07.22.21
Rank: #16 (Last year: #14)
$7.03 Billion
Prior Fiscal: $7.98 Billion
Percentage Change: -12%
No. of Employees: 20,000
Global Headquarters: Warsaw, Ind.
KEY EXECUTIVES:
Bryan C. Hanson, Chariman, President, and CEO
Ivan Tornos, COO
Suketu Upadhyay, Exec. VP and CFO
Carrie Nichol, VP, Controller, and Chief Accounting Officer
Rachel Ellingson, Sr. VP, Chief Strategy Officer
David Kunz, Sr. VP, Global Quality and Regulatory Affairs
Kenneth R. Tripp, Sr. VP, Global Operations and Logistics
Chad Phipps, Sr. VP, General Counsel, and Secretary
Angela Main, Sr. VP, Global Chief Compliance Officer and Assoc. General Counsel, Asia Pacific
Wilfred van Zuilen, President, Europe, Middle East, and Africa
Sang Yi, Group President, Asia Pacific
Every company faced challenges in 2020 due to the COVID-19 pandemic. Some had to determine how to remain open but do so safely, while others had to close their doors, unsure of when they would be allowed to reopen.
Within the medical device community, it was a tale of two cities. While there were no “best of times” for anyone, some companies saw increased demands for products while others saw a substantial decrease. Unfortunately, Zimmer Biomet found itself among the latter (as was true for many orthopedic-focused firms).
By the end of the organization’s fiscal year, the final tally saw the firm’s revenue at a 12 percent deficit compared to the prior period. Company leadership did attempt to help alleviate losses to a degree. Bryan Hanson, president and CEO of Zimmer Biomet, announced he would forgo his salary, which was reported as almost $1.1 million in 2019. Other members of the company’s top management and board of directors also faced pay cuts.
Unfortunately, while a grand gesture, the move by the company’s leadership was not enough to curb the substantial losses experienced by the organization during its 2020 fiscal. The 12 percent loss translated into an almost $1 billion shortfall compared to the prior year. The losses were reflected across all five business segments of the organization, with the primary reason for all attributed to the elimination of elective surgical procedures during a substantial timeframe in 2020 as a result of the pandemic.
The company’s largest unit, Knees, saw a 15 percent decrease compared to 2019, dropping from $2.81 billion to just shy of $2.39 billion. Hips experienced a 9.4 percent decline, which put it at $1.75 billion following its 2019 tally of $1.93 billion. Sports Medicine, Extremities and Trauma (S.E.T.) followed suit with an 8.4 decrease of its own. That figure translated to its reported $1.44 billion in 2019 falling to $1.32 billion in 2020. Dental, Spine & CMFT (Craniomaxillofacial and Thoracic) plummeted 10.1 percent, landing at $1.04 billion in 2020 after 2019’s $1.16 billion total. Its final segment, identified as Other, shrank 18.4 percent, falling from $635 million to $519 million.
ANALYST INSIGHTS: With the spin-off of their Spine and Dental business as “ZB Newco,” it will create additional cash for ZB to utilize in their core Ortho battle with Stryker, J&J, and S&N. It will be exciting what moves ZB decides to take to grab market share in both Sports Medicine and in their Joints business. Expect robotics and digital technologies to play a key role.
This news, however, was quickly overshadowed by a major announcement that came in early February 2021. Zimmer Biomet would be shedding its Spine and Dental businesses, which would combine to form a new, independent company (ie., “NewCo”). The move would allow each remaining entity to optimize resource allocation and drive toward market leadership. For Zimmer Biomet, that translates to a focus on areas it views as high growth and high priority—Knees, Hips, S.E.T., and CMFT.
“As part of the third phase of ZB’s ongoing transformation, we are changing the complexion of our business through active portfolio management in order to accelerate growth and drive value creation,” explained Hanson. “For Zimmer Biomet, the transaction is an important step toward shifting our portfolio mix to higher-growth markets where we have a clear path to leadership and right to win. We believe NewCo [the temporary name assigned to the Spine/Dental entity] will thrive as an independent company with prioritized capital allocation to pursue strategic growth opportunities and investment strategies in the large and growing Spine and Dental markets.”
