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Product / Company Performance

Orthofix Weighed Down by Management Vacancies and Order Delays -

Orthofix reported 3Q19 revenue of USD $113.5MM, +1.6% vs. 3Q18.

 

  • The company has lowered full year 2019 revenue guidance to the range of $460MM (+1.5%) to $463MM (+2.2%)
  • Jon Serbousek will succeed Brad Mason as President and CEO on November 1, 2019
  • While biologics and the U.S. rollout of the M6 cervical disc were positives in the quarter, the company was set back by key management vacancies, delays in stocking orders in the trauma business unit, unanticipated currency headwinds and a longer than expected CEO search process
  • Orthofix’s president of global spine was let go and the VP of Sales for Spine Fixation departed, creating a cascade of challenges including halting integration efforts, distracting the salesforce and delaying needed operational changes that impacted new product rollouts impact to top line spine sales will continue into 2020
  • Due to geopolitical uncertainties, the company could not ship $2MM in extremity trauma orders for ex-U.S. distributors; those orders have been removed from full year guidance numbers, and leadership called out Libya and Sri Lanka as impacted countries
  • To date, surgeons have implanted approximately $2MM in U.S. M6 cervical discs, giving the company confidence that they will achieve their full year $3MM to $4MM target. Sales of the M6 disc accelerated from $500K in 2Q19 to $1.5MM in 3Q19
  • Double-digit sales growth in biologics was driven by contributions from new distribution
  • ORTHOWORLD projects Orthofix full year 2019 revenue of $460.4MM, +1.6% vs. 2018

 

“While it was a bit of a perfect storm this period, none of these issues are reflective of the core value proposition of Orthofix and the opportunity for growth and shareholder value creation. They are all fixable and in the process of being addressed.” – Orthofix President, CEO & Director Bradley Mason on the challenges faced by the company in the third quarter

 

ORTHOWORLD estimates segment sales and growth on an as-reported basis, as follows ($MM).

  3Q19 3Q18 $ Chg % Chg
Spine $22.9 $22.1 $0.8 3.8%
Trauma $25.4 $26.9 -$1.5 -5.6%
Orthobiologics $16.3 $14.6 $1.7 11.4%
Other * $48.8 $48.1 $0.8 1.6%
Total $113.5 $111.7 $1.8 1.6%
  9Mo 19 9Mo 18 $ Chg % Chg
Spine $69.1 $66.7 $2.4 3.6%
Trauma $74.4 $79.2 -$4.8 -6.1%
Orthobiologics $48.8 $43.6 $5.1 11.8%
Other * $146.2 $142.4 $3.8 2.7%
Total $338.5 $332.0 $6.5 2.0%

Bone Growth Therapies

 

ORTHOWORLD estimates orthopaedic sales by geographic region as follows ($MM).

  3Q19 3Q18 $ Chg % Chg
US $89.5 $86.8 $2.7 3.1%
Ex-US $24.0 $25.0 -$0.9 -3.6%
Total $113.5 $111.7 $1.8 1.6%

 

Net earnings are as follows.

  Amt % of Sales
Sales $113.5  
   Cost of Sales -$24.9 21.9%
   General and Admin -$21.1 18.6%
   Selling and Marketing -$54.8 48.3%
   R & D -$8.0 7.0%
   Other -$45.2 39.8%
Net Earnings -$40.5 -35.7%

 

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

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