Zimmer Biomet 3Q17 Orthopaedic Revenue

ORTHOWORLD estimates Zimmer Biomet 3Q17 orthopaedic revenue of US $1,694.5MM, -0.7% from 3Q16, and YTD revenue of $5,346.6MM, +2.3% vs. the prior year. Estimated segment sales and growth follow.

*Includes CMF, Bone Healing, Forgings, Accelero

Zimmer Biomet remains challenged.

The Persona Partial Knee launch in 3Q17 was met with encouraging acceptance, and Persona was cited as a strong growth contributor as well. The first case using Clinical Graphics 3D range-of-motion simulation technology for hip conditions, acquired in 3Q16, occurred during the quarter.

Sales of G7, Taperloc and Arcos sales were reported to be solid, as were Gel-One, Subchondroplasty treatments, Quattro Link anchors and the A.L.P.S. foot system. U.S. launches of Vitality+ and Vital spine fixation and the Avenue T TLIF Cage, made after the quarter’s close, are expected to lend future momentum to spine.

However, the pace of supply recovery, low overall U.S. hip and knee procedures, a lag in anticipated sales recapture (particularly in the U.S.), weather impacts, issues with integration of the U.S. spine salesforce, attrition in temporary labor and the knee price reduction in India created a lot of headwinds.

Hurricane impact and India price adjustments reduced 3Q revenue by $10 million, split evenly. Production instability in Puerto Rico, where certain hip and trauma products are made, will lead to minor sales disruption in 4Q and into 2018.

The clean-up of supply chain issues has lasted beyond expectations. Production at the Warsaw North Campus is still constrained, with lower than expected output of key brands. Complex manufacturing processes have led to inconsistent yields. On top of that, attrition in a temporary labor workforce started in August. A dual sourcing strategy with outside vendors has been accelerated, which could provide external capacity as of 2Q18. Temp-to-direct hiring plans are in place, as well.

For brands not affected by complex processes, back orders and safety stocks will reportedly be in full supply by year-end 2017. For the affected brands, fully supply is now slated for 2Q18, pushed forward from year-end 2017.

Production shortfalls contributed to the slow U.S. sales recapture in knee, hip and S.E.T. (which comprises Surgical, Sports Medicine, Foot/Ankle, Extremities and Trauma).

New shoulder products were mentioned for 2018, like an augmented baseplate and stemless shoulder. In other segments, the 2018 pipeline includes the cementless Persona Trabecular Metal Tibia Knee, a Persona revision knee, ROSA’s limited launch for knee in 2H18 and x-ray-based knee PSI guides.

Leadership has updated full-year 2017 whole-company guidance to a range of $7.76BB to $7.80BB, down ~$45.0MM from the $7.80BB to $7.87BB that was stated in 2Q17.

Finally, one of the suggested persons of interest for the ZBH CEO position—Stephen MacMillan, former President & CEO of Stryker—appears to be solidly in place at Hologic, having just been awarded a special performance-based retention equity grant after a “large medical device company” made a substantial offer to be its CEO. Zimmer Biomet’s search continues.

Source: Zimmer Biomet, Inc.; ORTHOWORLD estimates