30 Day Trial
ORTHOKNOW logo

ORTHOKNOW content is posted to these pages in real time.

Monthly compilations are available in PDF form.

Quarterly Review

2Q12: A First Look at Earnings

ORTHOWORLD’s estimates place preliminary 2Q12 market growth at 5% over 2Q11, as shown in Exhibit 1. Performance highlights follow and pertain to 2Q12, unless otherwise noted.

Exhibit 1
Orthopaedic Sales Increases by Product Segment: 2Q12 vs. 2Q11(1)

Notes to Exhibit 1

1 Orthopaedic products; constant currency, pro forma growth
2 Includes biologics
3 For the quarter ended 5/31/12; includes Dental. Spine includes Bone Stim and Biologics; Bone Stim reflects all Bone Healing sales.
4 Spine
5 For the quarter ended 6/30/12
6 Extremities: extremities + fixation combined; Endoscopy: endoscopic + communications, most of which is orthopaedic; Spine: neuro + spine. Total growth excludes Patient Handling.
7 ORTHOWORLD estimates
 

Alphatec Spine

$48.2MM, -4% (U.S. $32.8MM, -5%; ex-U.S. $15.3MM, -1%)

Acquired exclusive U.S. distribution rights to sell under the company’s own label an FDA-cleared synthetic biologic for posterolateral spine fusion

Signed letter of intent to acquire a small spinal implant company

Signed several new U.S. distributor agreements and added new distributors in Austria, Switzerland, other countries

Received FDA conditional approval to commence pivotal Investigational Device Exemption trial of OsseoFix: 400 patients, 25 sites

Completed design changes for Solus, expects to file for new 510(k) by year-end; will launch in Europe in early 4Q

Dirk Kuyper leaving company

Noted pressures in core hospital business not seen in previous quarters, slight deterioration in pricing (low single digits)

 

Anika Therapeutics

Orthobiologics $10.9MM, +12% (U.S. +24%)

· ORTHOVISC U.S. +22%, ex-U.S. +16%

· MONOVISC -46%

MONOVISC sales down due to order timing, distributor change in Turkey, cautious inventory management in
Europe, competitive product in some regions

Held “productive” meeting with FDA re MONOVISC; expects update by end of summer

Safety profile and flexible, 3 or 4 injection regimen support strong ORTHOVISC sales

Entered into licensing/distribution agreement in Korea for Hyalofast + bone marrow aspirate concentrate

Cingal single injection viscosupplement will be considered a medical device in Europe, will commence patient enrollment for clinical trial in 2013

 

ArthroCare

$60.5MM, +2%

· Sports Medicine $57.7MM, +3% (Americas +5%, International -5%)

· Other (primarily spine) $2.8MM, +22% (Americas -52%, International +64%)

Speedlock knotless anchor contributed to overall increase in average revenue per customer in U.S.

Launched 2 new products: Ambient MegaVac 90 Coblation Wand, MultifIX P Knotless Fixation Device for rotator cuff repair

A number of significant investments to hit SportsMed in 2013

 

Biomet (FY2012 ended 5/31/12)

$2,838.1MM, +3% (U.S. $1,713.3MM, +3%, Europe $702.7MM, flat, International $422.1MM, +9%)

Reconstructive $1,698.8MM, +3%

· Hips +5%

· Knees +2%

· Bone Cement/Other +4%

Sports/Extremities/Trauma (S.E.T.) $354.4MM, +13%

· SportsMed +18%

· Extremities +18%

· Trauma -2%

Spine/Bone Healing $314.0MM, -4%

· Spine -3%

· Bone Healing -7%

Other $203.2MM, +5%

(Overall growth includes dental.)

 

Fiscal 4Q12 revenue: $739.5MM, +5% (U.S. $439.5MM, +7%; Europe $182.4MM, -2%; International $117.6MM, +14%)

Reconstructive $439.6MM, +6% (U.S. +7%)

· Hips +6% (U.S. +8%)

· Knees +6% (U.S. +6%)

· Bone Cement/Other +4% (U.S. +13%)

S.E.T. $96.2MM, +16% (U.S. +18%)

· SportsMed +21% (+16%)

· Extremities +22% (+29%)

· Trauma -4% (U.S. -5%)

Spine/Bone Healing $83.9MM, +5% (U.S. +3%)

· Spine +9% (U.S. +7%)

· Bone Healing -5% (U.S. -5%)

Other $50.6MM, +1% (U.S. -3%)

(Overall growth includes dental.)

