1Q11 Company Financials: Orthopaedic and Spine

Here we present available company earnings for 1Q11. Our estimates place overall market growth at 4% over 1Q10, as seen in Exhibit 1, which displays 1Q orthopaedic sales growth by product segment for select companies. Performance highlights follow. Highlights pertain to 1Q11 unless otherwise noted.

Exhibit 1: Orthopaedic Sales1 Increases by Product Segment: 1Q11 vs. 1Q10

financial1

Notes to Exhibit 1

1Orthopaedic products only; constant currency, pro forma growth
2Includes biologics
3For the quarter ended 2/28/11; trauma includes stimulators; spine includes stimulators and orthobiologics.
4For the quarter ended 4/29/11
5Spine
6For the quarter ended 3/31/11
7Extremities: Extremities + Fixation combined; Endoscopy: Endoscopic + Communications, mostly orthopaedic; Spine: Neuro + Spine. Total growth excludes Patient Handling.
8ORTHOWORLD estimates
9Excludes Other (Aerospace)


Alphatec Spine (pro forma)

$49.7MM, +5% (U.S. $33.8MM, +8%; International $15.8, -0.2%)

  • Strong demand/uptake for PureGen Osteoprogenitor Cell Allograft, 400 cases complete (existing and new customers)
  • OsseoFix, OsseoScrew and Helifix driving new relationships ex-U.S.
  • Commenced controlled U.S. launch of Solus ALIF, full launch expected 2H11
  • Acquired a company licensed to sell medical devices in Brazil

ArthroCare

$59.2MM, -7%

Sports Medicine $56.7MM, -6% (ex-U.S. +20%)
Other (includes Spine) $2.4MM, -16%

  • Ambient products represented ~10% of proprietary Sports Med Coblation product sales
  • Now anticipating 3Q11 launch for SpeedLock and SpeedFix labral repair products; delayed due to design modifications

Biomet (for fiscal 3Q11, ended 2/28/11)

$678MM, +2% (U.S. $412.4MM, flat; Europe $173.0, flat; International $92.6, +14%)

Reconstructive $516.2MM, +1% (U.S. -1%)

  • Hips flat (U.S. flat)
  • Knees -1% (U.S. -5%)
  • Extremities +18% (U.S. +25%)
  • Other -1% (U.S. -2%)

Fixation $58.5MM, -1% (U.S. -2%)
Spine $55.4MM, +1% (U.S. -1%)
Other $47.9MM, +14% (U.S. +11%)

  • Sports Medicine +21% (U.S. +16%)
  • Other +5% (U.S. +3%)

Recon

  • Launched Active Articulation E1 Dual Mobility Hip and Arcos Modular Femoral Revision System, will reload additional sets of Arcos instruments in 4Q
  • Showcased Oxford microplasty instrumentation system at AAOS, received excellent surgeon feedback and will roll out instruments and Oxford twin-peg femoral component in 4Q11
  • Cleared FDA Warning Letter relative to the Signature Personalized Patient Care System
  • Anticipates 4Q limited launch of Vanguard SSK 360 Revision (super-stabilized knee)
  • Expects to launch Signature program for Oxford in 2HFY12

Trauma and Spine

  • Increased craniomaxillofacial sales offset by decreased external fixation and electrical stimulation, with flat internal fixation sales
  • Spinal stim sales decreased
  • Released and placed 150 units of iQ Intelligent Delivery System, designed to increase speed of titanium screw insertion via cordless drilling, will delivery additional 100 in 4Q
  • Released Enclave spacer and Valiant Anterior Lumbar plate in U.S.

Other

  • Soft goods/bracing sales decreased, but demand grew for procedure-specific devices such as JuggerKnot Soft Anchor, ToggleLoc Femoral Fixation, Maxfire MarXmen Meniscal Repair

 

China Kanghui

RMB 68MM(~US $10.4MM), +39%

Trauma $6.4MM, +29%
Spine $2.9MM, +60%
OEM $1MM, +62%

  • Acquired majority stake in Beijing Wei Rui Li, brings on FDA-cleared knee and bipolar hip systems that will launch in 2012
  • Expanded product coverage in China, now in >2,300 hospitals
  • Instrument sets in market: trauma ~3,000-5,000, spine ~1,500-2,000; should add 1,000-1,500 trauma and 700-800 spine each year
  • Expecting 2012 clearance of Consensus hip and knee; may not have to perform clinical trial for Chinese regulatory body

