Biomet, Inc. reported making a profit in the last quarter and doubled down on the spine business.
The day after announcing the $147 million acquisition of Lanx, Inc., the company reported a 3.3% increase in 2014 first quarter revenue to $730.7 million. Excluding currency, net sales increased 4.3%. Net income was $31.1 million versus a $31.5 million loss in the previous year’s first quarter. The company also reported paying $5 million for the medical device tax during the quarter and $6 million for litigation. Net debt increased slightly for the previous quarter to $5.62 billion.
Binder: “A Great Start”
Jeff Binder, Biomet’s president and CEO, said on October 8, 2013, that the company had a great start to their fiscal year. He cited an uptick in first quarter hip and knee sales with worldwide constant currency growth at 4% and 5%, respectively, despite having one less selling day in the quarter. “Our sports, extremities and trauma (S.E.T.) sales remained strong during the quarter with double digit growth worldwide. And, we started this week on a high note with yesterday’s press release announcing the signing of a definitive agreement to acquire Lanx, Inc., a leader in minimally invasive spine technologies.”
On a reported basis, knees and hips were up 3.5% and 1.9%, respectively. S.E.T. sales climbed 17.4%. Spine, however, declined by 6.6%.
Lanx, Inc.
Adam Johnson, president of Biomet Spine, Bone Healing & Microfixation, said the agreement to acquire Lanx is “a key step in the fulfillment of our strategic plan. The resulting increase in scale, expansion of our product portfolio and infusion of talent will accelerate our efforts to be the partner of choice in spine for distributor partners, hospitals and the spine surgeons we serve.”
Wells Fargo analyst Larry Biegelsen estimates that Lanx likely has between $80 million to $100 million in annual sales. “We estimate that Biomet had worldwide spine sales of approximately $160 million during fiscal 2013 (ended May) which represents close to 2% market share. We believe the combined company will have about 3% share of the $9 billion worldwide spine market.”
Healthy Markets
Bank of America analyst Bob Hopkins said he took away three things from the quarterly conference call with the company.
One, the hip, knee and extremities markets are healthy. Despite competitive launches from Zimmer Holdings, Inc. and Johnson & Johnson, Hopkins said Biomet’s same day knee sales growth went from 0% to over 6% over the previous quarter.
Two, Biomet isn’t acting like a company that is about to be sold. “Indeed Biomet’s recent deals in trauma and spine suggest a company likely to remain independent.
No Robots
And three, Hopkins said Biomet outlined a new knee technology today that it believes can improve the patient’s experience with total knees by leveraging the high level of patient satisfaction with its Oxford knee, which is derived in large part from preservation of the ACL. “Biomet plans on creating a bicruciate-preserving arthroplasty category and expects to introduce this new innovation for its Vanguard platform at AAOS (American Academy of Orthopaedic Surgeons) in early 2014 and launch the new system in fiscal year 2015.”
Hopkins said this announcement is particularly interesting in light of Stryker Corporation’s deal for MAKO Surgical, Inc. “Because outcomes are already so good in hips and knees long term, innovation in ortho going forward is likely to come from technologies that reduce patient recovery times and increase the reproducibility of the procedure. Biomet believes that can be done without a large piece of capital and with new knee approaches like the one described above, while Stryker clearly sees the robot as the best way to drive this type of innovation.”
