Company Financials: Orthopaedics and Spine

ORTHOWORLD’s estimates place overall 1Q12 market growth at 4% over 1Q11, as shown in Exhibit 1. Performance highlights follow and pertain to 1Q12, unless noted otherwise.

Exhibit 1: Orthopaedic Sales Increases1 by Product Segment: 1Q12 vs. 1Q11

financial1q12

NOTES TO EXHIBIT 1

  1. Orthopaedic products; constant currency, pro forma growth
  2. Includes biologics
  3. For the quarter ended 2/29/12; includes Dental. Spine includes Bone Stim and Biologics; Bone Stim reflects all Bone Healing sales.
  4. For the quarter ended 4/27/12
  5. Spine
  6. For the quarter ended 3/31/12
  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. For the quarter ended 3/31/12

AAP IMPLANTATE
€9.9MM (~US $12.7MM), +51%

  • LOQTEQ update: presented to potential new distributors in Asia, Europe, Latin America and U.S.; expecting full FDA clearance in 3Q

ALPHATEC SPINE
$48.4MM, -3% (U.S. $32.5MM, -4%; Ex-U.S. $15.9MM, flat)

  • Will take on in-house manufacturing of certain high-volume, high-cost products, 1st to be Trestle Luxe anterior cervical plate
  • Late in quarter, voluntarily recalled deployment instrument for Solus Anterior Lumbar Interbody Fusion device (in beta launch) to improve its performance in surgeries involving extremely hard or sclerotic bone (a problem not dissimilar from other standalone ALIF devices)
  • Modifications to Solus instrumentation expected to require resubmission of 510(k); expects product back to market by year-end
  • Physician-owned distributorships account for substantially <10% of U.S. business, and declining

ARTHROCARE
$61.2MM, +3%
• Sports Medicine $59.3MM, +5% (Americas +7%, International +5%)
• Other (includes Spine) $1.8MM, -24%

  • 2012 product launches include MultiFIX P knotless fixation, pound-in implant composed entirely of PEEK (primarily for rotator cuff repair) and MegaVac Wand, 90-degree suction wand that reportedly ablates tissue 40% faster than leading competitor’s product
  • Recent Civil Investigative Demand relates to ENT business

BIOMET (fiscal quarter ended 2/29/12)
$708.9MM, +5% (U.S. $432.8MM, +5%; Europe $176.7MM, +4%; International $99.4MM, +6%)

Reconstructive $422.7MM, +5% (U.S. +6%)
• Hips +6% (U.S. +7%)
• Knees +4% (U.S. +4%)
• Bone Cement/Other +7% (U.S. +8%)
Sports, Extremities, Trauma (S.E.T.) $92.7MM, +16% (U.S. +15%)
• Sports Medicine +22% (U.S. +18%)
• Extremities +18% (U.S. +21%)
• Trauma 1% (U.S. -6%)
Spine & Bone Healing $76.5MM, -5% (U.S. -5%)
• Spine -3% (U.S. -3%)
• Bone Healing -10% (U.S. -10%)
Other $51.4MM, +9%
(Growth includes dental.)

Binding offer for DePuy’s trauma assets

  • DePuy’s U.S. distributors are making available dedicated trauma reps, managers and specialists to interview Will offer full-time positions to DePuy’s dedicated sales reps in Japan, U.K.
  • Commenced acquisition in 6/12

Recon

  • Volume of custom implants very, very low, not a material driver of mix
  • Gained market share in Europe hips/knees (particularly strong in Germany, U.K.), Japan and Australia hips and Canada knees
  • Metal-on-Metal <10% of hip sales, Super Premium Bearing ~70% of domestic acetabular units
  • Continued strong demand in Europe, U.S. for Taperloc Complete Hip, will release >100 additional sets to field in FY4Q
  • Very strong market acceptance of cementless Global Tissue Sparing Hip Stem in Europe and Active Articulation Dual Mobility Hip in U.S.
  • New knee technologies, including Oxford Microplasty instruments and Signature for Oxford, contributing to stabilization for Oxford line
  • Launching Signature for Oxford in Europe in FY4Q