ConMed

$113.5MM, +6%

Arthroscopy $75.4MM, +5% (Single-use devices +6%, Capital equipment +10%)
Powered Instruments $38.1MM, +9% (Handpieces ~20%, Generators +15%, Video Systems flat)

  • Shoulder Restoration System line at annual run rate of ~$20MM
  • Sequent for meniscal tears of the knee and Concept Suture Passer for shoulder surgery generating great deal of interest

DePuy

$1,503MM, +2% (U.S. $811MM, -0.4%, ex-U.S. $692MM, +4%)

Hips -2% (U.S. -6%, ex-U.S. +3%)
Knees -4% (U.S. -6%, ex-U.S. -1%)
Spine +1% (U.S. -1%, ex-U.S. +6%)
Trauma +6% (U.S. +6%, ex-U.S. +6%)

  • Hip growth impacted by lower volume of metal-on-metal (MoM) bearings, continued price pressure; mix and success of cementless systems contributed to sequential growth of 4%
  • Sequential knee growth of 1% tempered by continued market softness; ex-U.S. +5% due to Sigma Fixed Bearing Knee

DJO (pro forma)

$249.7MM, +3%

Recovery Sciences $85.1MM, +3% (Bone growth stimulation +8%)
Bracing and Vascular $78.1MM, +0.9%
International $69.8MM, +6%
Surgical Implant $16.5MM, -1%

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

  • Strong performance of Reverse Shoulder, Lima Hip Revision
  • Launched e-plus total knee insert: vitamin E blended into the polyethylene, intended to improve strength, reduce wear

 

Exactech

$53.4MM, +9% (U.S. $35MM, +7%; ex-U.S. $18.4MM, +13%)

Hips $8MM, +21%
Knees $21.3MM, +2%
Biologic/Spine $7MM, -5%
Extremities $9.4MM, +33%
Other, $7.5MM, +6%

  • LPI Prime hip project on hold as relates to FDA clearance; revision porous acetabular system pilot launch in 3Q
  • Continuing to add new customers in knees
  • Future knee product launches include Logic tibial insert (pilot underway, launch 4Q); Optetrak Logic CR Knee (pilot 3Q, launch 1Q12); Logic RBK Knee (pilot 3Q, launch 4Q); Logic CRC tibial insert (launch 1H12)
  • Spine showing robust growth (on a small base); biologics represents larger part of that segment’s growth
  • Spine launches include Proliant pedicle screw (2Q), Gibraltar posterior cervical system (3Q), Proliant HydraLok iliac staple (1Q12)
  • Pilot release of proximal fracture plates now concluded; pilot release of CTA humeral heads in 3Q
  • Other extremity launches include posterior augmented glenoid (pilot currently, launch 3Q), reverse shoulder line extensions (pilot 2Q, launch 4Q)

Greatbatch Medical

$39.5MM, +34%

  • Growth occurred across all product lines; some inventory build, also won new customers and new projects
  • Will continue to invest in support of orthopaedic business

Integra Orthopaedics

$72.2MM, +3%

  • Extremities grew high single digits, driven by upper extremity, midfoot, hindfoot products
  • Spine and orthobiologics declined slightly due to price pressure, with weakness in Europe spine hardware offset by strong U.S. biologic performance (private label revenue increased modestly)
  • Spine hardware pricing in mid-single-digits, biologics pricing stable
  • Vu aPOD Prime in controlled market release, standalone device that requires no additional supplemental fixation
  • Received FDA 510(k) clearance for steerable keyless interbody fusion device, in controlled release, full commercialization expected later in 2011
  • May be somenice opportunities to find attractive spine acquisitions at reasonable valuations

MAKO Surgical

$13MM, +80%

Procedures $6.4MM, +78%
RIO Systems $5.3MM, +58%
Service/Other $1.1MM

  • 1,304 MAKOplasty procedures performed, 7,173 to date since 2006; average selling price $5,000 per procedure
  • 74 bicompartmental procedures performed (~6% of total MAKOplasty volume)
  • Performed 16 hip procedures (39 total through end of 1Q)
  • On track for hip application commercial launch in 2H11

