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Product / Company Performance

OrthoPediatrics reports 4Q18 revenue of USD $14.6MM, +24.7% vs. 4Q17, with 2018 full year revenue of $57.6MM, +26.2% vs. 2017. -

By Mike Evers, ORTHOWORLD

OrthoPediatrics reported 4Q18 revenue of USD $14.6MM, +24.7% vs. 4Q17, with 2018 full year revenue of $57.6MM, +26.2% vs. 2017. Growth for the year was attributed to new product introductions, investments in consigned instrument sets and the ongoing conversion of international stocking distributors to sales agencies. Leadership provided 2019 guidance in the range of $69.7MM (+21%) to $70.1MM (+23%).

In 2018, the company expanded its portfolio to 26 surgical systems and filled a portfolio gap with the REPSONSE 4.5/5.0mm system which addresses complex scoliosis in smaller, younger patients. OrthoPediatrics also launched PediFlex, a flexible intramedullary nail with enhanced surgery and extraction instrumentation. The company also fully launched their Pediatric Nailing Platform (PNP) Femur that expands their intramedullary nail offering to adolescent patients. 

Another important 2018 launch that drove growth in the company’s scoliosis business was the FIREFLY Pedicle Screw Navigation Guide, an alternative to robotic navigation systems. While a small number of accounts are using FIREFLY, leadership noted that uptake has been very good. OrthoPediatrics CEO Mark Throdahl said, “These are not accounts that have been using navigation systems, robotic systems. I think that’s because there just aren’t many robotic systems that are in use in pediatric centers, which typically don’t have the sort of volume of spine surgeries that large adult hospitals would have, for whom those navigation systems really have been designed.”

In February 2019 the company launched an extension to the BANDLOC 5.5/6.0MM system via the BANDLOC Duo, providing an efficient solution for temporary stabilization. The PediFoot, an osteogenesis nail system, and an expanded range of cannulated screws will be launched later in the year. Additionally, investment in consigned sets is expected to be in the $15MM to $17MM range for 2019. OrthoPediatrics expects those sets to contribute as revenue within 12 to 18 months, and views them as both an important revenue driver and a significant barrier to entry for competitors.

The company also saw accelerating international revenue from sales agencies in the U.K., Ireland, Australia, New Zealand, Canada, Belgium and the Netherlands. In addition to these sales agencies, the company has 35 stocking distributors serving 39 countries. At the end of 2018, OrthoPediatrics had 131 sales reps vs. 110 in the prior year. Two-thirds of the reps sell OrthoPediatrics products exclusively, while the others have unique relations that expand the company’s reach into select scoliosis accounts or regional pockets.

With record growth and a strong balance sheet, OrthoPediatrics is actively pursuing a number of acquisitions to address portfolio gaps such as external fixation devices. Since its IPO in 2017, the company has compiled a list of 30 potential targets and currently has ongoing discussions with a “handful” at the top of the list. Leadership stated that many of the targets are products or technologies, and if the acquisition were to be a company it would have to be very small to minimize integration risk and disruption.

Segment sales and growth on an as-reported basis:

  4Q18 4Q17 $ Chg % Chg
Spine $4.1 $2.9 $1.2 39.8%
Trauma $10.2 $8.5 $1.7 19.4%
Sports Medicine $0.4 $0.3 $0.1 27.6%
Total  $14.6 $11.7 $2.9 24.7%
  FY18 FY17 $ Chg % Chg
Spine $16.7 $11.6 $5.1 44.2%
Trauma $39.7 $32.8 $6.9 20.9%
Sports Medicine $1.2 $1.2 $0.0 -2.6%
Total  $57.6 $45.6 $11.9 26.2%

Revenue by geographic region:

Geographic Region 4Q18 4Q17 $ Chg % Chg
US $10.9 $8.8 $2.1 23.9%
Ex-US $3.6 $2.9 $0.8 27.4%
Total   $14.6 $11.7 $2.9 24.7%

Net earnings:

4Q18 Amount ($MM) % of Sales
Sales $14.6  
Cost of Sales -$4.1 27.8%
General and Admin -$4.5 31.2%
Selling and Marketing -$6.6 45.0%
R & D -$1.3 8.8%
Other -$0.6 4.1%
Net Earnings  -$2.5 -16.9%

Sources: OrthoPediatrics

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

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