2010 Company Financials: Orthopaedic and Spine

The following summarizes publicly available year over year earnings results to date. Our estimates place year over year market growth at 5% thus far, as indicated in Exhibit 1, which displays growth by product segment. Performance highlights relate to 2010, unless otherwise noted.

Exhibit 1: Orthopaedic Sales1 Increases by Product Segment: 2010 vs. 2009


1Orthopaedic products only; constant currency, pro forma growth
2For the quarter ended 11/30/10; excludes dental; trauma includes stimulators; spine includes stimulators and orthobiologics.
3ORTHOWORLD estimates

Biomet (for fiscal 2Q11, ended 11/30/10)

$698.3MM, +2%

  • U.S. $416.9MM, +2%
  • Europe $188.8MM, -1%
  • International $92.6MM, +7%

Reconstructive $540.5MM, +3% (U.S. +3%)

  • Hips flat (U.S. flat)
  • Knees +3% (U.S. +3%)
  • Extremities +23% (U.S. +36%)
  • Other -3% (U.S. -2%)

Fixation $56.3MM, -2% (U.S. -1%)

Spine $56.0MM, -3% (U.S. flat)

Other $45.5MM, +2% (U.S. +2%)

  • Sports Medicine +17% (U.S. +17%)
  • Other -14% (U.S. -16%)

Overall growth includes Dental.

  • Not observing a lot of movement in larger U.S. hospital customers toward purchasing to eliminate the distributor and manage inventory on their own



  • Worldwide hip/knee sales +2% (U.S. +2%)
  • Continued deceleration in procedure volume growth, increased price mix pressure
  • Average selling prices (ASP) for U.S. hips/knees declined slightly in low single digits; ASP decline worse than previous quarter
  • Performance improving in U.K., especially Germany
  • International performance very solid, with strong double-digit growth in Australia
  • Growth in Japan decelerated into single digits (partially due to price decreases from 4/10)


  • Continued mix shift from metal-on-metal (MoM) acetabular systems to RingLoc cups with E1 bearings in U.S. and to Exceed ABT in Europe
  • Noticing some impact of MoM shift on company’s overall market share, some price impact, especially in Europe, where metal-on-poly alternatives offer lower price point
  • Will complete initial U.S. launch of Arcos Modular Revision Hip in 3Q
  • Launching additional sets for Arcos throughout end of FY11, into FY12
  • Rollout of new Taperloc Complete Hip in 4Q


  • Vanguard, E1 Tibial Bearings and Regenerex Porous Titanium key supporters of knee growth
  • Received FDA clearance for Vanguard SSK 360 Revision for stabilized knee; will commence limited launch during 3Q
  • Trained ~250 U.S. surgeons on Oxford knee
  • Will commence limited launch of Oxford Partial Knee extensions and instrument upgrades during fiscal year


  • Double-digit growth for 12th consecutive quarter worldwide and 10th consecutive for U.S.
  • ExploR Modular Radial Head, primary reverse and fracture shoulder systems strong contributors to growth
  • Trained ~250 U.S. surgeons (strong focus on comprehensive shoulder), will train 150 more during 3Q

Trauma and Spine

  • Trauma hardware operations business now fully transferred into U.S. orthopaedic division
  • Strong craniomaxillofacial fixation sales offset by decreased sales in internal/external fixation, electrical stimulation
  • Planning 3Q release of IQ intelligent delivery system for increased speed of titanium screw insertion with cordless drilling
  • Significant price pressure in spine hardware continues
  • Spinal stimulation supported by strong sales of SpinalPak
  • Expects increased market demand in 2HFY11 for Polaris Deformity System with Trivium derotation instruments for scoliosis, and for MaxAn Anterior Cervical Plate


  • Soft goods/bracing sales decreased, but sports med supported by increased demand for JuggerKnot Soft Anchor, MaxFire MarXmen meniscal repair device, etc.
  • Completed patient enrollment in U.S. clinical trial for Recover Kit to treat chronic tennis elbow: 230 patients, will conclude mid-calendar 2011


  • Update on AVAmax Vertebral Balloon: ~125 customers to date; market showing some volatility based on payer comments/actions, but CareFusion not seeing particular impact due to very small market share