 

Medtronic(for fiscal year ended 4/29/11)

$3,414MM, -3%(U.S. $2,553MM, -5%; ex-U.S. $861MM, +3%)

Core Spinal $2,530MM, -4% (U.S. $1,744MM, -7%; ex-U.S. $786MM, +2%)
Biologics $884MM, +1% (U.S. $809MM, flat; ex-U.S. $75MM, +20%)

  • “Novation noise has not had an impact on our implant rates”
  • Believes that Kyphon business will be stabilized by recent positive coverage decisions from Meridian, new products including Xpander II balloons, Japan expansion, etc.
  • Solera has seen a price uplift; expects Solera to penetrate nearly all U.S. accounts by end of FY12
  • DLIF system should be navigation-enabled this summer

Medyssey Spine

Sales +84%

  • Received FDA 510(k) clearance for LP Cage in 4/11, will commence full launch in 4Q

NuVasive

$124.5MM, +14% (Biologics $22.6MM; Lumbar fusion +10%)

  • Launching MaXcess 4 (surgical access system) in 2Q
  • Opened office in Puerto Rico, on track to open Tokyo office later this year

Orthofix

$137.8MM, +3%

Spine $72.6MM, +1% (Stimulation $38.6MM, -8%, Implants/Biologics $34MM, +14%)
Orthopaedics $40.5MM, +4%
Sports Medicine $24.7MM, +5%

  • Stimulation sales still challenged by reimbursement issues, ongoing industry-wide investigation of bone growth stim business
  • Orthopaedics led by external fixation platform, increased use of Trinity Evolution in both ortho and spine

Smith & Nephew

$823MM, +3%*

Orthopaedics $590MM, +2% (U.S. +5%, Europe -2%, Rest of World +3%)

Hips $184MM, -2% (U.S. -4%, ex-U.S. -1%)
Knees $224MM, +5% (U.S. +10%, ex-U.S. flat)
Trauma $116MM, +6% (U.S. +7%, ex-U.S. +5%)
Clinical Therapies $56MM, +2%

Endoscopy $233MM, +6% (U.S. +1%, Europe +6%, Rest of World +12%)

Arthroscopy $201MM, +8% (Repair +11%, Resection +3%)
Visualization $27MM, -7%

*Excludes Wound Management.

Recon

  • Introduced SMF Short Modular Femoral Hip with variety of stem options
  • Birmingham Hip represents ~14% of global hips
  • Taking share from all knee competitors

Trauma and Clinical Therapies

  • EXOGEN still delivering strong growth, SUPARTZ still under pressure

Endoscopy

  • This summer, launching BIORAPTOR Curved Suture Anchor for hip, shoulder repair

 

Stryker

$2,015.2MM, +1%*(U.S. $1,279.1MM, +9%, ex-U.S. $736.1MM, +12%)

Reconstructive $911.1MM, flat (U.S. flat, ex-U.S. flat)

Hips $302MM, +2% (U.S. +1%, ex-U.S. +3%)
Knees $335.3MM, -2% (U.S. -2%, ex-U.S. -2%)
Trauma/Extremities $222.6MM, +2% (U.S. +7%, ex-U.S. -2%)

MedSurg Equipment $763.8MM, +12% (U.S. +12%, ex-U.S. +11%)

Neurotechnology/Spine $340.3MM, +46% (U.S. +27%, ex-U.S. +94%)

Neurotechnology $178.7MM, +143% (U.S. +86%, ex-U.S. +309%)
Spine $161.6MM, +1% (U.S. -1%, ex-U.S. +7%)

*Does not include Patient Handling and Emergency Medical Equipment.

  • Higher shipments of hip, trauma and extremity implant systems offset by lower shipments of knee and other implants (including lack of shape-matching knee offering)
  • Highly encouraged by acceptance of ADM and MDM hips
  • Endoscopy and instruments recorded double-digit U.S. and ex-U.S. growth
  • Spine remains challenged in volume and price, but no real change from 2H10 in market dynamics

