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Product / Company Performance

Globus Medical Reports 4Q18 Revenue of $195.9MM, +11.3% vs. 4Q17 -

By Mike Evers, ORTHOWORLD

Globus Medical reported 4Q18 revenue of USD $195.9MM, +11.3% vs. 4Q17, with 2018 full year revenue of $713MM, +12.1% vs. 2017. This marks the fifth consecutive quarter of double-digit growth, and the highest organic growth since the company went public. Globus Medical reaffirmed its 2019 guidance of $770MM.

For the quarter, U.S. growth was driven by additional implant sales from competitive reps with expiring non-competes and increased implant pull-through from ExcelsiusGPS placements. International growth was driven by increased market penetration in Japan, Spain, Italy and other key areas coupled with ExcelsiusGPS sales. Company leadership believes that international spine growth rates will surpass U.S. spine growth rates in 2019.

Revenue for the ExcelsiusGPS system was $14.3MM in 4Q18, a 31% year-over-year increase. Leadership believes that the nascent nature of the robotics market combined with Globus Medical’s strong balance sheet allows the company to compete effectively against much larger competitors in the robotics space. In January 2019, the company received FDA clearance to market the AQrate robotics system. While there are no immediate plans to commercialize the product, it is likely that Globus Medical will use the IP and engineering team acquired from KB to further enhance the ExcelsiusGPS feature set.

In February, Globus received FDA clearance for use of its SI joint fixation system, SI-LOK, with ExcelsiusGPS. Per leadership, additional applications for ExcelsiusGPS, including interbody and cranial solutions, are nearing the completion of their development cycles. While these may not bring notable incremental volume, they do further differentiate the product versus competitive robots. Value and versatility are key components of the capital equipment purchase decision process as hospitals strive to contain costs.

Globus Medical also indicated a willingness to be flexible with capital-constrained customers to expand the base of installed robotic systems. Company CEO Dave Demski said it’s “probably not accurate” to say they are exchanging robots for volume, but mentioned package deals and deferred payments as options. Like its competitors, Globus Medical is driven to place robots not just for the capital sale but also to facilitate product pull-through and upselling, important factors in offsetting the ~2% price erosion seen across most of the orthopedic industry.

One of the few areas where the company struggled in 2018 was in launch of its trauma line, as it faced challenges in achieving the necessary inventory for a national rollout. Mr. Demski said, “There’s thousands of SKUs. So we’re taking on a lot at the same time. While they’re similar, they are different in several respects and the teams developing them are different. That’s posed some challenges as we’ve gone from design to manufacturing as well as trying to take that on in addition to our growth in spine in the Alphatec conversion.” Trauma revenue for 2019 is expected to be in the $5MM range.

ORTHOWORLD estimates 4Q18 and full year segment sales and growth on an as-reported basis as follows.

  4Q18 4Q17 $ Change % Change
Spine $186.5 $167.4 $19.1 11.4%
Trauma $0.4     n/a
Orthobiologics $9.1 $8.6 $0.4 5.1%
Total  $195.9 $176.0 $19.9 11.3%
  FY18 FY17 $ Change % Change
Spine $678.6 $604.8 $73.8 12.2%
Trauma $1.3     n/a
Orthobiologics $33.1 $31.2 $1.9 6.1%
Total  $713.0 $636.0 $77.0 12.1%

Globus Medical’s revenue by geographic region is as follows.

Geographic Region 4Q18 4Q17 $ Change % Change
US $163.8 $148.0 $15.8 10.7%
Ex-US $32.2 $28.0 $4.1 14.7%
Total  $195.9 $176.0 $19.9 11.3%

4Q18 net earnings are as follows.

4Q18 Amount ($MM) % of Sales
Sales $195.9  
   Cost of Sales -$46.0 23.5%
   R & D -$13.8 7.0%
   Selling and Admin -$83.6 42.7%
   Other -$15.8 8.1%
Net Earnings  $36.8 18.8%

 

Sources: Globus Medical; ORTHOWORLD estimates.

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

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