Spine/Bone Healing

  • FY4Q launch slated for Solitaire C, stand-alone cervical spacer (PEEK-Optima + titanium faceplate), “deroduction” (derotation and rod reduction) instruments for Trivium Deformity Correction
  • Planning FY1Q13 launch of Celentra Viable Cell Bone Matrix

BRADSHAW MEDICAL
$5.4MM, +21%

CHINA KANGHUI
RMB 82.7MM (~US $13.1MM), +22% (China ~$10.1MM, +29%; ex-China ~$2MM, +18%)

  • Trauma ~$8.2MM, +23%
  • Spine ~$4.1MM, +35%
  • OEM ~$0.8MM, -24%
  • Released new cannulated pedicle screw, indicated for treatment of osteoporosis
  • Product launches for remainder of year include 1 for spine (2Q), 2 trauma and 3 joint (2H12)
  • Will price TGM Hip and Knee product at a 20-30% discount to JNJ and Zimmer offerings

CONMED
$124.8MM, +10%
• Arthroscopy $86.2MM, +14%
• Powered Instruments $38.6MM, +1%

  • Signed exclusive worldwide marketing agreement for Musculoskeletal Transplant Foundation’s (MTF) sports medicine allograft tissue

DJO GLOBAL
$278.9MM, +4%
• Bracing and Vascular $105.2MM, +9%
• Recovery Sciences $84.2MM, -1%
• International $71.5MM, +5%
• Surgical Implant $17.8MM, +8%
(Growth is pro forma and reflects constant currency. Bracing and Vascular includes products serving the diabetes market.)

  • Performance driven by new products (Exos upper extremity, Turon Total Shoulder, RSP Monoblock Shoulder), early performance of new OA Nano osteoarthritis knee brace

EXACTECH
$58.6MM, +10% (U.S. $36.8MM, +5%; ex-U.S. $21.9MM, +19%)
• Hips $11.0MM, +37%
• Knees $21.5MM, +1%
• Biologic/Spine $6.2MM, -13%
• Extremities $13.0MM, +37% (mostly U.S.)
• Other $7.1MM, -6%

  • Hip sales driven by positive traction ex-U.S., particularly Japan and Spain, good response to direct anterior approach
  • Knees relatively flat in units

GLOBUS MEDICAL
$94.7MM, +21%

  • Fusion $61.5MM, +9%
  • Disruptive Technologies $33.2MM, +51%
  • Recent product launches, Coalition and Caliber, represented 11% and 10% of sales, respectively

GREATBATCH MEDICAL
$31MM, -19%

  • Lower orthopaedic customer product launches and product development opportunities
  • Did not execute operationally in Europe, must get more aggressive to meet objectives set up in Switzerland and Europe

INTEGRA LIFESCIENCES
$86.1MM, +19% (U.S. $71.2MM, +22%; ex-U.S. $14.9MM, +9%)

  • U.S. Extremities $26.5MM, +25%; U.S. Spine & Other $44.8MM, +20%
  • 2Q product launches include NewPort MIS and Daytona Deformity System full release

INTERNAL FIXATION SYSTEMS
$0.15MM, +136%

  • Released additional sets of redesigned cannulated screw systems, limited release of modular locking small fragment system
  • Manufacturer of “value priced orthopaedic and spinal implants” focused on existing, commonly used products, selling for 40-60% less than competition

JOHNSON & JOHNSON
$1,493MM, flat vs. 1Q11 (U.S. $783MM, -4%, ex-U.S. $710MM, +4%)
• Hips +1% (U.S. flat, ex-U.S. +3%)
• Knees +2% (U.S. +2%, ex-U.S. +1%)
• Spine -3% (U.S. -8%, ex-U.S. +5%)

  • Now referring to segment as orthopaedic sales (vs. DePuy sales)
  • U.S. sales impacted by 2011 divestiture of Surgical Instruments, continued pricing pressure partially offset by positive mix; ex-U.S. sales strong in Asia

KENSEY NASH (fiscal quarter ended 3/31/12)
$11.6MM, +68%
• Sports Medicine $4.8MM, +33%
• Spine $4.1MM, +29%
• Trauma/CMF $2.7MM
(Revenues include earnings from Norian acquisition.)