$430.7MM, +4%

  • Arthroscopy $288.4MM, +5%
  • Powered Surgical Instruments $142.3MM, -3%
  • Expects single-use arthroscopy business will continue to lead growth as economy continues to improve
  • Working to structure U.S. sales more like ex-U.S.: dividing U.S. into territories similar to size of European counties
  • Orthopaedic salesforce stands at 260 reps
  • Not losing market share in surgical video imaging, in which customers are replacing equipment vs. upgrading
  • Maintaining market position in powered instruments
  • Received FDA 510(k) clearance for Sequent hybrid knee arthroscopy device, uses sutures plus PEEK implant material to repair meniscal tears
  • Sequent and Shoulder Restoration System will continue to drive arthroscopy growth


Full year: $5,585MM, +3% (US $3,145MM, +2%; ex-U.S. $2,440MM, +5%)

  • Hips +3% (US -1%, ex-U.S. +8%)
  • Knees +3% (US +3%, ex-U.S. +4%)
  • Spine flat (US -4%, ex-U.S. +7%)
  • Medical devices expected to feel continuing effect of economic slowdown in 2011
  • Slower growth in procedure volumes continued in 4Q
  • U.S. hips impacted by lower volume on metal-on-metal bearings, intensified pressure on price net of mix
  • Ex-U.S. hip growth, driven by acetabular and cementless systems, partially offset by ASR and softness in procedure volumes in Europe
  • Knees impacted by slower growth in revisions, continued price pressure (price net of mix quarter over quarter did not change very much)
  • U.S. spine affected by pricing pressure, softness in procedure volumes
  • Products in the pipeline pending clearance include AOX Poly for Sigma and LCS, shoulder fracture platform, TLIF Cage, etc.
  • In 2011, plans to submit for clearance products including Platelet Rich Plasma System, new poly hip bearings, bone-preserving hip stem, Next Generation DVR Wrist Plate, as well as ex-U.S. CAIS Cartilage Regeneration system
  • 2012 planned submissions include CAIS Cartilage in U.S., as well as DeltaMotion hip, Next Generation hip and shoulder, hip resurfacing system, etc.


Kensey Nash (for 2Q11 ended 12/31/10)

$4.8MM, -20%

  • Spine $2MM, -30%
  • Sports Medicine $2.6MM, -14%
  • Other Orthopaedic $0.2MM, +34%
  • Royalties from Orthovita $1.4MM, -7%
  • Spine sales continue to reflect overall market weakness and inventory reductions from largest spine customer
  • New orders for FY3Q11 expected to increase: Sports Medicine +30%, Spine +50%
  • Not currently pursuing U.S. regulatory clearance for cartilage product, but will publish 2-year data from equine study in summer 2011

Agreements and Acquisitions

  • Signed agreement with Arthrex for distribution in Europe of Cartilage Repair Device (11/10)
  • Entered into manufacturing agreement and made minority equity investment in Orteq Sports Medicine, specialist in biodegradable polymer technology for meniscus repair (1/11)
  • Acquired Nerites, developer of medical adhesives and anti-fouling coatings (1/11); can use with current collagen and polymers, and could develop standalone products based on adhesives


€18.2MM (~US $24.3MM), +39% (U.S. ~$12MM, +50%

  • PASS LP platform = ~75% of group sales
  • Granvia C cervical disc = 5% of group sales
  • 250 patients treated to date using Granvia C

RTI Biologics

$104.3MM, +0.5%

  • Spinal Constructs $33.9MM, -17%
  • Sports Medicine $45.0MM, +14%
  • Bone Graft Substitutes and General Orthopaedic $25.4MM, +10%
  • Sports Medicine will remain key growth driver going forward
  • Availability of Sports Medicine tissues somewhat dependent upon growth rates of other businesses
  • Over 2011 and beyond, seeking tuck-in acquisitions to enhance Sports Medicine portfolio, leverage direct distribution
  • Spine expected to be relatively flat in 2011 due to pressure from hospitals, payers
  • Will expand spinal distributors during year
  • Anticipates early 2012 launch for Multipotent Adult Progenitor Cell (MAPC) technologies (via exclusive agreement with Athersys), adding reps incrementally in Bone Graft segment during 2011 to support launch
  • Will initiate small and large animal studies early in 2H11 for MAPC, with initial human implants in 4Q11


Seikagaku(for 3QFY11, ended 12/31/10)

¥7,224MM (~US $88.2MM), -3%


$7,320.0MM*, +8% (U.S. $4,792.8MM, +11%; ex-U.S. $2,527.2MM, +2%)

Orthopaedic Implants $4,308.4MM, +3% (U.S. +5%, ex-U.S. +1%)

  • Hips +3% (U.S. +5%, ex-U.S. +1%)
  • Knees +3% (U.S. +6%, ex-U.S. -2%)
  • Trauma +7% (U.S. +11%, ex-U.S. +5%)
  • Spine +1% (U.S. -1%, ex-U.S. +6%)

MedSurgEquipment $3,011.6MM, +15% (U.S. +19%, ex-U.S. +4%)

*MedSurg includes patient handling and emergency medical equipment.

