Company Financials: Orthopaedics and Spine

ORTHOWORLD estimates place overall market growth at 5% over 3Q10, as shown in Exhibit 1, which displays orthopaedic sales growth by product segment. Performance highlights follow, and relate to 3Q unless otherwise noted.

Exhibit 1: Orthopaedic Sales Increases1 by Product Segment: 3Q11 vs. 3Q10 

 BZ December_-_3Q11_Financials_-_Final_-_2

Notes to Exhibit 1
1 Orthopaedic products only; constant currency, pro forma growth
2 Includes biologics
3 For the quarter ended 8/31/11; Spine includes Bone Stim and Biologics; Bone Stim reflects all Bone Healing sales.
4 For the quarter ended 10/28/11
5 Spine
6 For the quarter ended 9/30/11
7 Extremities: extremities + fixation combined; Endoscopy: endoscopic + communications, most of which is orthopaedic; Spine: neuro + spine. Total growth excludes Patient Handling.
8 ORTHOWORLD estimates
9 Excludes "Other" (Aerospace) 


aap Implantate
€6.9MM (~US $9.4MM), -4%

  • Commenced international launch of LOQTEQ trauma products
  • Signed 2 new contracts for biomaterials with customers in Brazil and Israel

Alphatec Spine (pro forma)
$47.6MM, +3% (U.S. $32.7MM, +9%; ex-U.S. $14.9MM, -8%)

  • Greater than expected slowdown in procedure volume
  • U.S. pricing stable for past 2 quarters, low single-digit decline year over year
  • Growth propelled by launch of Illico MIS system in Japan
  • Relaunched Solus ALIF to 20 U.S. and 5 ex-U.S. beta sites (See ORTHOKNOW, 8/11.); full release slated for 1Q12
  • PureGen allograft now implanted in >1,000 patients, no adverse events
  • Negotiating with FDA to accept patients treated with OsseoFix under original protocol as completion of feasibility study
  • 4Q product launches include Discocerv ex-U.S., as well as products in Australia and Russia
  • Added 10 distributors, 2 direct sales reps

Anika Therapeutics
Orthobiologics $10.3MM, +35% (U.S. +28%, ex-U.S. +55%)
Ÿ ORTHOVISC U.S. +28%, ex-U.S. +72%
Ÿ MONOVISC ex-U.S. +3%

  • Resolved 2Q ex-U.S. backorder issue with ORTHOVISC
  • Added distributors in EU for Hyalograft C, Hyalofast cartilage regeneration
  • Will submit data for CE Mark approval of CIGNAL by end of 2011
  • No update on FDA clearance of MONOVISC

ArthroCare
$54.5MM, -10%
Ÿ Sports Medicine $52.1MM, -9%
Ÿ Other [includes spine] $2.4MM, -17%

  • U.S. sports med procedure volumes remained weak
  • Active U.S. sports med customers declined slightly
  • ~1% increase in sports med average selling price (ASP)
  • Ambient products >25% of U.S. sports med Coblation sales
  • Ambient Advantage promo intends to migrate existing customers to Ambient platform, capture competitive accounts
  • Ambient-equipped HipVac Coblation Wand fully launched globally
  • Received FDA clearance for SpeedLock PEEK knotless anchor


Artimplant
SEK 4.7MM (~US $0.71MM), -8%

  • Launched complementary Artelon Tissue Reinforcement products, mainly in foot/ankle applications
  • Received CE Mark approval for Artelon CMC Soft (spacer for thumb base OA) and MTP Soft (spacer for large toe OA)

ConMed
$104.2MM, +1%
Ÿ Arthroscopy $69.4MM, -1% (Single-use $54.4MM, +6%; Capital $15MM, -21%)
Ÿ Powered Instruments $34.8MM, -2% (Single-use $18.7MM, -3%; Capital $16.1MM, -1%)