  • Product royalties from Stryker reached $1.7MM
  • SportsMed increase primarily due to ex-U.S. product clearances for largest customer
  • Spine, Trauma/CMF increases primarily from Norian

DSM acquisition of Kensey Nash

  • Royal DSM entered into a definitive agreement to acquire Kensey for $360MM ($38.50/share) in cash (subsequently completed in 6/12)
  • Will support DSM’s biomedical business, which currently comprises medical coatings, polyurethanes, UHMWPE, hydrogels, etc.

MAKO SURGICAL
$19.6MM, +51%

  • Procedures $11.6MM, +79%
  • RIO Systems $5.9MM, +9%
  • Service/Other $2.2MM, +87%
  • Reduced partial knee replacement procedures, pricing pressure, delays (not cancellations) in customer orders contributed to shortfall in system sales
  • 2,297 MAKOplasty procedures performed (Domestic: 2,008 knees, 211 hips), +76% from 1Q11
  • 6 RIO systems sold, 5 to domestic customers, 1 in Japan; now at 118 RIO systems installed
  • 13 MAKOplasty THA applications sold, 9 as upgrades for current customers; now at 62 hip applications installed
  • Introducing next-generation hip application during 2012, will support a direct anterior approach
  • Pipeline Biomedical’s Restoris tapered femoral stem and PST acetabular cup received 510(k) clearance, will be fully commercialized by year-end
  • Restoris Z hip (manufactured by Total Joint Orthopedics) launched for use with MAKOplasty

MAZOR ROBOTICS
NIS 9.2MM (~US $2.4MM), +45% (U.S. ~$2.2MM, +100%)

  • Sold 3 Renaissance surgical robotic systems; to date, 12 installed in U.S.
  • To date, technology used in >3,000 spinal procedures worldwide in placement of ~20,000 implants
  • In 5/12, commenced global launch of C-OnSite enhancement to enable fast, low-radiation, intra-operative 3D verification of implant placement using imagery from any standard 2D C-Arm


MEDTRONIC (for fiscal year 2012, ended 4/27/12)
$3,267MM, -4% (U.S. $2,300MM, -10%; ex-U.S. $967MM, +12%)

  • Core Spinal $2,467MM, -2% (U.S. $1,596MM, -8%; ex-U.S. $871MM, +11%)
  • Biologics $800MM, -10% (U.S. $704MM, -13%; ex-U.S. $96MM, +28%)

Fiscal Year 4Q12 revenue: $818MM, -6% (-2% ex-Infuse; U.S. $557MM, -12%; ex-U.S. $261MM, +8%; Japan +20%)

  • Core Spinal $629MM, -3% (U.S. $394MM, -8%; ex-U.S. $235MM, +7%; Core metal -3%)
  • Biologics $189MM, -16% (U.S. $163MM, -19%; ex-U.S. $26MM, +4%; Infuse $126MM, -26%; Kyphoplasty flat, U.S. -26%; Bone morphogenetic protein -24%, U.S. -26%)
  • Acquired AMT, German manufacturer with wide portfolio of interbody systems in new shapes, geometries, materials; aggressively increasing number of sets available
  • Solera ~45% rolled out in U.S. (larger rod diameters used in more complex spine and deformity procedures rolled out less than that), represents ~20% of thoracolumbar revenue; launch should reach apex in FY13
  • MAST MIDLF pulling share, combines screws/rods, interbody devices, access instruments, biologics: 100 sets in field, trained ~200 surgeons, more than half of which are competitive; global rollout expected in 2Q FY13
  • ~60% of FY4Q decline driven by Infuse
  • Not seeing smaller number of accounts using Infuse, just more selective use around indications and smaller kit sizes
  • U.S. DOJ closed Infuse investigation
  • Introduced InflateFX, a balloon kyphoplasty-like product to repair tibial plateau fractures in extremities
  • Believes that PODs will be ruled illegal in the face of anti-kickback laws

NUVASIVE
$151.7MM, +22% (Ex-U.S. $11MM, +~35%; Biologics $27MM, +19%; Monitoring $9.4MM)

