Rank: #14 (Last year: #15)
Prior Fiscal: $7.80 billion
Percentage Change: +1.7%
No. of Employees: 19,000
Global Headquarters: Warsaw, Ind.
Bryan C. Hanson, President and CEO
Suketu Upadhyay, Exec. VP and CFO
Aure Bruneau, Group President, Spine, CMF, Thoracic and Surgery Assisting Technology
Ivan Tornos, Group President, Orthopedics
Didier Deltort, President, Europe, Middle East and Africa
Pedro Malha, President, Dental
Sang Yi, President, Asia Pacific
A line of 500 forms outside a Guatemalan clinic every time the surgeons arrive for a mission trip. Many have journeyed 100 miles to have an orthopedic ailment treated, knowing full well only a fortunate 50 people or so will be admitted to see the U.S. doctors.
Employees from global orthopedic manufacturer Zimmer Biomet watched in awe as the Guatemalans stood in line for treatments they may never receive, and immediately resolved to change how the company could help. For decades, the firm supported hundreds of mission trips by supplying orthopedic implants and instruments, but each was usually a one-off agreement. Supporting a single mission trip had proven to be a headache—the equipment needed to arrive at a specific time and clear customs unharmed, a difficult task for delicate, high-tech orthopedic technology.
Last May, Zimmer Biomet’s Global Knees team inked the company’s first long-term partnership with Faith in Practice, a Texas-based organization seeking to improve the physical, spiritual, and economic conditions of the poor in Guatemala through short-term surgical, medical, and dental mission trips and health-related educational programs. Zimmer Biomet will supply Indiana-made implants and instruments for Faith in Practice to perform total knee replacements (TKR) at two Guatemalan hospitals, replenishing the supply with each trip.
“Rather than a shipment that’s supposed to get there during the window of a [mission] team arriving, [Faith in Practice] will have [Zimmer Biomet devices] in-country, stocked and stored in their warehouse in Guatemala,” Zimmer Biomet VP and general manager of Global Knees Todd Davis told Inside INdiana Business. “This enables them with much more assurance to schedule a mission trip and know everything is going to be there waiting for them. We think their numbers will increase, because they’re not going to be living hand-to-mouth, wondering if they’re going to get donations to cover upcoming trips.”
Usually, only the most affluent Guatemalans have access to TKR procedures. A single total knee implant can cost $5,000, and Faith in Practice implants 30 knees on each week-long trip. Zimmer Biomet will also supply two employees to travel to Guatemala to support each mission trip.
“They’re there to act as the knee experts on those instruments and implants, because those surgeons may have never used a Zimmer Biomet knee before,” Davis explained. “This gives us people in-country to help those surgeries run smoothly. And it’s just a great experience for our team members; they come away supercharged by what we’re doing there.”
Davis hopes other departments will follow suit—implants for trauma and hip replacements are also underserved areas.
“You hope you never get to this point, but sometimes it’s easy to lose sight of the fact that the parts we design, make and sell are going in people,” he said. “We’re a manufacturing facility first and foremost, and we’re making widgets. This makes those widgets come to life.”
Philanthropy, unfortunately, doesn’t automatically curry the U.S. Food and Drug Administration’s (FDA) favor as the agency continued the quarrel initiated in 2016 over quality control issues at Zimmer Biomet’s Warsaw, Ind., plant (formerly owned by Biomet). The federal watchdog released a 12-page document last February covering issues it found in an October 2017 inspection of the facility, many of which were repeat issues noted during prior inspections. The list of observations in the Form 483 letter included failure to establish CAPA procedures for nonconforming products, failure to create packaging or shipping containers designed to prevent device alteration during transport, failure to validate quality system software, and failure to implement MDR procedures, among other quality control oversights.
ANALYST INSIGHTS: CEO Bryan Hanson has now firmly taken the reigns at Zimmer Biomet. It’s his company now. With his Covidien experience, expect him to continue to be aggressive in M&A to supplement Zimmer Biomet’s current portfolio. Additionally, Bryan will continue to commit to operational excellence to improve business performance—especially margins.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
The company responded soon after that it would execute a remediation plan to address the Warsaw plant’s Form 483. However, Zimmer Biomet received another Form 483 with 11 observations following re-inspection last April. This time, the company pushed back. FDA had flagged inadequate process controls for a specific packaging sealer because Zimmer Biomet hadn’t included pressure as a process control, pointing to the sealer’s manual as evidence there were unused pressure control features.
