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Quarterly Review

First Look at Quarterly Results: 1Q12 vs. 1Q11

ORTHOWORLD’s preliminary estimates place overall 1Q12 market growth at 3% over 1Q11, as shown in Exhibit 1. Performance highlights follow and pertain to 1Q12, unless noted otherwise.

Exhibit 1
Orthopaedic Sales1 Increases by Product Segment: 1Q12 vs. 1Q11

Notes to Exhibit 1

1 Orthopaedic products; constant currency, pro forma growth
2 For the quarter ended 2/29/12; includes Dental. Spine includes Bone Stim and Biologics; Bone Stim reflects all Bone Healing sales.
3 Includes biologics
4 Spine
5 Extremities: extremities + fixation combined; Endoscopy: endoscopic + communications, most of which is orthopaedic; Spine: neuro + spine. Total growth excludes Patient Handling.
6 ORTHOWORLD estimates
7 For the quarter ended 3/31/12

Anika Therapeutics
Orthobiologics $10.1MM, +26% (U.S. +27%, ex-U.S. +23%)
ORTHOVISC U.S. +27%, ex-U.S. +44%
MONOVISC ex-U.S. +30%
DePuy Mitek’s 3-step strategy to support ORTHOVISC: 1) expand physician awareness/comfort levels; 2) build private payor acceptance; 3) generate patient awareness as alternative to knee replacement
Will commence patient enrollment in 3Q for randomized, placebo-controlled human clinical trial of Hyalograft C autograft
Request granted for FDA appeal hearing on PMA application for MONOVISC as therapy for osteoarthritis; will schedule within next 2 months

$61.2MM, +3%
•    Sports Medicine $59.3MM, +5% (Americas +7%, International +5%)
•    Other (includes Spine) $1.8MM, -24%

Sports Medicine growth supported by 2011 product launches, including SpeedLock knotless anchor for labrum repairs, also higher revenue per active customer, strong sales in Asia Pacific market
Ambient >30% of Americas Coblation sales
2012 product launches include MultiFIX P knotless fixation, pound-in implant composed entirely of PEEK (primarily for rotator cuff repair) and MegaVac Wand, 90-degree suction wand that reportedly ablates tissue 40% faster than leading competitor’s product
Recent Civil Investigative Demand relates to ENT business

SEK 6.8MM (~US $1.0MM), +27% (U.S. +23%, Europe +42%)
Terminated sales agreement with Biomet Sports Medicine, assumed total responsibility for U.S. sales of Artelon Tissue Reinforcement
Own sales in U.S. +86%
Enrolling patients in 2 further post-market studies for new sizes of Artelon in foot/ankle

$7.8MM, +29% (Tissue Sales $7.7MM, +31%, Royalties/Other $0.09MM, -25%)
In peer review, OsteoSponge allograft was determined to exhibit ideal properties for bone regeneration, similar to autograft, without donor pain or risk of complications at the harvest site
Secured 3-year U.S. GPO contract for OsteoSelect, OsteoWrap, OsteoLock, DBM putty, sports medicine allograft, etc.
Hospital accounts +45% to 756 facilities
Overcame short-term production issues
Expecting clinical data on coatings, independent data on OsteoSponge SC in 2H12

Biomet (fiscal quarter ended 2/29/12)
$708.9MM, +5% (U.S. $432.8MM, +5%; Europe $176.7MM, +4%; International $99.4MM, +6%) Reconstructive $422.7MM, +5% (U.S. +6%)
•    Hips +6% (U.S. +7%)
•    Knees +4% (U.S. +4%)
•    Bone Cement/Other +7% (U.S. +8%)
Sports, Extremities, Trauma (S.E.T.) $92.7MM, +16% (U.S. +15%)
•    Sports Medicine +22% (U.S. +18%)
•    Extremities +18% (U.S. +21%)
•    Trauma 1% (U.S. -6%)
Spine & Bone Healing $76.5MM, -5% (U.S. -5%)
•    Spine -3% (U.S. -3%)
•    Bone Healing -10% (U.S. -10%)
Other $51.4MM, +9%
(Growth includes dental.)