  • Sports med bolstered by new products (SRS Shoulder Repair, Sequent Meniscal Repair)
  • In 4Q, launching Y-Knot suture for shoulder instability procedures
  • “Very near future” launch slated for new hip arthroscopy instrumentation

DePuy
$1,384MM, +2%* (U.S. $737MM, -2%, ex-U.S. $647MM, +6%)
Ÿ Hips +1% (U.S. -4%, ex-U.S. +8%)
Ÿ Knees -4% (U.S. -7%, ex-U.S. -1%)
Ÿ Spine +1% (U.S. -3%, ex-U.S. +10%)

*Growth is operational and reflects constant currency. DePuy sales do not reflect purely orthopaedic revenue and growth.

  • Entered into definitive agreement to acquire SterilMed, reprocessor/remanufacturer of medical devices in U.S.
  • U.S. hips still impacted by price pressures, low metal-on-metal sales
  • Seeing more competition in knee market
  • Received clearance to market TRUMATCH knee implant positioning software for use with Sigma Fixed-Bearing Knee

DJO Global (pro forma)
$263.1MM, flat
Ÿ Bracing/Vascular* $101.4MM, +0.7%
Ÿ Recovery Sciences $81.9MM,-5%
Ÿ International $64.4MM, +3%
Ÿ Surgical Implant $15.2MM, +5%

*Includes products serving the diabetes market.

  • Seeing early success with Reaction knee brace, Exos upper extremity braces, Turon shoulder
  • Shoulder portfolio delivering >25% growth
  • Hip and knee sales declined due to market conditions, loss of certain customers
  • Empi revenue impacted by unfavorable insurance pricing, decrease in patient visits to physical therapy clinics


Exactech
$47MM, +10% (U.S. $31.5MM, -1%; ex-U.S. $15.8MM, +56%)
Ÿ Hips $8MM, +22%
Ÿ Knees $17.9MM, +15%
Ÿ Biologics and Spine $5.4MM, -15%
Ÿ Extremities $9.8MM, +34%
Ÿ Other $6.2MM, flat

  • Pressure from hospitals on adding biologics products (notably demineralized bone, cell therapies)
  • Spine hampered by transition following purchase of Silverbolt from Vertiflex
  • LPI Prime short hip stem rejected by FDA; resubmitting in 12/11
  • Revision Intergrip Cup in pilot launch; full launch expected 3Q12
  • Good reception in U.S. for Logic Cruciate Retaining Knee, Logic FIT Tibial Tray
  • Posterior stabilized constrained tibial insert in full launch
  • 1Q12 launches include CTA Humeral Head Pusher, Augmented Glenoid, Augmented Reverse Faceplate
  • 65% sales are direct; ~75 direct reps in Europe, 255 in U.S.

Greatbatch Medical
$31.1MM, +4%

  • Continued price pressure from OEMs
  • Plans to open 2 new orthopaedic design centers, transfer production of several lines to lower-cost manufacturing facilities, consolidate ortho operations in Switzerland, etc.
  • Still winning design projects in instruments, cases, trays, implants

Integra Orthopedics
$86.4MM, +18%

  • Observed some softness in elective extremity procedures
  • Spine hardware and orthobiologics saw double-digit increases
  • Acquired Ascension Orthopedics for $65MM in cash
  • SeaSpine transition progressing well, will be complete by end of 4Q
  • Will introduce reverse shoulder and fracture plating options in U.S. by end of 2012


Kensey Nash (for fiscal 1Q12 ended 9/30/11)
$12.7MM, +140%
Ÿ Sports Medicine $3.6MM, +36%
Ÿ Spine $5.4MM, +113%
Ÿ Trauma & CMF $3.7MM, flat

  • Growth includes ~$1MM in spine sales from 5/11 Norian acquisition.
  • Royalties from Stryker $1.4MM, +8%
  • Stryker has ~1,000 reps that may sell products acquired from Orthovita; includes expanded ex-U.S. presence
  • Plans to release new Orthovita-based products in 2012

