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Product / Company Performance

Alphatec Spine Reports 3Q18 Revenue of $23MM, -0.4% vs. 3Q17 -

By Mike Evers, ORTHOWORLD

Alphatec Spine reported 3Q18 revenue of US $23MM, a 0.4% decline vs. 3Q17. The company has made progress in transforming its distributor network and bringing innovation to a legacy portfolio that had little differentiation.

During this transformation, leadership has preferred to frame their results in sequential quarters instead of year-over-year. Sales in the third quarter were up 3% vs. the second quarter. U.S. commercial revenue was up year-over-year for the first time since the company began reducing nonstrategic distributor relationships in 2017. President and COO Terry Rich said, “It’s exciting to see the revenue growth from our expanding dedicated sales channels and surgeon adoption begin to outpace revenue losses associated with that transition.” For the quarter, 63% of U.S. revenue was driven by dedicated distribution, up from 40% at the end of 2017.

Driving surgeon adoption has been a complex undertaking for the company, with 80% of revenue currently generated by products developed and launched before 2016. There has been progress, however, with 3Q18 revenue from new surgeon customers significantly outpacing overall revenue growth.

Alphatec is driving toward refreshing their portfolio and is on track for 12 alpha launches within 2018, including procedure-specific porous titanium interbody implants. The OsseoScrew system, a next-generation expandable posterior fixation implant designed for patients with advanced thoracolumbar tumors, received FDA 510(k) clearance and debuted in the quarter. The company plans to launch a comprehensive thoracolumbar fixation system next week. Moving forward, the company plans to release eight to ten new products each year.

Alphatec is also seeking clinical differentiation with their Alpha Informatics system, a small Bluetooth-enabled platform that delivers real-time information to surgeons. The first set for Alpha Informatics will be automated neuromonitoring powered by SafeOp and can be used with or without a neurophysiologist in the O.R., which was submitted to the FDA within the quarter. Alphatec is developing new systems, implants and biologics, regardless of the minimally disruptive approach, to integrate with Alpha Informatics. The company believes surgeons yearn for immediately available interoperative information to drive better decision making. Pat Miles, Chairman and CEO, said, “Other market players are addressing that need with robotics and capital equipment that demand huge physical footprints in the O.R., an already severely limited space.”

In the quarter, the company secured $35MM in financing from Squadron Capital, which they used to retire the $29.2MM term loan with Globus Medical. The leadership team also expanded with the hiring of Mark Ojeda, previously with NuVasive, as Executive Vice President of Cervical and Biologics, as well as Darrell Wilson and Mason Zabel as Territory Development Managers for the Central United Sates.

With 4Q18 domestic growth expect to be in the 10% range, Alphatec has updated their guidance to a range of $92MM to $95MM, compared to previous guidance of $95MM. ORTHOWORLD projects 2018 revenue of $92.5MM, -9.1% vs. 2017.

ORTHOWORLD estimates 3Q18 and YTD segment sales and growth on an as-reported basis as follows.

  3Q18 3Q17 $ Change % Change
Spine $20.9 $21.0 -$0.1 -0.5%
Orthobiologics $2.1 $2.1 $0.0 0.6%
Total  $23.0 $23.1 -$0.1 -0.4%

 

  YTD18 YTD17 $ Change % Change
Spine $60.2 $68.5 -$8.4 -12.2%
Orthobiologics $6.1 $6.9 -$0.8 -11.2%
Total  $66.3 $75.5 -$9.2 -12.1%

 

Net earnings for 3Q8 are as follows.

3Q18 Amount ($MM) % of Sales
Sales $23.0  
   Cost of Sales -$8.1 35.2%
   Sales and Marketing -$11.0 47.6%
   Administrative -$7.9 34.4%
   R&D -$3.2 13.7%
   Other -$2.2 9.7%
Net Earnings  -$9.4 -40.7%

 

Sources: Alphatec Spine; ORTHOWORLD estimates. All revenue figures presented in USD $MM.

Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.

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