With NewCo’s separation will also go several significant product names in the Zimmer Biomet portfolio. From the Spine business, this includes ROSA ONE Spine, Mobi-C Cervical Disc, and The Tether. The Dental segment will bring with it the T3 Implant, Tapered Screw-Vent Implant System, Trabecular Metal Dental Implant, BellaTek Encode Impression System, and Puros Allograft Particulate.
Based upon 2019 and 2020 pro forma revenue for NewCo, the new organization will likely see annual sales of just under $1 billion. Zimmer Biomet, on the other hand, can likely anticipate revenues in the mid- to high-$6 billion range, following the divestiture.
Former Medtronic executive Vafa Jamali has been named CEO for the spin-off.
Despite its lackluster revenue performance in 2020, Zimmer Biomet didn’t become short-sighted with regard to its post-pandemic future. Recognizing opportunities and product portfolio synergies, the organization made three acquisitions during the year.
The most substantial investment—with a price tag of $250 million—was for A&E Medical Corporation, previously a Vance Street Capital Portfolio Company. A&E Medical is a designer and manufacturer of a comprehensive portfolio of sternal closure devices including A&E DoubleWire, the A&E Medical Sternal Cable System, and the Thorecon and Tritium rigid fixation systems. The buy also brought to Zimmer Biomet a wide variety of temporary cardiac pacing wires, including the MYO/Wire Ultra-Thin and MYO/Wire Ultra-Flex brands, disposable patient cables, and A&E Medical Surgical Punch.
According to the company, the global sternal closure business is growing at a high single digit percentage rate annually. Revenue from the new integrated business was to be recognized in the Dental, Spine and CMFT product category, but it is unclear what products would stay with Zimmer Biomet and what would go to NewCo.
During Q3 2020, the firm announced two other acquisitions it made totaling $80 million in initial spend (with the potential for $98 million in deferred and milestone payments). The revenues generated by the products from both organizations will be recorded in the S.E.T. segment.
The first was for Incisive LLC, a privately-held operating room (OR) solutions company in the expanding $1.2 billion global integrated OR market. That company’s technology drives efficiency in the surgical setting through a comprehensive offering of “smart OR” infrastructure, including surgical booms and lights with a smaller footprint as well as proprietary data analytics and artificial intelligence capabilities. This approach reduces acquisition and construction costs and is especially attractive to ambulatory surgery center customers. The revenues from the Relign Corp., a privately-held company in the growing $1.6 billion arthroscopy market and overall $5 billion sports medicine market, was the second purchase. Relign's offerings included the consolidation of three differentiated arthroscopy tower components into a single system and address a key portfolio gap for Zimmer Biomet in the sports medicine and broader ASC markets.
Recognizing the importance of not relying solely on growth through acquisition, Zimmer Biomet also launched 21 products in 2020, with several notable announcements among them.
Within the digital health space, the organization added new functionality to its mymobility solution that works in conjunction with the Apple Watch. The new capabilities enabled a remote care management system for patients who utilized the offering for pre- and post-operative joint replacement guidance. With the addition of new mobility metrics to measure gait quality, mymobility provides healthcare professionals with even more virtual touchpoints and real-time patient information to enhance the decision-making process, while patients continue to receive a connected and customizable experience throughout their episode of care. In addition, with the patient’s permission, the new gait quality metrics leverage the power of Apple’s ecosystem by using sensors in the Apple Watch and iPhone to passively collect walking speed and double-support time (period of time when both feet are in contact with the ground) when walking on flat surfaces—without GPS.
Another product launch, Zimmer Biomet’s Signature ONE Surgical Planning System provides a 3D image-based approach to preoperative visualization, surgical planning, and patient-specific guide creation. Based on each patient’s unique anatomy, integrated with proprietary algorithms and known anatomical landmarks, Signature ONE offers a tailored approach to shoulder arthroplasty.
Gaining FDA 510(k) clearance in 2019, the firm continued its commercial launch of its Persona Revision Knee System. This solution offers anatomic components designed to match a patient's anatomy for a personalized fit. Available with a modern, intuitive instrumentation platform, the Persona Revision Knee System enables surgeons to take a personalized approach to addressing simple to complex revision procedures by offering the flexibility to utilize their preferred surgical approach. It leverages the company’s Trabecular Metal Technology—a unique, highly porous biomaterial made from elemental tantalum with structural, functional, and physiological properties similar to that of bone. It also employs Vivacit-E Highly Crosslinked Polyethylene (HXPE)—a bearing surface with actively stabilized Vitamin E designed to protect against oxidation and maintain wear resistance and strength throughout the life of the implant.