MAKO Surgical
$20MM, +67%
Ÿ RIO Systems $7.7MM, +2%
Ÿ MAKOplasty Total Hip $1.6MM
Ÿ Implants/disposables $9.1MM, +124%

  • 1,813 MAKOplasty procedures performed; 1,752 in U.S.
  • Performed 10,000th MAKOplasty knee procedure
  • Sold 11 RIO Robotic Arm Interactive Orthopedic platforms
  • Launched MAKOplasty Total Hip, sold and installed 12 applications
  • Completed 88 hip procedures
  • ASP for RIO: ~$860,000, Hip: $134,000
  • Initial release of hip application includes RESTORIS MetaFix Femoral Stem, RESTORIS Trinity Acetabular Cup
  • Developing additional MAKO systems for use with hip application, to be available in 2012
  • 75 reps selling MAKOplasty implants

Medicrea
€4.0MM (~US $5.5MM), -13%

  • PASS-LP polyaxial system accounts for ~75% of revenue
  • Low growth partially attributed to time taken to get new sales staff up to speed
  • Unveiled 6 new products, including GRANVIA-L hybrid lumbar disc, CARYTID VBR corporectomy implant (made with additive manufacturing technology), etc.
  • Filed with FDA for clearance of K-Jaws cervical compressive mini-frame


NuVasive
$132.9MM, +11% (Biologics $25.5MM, +10%; ex-U.S. ~$10MM)

  • U.S. lumbar +6%, ~65% of overall business
  • Cervical business +20%
  • Strong growth continues in Asia, Latin America
  • European “turbulence” impacting surgery volumes, European distributors reluctant to invest in growth
  • Completed acquisition of Impulse Monitoring
  • Team of >300 spine reps has little overlap with Impulse’s team of 150 neurophysiologists
  • Of Impulse’s 200 hospitals, NuVasive has current business in 20
  • Not seeing anticipated pull-through for Osteocel Plus
  • Not seeing increase in business due to Infuse issues
  • Launches of AttraX synthetic biologic and PCM cervical disc now expected in 1H12

Orthofix
$142.9MM, +3%
Ÿ Spine $76.5MM, -1% (Stimulation $39.7MM, -8%, Implants/Biologics $36.8MM, +8%)
Ÿ Orthopaedics $40.8MM, +8%
Ÿ Sports Medicine $25.6MM, +7%

  • Mid-single-digit price erosion in spine
  • Sales of exfix and infix more than doubled in Brazil due to distribution expansion
  • Launched Collage synthetic bone graft substitute, Lapidus Plating System
  • Expecting significant opportunities “all over the place” in spine as result of Infuse controversy

Ossur
Bracing & Supports $52.3MM, +17%

  • Launched 4 new products, including Hiptric V2 post-op brace, Rebound Knee ligament brace

RTI Biologics
$28.4MM, +8%
Ÿ Sports Medicine $11MM, +2% (U.S. +3%)
Ÿ Spine $10.3MM, +6%
Ÿ Bone Growth Substitute/General Orthopaedic (BGS/GO) $7MM, +24%

  • Spine growth attributed to inventory replenishment from a few smaller distributors
  • BGS/GO growth due to strong increases in direct business in U.S., Germany
  • Medtronic ~17% of total sales


Seikagaku (for fiscal 2Q11, ended 9/30/11)
¥6,898MM (~US $88.4MM), +3%

  • Export sales of ARTZ (injectable for treatment of knee OA) to China continue to rise

Smith & Nephew
$774MM, +4%*
Orthopaedics $548MM, +3% (U.S. +1%, Europe +3%, Rest of World +9%)
Ÿ Hips $162MM, -2% (U.S. -6%, ex-U.S. +2%)
Ÿ Knees $202MM, +6% (U.S. +5%, ex-U.S. +6%)
Ÿ Trauma $113MM, +4% (U.S. flat, ex-U.S. +8%)
Ÿ Clinical Therapies $60MM, +7%

Endoscopy $226MM, +7% (U.S. +3%, Europe +4%, Rest of World +16%)
Ÿ Arthroscopy $194MM, +7% (Repair +8%, Resection +6%)
Ÿ Visualization $26MM, -1%

*Excludes Wound Management.