Binding offer for DePuy’s trauma assets
Not a lot of product overlap
DePuy’s U.S. distributors are making available dedicated trauma reps, managers and specialists to interview Will offer full-time positions to DePuy’s dedicated sales reps in Japan, U.K.

U.S. hip and knee markets stable, maybe even slightly improving
Volume of custom implants very, very low, not a material driver of mix
Gained market share in Europe hips/knees (particularly strong in Germany, U.K.), Japan and Australia hips and Canada knees
U.S. hip/knee pricing negative in low single digits
Metal-on-Metal <10% of hip sales, Super Premium Bearing ~70% of domestic acetabular units
Continued strong demand in Europe, U.S. for Taperloc Complete Hip, will release >100 additional sets to field in FY4Q
Continuing clinical evaluations of Short Stem Microplasty version of Taperloc
Very strong market acceptance of cementless Global Tissue Sparing Hip Stem in Europe and Active Articulation Dual Mobility Hip in U.S.
Growth buoyed by increased demand for Vanguard Complete Knee, Vanguard 360 Revision
Completed clinical evaluation for 360 in U.S. and Europe, will launch globally in FY4Q
New knee technologies, including Oxford Microplasty instruments and Signature for Oxford, contributing to stabilization for Oxford line
Launching Signature for Oxford in Europe in FY4Q
Bone Cement/Other driven by Cobalt cements with Gentamicin, StageOne Select Modular Hip Molds
Commenced launch in Europe for Optipac closed-system knee cement kit

17th consecutive quarter of double-digit worldwide and 15th consecutive double-digit U.S. sales growth in extremities
Growth supported by new product launches (TunneLoc, JuggerKnot) and ToggleLoc Femoral Fixation device
Internal fixation growth partially offset by decline in external fixation

Spine/Bone Healing
Strong spine sales in Europe more than offset by significant decline in international
FY4Q launch slated for Solitaire C, standalone cervical spacer (PEEK-Optima + titanium faceplate), “de-roduction” (derotation and rod reduction) instruments for Trivium Deformity Correction
Planning FY1Q13 launch of Cellentra Viable Cell Bone Matrix
Noted increased payor pushback in noninvasive stimulation; commenced initial planning for large, prospective clinical trial for trauma stim (patient enrollment to commence in 5/12)

Bradshaw Medical
$5.4MM, +21%

$124.8MM, +10%
•    Arthroscopy $86.2MM, +14%
•    Powered Instruments $38.6MM, +1%

Signed exclusive worldwide marketing agreement for Musculoskeletal Transplant Foundation’s (MTF) sports medicine allograft tissue
Opportunities for MTF cross-selling, including Canada, where MTF not previously represented
Capital equipment market appears to be starting to stabilize (e.g. surgical video systems, orthopaedic drills, etc.)

DJO Global
$278.9MM, +4%
•   Bracing and Vascular $105.2MM, +9%
•   Recovery Sciences $84.2MM, -1%
•   International $71.5MM, +5%
•   Surgical Implant $17.8MM, +8%

(Growth is pro forma and reflects constant currency. Bracing and Vascular includes products serving the diabetes market.)
Performance driven by new products (Exos upper extremity, Turon Total Shoulder, RSP Monoblock Shoulder) and early performance of new OA Nano osteoarthritis knee brace

58.6MM, +10% (U.S. $36.8MM, +5%; ex-U.S. $21.9MM, +19%)
•    Hips $11.0MM, +37%
•    Knees $21.5MM, +1%
•    Biologic/Spine $6.2MM, -13%
•    Extremities $13.0MM, +37% (mostly U.S.)
•    Other $7.1MM, -6%

Ex-U.S. sales ~65% direct, up from ~50% last year
Hip sales driven by positive traction ex-U.S., particularly Japan and Spain, good response to direct anterior approach
Knees relatively flat in units, ~-3% downward pressure on pricing
Extremities pricing stable
Stabilized biologics with focus on bone marrow concentrate products

