Zimmer Biomet Reports 1Q18 Orthopaedic Revenue

ORTHOWORLD estimates Zimmer Biomet (ZBH) 1Q18 orthopaedic revenue of US $1,856.6MM, +2.2% vs. 1Q17.

*Includes CMF, Bone Healing, Forgings, Accelero

CEO Bryan Hanson kicked off the earnings call by noting that ZBH is positioned to return to positive market share growth in what is likely to be a two-year turnaround. Chief takeaways from the call included new observations following FDA’s site inspection that occurred in April, new hires, new information on supply recovery and new product launches.

Let’s start with the expected re-inspection of the Warsaw North Campus facility. Additional 483 observations were issued; ZBH will submit its formal response over coming weeks. It was affirmed that there were fewer observations than in the 2016 inspection.

To fill capability gaps, the following additions have occurred in the leadership team:

• Kenneth Tripp joined as Senior Vice President of Global Operations and Logistics. Mr. Tripp’s previous positions include responsibility for Patient Recovery global manufacturing operations at Cardinal Health and varying responsibilities in operations oversight at Tyco/Covidien/Medtronic. Hanson noted his track record for delivering productivity across networks. (He also noted that Adrian Furey, who formerly ran operations, is staying with the company and moving back to Ireland.)
• Rachel Ellingson, former Head of Strategy for St. Jude, joins as Senior Vice President of Strategy.

To encourage a more responsive organization in tune with the business, these executives now report directly to Mr. Hanson:

• Aure Bruneau, Group President of Spine/CMF
• Angela Main, Chief Ethics and Compliance
• Pedro Malha, Group Division Head of Dental

On supply recovery in knee, hip and S.E.T., Mr. Hanson stated that ZBH is on track with the goal to restore supply in substantially all key brands by the beginning of 3Q18. The last update we recall was that full supply slated for 2Q18, as of comments in the 3Q17 earnings call.

New product launches for 2018 still include:

• Comprehensive® Augmented Baseplate (in limited launch; full launch mid-year)
• Persona cementless Trabecular Metal Tibia Knee (2H)
• Persona Revision Knee (2H limited launch)
• ROSA® Knee application (2H limited launch)

Again, the company benefited from its typical high-performing products: Gel-One, the Taperloc Hip and G7 cup, Subchondroplasty, Mobi-C, etc. Growth of the Vitality spinal fixation platform, launched in 4Q, contributed to 1Q sales. 1Q18 saw the U.S. launch of the Sidus stem-free shoulder, which has been available in the EU since 2012.

Finally, ZBH leadership offered full-company 2018 revenue guidance in the range of $7.9BB to $8.1BB.

Sources: Zimmer Biomet, Inc.; ORTHOWORLD estimates