Perhaps recognizing the value of working with another firm as it’s done with Apple on mymobility, Zimmer Biomet also engaged in initiatives with other corporate entities to further its growth efforts. One such project resulted in the firm teaming with the Hospital for Special Surgery (HSS), a leading academic medical center focused on musculoskeletal health, on an exclusive agreement to deploy and commercialize HSS Orthopedic Care Pathways on mymobility. Through Zimmer Biomet, healthcare systems and clinicians worldwide were able to implement HSS Orthopedic Care Pathways through the mymobility platform. In addition, the mymobility with Apple Watch platform was made accessible to clinicians and patients in the HSS network.
Via another mutually beneficial arrangement, NeuroOne Medical Technologies Corporation agreed to have Zimmer Biomet market its Evo Cortical Electrode, the company's first FDA 510(k)-cleared product. The Evo is an innovative product indicated for recording, monitoring, and stimulating brain tissue for up to 30 days. Utilizing proprietary automated manufacturing processes, the thin-film lightweight design offers high-resolution capabilities, reduced immunological response, and the potential to be placed in a minimally invasive manner. Per the terms of the deal, Zimmer Biomet gains the exclusive global right and license to distribute NeuroOne's strip and grid electrodes and electrode cable assembly products and the exclusive right and license to distribute certain depth electrodes developed by NeuroOne. Zimmer Biomet provided a $2 million upfront payment to NeuroOne, with an additional payment due to maintain exclusive rights.
In May, Zimmer Biomet agreed to settle a pending lawsuit brought on by Conformis, an orthopedic implant manufacturer that customizes each product specifically to the patient through its iFit Image-to-Implant technology platform. According to a filing with the U.S. Securities and Exchange Commission, the two entities engaged in a license agreement, which resulted in the dismissal of all outstanding litigation between the two firms. It also established a cross-license arrangement of the two firms’ respective technologies. Ultimately, Zimmer Biomet paid $9.6 million to Conformis in addition to the license agreement. Conformis was not required to pay Zimmer Biomet any money.
$7.03 Billion
Prior Fiscal: $7.98 Billion
Percentage Change: -12%
No. of Employees: 20,000
Global Headquarters: Warsaw, Ind.
KEY EXECUTIVES:
Bryan C. Hanson, Chariman, President, and CEO
Ivan Tornos, COO
Suketu Upadhyay, Exec. VP and CFO
Carrie Nichol, VP, Controller, and Chief Accounting Officer
Rachel Ellingson, Sr. VP, Chief Strategy Officer
David Kunz, Sr. VP, Global Quality and Regulatory Affairs
Kenneth R. Tripp, Sr. VP, Global Operations and Logistics
Chad Phipps, Sr. VP, General Counsel, and Secretary
Angela Main, Sr. VP, Global Chief Compliance Officer and Assoc. General Counsel, Asia Pacific
Wilfred van Zuilen, President, Europe, Middle East, and Africa
Sang Yi, Group President, Asia Pacific
Every company faced challenges in 2020 due to the COVID-19 pandemic. Some had to determine how to remain open but do so safely, while others had to close their doors, unsure of when they would be allowed to reopen.
Within the medical device community, it was a tale of two cities. While there were no “best of times” for anyone, some companies saw increased demands for products while others saw a substantial decrease. Unfortunately, Zimmer Biomet found itself among the latter (as was true for many orthopedic-focused firms).
By the end of the organization’s fiscal year, the final tally saw the firm’s revenue at a 12 percent deficit compared to the prior period. Company leadership did attempt to help alleviate losses to a degree. Bryan Hanson, president and CEO of Zimmer Biomet, announced he would forgo his salary, which was reported as almost $1.1 million in 2019. Other members of the company’s top management and board of directors also faced pay cuts.
Unfortunately, while a grand gesture, the move by the company’s leadership was not enough to curb the substantial losses experienced by the organization during its 2020 fiscal. The 12 percent loss translated into an almost $1 billion shortfall compared to the prior year. The losses were reflected across all five business segments of the organization, with the primary reason for all attributed to the elimination of elective surgical procedures during a substantial timeframe in 2020 as a result of the pandemic.
