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OrthoPediatrics’ significant growth for the quarter was driven by their Trauma and Deformity as well as Scoliosis product lines. The company reported 3Q18 revenue of US $15.8MM, +27.8% vs. 3Q17. Robust U.S. sales drove the 52.4% growth of the spine segment, reflecting an initial return on the company’s investment in consigned instrument sets. Within the quarter, an additional $2.3MM of consignment sets were deployed. Leadership expects demand to support $12MM in sets for 2018 and $10MM to $12MM in 2019. As in last quarter, OrthoPediatrics offered no commentary on the decline in their sports medicine product sales, though PiperJaffray analysts reminded us that the segment is not a top priority, given the different call points outside of pediatric hospitals.
Sales were bolstered by full launch of the Pediatric Nailing Platform | FEMUR as well as additional indications for the FIREFLY Pedicle Screw Navigation Guides. In October, the company received FDA 510(k) clearance for the RESPONSE 4.5/5.0mm System to treat complex scoliosis in small stature patients. Leadership estimates that smaller stature children represent 20% to 30% of all scoliosis surgeries. However, both the RESPONSE 4.5/5.0mm and BandLoc Duo, the latter a pedicle-sparing, sub-laminar polyester band to treat complex spinal pathologies, require additional testing to meet new CE Mark guidelines. Both products are now expected to launch early in 2019.
The company onboarded two fulltime-equivalent sales reps in the quarter, while removing three underperforming reps and losing one to non-compete issues. There may soon be a deeper pool of candidates with potential sales rep dislocation caused by Stryker’s acquisition of K2M. Leadership expects to meet their 2018 goal of 92 sales reps. OrthoPediatrics’ independent sales agencies have 86 full-time-equivalent reps with 36 international stocking distributors. The company now has sales agencies in Australia, Canada, Ireland, New Zealand and the U.K.
OrthoPediatrics’ 3Q18 and YTD segment sales and growth on an as-reported basis is as follows.
| 3Q18 | 3Q17 | $ Change | % Change | |
| Spine | $5.0 | $3.3 | $1.7 | 52.4% |
| Trauma | $10.6 | $8.7 | $1.8 | 21.0% |
| Arthroscopy / Soft Tissue Repair | $0.2 | $0.3 | -$0.1 | -33.2% |
| Total | $15.8 | $12.4 | $3.4 | 27.8% |
| YTD18 | YTD17 | $ Change | % Change | |
| Spine | $12.6 | $8.7 | $4.0 | 45.7% |
| Trauma | $29.5 | $24.3 | $5.2 | 21.4% |
| Arthroscopy / Soft Tissue Repair | $0.8 | $0.9 | -$0.1 | -11.7% |
| Total | $43.0 | $33.9 | $9.1 | 26.7% |
OrthoPediatrics’ revenue by geographic region is as follows.
| Geographic Region | 3Q18 | 3Q17 | $ Change | % Change |
| US | $12.42 | $9.6 | $2.9 | 30.0% |
| Ex-US | $3.40 | $2.8 | $0.6 | 20.6% |
| Total | $15.8 | $12.4 | $3.4 | 27.8% |
ORTHOWORLD projects OrthoPediatrics 2018 revenue of $57.2MM, +25.4% vs. 2017.
Operating expenses increased compared to 3Q17 due to higher sales and marketing costs, increased sales rep commissions and unusually higher professional fees associated with legal expenses. Within the quarter, the company filed three additional intellectual property rights claims in addition to their pending litigation against K2M. Net earnings for 3Q18 are as follows.
| 3Q18 | Amount ($MM) | % of Sales |
| Sales | $15.8 | |
| Cost of Sales | -$3.8 | 24.3% |
| Sales and Marketing | -$7.2 | 45.2% |
| Administrative | -$4.9 | 30.8% |
| R&D | -$1.1 | 7.1% |
| Other | -$0.7 | 4.4% |
| Net Earnings | -$1.9 | -11.8% |
Sources: OrthoPediatrics; ORTHOWORLD estimates. All revenue figures presented in USD $MM.
Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.
OrthoPediatrics’ significant growth for the quarter was driven by their Trauma and Deformity as well as Scoliosis product lines. The company reported 3Q18 revenue of US $15.8MM, +27.8% vs. 3Q17. Robust U.S. sales drove the 52.4% growth of the spine segment, reflecting an initial return on the company’s investment in consigned instrument sets....