 

Recon

Year over year pure price declined; FY4Q price decline for U.S. hips, knees in low single-digits

Very strong demand for Taperloc Complete Hip in U.S. and Europe

Highly-advanced bearings ~70% of domestic acetabular units

Received clearance for Signature Personalized Patient Care System for acetabular cup placement, will start clinical evaluations in FY1H13

Continued increased demand for Vanguard Complete Knee, positive momentum from Vanguard 360, strong demand for Orthopedic Salvage System

Oxford partial knees declined very slightly, but at improved rate vs. previous quarters

Referenced “pretty significant knee development,” targeting “clinical evaluation in the back half of this year”

 

S.E.T.

Supported by sales of JuggerKnot Soft Anchor for hand/wrist and shoulder repair

Rolling out comprehensive reverse shoulder in Europe in FY1Q13

Relatively seamless transition so far with acquisition of DePuy’s trauma operations

 

Spine/Bone Healing

Received clearance for Lineum Posterior Occipital Cervical Thoracic System with proprietary translating screw design

Microfixation sales very strong, but almost entirely offset by decreases in biologics

 

ConMed

$118.2MM, +9%

· Arthroscopy $81.0MM, +15% (Single-use products +18%; Y-KNOT ~$0.5MM)

· Powered Instruments $37.2MM, -3% (Burs/blades +6%)

In 3Q, announced partnership with Exactech on surgeon education in North America, from early arthroscopic intervention to total joint replacement

 

DJO

$285.9MM, +5%

· Bracing/Vascular $112.5MM, +9%

· Recovery Sciences $84.8MM, -2%

· International $70.4MM, +5%

· Surgical Implant $18.0MM, +10%

(Bracing and Vascular includes products serving the diabetes market.)

Growth driven by Exos upper extremity bracing/support products, OA Nano osteoarthritis knee brace, X-Act ROM post-op brace, Turon total shoulder, RSP Monoblock shoulder, Revelation microMAX hip, etc.

 

Exactech

$55.2MM, +7% (U.S. $35.2MM, +8%; ex-U.S. $19.9MM, +5%)

· Hips $10.3MM, +22%

· Knees $21.0MM, +1%

· Biologics and Spine $5.9MM, -1%

· Extremities $12.0MM, +24%

· Other $6.0MM, -14%

Seeing small signs of recovery in U.S. market

Sales strong in Latin America and Asia

Fully launched posterior augmented glenoid and augmented reverse base plates

In full release of cage glenoid

Planning 4Q full launch of InteGrip cup with acetabular augment

Line extension to Element hip system will offer shorter neck

European shoulder business under a little bit of pressure; some pricing pressure in the U.S.

On track with Investigational Device Exemption study for cartilage project in Taiwan

Sales force ~265 strong

 

Greatbatch Medical

$32.8MM, -5%

Continued to experience operational issues with Swiss orthopaedic facilities

Opening manufacturing facility in Ft. Wayne, Indiana to consolidate orthopaedic operations

 

Integra LifeSciences

$95.6MM, +17% (U.S. $80.7MM, +22%, ex-U.S. $14.9MM, -2%)

U.S. Extremities $32.0MM, +38%

U.S. Spine/Other $48.8MM, +13%

Orthobiologics +>20%

Spine hardware challenged in both price and volume

New spine launches doing quite well (scoliosis, Daytona and minimally invasive systems)

Continued high demand for Evo3 and Mosaic biologics through existing and new distributors

 

Johnson & Johnson

$1,628MM, +14% (U.S. $873MM, +13%, ex-U.S. $755MM, +15%; excluding Synthes, growth +0.9%, U.S. -0.6%, ex-U.S. +3%)

· Hips +4% (U.S. +5%, ex-U.S. +3%)

· Knees +3% (U.S. +3%, ex-U.S. +3%)

· Spine -3% (U.S. -5%, ex-U.S. +1%)

Completed acquisition of Synthes, divested trauma business to Biomet

Synthes contributed ~$200MM, ~13% of sales growth

Noted that orthopaedic procedures were +3% in 1Q, and 2Q experienced similar trends

Pricing/mix change -1%: hip pricing down 4%, mix up 0.5%, price/mix change -3.4%; knee pricing up 1%, mix up ~2%

 

