth potential and market leadership in the venous disease treatment segment. Inari’s most recent quarterly results showcased solid revenue growth, with Q3 revenue of $153.4 million beating estimates. While the company remains unprofitable, its gross margins and TAM expansion opportunities indicate significant potential for future profitability, making the premium valuation justifiable for Stryker.

In conclusion, the potential acquisition of Inari Medical by Stryker represents a strategic fit that could unlock significant value for both companies. For Stryker, it strengthens its portfolio in a high-growth market, while Inari gains access to Stryker’s global distribution channels and resources to accelerate its growth. Investors should monitor this deal closely, not only for its impact on SYK and NARI but also for the broader implications it may have on M&A activity and valuations across the healthcare sector.

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