“We respectfully disagree with this observation,” Zimmer Biomet VP of quality assurance and quality control Jeff Gensler said in the company’s response to FDA. “The necessary process controls were established to ensure that the sealer conformed to Zimmer Biomet’s established specifications. Zimmer Biomet is not required to use all available features on a piece of equipment, but it must identify, qualify, control, and monitor the critical features and the resulting process.”
Another FDA observation alleged Zimmer Biomet didn’t properly validate certain cleaning processes used at the Warsaw facility. “Zimmer Biomet believes that these aspects of Observation 1(B) are a byproduct of a misunderstanding between the investigators and Zimmer Biomet personnel,” Gensler said in the response letter.
The conflict escalated as the FDA sent Zimmer Biomet a warning letter last August related to the Warsaw facility’s re-inspection in April. The warning letter cited “observed non-conformities with current good manufacturing practice requirements of the Quality System regulation.” Regulatory Focus reported at the time that the orthopedic manufacturer was cited for six violations, which included failure to establish and maintain procedures to verify and validate a CAPA. The FDA also flagged five separate operations where employees on the production line weren’t adequately following production procedures. Zimmer Biomet then wrote a response to the warning letter and met with FDA to discuss proposed corrections. (To date, no information has come to light regarding Zimmer Biomet’s response letter or the FDA meeting.)
However, the warning letter didn’t mandate pulling products, restrict production and shipment, or block 510(k) device clearance. Premarket applications are put on hold until the problems are corrected, but at the time Zimmer didn’t have any PMA applications before the FDA. There were also worries about a consent decree—which can mean halted manufacturing on non-essential or multi-source products, assignment of quality assurance to a third party, or fines—because of the continued quality control issues’ elevation.
Luckily, this was not in the cards for Bryan Hanson’s first year as CEO. Despite the firm’s quarrels with the FDA, its sales last year rose 1.7 percent to $7.93 billion. According to Hanson, the second half of last year was most responsible for this due to strengthened global large joint sales and consistent outperformance of the Asia Pacific region (with a 6.6 percent revenue bump over the prior year). The Americas market was the only region where sales fell—albeit, a paltry 0.2 percent.
The Knees franchise accrued $2.8 billion last year, rising 1.5 percent over 2017. Knee sales improved thanks to recent product introductions and improved supply. Knee sales volume/mix growth was led by the Persona Personalized Knee System and Oxford Partial Knee.
The Persona line got its first boost last January with the Persona Trabecular Metal (TM) Tibia’s FDA clearance. The first surgical case using Persona TM Tibia took place two months later, and it received CE mark approval a month after that. Combined with TM Femur and Patella, the Persona line then offered a fully cementless total knee solution. Zimmer Biomet’s TM material is a porous biomaterial made from elemental tantalum with structural, functional, and physiological properties that mimic cancellous bone.
The Persona Revision Knee obtained FDA clearance last November, also featuring TM technology. It allows surgeons to take a personalized approach to revision procedures, offering the flexibility to utilize a preferred surgical approach thanks to a modern, intuitive instrumentation platform.
Hips business proceeds last year rose 2.6 percent to reach $1.9 billion, driven primarily by volume mix/growth resulting from strong performance in the Asia Pacific and Americas regions. Improved supply also impacted the product category positively. The sales expansion was led by the company’s Taperloc Hip System, Arcos Modular Hip System, and G7 Acetabular System. Most impressively, Zimmer Biomet was able to grow Hips sales without any reported hip product launches last year.
Last October Zimmer Biomet began a partnership with Apple to combine a new app with smartwatch health-tracking data to help understand why some patients recover faster from knee and hip replacement surgeries than others. The two also initiated a clinical study at that time. The mymobility app will guide patients through surgery to improve recovery, with education resources, exercise videos, and a way to contact their surgeon and care team about questions and concerns.