MAKO Surgical

$23.7MM, +27%

· Procedures $13.0MM, +70%

· RIO Systems $8.2MM, -14%

· Service/Other $2.5MM, +73%

2,590 MAKOplasty bone-resurfacing procedures performed, +66% (2,494 domestic; of those, 280 hip)

Sold 9 RIO systems (8 U.S., 1 China); 126 worldwide to date

Sold 9 MAKOplasty hip applications (7 with U.S. RIO systems, 2 upgrades)

58% of domestic installed base of RIO systems have purchased upgrade

Rolling out RIO 2.5 and Hip 2.0 software systems by end of 3Q

Presented results of randomized, controlled clinical trial comparing uni knee implant alignment error between group receiving RESTORIS MCK delivered by RIO and those receiving the Oxford Partial Knee mobile bearing uni using non-robotic instrumentation; results deemed statistically significant and indicate more accurate alignment using RIO

Underestimated time and effort necessary to close system sales—future sales require more hospital approvals, additional surgeon support/training

 

Medicrea

€5.9MM (~US $7.3MM) +3%

Performed 30 complex spine procedures with LigaPASS

Planning 2H12 launch of PASS OCT for treatment of occipital, cervical and thoracic spinal conditions, primarily targeting U.S. market, and LaminoJAWS nonfusion implant for reconstruction of the posterior cervical arch under cervical laminoplasty

 

NuVasive

$154.4MM, +16% (Ex-U.S. $14MM, +40%; Monitoring services revenue $10.2MM; Lumbar U.S. +5%, Biologics U.S, +5%, worldwide >$26MM, +9%; Cervical U.S. +17%)

Nothing new to report on FDA progress on PCM total disc or AttraX synthetic biologic

Impulse Monitoring case volumes growing as planned, seeing a tightening of monitoring reimbursement by some payers

On track to add 40 neuro physiologists by year-end (many hired in 2Q)

 

Orthofix

$119.5MM, +5%

· Spine $81.8MM, +7% (Stimulation $43.3MM, +9%, Repair Implants/Regenerative Biologics $38.5MM, +4%)

· Orthopaedics $37.7MM, +2%

Biologics alone grew 48%, offset by mid-single-digit pricing pressures on implants

Planning 3Q launch of Forza next-generation interbody spacer

New cervical implant products slated for launch in 4Q and 2013

Increased competition in Brazil drove ex-U.S. weakness

Seeks to use new balance sheet flexibility to support acquisitions

 

Ossur

Bracing & Support $54.3MM, +4%

Launched 2 bracing/support updates and 3 new products

Market environment healthy in the U.S., generally good in EMEA (except France and certain southern regions, though France slowdown is thought to be temporary)

Of note, sprinter Oscar Pistorius is competing with Ossur’s Flex-Foot Cheetah prosthetics in this year’s Olympic games

 

RTI Biologics

$30.1MM, +3%

· Spinal $9.7MM, -11%

· Bone Graft Substitutes/General Orthopaedic $7.0MM, +12%

· Sports Medicine $13.3MM, +10%

Starting to see more indicators of economic stability in certain markets, though larger segments typically record slowdown during summer—will expect rebound once football and soccer season resumes

Expecting inventory reduction in base businesses

SportsMed growth buoyed by strong export business

Spine slowed by timing of inventory replenishment orders from some distributors in 2Q11, spine procedures flat to down

U.S. direct distribution for Bone Graft Sub/General Ortho (BGS/GO) increased 12%

Global BGS/GO direct distribution +25% and expected to grow in low-double-digits for year

Overall U.S. direct distribution accounted for $14MM of revenue, global direct ~42% of business

Launched/released for distribution 2 implants or enhancements

Multipotent Adult Progenitor Cell (MAPC) technology-based implants on track for human implantation within 2012; small and large animal studies processing with encouraging results

Claiming very strong market opportunity for MAPC, plenty of room to execute plans

Initiated large primate study for Xenograft Tendon in ligament reconstruction

Not planning additions to SportsMed distribution group at this time; General Ortho is fully prepped

SportsMed pricing relatively stable

Products should be exempt from medical device excise tax

 

Seikagaku (fiscal 1Q12 ended 6/30/12)

¥6,727MM (~US $86MM), -3%

Decrease attributed to National Health Insurance drug price reductions and discontinuation of research reagent business, despite higher sales volume for ARTZ in Japan and increased export sales of SUPARTZ in U.S.

Focusing on differentiation from competitors in U.S.