Greatbatch Medical
$31MM, -19%
Lower orthopaedic customer product launches and product development opportunities
Did not execute operationally in Europe, must get more aggressive to meet objectives set up in Switzerland and Europe

Integra LifeSciences
$86.1MM, +19% (U.S. $71.2MM, +22%; ex-U.S. $14.9MM, +9%)
U.S. Extremities $26.5MM, +25%
U.S. Spine & Other $44.8MM, +20%
Commenced full line of Ascension sales, excellent cross-selling opportunities in foot/ankle
Cross-pollination with SeaSpine hardware progressing well, majority of distribution trained on both lines
Double-digit orthobiologic growth driven by Evo3 and Mozaik
2Q product launches include NewPort MIS and Daytona Deformity System full release

Johnson & Johnson
$1,493MM, flat vs. 1Q11 (U.S. $783MM, -4%, ex-U.S. $1,493MM, flat vs. 1Q11 (U.S. $783MM, -4%, ex-U.S. $710MM, +4%)
•    Hips +1% (U.S. flat, ex-U.S. +3%)
•    Knees +2% (U.S. +2%, ex-U.S. +1%)
•    Spine -3% (U.S. -8%, ex-U.S. +5%)

Now referring to segment as orthopaedic sales (vs. DePuy sales)
U.S. sales impacted by 2011 divestiture of Surgical Instruments, continued pricing pressure partially offset by positive mix; ex-U.S. sales strong in Asia
Overall knee market appears to be improving
Spine pricing in mid-single-digits, got a little bit worse in quarter (factor of mix)

Synthes acquisition update
Expects to close in 2Q12
Received regulatory clearance of merger in Canada, China, Japan and European Union

Kensey Nash (fiscal quarter ended 3/31/12)
$11.6MM, +68%
•    Sports Medicine $4.8MM, +33%
•    Spine $4.1MM, +29%
•    Trauma/CMF $2.7MM

(Revenues include earnings from Norian acquisition.)
Product royalties from Stryker reached $1.7MM
SportsMed increase primarily due to ex-U.S. product clearances for largest customer
Spine, Trauma/CMF increases primarily from Norian

DSM proposed acquisition of Kensey Nash
Royal DSM entered into a definitive agreement to acquire Kensey for $360MM ($38.50/share) in cash; tender offer is expected to be complete by end of 6/12
Will support DSM’s biomedical business, which currently comprises medical coatings, polyurethanes, UHMWPE, hydrogels, etc.
Attractive for DSM growth in U.S., Kensey leverage in Europe + Asia

€4.9MM (~$6.4MM), +20%

$151.7MM, +22% (Ex-U.S. $11MM, +~35%; Biologics $27MM, +19%; Monitoring $9.4MM)
U.S. growth: lumbar +12%, biologics +15%, cervical +20%
Ex-U.S. growth strong in Asia Pacific, Latin America
Still expects to be selling in Japan in 2012
Waiting for answers from FDA on AttraX, PCM cervical disc (latter could receive clearance in 2012)
Impulse Monitoring completely integrated
PODs “not part of our strategy”

$143.1MM, +5%
•    Spine $75.0MM, +3% (Stimulation $39.3MM, +2%, Biologics $35.8MM, +5%)
•    Orthopaedics $41.0MM, +4%
•    Sports Medicine $27.1MM, +10%

Growth supported by increased adoption of Trinity Evolution in spine, ex-U.S. launch of Galaxy fixation system, U.S. launch of Ankle Compression Nailing and Lapidus Plating Systems
Commenced full market launch of Firebird Deformity System
Established new U.S. sales management, realigned sales regions, increasing number of reps
Adding new customers for Trinity Evolution in big and midsized hospitals
Enrollment complete in post-market evalutions fo Trinity in spine, cervical, lumbar, foot/ankle fusion
Selling Breg Sports Medicine unit to private equity firm for $157.5MM in cash, to close during 2Q12
Initiated co-development investment with MTF to deliver natural biologic solution to complement Trinity Evolution, launch in 2013
Spinal implants subject to low to mid-single-digit pricing pressures