The company’s largest unit, Knees, saw a 15 percent decrease compared to 2019, dropping from $2.81 billion to just shy of $2.39 billion. Hips experienced a 9.4 percent decline, which put it at $1.75 billion following its 2019 tally of $1.93 billion. Sports Medicine, Extremities and Trauma (S.E.T.) followed suit with an 8.4 decrease of its own. That figure translated to its reported $1.44 billion in 2019 falling to $1.32 billion in 2020. Dental, Spine & CMFT (Craniomaxillofacial and Thoracic) plummeted 10.1 percent, landing at $1.04 billion in 2020 after 2019’s $1.16 billion total. Its final segment, identified as Other, shrank 18.4 percent, falling from $635 million to $519 million.
ANALYST INSIGHTS: With the spin-off of their Spine and Dental business as “ZB Newco,” it will create additional cash for ZB to utilize in their core Ortho battle with Stryker, J&J, and S&N. It will be exciting what moves ZB decides to take to grab market share in both Sports Medicine and in their Joints business. Expect robotics and digital technologies to play a key role.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
This news, however, was quickly overshadowed by a major announcement that came in early February 2021. Zimmer Biomet would be shedding its Spine and Dental businesses, which would combine to form a new, independent company (ie., “NewCo”). The move would allow each remaining entity to optimize resource allocation and drive toward market leadership. For Zimmer Biomet, that translates to a focus on areas it views as high growth and high priority—Knees, Hips, S.E.T., and CMFT.
“As part of the third phase of ZB’s ongoing transformation, we are changing the complexion of our business through active portfolio management in order to accelerate growth and drive value creation,” explained Hanson. “For Zimmer Biomet, the transaction is an important step toward shifting our portfolio mix to higher-growth markets where we have a clear path to leadership and right to win. We believe NewCo [the temporary name assigned to the Spine/Dental entity] will thrive as an independent company with prioritized capital allocation to pursue strategic growth opportunities and investment strategies in the large and growing Spine and Dental markets.”
With NewCo’s separation will also go several significant product names in the Zimmer Biomet portfolio. From the Spine business, this includes ROSA ONE Spine, Mobi-C Cervical Disc, and The Tether. The Dental segment will bring with it the T3 Implant, Tapered Screw-Vent Implant System, Trabecular Metal Dental Implant, BellaTek Encode Impression System, and Puros Allograft Particulate.
Based upon 2019 and 2020 pro forma revenue for NewCo, the new organization will likely see annual sales of just under $1 billion. Zimmer Biomet, on the other hand, can likely anticipate revenues in the mid- to high-$6 billion range, following the divestiture.
Former Medtronic executive Vafa Jamali has been named CEO for the spin-off.
Despite its lackluster revenue performance in 2020, Zimmer Biomet didn’t become short-sighted with regard to its post-pandemic future. Recognizing opportunities and product portfolio synergies, the organization made three acquisitions during the year.
The most substantial investment—with a price tag of $250 million—was for A&E Medical Corporation, previously a Vance Street Capital Portfolio Company. A&E Medical is a designer and manufacturer of a comprehensive portfolio of sternal closure devices including A&E DoubleWire, the A&E Medical Sternal Cable System, and the Thorecon and Tritium rigid fixation systems. The buy also brought to Zimmer Biomet a wide variety of temporary cardiac pacing wires, including the MYO/Wire Ultra-Thin and MYO/Wire Ultra-Flex brands, disposable patient cables, and A&E Medical Surgical Punch.
According to the company, the global sternal closure business is growing at a high single digit percentage rate annually. Revenue from the new integrated business was to be recognized in the Dental, Spine and CMFT product category, but it is unclear what products would stay with Zimmer Biomet and what would go to NewCo.
During Q3 2020, the firm announced two other acquisitions it made totaling $80 million in initial spend (with the potential for $98 million in deferred and milestone payments). The revenues generated by the products from both organizations will be recorded in the S.E.T. segment.
The first was for Incisive LLC, a privately-held operating room (OR) solutions company in the expanding $1.2 billion global integrated OR market. That company’s technology drives efficiency in the surgical setting through a comprehensive offering of “smart OR” infrastructure, including surgical booms and lights with a smaller footprint as well as proprietary data analytics and artificial intelligence capabilities. This approach reduces acquisition and construction costs and is especially attractive to ambulatory surgery center customers. The revenues from the Relign Corp., a privately-held company in the growing $1.6 billion arthroscopy market and overall $5 billion sports medicine market, was the second purchase. Relign's offerings included the consolidation of three differentiated arthroscopy tower components into a single system and address a key portfolio gap for Zimmer Biomet in the sports medicine and broader ASC markets.