  • U.S. growth: lumbar +12%, biologics +15%, cervical +20%
  • Still expects to be selling in Japan in 2012

ORTHOFIX
$143.1MM, +5%
• Spine $75.0MM, +3% (Stimulation $39.3MM, +2%, Biologics $35.8MM, +5%)
• Orthopaedics $41.0MM, +4%
• Sports Medicine $27.1MM, +10%

  • Growth supported by increased adoption of Trinity Evolution in spine, ex-U.S. launch of Galaxy fixation system, U.S. launch of Ankle Compression Nailing and Lapidus Plating Systems
  • Enrollment complete in post-market evalutions fo Trinity in spine, cervical, lumbar, foot/ankle fusion
  • Initiated co-development investment with MTF to deliver natural biologic solution to complement Trinity Evolution, launch in 2013

RTI BIOLOGICS
$29MM, +1%
• Sports Medicine $13.4MM, +15%
• Spine -12% (Constructs $8.6MM, -8%)
• Bone Graft Substitutes/General Orthopaedic (BGS/GO) $7.0MM, +15%

  • U.S. direct distribution for BGS/GO +35%
  • Launched 4 implants or implant enhancements and 4 business lines
  • Multipotent Adult Progenitor Cells (MAPC) implants on track for human implantation in 2012; small and large animal studies in progress
  • Initiating large primate study in 2012 for xenograft tendon for ligament reconstruction

SEIKAGAKU (for fiscal year 2011, ended 3/31/12)
¥27.0BB (~US $339MM), -1% (Domestic ~$225.7MM, +0.1%, ex-Japan ~$43.9MM, +9%; U.S. +7%)

  • Artz brand benefiting from introduction of plastic delivery syringe
  • U.S. Supartz sales increased as sales reps focused on differentiation from competitors
  • Commenced case registration for Phase III clinical trial in Japan to investigate SI-6603 condoliase enzyme in the treatment of lumbar disc herniation

SMITH & NEPHEW
Advanced Surgical Devices $839MM, +3% (U.S. flat, Established Markets +4%, Emerging/International Markets +13%)
• Hips $179MM, -2% (U.S. -4%, ex-U.S. +1%)
• Knees $235MM, +6% (U.S. +3%, ex-U.S. +9%)
• Sports Medicine Joint Repair $129MM, +7%
• Arthroscopic Enabling Technologies $107MM, +1%
• Trauma $114MM, -1%
• Clinical Therapies $58MM, +6%

  • Acquired LifeModeler software firm, provider of biomechanical human body simulation tools and services
  • Strong contribution from Legion Revision Knee, Verilast bearing technology, Visionaire Patient-Matched Instrumentation
  • Visionaire represents ~20% of U.S. knee procedures

STRYKER
$2,161MM, +7% (U.S. $1,384MM, +8%, ex-U.S. $777MM, +6%)
Reconstructive $958MM, +5% (U.S. +7%, ex-U.S. +3%)
• Hips $312MM, +3% (U.S. +6%, ex-U.S. -0.1%)
• Knees $352MM, +5% (U.S. +5%, ex-U.S. +5%)
• Trauma/Extremities $243MM, +10% (U.S. +13%, ex-U.S. +7%)
Neurotechnology/Spine $382MM, +12% (U.S. +15%, ex-U.S. +8%)
• Neurotechnology $201MM, +12% (U.S. +16%, ex-U.S. +8%)
• Spine $181MM, +12% (U.S. +15%, ex-U.S. +7%)
MedSurg Equipment $821MM, +8% (U.S. +6%, ex-U.S. +13%)

  • Pricing: -2.6% in Recon (offset by favorable mix, particularly in hips), -0.5% in MedSurg, -2% in Neurotechnology/Spine

SYMMETRY MEDICAL
$100.7MM, +5%
• Instruments $27.0MM, -16%
• Implants $24.8MM, -9%
• Cases $15.9MM, -25%
• Other $6.3MM, +2%
• Surgical $26.7MM, +197%