Symmetry Medical

$95.8MM, +14%

Instruments $39.2MM, +24%
Implants $27.2MM, -4%
Cases $23.2MM, +23%

  • Instrument growth spurred by customer product launches; implant decline driven by lower ortho market growth, inventory adjustments, timing of customer product launches; case revenue increase supported by increased demand from orthopaedic customers
  • Key strategic pursuit is the strengthening of competitive position as the largest supplier to orthopaedic community
  • Implementing company-wide quality and compliance system, EtQ’s Reliance Quality Management
  • Migrating to one enterprise resource planning platform (Epicor), starting with U.S. instrument plants this summer, followedby U.S. implant and case businesses in 2012

Synthes

$983.0MM, +6%(includes revenue from Anspach)

North America $558.3MM, +5% (combined Trauma, CMF and Power Tools growth +8%)
Europe $235.1MM, +3% (combined Spine, CMF and Power Tools growth +11%)
Asia Pacific $128.9MM, +19%
Rest of World $60.7MM, +8%

  • Due to acquisition activity, Synthes did not record an earnings call for 1Q11
  • Asia Pacific generated exceptional results: +13% growth in Japan, growth >20% in Australia, China, India
  • Universal Trauma System, specifically designed for Asia Pac market, well-received by surgeons
  • Trauma fueled by new product launches
  • Matrix pedicle screw exceeded expectations in U.S. launch, >90% of procedures performed by surgeons who did not previously use Synthes products; Europe launch to come in 2Q

 

Tornier

$69.3MM, +12% (U.S. $37MM, +10%; ex-U.S. $32.4MM, +16%)

Total Extremities $52.3MM, +13% (Upper $41.9MM, +15%, Lower $6.6MM, +6%, Sports Med/Biologics $3.8MM, +12%)
Large Joints/Other $16.9MM, +9%

  • Recently commenced implants of porous coated Affinity shoulder
  • Launched BioFiber surgical mesh
  • Will revamp entire traditional anchor line and launch 2nd-generation elbow in 3Q
  • Launching Stabilis ankle fusion plate in 2H11

TranS1

$5.1MM, -24%(U.S.$4.6MM, -23%, ex-U.S. $0.5MM, -18%)

  • U.S. AxiaLIF $4.4MM (~62% using 1-level, 38% 2-level)
  • Non-AxiaLIF $~$0.2MM
  • 477 AxiaLIF procedures performed, 369 in U.S. (of the latter, 27% 2-level)
  • Direct business in Europe +8%
  • Unusually high cancellation rate in 2/11, but signs of stability in 3/11 attributed to combination of Humana decision, bringing some new surgeons on board, ancillary instrumentation; generally degenerative spine surgeons

Wright Medical

$135.4MM, +2% (U.S. flat, ex-U.S. +4%)

Hips $45.8MM, -3% (U.S. -15%, ex-U.S. +5%)
Knees $32.8MM, flat (U.S. flat, ex-U.S. flat)
Biologics $19.3MM, -3% (U.S. -2%, ex-U.S. -5%)
Extremities $34.2MM, +13% (U.S. +12%, ex-U.S. +18%)
Other $3MM, +16%

  • Have lost hip customers, but does not attribute this to issues with MoM
  • Getting excellent feedback on EVOLUTION Medial Pivot knee, picking up new business
  • Launched PRO-TOE VO Hammertoe System and EVOLVE Elbow Plate, also recently launched FUSIONFLEX Demineralized Moldable Scaffold and will launch INBONE 2 within the month

 

Zimmer

$1,116MM, +3%(Americas $629.7MM, +2%; Europe $299.2MM, +4%; Asia Pacific $186.7MM, +7%)

Hips $337MM, +5% (Americas $155MM, +5%; Europe $114MM, +2%; Asia Pacific $68MM, +10%)
Knees $462MM, -1% (Americas $278MM, -3%; Europe $117MM, +3%; Asia Pacific $67MM, +2%)
Extremities $43MM, +11%
Dental $63MM, +21%
Trauma $70MM, +14%
Spine $57MM, -6%
Orthopaedic Surgical Products/Other $84MM, +7%

Recon

  • Continuing benefit from improved mix in hips, supported by recently product launches (including Continuum Acetabular Cup)
  • New products, increasing utilization of Patient Specific and Posterior Referencing Instruments will elevate knee growth

Trauma and Spine

  • U.S. still challenged by reimbursement, pricing
  • Launched PathFinder NXT Percutaneous MIS Pedicle Screw, TMS Trabecular Metal Cervical Interbody Fusion device

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.