Market in Japan for injectable knee osteoarthritis treatments continues to expand due to demographics and patient awareness campaigns

ARTZ sales in China remain strong

 

Smith & Nephew

Advanced Surgical Devices (ASD) $774MM, +2% (U.S. +2%, Established Markets flat; Emerging/International Markets +10%)

· Hips $165MM, -5% (U.S. -6%, ex-U.S. -4%)

· Knees $219MM, +3% (U.S. +3%, ex-U.S. +3%)

· Sports Medicine Joint Repair $127MM, +10%

· Arthroscopic Enabling Technologies $98MM, -4%

· Trauma $116MM, +3%

· Other ASD, including Clinical Therapies $49MM, +11%

Completed transfer of Biologics and Clinical Therapies business to Bioventus

Overall signs of U.S. market stabilization, with challenges continuing in Europe

Overall same price picture as recent quarters, recon and trauma saw like for like reduction of ~2%, partially offset by mix

SportsMed pricing slightly easier than implants—like for like pricing flat

Investing in growth of Emerging Markets; approaching 40 new product introductions in 1H12 across franchise

 

Recon

Continued effects of negative commentary on metal-on-metal hips; Birmingham sales continue to decline, -3% globally, represents <8% of hip sales, little over 1% of total sales

Good growth from traditional hips: OXINIUM, VERILAST bearing technology, SMF Short Modular Femoral stem, R3 Acetabular system, POLARCUP Dual Mobility

Commenced limited launch of REDAPT Revision Femoral system, will add U.S. later in 2012

Knees led by good sales of LEGION Revision

Launched LEGION HK (Hinge Knee) with a kinematic design: “redefines the interpretation of what a hinged knee should deliver for a patient”

Commenced limited release of JOURNEY II TKA in U.S. to positive early feedback from surgeons, patients; full global release to follow in 2014

 

Other

SportsMed driven by FAST-FIX 360 Meniscal Repair, other new products

Arthroscopic Enabling affected by customer reduction in capital spending on visualization

Continued rollout of DYONICS PLATINUM specialty blades

More work required on trauma franchise, as growth reduced by expiration of several agreements

Introduced VLP FOOT Percutaneous Calcaneus Plate and PERI-LOC Ankle Fusion Plate

3Q launches include ENDOBUTTON CL Ultra 10mm fixation, Gluteal Tendon Repair kit

 

Stryker

$2,106MM, +3%* (U.S. $1,384MM, +8%, ex-U.S. $722MM, +0.3%)

Reconstructive $927MM, +2%* (U.S. 10%, ex-U.S. -4%)

· Hips $308MM, +0.8% (U.S. +6%, ex-U.S. -4%)

· Knees $329MM, +2% (U.S. +5%, ex-U.S. -3%)

· Trauma/Extremities $233MM, +11%* (U.S. +22%, ex-U.S. -1%)

MedSurg Equipment $786MM, +3%* (U.S. +3%, ex-U.S. +5%)

Neurotechnology/Spine $393MM, +5%* (U.S. +17%, ex-U.S. +6%)

· Neurotechnology $212MM, +16% (U.S. +23%, ex-U.S. +8%)

· Spine $181.0MM, +9% (U.S. +11%, ex-U.S. +3%)

(MedSurg includes patient handling and emergency medical equipment.)

*Excludes acquisitions.

About 80% finished with company reconstruction efforts announced in late 2011

Weaker results in certain geographies, particularly Europe and Japan

U.S. hip and knee pricing overall trend improved, with mix offsetting price pressure (a little stronger on hips vs. knees)

Recon pricing and utilization trends stable to modestly improving in the U.S.

Recon growth continues to benefit from launches of ADM, MDM and rollout of next-gen Accolade primary hip stem

Two months in to direct-to-consumer “Get Around” ad campaign focusing on single radius design of Triathlon knee (based on circular point of rotation), product well-received

Neuro/Spine, interventional spine and CMF generated double-digit growth

Voluntary recall of Rejuvenate ABG II modular hip stem in early 3Q

Due to potential for fretting and corrosion at modular neck junction

As of 6/12, reported rate of ALTR less than 0.5% of patients (~150 patients)

30,000 units implanted since global 2007 launch (20,000 in U.S.), revenue impact not material

 

Symmetry Medical

$102.3MM, +8%

· Instruments $28.5MM, -8%

· Implants $25.1MM, -5%

· Cases $14.5MM, -36%

· Other $6.9MM, +23%

· Surgical $27.3MM, +210%

OEM Solutions revenue decline continues to be affected by macro environment in orthopaedics: primarily driven by customers’ reduced capital spending on instruments and cases, as well as low-single-digit hip and knee procedural growth offset by customer inventory management