OrthoPediatrics’ significant growth for the quarter was driven by their Trauma and Deformity as well as Scoliosis product lines. The company reported 3Q18 revenue of US $15.8MM, +27.8% vs. 3Q17. Robust U.S. sales drove the 52.4% growth of the spine segment, reflecting an initial return on the company’s investment in consigned instrument sets. Within the quarter, an additional $2.3MM of consignment sets were deployed. Leadership expects demand to support $12MM in sets for 2018 and $10MM to $12MM in 2019. As in last quarter, OrthoPediatrics offered no commentary on the decline in their sports medicine product sales, though PiperJaffray analysts reminded us that the segment is not a top priority, given the different call points outside of pediatric hospitals.
Sales were bolstered by full launch of the Pediatric Nailing Platform | FEMUR as well as additional indications for the FIREFLY Pedicle Screw Navigation Guides. In October, the company received FDA 510(k) clearance for the RESPONSE 4.5/5.0mm System to treat complex scoliosis in small stature patients. Leadership estimates that smaller stature children represent 20% to 30% of all scoliosis surgeries. However, both the RESPONSE 4.5/5.0mm and BandLoc Duo, the latter a pedicle-sparing, sub-laminar polyester band to treat complex spinal pathologies, require additional testing to meet new CE Mark guidelines. Both products are now expected to launch early in 2019.
The company onboarded two fulltime-equivalent sales reps in the quarter, while removing three underperforming reps and losing one to non-compete issues. There may soon be a deeper pool of candidates with potential sales rep dislocation caused by Stryker’s acquisition of K2M. Leadership expects to meet their 2018 goal of 92 sales reps. OrthoPediatrics’ independent sales agencies have 86 full-time-equivalent reps with 36 international stocking distributors. The company now has sales agencies in Australia, Canada, Ireland, New Zealand and the U.K.
OrthoPediatrics’ 3Q18 and YTD segment sales and growth on an as-reported basis is as follows.
| 3Q18 | 3Q17 | $ Change | % Change | |
| Spine | $5.0 | $3.3 | $1.7 | 52.4% |
| Trauma | $10.6 | $8.7 | $1.8 | 21.0% |
| Arthroscopy / Soft Tissue Repair | $0.2 | $0.3 | -$0.1 | -33.2% |
| Total | $15.8 | $12.4 | $3.4 | 27.8% |
| YTD18 | YTD17 | $ Change | % Change | |
| Spine | $12.6 | $8.7 | $4.0 | 45.7% |
| Trauma | $29.5 | $24.3 | $5.2 | 21.4% |
| Arthroscopy / Soft Tissue Repair | $0.8 | $0.9 | -$0.1 | -11.7% |
| Total | $43.0 | $33.9 | $9.1 | 26.7% |
OrthoPediatrics’ revenue by geographic region is as follows.
| Geographic Region | 3Q18 | 3Q17 | $ Change | % Change |
| US | $12.42 | $9.6 | $2.9 | 30.0% |
| Ex-US | $3.40 | $2.8 | $0.6 | 20.6% |
| Total | $15.8 | $12.4 | $3.4 | 27.8% |
ORTHOWORLD projects OrthoPediatrics 2018 revenue of $57.2MM, +25.4% vs. 2017.
Operating expenses increased compared to 3Q17 due to higher sales and marketing costs, increased sales rep commissions and unusually higher professional fees associated with legal expenses. Within the quarter, the company filed three additional intellectual property rights claims in addition to their pending litigation against K2M. Net earnings for 3Q18 are as follows.
| 3Q18 | Amount ($MM) | % of Sales |
| Sales | $15.8 | |
| Cost of Sales | -$3.8 | 24.3% |
| Sales and Marketing | -$7.2 | 45.2% |
| Administrative | -$4.9 | 30.8% |
| R&D | -$1.1 | 7.1% |
| Other | -$0.7 | 4.4% |
| Net Earnings | -$1.9 | -11.8% |
Sources: OrthoPediatrics; ORTHOWORLD estimates. All revenue figures presented in USD $MM.
Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.
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ME
Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
