Advanced Medical Solutions Seeks More Tuck-In Acquisitions To Solidify Tissue Adhesive Expertise

Advanced Medical Solutions AMS finished 2022 in strong fashion as the firm delivered 15% top-line growth following stellar performance in 2021 with 25% growth. Considering these results were generally consistent with our expectations as surgical-procedure volume stabilizes after the pandemic, we’re leaving our fair value estimate unchanged. For 2023, we anticipate the firm should post mid-single-digit revenue growth, as higher-margin branded surgical products grow a touch faster than the wound care segment. In the meantime, the firm continues to make tuck-in acquisitions that we think should support its narrow economic moat. Management seems to be intent on constructing deep expertise at AMS in both tissue adhesives and wound care technologies.

Most recently, AMS acquired Connexicon Medical, which further bolsters AMS’ prowess in cyanoacrylate adhesives. This includes products such as Indermil Flexifuze, chemical formulations, and R&D resources. The addition of Connexicon underscores AMS’ intangible assets, in our view. There are many potential medical applications of cyanoacrylate adhesives, but there can be tricky aspects and proprietary formulations and trade secrets can play significant roles in the success of these products.

Nonetheless, the driving factor for AMS in the near term is the normalization of surgical procedures. First-quarter results at several providers and medical device firms highlighted robust growth in healthcare utilization in the U.S., and we anticipate this strength should last through this year, as patients become accustomed to seeking care without needing to accommodate COVID-19 concerns.