Recon

  • Life for like price reduction ~3%
  • Double-digit growth from Oxinium bearing surface products
  • Orthopaedic segment challenged by too high a cost base, instigating tighter cost controls
  • Sales of Birmingham hip still low

Endoscopy

  • Expanding distribution of Fast-Fix 360 Meniscal Repair system
  • Launched HD1200 Autoclavable Camera, signed agreement to sell off Digital OR business

Stryker
$2,031MM, +12% (U.S. $1,298MM, +11%; ex-U.S. $733MM, +14%)
Reconstructive $901MM, +4% (U.S. +3%, ex-U.S. +5%)
Ÿ Hips $300MM, +5% (U.S. +5%, ex-U.S. +6%)
Ÿ Knees $311MM, -0.5% (U.S. -2%, ex-U.S. +2%)
Ÿ Trauma/Extremities $236MM, +12% (U.S. +20%, ex-U.S. +5%)

MedSurg Equipment $767MM, +10%* (U.S. +12%, ex-U.S. +3%)

Neurotechnology/Spine $363MM, +43% (U.S. +26%, ex-U.S. +85%)
Ÿ Neuro $184MM, +119% (U.S. +69%, ex-U.S. +241%)
Ÿ Spine $179MM, +5% (U.S. +5%, ex-U.S. +6%)

*MedSurg includes patient handling and emergency medical equipment.

General

  • Volume mix contributed 6.1% to top line growth; company wide price declined -2%

Recon

  • Excluding acquisitions, Recon grew +2%
  • U.S. hips continue to benefit from MDM offering
  • Launch of OtisMed shape-matching knee going well

Neuro/Spine

  • Excluding acquisitions, Neuro/Spine grew +0.5%
  • Commenced initial launch of lateral access fusion system


Symmetry Medical
$84.0MM, -8%
Ÿ Instruments $33.6MM, -7%
Ÿ Implants $26.7MM, -6%
Ÿ Cases $17.6MM, -18% (mostly non-ortho)
Ÿ Other $6.1MM, +7%

  • Decline driven by lower aggregate sales to 5 largest orthopaedic customers, though partially offset by aggregate double-digit growth with all other ortho and medical device customers (and impact of currency, acquisitions, etc.)
  • Experiencing more frequent inquiries on pushing orders to 2012
  • Launched Elbow Lock arm positioning
    system under ACCESS Arthroscopy brand, initial feedback positive

Synthes
$1,007.0MM, +7%
Ÿ North America $567.3MM, +5%
Ÿ Europe $230.6MM, +7%
Ÿ Asia Pacific $134.3MM, +18%
Ÿ Rest of World $74.8MM, +3%

  • Stockholders to meet on 12/15/11 to vote upon merger agreement to become wholly-owned subsidiary of Johnson & Johnson

North America

  • Still facing weak economy, pricing dynamics
  • Continued growth in trauma, specifically VA-LCP Forefoot/Midfoot system
  • Continues rollout of MATRIX pedicle screw
  • Launched Vertecem vertebroplasty system

Europe

  • Growth supported by new product launches, integration of Anspach power tools

Asia Pacific

  • New products across all groups contributed to growth
  • Australia and New Zealand growing at or greater than +15%
  • China, India and Korea sales growth >20%

Rest of World

  • Latin America contributed double-digit growth
  • Successfully transitioned Chile to direct sales


Tornier
$57.5MM, +11% (U.S. +9%, ex-U.S. +14%)
Ÿ Total Extremities $46.9MM, +12% (Upper $37.6MM, +14%, Lower $5.9MM, +4%, Sports Med/Biologics $3.3MM, +2%)
Ÿ Large Joints/Other $10.5MM, +7%