Bracing & Support $52.2MM, +2%

Synvisc and Synvisc-One €78MM (~US $103MM), +9% (U.S. ~$86MM, +19%)

RTI Biologics
$29MM, +1%
•    Sports Medicine $13.4MM, +15%
•    Spine -12% (Constructs $8.6MM, -8%)
•    Bone Graft Substitutes/General Orthopaedic (BGS/GO) $7.0MM, +15%

U.S. Direct Distribution revenue $14.1MM, +16% (Represents 33% of distribution revenue; includes Sports Medicine, some BGS/GO implants)
Sports Med supported by increased procedure volumes, availability of tissue
BGS/GO growth due to strong domestic direct sales, ex-U.S. exports
U.S. direct distribution for BGS/GO +35%
Launched 4 implants or implant enhancements and 4 business lines
Multipotent Adult Progenitor Cells (MAPC) implants on track for human implantation in 2012; small and large animal studies in progress
Initiating large primate study in 2012 for xenograft tendon for ligament reconstruction

Smith & Nephew
Advanced Surgical Devices $839MM, +3% (U.S. flat, Established Markets +4%, Emerging/International Markets +13%)
•    Hips $179MM, -2% (U.S. -4%, ex-U.S. +1%)
•    Knees $235MM, +6% (U.S. +3%, ex-U.S. +9%)
•    Sports Medicine Joint Repair $129MM, +7%
•    Arthroscopic Enabling Technologies $107MM, +1%
•    Trauma $114MM, -1%
•    Clinical Therapies $58MM, +6%

Opened innovation and training center in Memphis, Tennessee to support implant, trauma and sports medicine specialties
Acquired LifeModeler software firm, provider of biomechanical human body simulation tools and services

Like-for-like price pressure in hips/knees similar to previous quarters, partially offset by mix gains
Continuing headwinds in MoM sector, but double-digit growth in Verilast hips
Launched Polarcup Dual Mobility Hip in U.S.
Strong contribution from Legion Revision Knee, Verilast bearing technology, Visionaire Patient-Matched Instrumentation
Visionaire represents ~20% of U.S. knee procedures

Introduced Clancy Flexible Drill, Acufex Pinpoint Anatomic ACL Guide, Helicoil PK suture anchor
Fast-Fix 360 Meniscal Repair system adopted by many new customers
Trauma affected by unusually mild winter (reduced procedures)

$2,161MM, +7% (U.S. $1,384MM, +8%, ex-U.S. $777MM, +6%)
Reconstructive $958MM, +5% (U.S. +7%, ex-U.S. +3%)
•    Hips $312MM, +3% (U.S. +6%, ex-U.S. -0.1%)
•    Knees $352MM, +5% (U.S. +5%, ex-U.S. +5%)
•    Trauma/Extremities $243MM, +10% (U.S. +13%, ex-U.S. +7%)
Neurotechnology/Spine $382MM, +12% (U.S. +15%, ex-U.S. +8%)
•    Neurotechnology $201MM, +12% (U.S. +16%, ex-U.S. +8%)
•    Spine $181MM, +12% (U.S. +15%, ex-U.S. +7%)
MedSurg Equipment $821MM, +8% (U.S. +6%, ex-U.S. +13%)

Pricing: -2.6% in Recon (offset by favorable mix, particularly in hips), -0.5% in MedSurg, -2% in Neurotechnology/Spine
No meaningful reacceleration in elective procedure volumes, but environment appears stable
Recon continues to benefit from ADM, MDM mobile bearing systems (~21% of U.S. hip cup procedures in 1Q)
Launching Accolade II next-generation primary hip, expecting competitive surgeon conversions
OtisMed continues to see sequential growth

Symmetry Medical
$100.7MM, +5%
•    Instruments $27.0MM, -16%
•    Implants $24.8MM, -9%
•    Cases $15.9MM, -25%
•    Other $6.3MM, +2%
•    Surgical $26.7MM, +197%