  • Decline in OEM revenue primarily driven by continued inventory contraction affecting implants, reduced capital spending
  • Noted sequential uptick in implant sales (+8%)
  • Launched 12 new line enhancements to Bookwalter Retractor platform, including reduced tray weight; launched Offset Reamer Driver for total hip replacement

SYNTHES
$997.5MM, +2%
• North America $545.0MM, -2%
• Europe $235.6MM, +4%
• Asia Pacific $144.5MM, +9%
• Rest of World $72.4MM, +22%

TORNIER
$74.5MM, +9% (U.S. $39.7MM, +7%; ex-U.S. $34.7MM, +11%)

  • Total Extremities $58.1MM, +11% (Upper $47.0MM, +13%, Lower $7.0MM, +7%, Sports Med/Biologics $4.1MM, +8%)
  • Large Joints/Other $16.2MM, +1%
  • U.S. growth affected by changes in distribution: moved to direct selling in one market, replaced 2 underperforming territories
  • Launched direct sales in Japan at very end of 1Q
  • Making progress on new pyrolytic carbon shoulder

TRANS1
$3.8MM, -26% (U.S. $3.5MM, -24%; ex-U.S. $0.3MM, -50%)

  • U.S. AxiaLIF revenue $3.1MM: 58% 1-level, 42% 2-level
  • Non-AxiaLIF revenue ~$450,000, including ~$300,000 from VEO direct lateral cases
  • 295 AxiaLIF procedures, 222 in U.S.; volume weak due to denials, limited physician reimbursement
  • No update on OIG subpoena from 10/11
  • Positive early adoption of VEO; surgeons like 2-stage retraction
  • In 2Q, will commence patient enrollment in RAMP trial comparing AxiaLIF to TLIF
  • Planning an IDE clinical study to expand labeling for AxiaLIF to include use at base of fusion constructs of 3 or more levels (no current lumbar interbody fusion device offers this labeling)

WRIGHT MEDICAL
$126.7MM, -6% (U.S. -10%, ex-U.S. -1%)
OrthoRecon $73.7MM, -8% (U.S. -15%, ex-U.S. -2%)
• Hips $41.5MM, -10% (U.S. -20%, ex-U.S. -4%)
• Knees $31.0MM, -5% (U.S. -11%, ex-U.S. +2%)
• Other $1.2MM, -5% (U.S. -27%, ex-U.S. +4%)
Extremities $52.8MM, -6% (U.S. -6%, ex-U.S. +2%)
• Foot/Ankle $29.6MM, +11% (U.S. +9%, ex-U.S. +22%)
• Upper $6.5MM, -13% (U.S. -16%, ex-U.S. -8%)
• Biologics $15.1MM, -21% (U.S. -24%, ex-U.S. -11%)
• Other $1.5MM, -14% (U.S. +17%, ex-U.S. -25%)

  • U.S. foot/ankle update: ~100 direct and 90 indirect reps to date; by end of 3Q, will have ~200 reps with minimum 70% direct and 30% independent
  • Continued strong acceptance of EVOLUTION medial-pivot knee more than offset by prior-year customer losses relative to enhancements to compliance processes, distributor transition

ZIMMER
$1,141MM, +3% (Americas $634MM, +1%; Europe $301MM, +4%; Asia Pacific $206MM, +7%)
Reconstructive $860MM, +3% (Americas $468MM, +1%; Europe $239MM, +4%; Asia Pacific $153MM, +7%)
• Hips $344MM, +2% (Americas $154MM, flat; Europe $114MM, +3%; Asia Pacific $76MM, +8%)
• Knees $471MM, +2% (Americas $279MM, flat; Europe $118MM, +5%; Asia Pacific $74MM, +2%)
• Extremities $45MM, +5%
• Trauma $76MM, +8%
• Spine $53MM, -6%
• Surgical/Other $92MM, +9%

  • Received European regulatory clearance for VIVACIT-E vitamin E highly crosslinked polyethylene
  • Introduced patient-specific instruments for Unicompartmental High-Flex knee
  • Received FDA clearance for 1st phase of new NexGen Knee; will have limited availability in 2012
  • ExtraFix external fixation fully rolled out
  • Planning to build out pedicle screw systems in 2H12


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..