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Product / Company Performance

Orthofix Reports 4Q18 Revenue of $121.1MM, +3.6% vs. 4Q17 -


Orthofix posted 4Q18 revenue of USD $121.1MM, +3.6% vs. 4Q17, with 2018 full year revenue of $453MM, +4.4% vs. 2017. Within the last year, the company moved its corporate domicile from Curaçao to Delaware, realigned its spine business and acquired Spinal Kinetics.

For full-year 2019, Orthofix expects net sales of $472MM to $477MM, a year-over-year increase of 4.2% to 5.3%. Between $3MM and $4MM of that revenue is expected to derive from the M6-C artificial cervical disc, which recently received FDA premarket approval. Spine sales are expected to grow in the high single-digits, with trauma sales fighting through currency headwinds to end at low single-digit growth.

Orthofix’s bone growth therapies segment (which we segment as “Other”) continued its run of strong performance, as adoption rates increased among both existing and new customers. The company’s spine segment sales grew +1.4% for the quarter but benefitted from a $3.6MM contribution from its acquisition of Spinal Kinetics. The biologics business unit decreased primarily due to a March 2018 reduction in contractual service fees with MTF Biologics. Adjusting out the contractual decrease, the biologics sales grew 2.7% for the quarter with increased Trinity volumes offset by low single-digit price erosion. The trauma segment was heavily impacted by the mandatory adoption of ASC-606 accounting practices and the related changes to the timing of revenue recognition. 

FDA premarket approval for the M6-C disc is an important inflection point for the company. Retiring CEO Brad Mason said, “If I think back over the history of Orthofix, few if any milestones were as strategically important to the company’s future as the Spinal Kinetics acquisition last year, and this approval.” The M6-C disc is indicated as an alternative to cervical fusion, and is the only disc in the U.S. with shock absorption capability. The disc received CE Mark approval in 2006 and has been used in 45,000 ex-U.S. implants to date. Orthofix expects U.S. cases to begin in March at a few centers of excellence, followed by a controlled market launch in 2Q19.

The company expects M6-C to generate excitement and opportunities for its direct and independent salesforce. Existing distributors have expressed interest in expanding their relationships with Orthofix, beyond just the M6 disc. As the company works toward exclusivity with distributors, it believes that it can achieve double-digit growth in 2020.

With the approval and impending launch of the M6 disc, Mr. Mason believes that he’s achieved his goals at Orthofix. He said, “What I’ve always done best and enjoyed the most in my career is starting and fixing companies…with the recent FDA approval of the M6-C disc as an inflection point in the transition of Orthofix from its recovery and rebuilding phases to a multiyear growth phase, I finished what I came to do and what I do best.” He will continue in his current role until a successor is found and then stay on for a year in a consulting role.

Segment sales and growth on an as-reported basis:

  4Q18 4Q17 $ Change % Change
Spine $25.0 $21.2 $3.8 17.9%
Trauma $27.2 $29.1 -$1.9 -6.4%
Orthobiologics $16.0 $16.9 -$0.8 -4.8%
Other * $52.8 $49.8 $3.1 6.1%
Total  $121.1 $116.9 $4.2 3.6%
  FY18 FY17 $ Change % Change
Spine $91.7 $82.0 $9.7 11.8%
Trauma $106.4 $103.2 $3.2 3.1%
Orthobiologics $59.7 $62.7 -$3.0 -4.8%
Other * $195.3 $185.9 $9.4 5.0%
Total  $453.0 $433.8 $19.2 4.4%

* Bone growth therapies

Sales by geographic region:

Geographic Region 4Q18 4Q17 $ Change % Change
US $94.97 $93.00 $2.0 2.1%
Ex-US $26.1 $23.9 $2.2 9.3%
Total  $121.1 $116.9 $4.2 3.6%

Net earnings:

4Q18 Amount ($MM) % of Sales
Sales $121.1  
   Cost of Sales -$25.6 21.2%
   Genereal and Admin -$20.0 16.6%
   Other -$3.9 3.2%
   R & D -$8.8 7.3%
   Selling and Marketing -$53.8 44.5%
Net Earnings  $8.9 7.3%

Source: Orthofix

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

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