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Product / Company Performance

ConforMIS Reports 4Q18 Revenue of $22MM, +6.3% vs. 4Q17 -


ConforMIS reported 4Q18 revenue of USD $22MM, +6.3% vs 4Q17, with 2018 full year revenue of $89.8MM, +14.9% vs. 2017. Accounting for the one-time $10.5MM royalty settlement with Smith & Nephew in 3Q, product revenue grew 1.5% for the year. The company reaffirmed its previously provided 2019 guidance of 4% product revenue growth.

Sales of the iTotal Posterior Stabilizing (PS) knee increased to 36% of total product revenue in the quarter, up from 29% the previous year. Sales of legacy products like iTotal CR, iDuo and iUni decreased by 8% on a year-over-year basis. ConforMIS CEO Mark Augusti offered the following insight, “We’ve done a better job targeting and reaching out to PS surgeons. I think the CR business is under pressure because, as I’ve said in past calls, we only have a cemented CR. And that segment is actually declining.”

Coming on the heels of Augusti assuming interim control of the sales team last quarter, the company announced in December that it was undertaking a series of cost-reduction moves that include reducing total headcount by 10% and outsourcing manual CAD-related portions of the manufacturing process to India. With focus shifting to the new product pipeline, especially the ConforMIS Hip and cementless press-fit knee, leadership stressed that restructuring will not inhibit top line growth or product launches.

The ConforMIS Hip remains on track for 2H19 full commercial launch, and generated $556K in limited release during 4Q18. To date, 20 surgeons have performed over 150 procedures with the system, and the company is integrating their feedback. Leadership is excited about their product pipeline, and expects to add the iTotal G3 knee in limited launch in the second half of the year with a cementless knee offering in 1H20. These new products are expected to enable ConforMIS-exclusive indirect reps to drive more product revenue growth.

Indeed, the company has expanded their network of indirect reps, who account for the lion’s share of product revenue, by 14% at the end of 2018 and plan for at least an additional 10% growth in reps this year.

The company continued to face ex-U.S. reimbursement headwinds. To offset these in Germany, ConforMIS has also expanded to ex-U.S. markets where they previously had no presence. These geographies include Australia, Italy, the Netherlands, Spain and areas in the Middle East. While pricing is more challenging in these regions than the U.S., the company believes there are small, underserved segments in these markets that want differentiated products such as customized knee implants.

ConforMIS’ segment sales and growth on an as-reported basis are as follows.

  4Q18 4Q17 $ Change % Change
Joint Replacement Knees $21.5 $20.8 $0.7 3.6%
Joint Replacement Hips $0.6      
Total  $22.0 $20.8 $1.3 6.3%
  FY18 FY17 $ Change % Change
Joint Replacement Knees $89.2 $78.1 $11.1 14.2%
Joint Replacement Hips $0.6      
Total  $89.8 $78.1 $11.7 14.9%

* Limited launch 3Q18, full launch 2H19

ConforMIS’ product revenue by geographic region is as follows.

Geographic Region 4Q18 4Q17 $ Change % Change
US $19.4 $17.6 $1.8 10.2%
Ex-US $2.5 $2.9 -$0.4 -13.6%
Total  $21.9 $20.5 $1.4 6.9%

Net earnings for 4Q18 are as follows.

4Q18 Amount ($MM) % of Sales
Sales $22.0  
   Cost of Sales -$11.2 50.7%
   Sales and Marketing -$9.7 43.9%
   General and Admin -$6.1 27.7%
   R & D -$3.5 15.7%
   Other -$1.5 6.8%
Net Earnings  -$9.9 -44.8%


Source: ConforMIS

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

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