However, noted slight uptick in instrument sales, stable results for implants, seeing order activity above year-on-year levels

Seeking more consistent inventory practices from customers to lend a more stable implant revenue growth; “encouraged by what we’re seeing on those fronts”

Notes that 2013 AAOS meeting is later than usual, might affect timing of customer product rollouts

 

Tornier

$66.0MM, +6% (U.S. $36.5MM, +6%; ex-U.S. $29.4MM, +6%)

· Total Extremities $53.2MM, +8% (Upper $42.9MM, +9%, Lower $6.4MM, +3%, Sports Med/Biologics $3.7MM, +8%)

· Large Joints/Other $12.7MM, flat

Growth leading products: Aequalis Ascend and Simpliciti stemless shoulder, Salto ankle, Stabilis ankle fusion system, Insite FT bone anchor, Duo Instability system

Launched Ascend PTC, porous-coated version of original stem

Will launch ArthroTunneler Tunnel Pro system in 3Q

4Q12 launch expected for Ascend Flex, convertible shoulder that can be used as a primary reverse, will be offered as porous- and non-pourous-coated

Launching larger sizes and collagen coating for BioFiber scaffold in 4Q

Preparing for early 2013 IDE submission of a novel ligament and tendon growth factor

U.S. distributor changes won’t be complete until mid-2013

 

Wright Medical

$123.3MM, -5% (U.S. $69.2MM, -8%, ex-U.S. $54.0MM, -1%)

Recon $71.3MM, -9% (U.S. -17%, ex-U.S. -3%)

· Hips $40.0MM, -10% (U.S. -19%, ex-U.S. -4%)

· Knees $30.1MM, -8% (U.S. -15%, ex-U.S. flat)

· Other $1.0MM, -18% (U.S. -13%, ex-U.S. -19%)

Extremities $51.9MM, +1% (U.S. -1%, ex-U.S. +7%)

· Foot/Ankle $28.8MM, +13% (U.S. +11%, ex-U.S. +23%)

· Upper $6.3MM, -8% (U.S. -10%, ex-U.S. -1%)

· Biologics $15.4MM, -13% (U.S. -16%, ex-U.S. flat)

· Other $1.2MM, -14% (U.S. +25%, ex-U.S. -27%)

Conversion of U.S. foot/ankle independent distributor business to direct sales proceeding ahead of schedule: 150 direct and 50 indirect, to date

Early feedback positive from launch of next-gen ORTHOLOC 3Di reconstruction plate for foot

Focused on expansion and completion of EVOLUTION knee platform, enhancements to hips such as superPATH Fast Recovery technique

 

Zimmer

$1,125MM, +2% (Americas $614.3MM, +1%; Europe $305.2MM, +4%; Asia Pacific $205.5MM, +4%)

Reconstructive $843MM, +2% (Americas $449MM, flat; Europe $240MM, +3%; Asia Pacific $154MM, +3%)

· Hips $340MM, +2% (Americas $152MM, +1%; Europe $115MM, +4%; Asia Pacific $72MM, +1%)

· Knees $461MM, +1% (Americas $265MM, flat; Europe $117MM, flat; Asia Pacific $79MM, +6%)

· Extremities $42MM, +6%

Dental $62MM, -5%

Trauma $74MM, +9%

Spine $52MM, -4%

Orthopaedic Surgical Products/Other $94MM, +8%

Recon volume trends remained relatively stable, with some apparent improvement in U.S.

Pricing: Overall -2.1% Hips -2.7% (volume/mix +4.6%), Knees -2.8% (volume/mix +3.6%)

Continuing benefit from increased utilization of patient-specific instruments, unicompartmental High Flex Knee

Received FDA clearance for VIVACIT-E, highly crosslinked polyethylene with vitamin E

Introduced Sidus stem-free shoulder in Europe

Cephalomedullary Nail a significant contributor to global trauma growth

Received FDA clearance for Trabecular Metal Ardis Interbody spine system

Next-generation knee to fully launch in 4Q, will be the company’s largest launch ever

 

Sources: Company press releases, earnings calls, filings with the Securities and Exchange Commission

Julie A. Vetalice is Editor, Information Products for ORTHOWORLD Inc. She can be reached at 440.543.2101 or julie@orthoworld.com.