Decline in OEM revenue primarily driven by continued inventory contraction affecting implants, reduced capital spending on instruments and cases
Noted sequential uptick in implant sales (+8%)
Launched 12 new line enhancements to Bookwalter Retractor platform, including reduced tray weight
Launched Offset Reamer Driver for total hip replacement
Regarding customers’ new knee platforms: encouraged by activity levels in instrument orders

$997.5MM, +2%
•    North America $545.0MM, -2%
•    Europe $235.6MM, +4%
•    Asia Pacific $144.5MM, +9%
•    Rest of World $72.4MM, +22%

North America: unusually mild winter contributed to low trauma procedures; recent FDA clearances will allow re-entry into corpectomy market and 1st entry into vertebral augmentation
Europe: gained market share across all segments, despite financial crisis and mild winter
Asia Pacific: double-digit sales growth seen in China, India, Korea, Taiwan; trauma continues to build in all markets
Rest of World: double-digit growth across Latin America; successful transition to direct sales in Chile

Wright Medical
$126.7MM, -6% (U.S. -10%, ex-U.S. -1%)
OrthoRecon $73.7MM, -8% (U.S. -15%, ex-U.S. -2%)
•    Hips $41.5MM, -10% (U.S. -20%, ex-U.S. -4%)
•    Knees $31.0MM, -5% (U.S. -11%, ex-U.S. +2%)
•    Other $1.2MM, -5% (U.S. -27%, ex-U.S. +4%)
Extremities $52.8MM, -6% (U.S. -6%, ex-U.S. +2%)
•    Foot/Ankle $29.6MM, +11% (U.S. +9%, ex-U.S. +22%)
•    Upper $6.5MM, -13% (U.S. -16%, ex-U.S. -8%)
•    Biologics $15.1MM, -21% (U.S. -24%, ex-U.S. -11%)
•    Other $1.5MM, -14% (U.S. +17%, ex-U.S. -25%)
U.S. foot/ankle update: ~100 direct and 90 indirect reps to date; by end of 3Q, will have ~200 reps with minimum 70% direct and 30% independent
Trained ~300 physicians in foot/ankle, goal is 1,200 for year
Launched CLAW II Polyaxial Compression Plate for fore- and midfoot reconstruction
Continued strong acceptance of EVOLUTION medial-pivot knee more than offset by prior-year customer losses relative to enhancements to compliance processes, distributor transition

$1,141MM, +3% (Americas $634MM, +1%; Europe $301MM, +4%; Asia Pacific $206MM, +7%)
Reconstructive $860MM, +3% (Americas $468MM, +1%; Europe $239MM, +4%; Asia Pacific $153MM, +7%)
•    Hips $344MM, +2% (Americas $154MM, flat; Europe $114MM, +3%; Asia Pacific $76MM, +8%)
•    Knees $471MM, +2% (Americas $279MM, flat; Europe $118MM, +5%; Asia Pacific $74MM, +2%)
•    Extremities $45MM, +5%
•    Dental $60MM, -2%
•    Trauma $76MM, +8%
•    Spine $53MM, -6%
•    Surgical/Other $92MM, +9%
Pricing: Overall -2% (Americas -2.8%, Europe -1%, Asia Pacific -0.7%); Hips -2.3% (volume/mix +4.8%); Knees -2.5% (volume/mix +4.9%)
Overall musculoskeletal procedures stable, sequentially
Recent hip, knee launches commanding premium pricing
Continuum Acetabular Cup continues to offer competitive selling opportunities
Received European regulatory clearance for VIVACIT-E vitamin E highly crosslinked polyethylene
Introduced patient-specific instruments for Unicompartmental High-Flex knee
Received FDA clearance for 1st phase of new NexGen Knee; will have limited availability in 2012
ExtraFix external fixation fully rolled out
Planning to build out pedicle screw systems in 2H12
Launched Chondrofix Osteochondral Allograft

Sources: Company press releases, earnings calls, filings with the U.S. 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