07.29.15
$3.2 Billion
And then there were four.
It’s become survival of the fittest in the orthopedic world, or quite literally, survival of the richest, as multinational implant manufacturers exploit their fiscal clout to gain market supremacy. Responding to a shifting healthcare landscape defined by cost pressures, shrinking reimbursement rates and customer demands for fewer product choices, orthopedic device firms are transforming themselves into “one-stop shops” to boost their appeal to hospital clients.
Such metamorphoses have become quite common in the last decade, with major players like Smith & Nephew plc buying Plus Orthopaedics and ArthroCare Corp., Stryker Corp. merging with Orthovita Inc., Tornier N.V. purchasing Wright Medical Group, and Johnson & Johnson (through its DePuy subsidiary) snagging Synthes Inc.
Zimmer Holdings Inc. finally jumped on the mega-merger bandwagon last spring, offering $13.35 billion for Biomet Inc. “We believe that current demographic and macroeconomic trends affecting the healthcare industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner. Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers. At the same time, we believe that this merger will further support our long-term growth and stockholder value creation strategies,” Zimmer President/CEO David C. Dvorak said when the merger was announced in April 2014.
It took Zimmer more than a year to officially close the deal, having been forced to satisfy American and European regulators with several product line divestitures. In late June 2015, however, the two separate companies became one, and the newly named Zimmer Biomet began trading on the New York Stock Exchange on June 29. (For more details on the merger’s logic, turn to the Zimmer listing on page 110).
Zimmer’s Chief Financial Officer James Crines and Asia Pacific President Stephen Ooi both retired following the deal’s closing, but Crines continues to serve in an advisory role.
Dvorak now is president/CEO of the combined company, which is organized around three business units led by 12 executives who report directly to him. These include the heads of business units, geographic regions and functional areas. Two of the three business heads reporting to Dvorak come from Biomet: Adam Johnson, group president for the Spine, Microfixation, Bone Healing and Dental businesses; David Nolan, group president for the Sports Medicine, Extremities, Trauma, Biologics and Surgical businesses; and Daniel Williamson, group president for the Knee, Hip and Bone Cement businesses.
Among the three geographical leaders named, two hail from Zimmer and one from Biomet. Of the six functional area heads, four are from Zimmer and two are from Biomet. These include David Florin as senior vice president and CFO; he was Biomet’s CFO.
Biomet’s final earnings report was a crowd-pleaser, as consolidated net sales rose 5 percent to $3.2 billion in the fiscal year ended May 31, 2014.
U.S. net revenue increased 5.8 percent to $1.97 billion, while European proceeds jumped 8.7 percent (4.8 percent in constant currency) to $772.0 million. International sales (comprising primarily Canada, Latin America and the Asia Pacific region) barely budged, inching up just 0.1 percent (9.3 percent in constant currency) to $481 million. Preliminary special items, after tax, totaled $383.3 million during FY14, compared to $964.1 million during FY13.
Operating income was $313.2 million compared to an operating loss of $164.5 million during the previous fiscal year. Excluding special items, adjusted operating income totaled $863.8 million during fFY14, compared to $837.6 million during the prior year period.
Net income was $36.8 million, compared to a net loss of $623.4 million during the prior year. Excluding special items, adjusted net income totaled $420.1 million.
Excluding special items, adjusted EBITDA during fiscal 2014 totaled $1.078 billion compared to $1.03 billion in 2013.
Preliminary reported cash flow from operations came to $529.0 million. Free cash flow (operating cash flow minus capital expenditures) was $300.3 million, which included $347.4 million of cash interest paid during the year, compared to a free cash flow of $264.5 million during FY13, including $388.6 million of cash interest paid.
Biomet briefly experienced a role reversal, having acquired Lanx Inc., a full-service spine company roughly six months before it was purchased itself. At the time, the merger expanded Biomet’s spine technology portfolio through the addition of such products as the Timberline Lateral Approach Fusion System and the Aspen Minimally Invasive Fusion System. Both items complemented Biomet’s spine offerings, including the Lineum OCT Spine System, MaxAn Anterior Cervical Plate system, Cellentra VCBM and the Polaris Translation Screw System.
“This is an exciting opportunity for Biomet to improve its competitiveness in the spine market by leveraging the best aspects of each company and adding strategically important technologies to our product portfolio,” former Biomet president/CEO Jeff Binder said.
Some of Biomet’s final product releases included the ePAK Single-Use Delivery System and the JuggerKnotless Soft Anchor device.
Biomet released the ePAK Single-Use Delivery System, an innovation for internal fracture fixation, in July 2013. The system is a pre-sterilized, single-use procedure pack that aims to add value by addressing the productivity needs of the operating room by helping to save time, reduce cost, improve efficiency, and ultimately increase productivity. The ePAK system addresses distal radius fractures and features the DVR Crosslock implant and instrumentation.
In July 2014, Biomet’s sports medicince subsidiary launched the JuggerKnotless Soft Anchor device, an innovation the company claimed was the first all-suture, knotless product on the market. Used for labral repair surgery in the shoulder, the JuggerKnotless Soft Anchor features:
And then there were four.