Recognizing the importance of not relying solely on growth through acquisition, Zimmer Biomet also launched 21 products in 2020, with several notable announcements among them.
Within the digital health space, the organization added new functionality to its mymobility solution that works in conjunction with the Apple Watch. The new capabilities enabled a remote care management system for patients who utilized the offering for pre- and post-operative joint replacement guidance. With the addition of new mobility metrics to measure gait quality, mymobility provides healthcare professionals with even more virtual touchpoints and real-time patient information to enhance the decision-making process, while patients continue to receive a connected and customizable experience throughout their episode of care. In addition, with the patient’s permission, the new gait quality metrics leverage the power of Apple’s ecosystem by using sensors in the Apple Watch and iPhone to passively collect walking speed and double-support time (period of time when both feet are in contact with the ground) when walking on flat surfaces—without GPS.
Another product launch, Zimmer Biomet’s Signature ONE Surgical Planning System provides a 3D image-based approach to preoperative visualization, surgical planning, and patient-specific guide creation. Based on each patient’s unique anatomy, integrated with proprietary algorithms and known anatomical landmarks, Signature ONE offers a tailored approach to shoulder arthroplasty.
Gaining FDA 510(k) clearance in 2019, the firm continued its commercial launch of its Persona Revision Knee System. This solution offers anatomic components designed to match a patient's anatomy for a personalized fit. Available with a modern, intuitive instrumentation platform, the Persona Revision Knee System enables surgeons to take a personalized approach to addressing simple to complex revision procedures by offering the flexibility to utilize their preferred surgical approach. It leverages the company’s Trabecular Metal Technology—a unique, highly porous biomaterial made from elemental tantalum with structural, functional, and physiological properties similar to that of bone. It also employs Vivacit-E Highly Crosslinked Polyethylene (HXPE)—a bearing surface with actively stabilized Vitamin E designed to protect against oxidation and maintain wear resistance and strength throughout the life of the implant.
Perhaps recognizing the value of working with another firm as it’s done with Apple on mymobility, Zimmer Biomet also engaged in initiatives with other corporate entities to further its growth efforts. One such project resulted in the firm teaming with the Hospital for Special Surgery (HSS), a leading academic medical center focused on musculoskeletal health, on an exclusive agreement to deploy and commercialize HSS Orthopedic Care Pathways on mymobility. Through Zimmer Biomet, healthcare systems and clinicians worldwide were able to implement HSS Orthopedic Care Pathways through the mymobility platform. In addition, the mymobility with Apple Watch platform was made accessible to clinicians and patients in the HSS network.
Via another mutually beneficial arrangement, NeuroOne Medical Technologies Corporation agreed to have Zimmer Biomet market its Evo Cortical Electrode, the company's first FDA 510(k)-cleared product. The Evo is an innovative product indicated for recording, monitoring, and stimulating brain tissue for up to 30 days. Utilizing proprietary automated manufacturing processes, the thin-film lightweight design offers high-resolution capabilities, reduced immunological response, and the potential to be placed in a minimally invasive manner. Per the terms of the deal, Zimmer Biomet gains the exclusive global right and license to distribute NeuroOne's strip and grid electrodes and electrode cable assembly products and the exclusive right and license to distribute certain depth electrodes developed by NeuroOne. Zimmer Biomet provided a $2 million upfront payment to NeuroOne, with an additional payment due to maintain exclusive rights.
In May, Zimmer Biomet agreed to settle a pending lawsuit brought on by Conformis, an orthopedic implant manufacturer that customizes each product specifically to the patient through its iFit Image-to-Implant technology platform. According to a filing with the U.S. Securities and Exchange Commission, the two entities engaged in a license agreement, which resulted in the dismissal of all outstanding litigation between the two firms. It also established a cross-license arrangement of the two firms’ respective technologies. Ultimately, Zimmer Biomet paid $9.6 million to Conformis in addition to the license agreement. Conformis was not required to pay Zimmer Biomet any money.