Please note, full year segment growth is not available for MedSurg. We include 4Q10 growth instead for Instruments and Endoscopy.

4Q10MedSurg Equipment

  • Instruments +10% (U.S. +11%, ex-U.S. +9%)
  • Endoscopy +5% (U.S. +2%, ex-U.S. +11%)
  • In 1Q11, closed sales of OP-1 platform for orthopaedic bone applications to Olympus
  • Forecasts assume joint replacement market will grow at similar rates seen in 2010
  • 4Q U.S. hips and knees continued to experience pricing pressure, partially offset by mix
  • No current signs pointing to worsening pricing trends in hips/knees
  • Realizing price premiums for ADM and Rejuvenate hips (launched in early 2010)
  • Not fully ramped up on new recon launches, but certainly on track
  • The impact of metal-on-metal in the marketplace at minimum eliminates challenging head winds; may create opportunity to gain some hip market share (seeing a little bit of movement in metal-on-metal, but can’t get granular at this point)
  • Ex-U.S. impacted (particularly in knees in Europe) by distributor changes, obsoleted products, some slowness in rolling out instrumentation for Scorpio knee
  • Overall European market dynamics may still be soft for 1H11
  • Still on track for 2011 clearance for OtisMed customized cutting blocks (not yet narrowing down to 1H or 2H)
  • Still feel great about Triathlon knee; reported U.K. registry data that showed Triathlon has lowest revision rate (See BARE BONES®, 12/10.)
  • Ongoing price pressure in spine, similar to what market is seeing; thinks there’s a stabilization trend
  • iVAS balloon off to a steady start (See ORTHOKNOW, 5/10.); nothing meaningful right now, but “we like the trajectory”
  • Feelingwell-positioned to continue delivering good results in trauma in 2011



$4,220MM, +2% (U.S. $2,432MM, +2%; Europe $1,099MM, +1%; Asia Pacific $689MM, +6%)

  • Hips $1,262MM, +2% (U.S. +4%, Europe -1%, Asia Pacific +4%)
  • Knees $1,790MM, +1% (U.S. +1%, Europe flat, Asia Pacific +4%)
  • Extremities $150MM, +10%
  • Dental $219MM, +8%
  • Trauma $246MM, +3%
  • Spine $234MM, -7%
  • Orthopaedic Surgical Products/Other $319MM, +11%


  • Completed acquisitions of Beijing Montagne Medical Device and Sodem Diffusion (See BARE BONES, 1/10.)
  • In 4Q, noted some stabilization of procedure volumes
  • For full-year 2010, experienced price decrease of -1% (Americas -1.2%, Europe +0.6%, Asia Pacific -3.4%); does not anticipate accelerated pricing erosion
  • Expecting to take market share in hips and trauma; claims good position with new knee instrumentation to close gaps there
  • Implementing restructuring and transformation initiatives (including staff reductions, reduction of management layers, centralization of global sourcing)


  • For 4Q, hips reflected volume and mix +5.6%, price -2% (does not see price pressure growing)
  • Continuum Acetabular Cup posted substantial sales growth in 4Q
  • Circumstances with respect to metal-on-metal will benefit hip growth, moving forward
  • Secured premium reimbursement for Trabecular Metal Modular Cup in Japan
  • For 4Q, knees reflected volume and mix of +2.3%, price -2%
  • Continuing to ramp up launch of personalized knee
  • Starting to see traction in Posterior Referencing Instruments
  • Trabecular Metal Reverse Shoulder and Trabecular Metal Glenoid supported 4Q growth

Trauma and Spine

  • Zimmer Natural Nail products proving to “be real door openers” for global sales
  • Spine challenged by U.S. market pressures/reimbursement, decreased revenues for Dynesys Dynamic Stabilization System
  • Planning 2011 launch of PathFinder NXT Percutaneous MIS Pedicle Screw
  • Seeking to return spine to positive space and market growth levels in 2011

Sources: Company press releases, earnings calls, analyst conferences, 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 This email address is being protected from spambots. You need JavaScript enabled to view it..