Meanwhile, using the Apple Watch will allow patients to share step count and heart rate data with doctors for a clearer picture of recovery and to analyze setbacks. Apple and Zimmer Biomet hoped to enroll 10,000 U.S. patients in the study. mymobility was initially only available to the study participants, but a Zimmer Biomet spokesperson told CNBC it would eventually be rolled out for everyone. CEO Bryan Hanson said in a company statement the partnership with Apple is “one of the largest evidence-gathering clinical studies in orthopedic history.” Apple COO Jeff Williams said in a separate statement that the new app lets patients and doctors connect in a way that was “not previously possible through traditional in-person visits.” Facilities participating in the study include academic centers, hospitals, group practices, and ambulatory surgery centers throughout the U.S.
The S.E.T. (sports medicine, extremities, trauma) division continued its increase last year by elevating 2.9 percent to post sales of $1.7 billion. According to the company, this was provoked by strong performances in key surgical and upper extremity brands.
Last January saw FDA clearance for the Sidus Stem-Free Shoulder System. The new total shoulder arthroplasty option was designed for patients with good bone stock that have either osteoarthritis, post-traumatic arthrosis, focal avascular necrosis of the humeral head, or those who have had previous shoulder surgeries that didn’t compromise the fixation. Sidus’ shoulder arthroplasty approach requires minimal bone resection while also reducing pain and restoring range of motion.
The Comprehensive Augmented Baseplate for the firm’s Comprehensive Reverse Shoulder System also gained an FDA nod last January. The first surgical case using it took place last April. The Comprehensive Augmented Baseplate complements the shoulder system by offering an alternative to bone grafting and eccentric reaming for patients with glenoid defects undergoing shoulder reconstruction. The baseplate’s circular design promotes bone ingrowth into its rim. The system aims to minimize the challenges of removing well-fixed humeral stems by permitting conversion to a reverse shoulder system.
The Spine and CMF (cranio-maxillo-facial) business remained flat last year with $764 million in sales. The slight increase—0.8 percent—was a result of strong Thoracic product sales. Spine sales took a hit thanks to continuing U.S. distributor integration problems.
The FDA green-lighted Zimmer Biomet’s first titanium spinal implant manufactured via 3D printing, the Zyston Strut Open Titanium Interbody Spacer System, last May. The family of lumbar cages is intended to augment interbody spacer strength, graft capacity, and visualization during spinal fusion. The cages come in a series of sizes and the system includes instruments for implant insertion, manipulation, and removal. Their unique cage architecture, formed by 3D printing, maximizes graft volume before implantation.
The Mobi-C Cervical Disc for cervical disc replacement launched in Japan last September. A week later, Mobi-C was granted FDA approval for a label change that included seven-year clinical results. The labeling update indicates that Mobi-C’s updated data remained consistent with the previous findings at two years and five years—namely, that it is non-inferior for one-level use and superior for two-level use as compared to anterior cervical discectomy and fusion. The label update was granted based on a successful trial that followed almost 600 patients through seven years.
The firm’s implantable bone growth and spinal fusion stimulators—specifically the EBI Osteogen Implantable Bone Growth Stimulator, SpF PLUS-Mini (60 μA/W) Implantable Spinal Fusion Stimulator, and the SpF-XL IIb 2/DM Implantable Spinal Fusion Stimulator—were recalled last February due to a lack of adequate cleaning process validation and controls. As such there was no way to ensure the devices were clean from bacteria and chemical residue, which carries the risk of infection, tissue death, additional surgery, impaired healing, long-term antibiotic therapy, spinal cord swelling and infection, secondary gastroenteritis, paralysis, organ damage, or death.
Dental sales continued their steady decline last year, slipping 2.2 percent to reach $411 million. Over the past few years, the Dental business has been subject to competition in the U.S. and EMEA, as well as dental organization restructuring in some European markets.
Remaining sales are encompassed in the “Other” category, which includes bone cement and office-based technology products. The division’s sales last year amounted to $311 million, dropping 2.6 percent from the prior year.