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Product / Company Performance

Alphatec Spine Reports 4Q18 Revenue of $25.3MM, -3.6% vs. 4Q17 -

By Mike Evers, ORTHOWORLD

Alphatec Spine reported 4Q18 revenue of USD $25.3MM, -3.6% vs. 4Q17, with 2018 full year revenue of $91.6MM, -9.9% vs. 2017. The company missed its low-end guidance for 2018 by approximately $0.3MM. However, leadership believes an undercurrent of growth was established in 2018 that will carry the company to 2019 revenues between $98MM (+7%) and $103MM (+12%). Alphatec expects to reach annual sales of $200MM by 2022.

The primary challenge to Alphatec is currently their legacy-heavy portfolio. In 2018, 46% of all revenue came from products six or more years old. Only 9% came from products less than two years old. The company addressed this with 12 alpha launches in 2018, with another 12 planned for 2019 including porous titanium interbody implants, a comprehensive thoracolumbar fixation system and an expandable screw designed to offer significantly improved pull-out strength compared to other pedicle screws.

With an updated portfolio that creates clinical distinction, the company will also be able to drive exclusive relationships with high-level distributors with the goal of having about 50 distributors each able to support a territory of at least $4MM in annual sales by 2022. Alphatec has been “bleeding off” many non-strategic distributors, and revenue from legacy distribution was down 51% in 2018. In fact, the entire company has experienced extraordinary turnover, as 44% of the entire Alphatec team was hired in 2018.

Hospital access has been a strong point for the company, with access to 21 of 25 integrated delivery networks. New products and more focused distribution drove surgeon adoption. Alphatec’s top 20 surgeons generated 61% more revenue in 2018 compared to the year prior, while revenue from new surgeon customers doubled. The company saw better pull through, as well, with revenue per surgery going up 9%.

Product pull through is a key theme for Alphatec in 2019, as it frames new product launches by spine approach. CEO Pat Miles said, “Spine surgeons view the world in terms of approaches. You’ll hear us refer to ourselves as spine approach technology. We really must create clinical distinction by spine approach.” The integration of SafeOp automatic neuromonitoring into Alphatec’s Informatics platform gives the company a differentiated technology scalable to all spinal approaches. Within each one, the company will have a suite of products that integrate with Informatics to create multiple revenue opportunities per procedure. Leadership expects the true revenue benefit of SafeOp and Informatics is the “assembly of products that we can put together in an approach to fulfill the obligations of surgery.”

As they did in 4Q18, Alphatec secured another $30MM in financing through Squadron Medical Finance Solutions on March 7, 2019. The expanded credit facility will allow Alphatec to continue to scale the company as it grows toward $200MM in revenue by 2022.

Segment sales and growth on an as-reported basis:

  4Q18 4Q17 $ Chg % Chg
Spine $23.0 $23.9 -$0.9 -3.7%
Orthobiologics $2.4 $2.4 -$0.1 -2.9%
Total  $25.3 $26.3 -$1.0 -3.6%
  FY18 FY17 $ Chg % Chg
Spine $83.1 $92.4 -$9.3 -10.0%
Orthobiologics $8.5 $9.3 -$0.8 -9.0%
Total  $91.6 $101.8 -$10.1 -9.9%

Revenue by geographic region:

Geographic Region 4Q18 4Q17 $ Chg % Chg
US $23.1 $20.9 $2.1 10.0%
Ex-US $2.3 $5.3 -$3.0 -57.0%
Total  $25.3 $26.3 -$0.9 -3.6%

Net earnings:

4Q18 Amount ($MM) % of Sales
Sales $25.3  
Cost of Sales -$8.8 34.6%
Selling and Admin -$18.9 74.5%
R & D -$3.0 12.0%
Other -$5.3 20.9%
Net Earnings  -$10.6 -41.9%

Sources: Alphatec Spine; ORTHOWORLD estimates.

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

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