  • Sports Med/Biologics under pressure in U.S., partly due to market forces and timing of product launches
  • Sales growth driven by Aequalis Ascend shoulder system, continued adoption of Aequalis Reverse Shoulder and CortiLoc glenoid
  • Will order additional instrument sets for Ascend before end of 2011
  • Ordered additional instrument sets to support lower extremity products (e.g., Stabilis ankle fusion)
  • Will introduce 19 new products by year-end
  • In a position to move quickly in Brazil and China, once products receive regulatory clearance (likely by 1Q12)

TranS1
$4.7MM, -26% (U.S. $4.3MM, -12%; ex-U.S. $0.4MM, -2%)

  • U.S. AxiaLIF $3.9MM (63% 1-level, 37% 2-level)
  • Non-AxiaLIF ~$0.37MM ($0.18MM lateral cases)
  • 387 TranS1 procedures performed (305 U.S.)
  • Received $18.3MM equity financing, will support clinical trials, reimbursement efforts, sales, R&D
  • Received subpoena under Federal Healthcare Fraud/False Claims statutes, seeking documents from 2008 through 2011; no claims against company, cannot comment further
  • Number of surgeons performing AxiaLIF procedure decreased sequentially
  • Announced positive coverage decision in Horizon Blue Cross/Blue Shield NJ lumbar spinal fusion reimbursement policy for medically necessary interbody fusion using AxiaLIF pre-sacral approach
  • Fully launched AxiaLIF 1L Plus
  • Expecting full launch of MIS direct lateral system in 1Q12

Wright Medical
$118.1MM, -6% (U.S. -7%, ex-U.S. -3%)
Ÿ Hips $39MM, -7% (U.S. -14%, ex-U.S. -2%)
Ÿ Knees $27.2MM, -10% (U.S. -7%, ex-U.S. -13%)
Ÿ Biologics $16.6MM, -16% (U.S. -20%, ex-U.S. +4%)
Ÿ Extremities $32.3MM, +6% (U.S. +5%, ex-U.S. +9%)
Ÿ Other $2.9MM, +23%

  • Plans to narrow product portfolio, selecting projects that have best leverage in hips, knees, biologics, extremities
  • Needs to be “very active in M&A” in extremities
  • Negatively impacted by slowdown in foot/ankle educational programs, working through new compliance processes and procedures
  • Observed significant increase in rate of claims this year relative to PROFEMUR modular neck fractures, with higher rate of fracture in North America
  • >200,000 modular neck stems implanted, with worldwide fracture rate ~0.1%
  • Rolled out cobalt chrome version of modular necks in North America


Zimmer
$1,031MM, +2% (Americas $582MM, -1%; Europe $252MM, +7%; Asia Pacific $197MM, +7%)
Ÿ Hips $315MM, +4% (Americas $142MM, flat; Europe $103MM, +6%; Asia Pacific $70MM, +11%)
Ÿ Knees $417MM, flat (Americas $253MM, -4%; Europe $90MM, +7%; Asia Pacific $74MM, +7%; Patient-specific instrumentation +70%)
Ÿ Extremities $36MM, +4%
Ÿ Dental $55MM, +9%
Ÿ Trauma $69MM, +14%
Ÿ Spine $55MM, -5% (Asia Pacific +12%)
 Ÿ Orthopaedic Surgical/Other $84MM, +4%

  • Overall price pressure -0.9% (Americas -1.5%, Europe +0.4%, Asia Pacific -0.8%)
  • Hip sales reflect positive volume and mix of 5.5%, price -1.6%; knee pricing -1.9%
  • Observing increased utilization of posterior referencing and patient-specific knee instruments
  • Posterior referencing instruments driving competitive gains in Europe
  • Trabecular shoulder performing well against new competition
  • Gel-One will most likely not launch in 2011

 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 This email address is being protected from spambots. You need JavaScript enabled to view it..