It’s become survival of the fittest in the orthopedic world, or quite literally, survival of the richest, as multinational implant manufacturers exploit their fiscal clout to gain market supremacy. Responding to a shifting healthcare landscape defined by cost pressures, shrinking reimbursement rates and customer demands for fewer product choices, orthopedic device firms are transforming themselves into “one-stop shops” to boost their appeal to hospital clients.
Such metamorphoses have become quite common in the last decade, with major players like Smith & Nephew plc buying Plus Orthopaedics and ArthroCare Corp., Stryker Corp. merging with Orthovita Inc., Tornier N.V. purchasing Wright Medical Group, and Johnson & Johnson (through its DePuy subsidiary) snagging Synthes Inc.
Zimmer Holdings Inc. finally jumped on the mega-merger bandwagon last spring, offering $13.35 billion for Biomet Inc. “We believe that current demographic and macroeconomic trends affecting the healthcare industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner. Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers. At the same time, we believe that this merger will further support our long-term growth and stockholder value creation strategies,” Zimmer President/CEO David C. Dvorak said when the merger was announced in April 2014.
It took Zimmer more than a year to officially close the deal, having been forced to satisfy American and European regulators with several product line divestitures. In late June 2015, however, the two separate companies became one, and the newly named Zimmer Biomet began trading on the New York Stock Exchange on June 29. (For more details on the merger’s logic, turn to the Zimmer listing on page 110).
Zimmer’s Chief Financial Officer James Crines and Asia Pacific President Stephen Ooi both retired following the deal’s closing, but Crines continues to serve in an advisory role.
Dvorak now is president/CEO of the combined company, which is organized around three business units led by 12 executives who report directly to him. These include the heads of business units, geographic regions and functional areas. Two of the three business heads reporting to Dvorak come from Biomet: Adam Johnson, group president for the Spine, Microfixation, Bone Healing and Dental businesses; David Nolan, group president for the Sports Medicine, Extremities, Trauma, Biologics and Surgical businesses; and Daniel Williamson, group president for the Knee, Hip and Bone Cement businesses.
Among the three geographical leaders named, two hail from Zimmer and one from Biomet. Of the six functional area heads, four are from Zimmer and two are from Biomet. These include David Florin as senior vice president and CFO; he was Biomet’s CFO.
Biomet’s final earnings report was a crowd-pleaser, as consolidated net sales rose 5 percent to $3.2 billion in the fiscal year ended May 31, 2014.
U.S. net revenue increased 5.8 percent to $1.97 billion, while European proceeds jumped 8.7 percent (4.8 percent in constant currency) to $772.0 million. International sales (comprising primarily Canada, Latin America and the Asia Pacific region) barely budged, inching up just 0.1 percent (9.3 percent in constant currency) to $481 million. Preliminary special items, after tax, totaled $383.3 million during FY14, compared to $964.1 million during FY13.
Operating income was $313.2 million compared to an operating loss of $164.5 million during the previous fiscal year. Excluding special items, adjusted operating income totaled $863.8 million during fFY14, compared to $837.6 million during the prior year period.
Net income was $36.8 million, compared to a net loss of $623.4 million during the prior year. Excluding special items, adjusted net income totaled $420.1 million.
Excluding special items, adjusted EBITDA during fiscal 2014 totaled $1.078 billion compared to $1.03 billion in 2013.
Preliminary reported cash flow from operations came to $529.0 million. Free cash flow (operating cash flow minus capital expenditures) was $300.3 million, which included $347.4 million of cash interest paid during the year, compared to a free cash flow of $264.5 million during FY13, including $388.6 million of cash interest paid.
Biomet briefly experienced a role reversal, having acquired Lanx Inc., a full-service spine company roughly six months before it was purchased itself. At the time, the merger expanded Biomet’s spine technology portfolio through the addition of such products as the Timberline Lateral Approach Fusion System and the Aspen Minimally Invasive Fusion System. Both items complemented Biomet’s spine offerings, including the Lineum OCT Spine System, MaxAn Anterior Cervical Plate system, Cellentra VCBM and the Polaris Translation Screw System.
“This is an exciting opportunity for Biomet to improve its competitiveness in the spine market by leveraging the best aspects of each company and adding strategically important technologies to our product portfolio,” former Biomet president/CEO Jeff Binder said.
Some of Biomet’s final product releases included the ePAK Single-Use Delivery System and the JuggerKnotless Soft Anchor device.
Biomet released the ePAK Single-Use Delivery System, an innovation for internal fracture fixation, in July 2013. The system is a pre-sterilized, single-use procedure pack that aims to add value by addressing the productivity needs of the operating room by helping to save time, reduce cost, improve efficiency, and ultimately increase productivity. The ePAK system addresses distal radius fractures and features the DVR Crosslock implant and instrumentation.
In July 2014, Biomet’s sports medicince subsidiary launched the JuggerKnotless Soft Anchor device, an innovation the company claimed was the first all-suture, knotless product on the market. Used for labral repair surgery in the shoulder, the JuggerKnotless Soft Anchor features:
- The benefits of all-suture anchor technology, which eliminates the use of a hard implant that can fracture and cause loose bodies in the joint.
- A small, 2,1 millimeter drill hole that preserves bone and allows more freedom in anchor placement.
- Technology that provides the surgeon with the ability to control the tension of the construct without tying a surgical knot.