$2.4 Billion
KEY EXECUTIVES:
Jeffrey R. Binder, President and CEO
Daniel P. Florin, Sr. VP and CFO
Jon C. Serbousek, Sr. VP, President, Biomet Orthopedics
Glen A. Kashuba, Sr. VP and President, Trauma and Spine
Gregory W. Sasso, Sr. VP and President, Biomet SBU Operations
Steven F. Schiess, Sr. VP and President, Biomet 3i
NO. OF EMPLOYEES: 7,000
GLOBAL HEADQUARTERS: Warsaw, Ind.
One of the few privately held companies on MPO’s Top Company list this year, Biomet has had its share of corporate drama over the past few years—from changes in top management to the blockbuster $11 billion private-equity takeover deal that took the company private in 2007. Fiscal 2008 (ended May 31, 2008) was comparatively less dramatic.
“Robust sales in our core orthopedic reconstructive device segment enabled Biomet to grow faster than the global market during each of our first three quarters [of 2008], and we finished the year with another quarter of strong reconstructive sales growth,” said Jeffrey Binder, president and CEO. “I am encouraged to see continued signs of stabilization in our trauma and spine business during the fourth quarter, and I am pleased with the fourth-quarter rebound in dental sales, returning dental to the double-digit growth reported during the first half of the fiscal year."
Binder also noted that the company’s microfixation, sports medicine and biologics businesses reported “excellent growth” for the year.
“Biomet’s strong finish to fiscal year 2008 provides us with a solid foundation to capitalize on future growth opportunities during fiscal year 2009 and beyond,” he added.
For fiscal 2008, net sales increased 13 percent worldwide to $2.4 billion. Excluding instruments and the foreign currency impact, net sales increased 10 percent worldwide. During fiscal year 2008, the company incurred special charges related the research and development and costs related to the merger of approximately $1.45 billion. Reported operating loss for fiscal year 2008 was $750.5 million, compared to operating income of $489.6 million for the same period last year. Excluding special charges in both years, adjusted operating income for fiscal year 2008 was $702 million, or 29.5 percent of sales, compared to $622 million for fiscal year 2007, an increase of approximately 13 percent.
Adjusted earnings before interest taxes depreciation and amortization (EBITDA) for fiscal year 2008 was $829 million, or 34.8 percent of sales compared to adjusted EBITDA of $719 million, or 34.1 percent of sales for fiscal year 2007, an increase of 15 percent.
During fiscal year 2008, reconstructive device sales increased 17 percent worldwide to approximately $1.75 billion. Reconstructive device sales in the United States increased 10 percent (12 percent excluding instruments), and international reconstructive device sales increased 26 percent. Excluding instruments and the impact of currency, worldwide reconstructive devices sales increased 13 percent. By reconstructive segment, knee sales increased 19 percent worldwide during fiscal year 2008 and increased 14 percent in the United States. Excluding instruments and on a constant currency basis, knee sales increased 17 percent both worldwide and in the United States. The Oxford Partial Knee System and the Vanguard Complete Knee System were the growth drivers for knees during fiscal year 2008, the company reported. Hip sales increased 13 percent worldwide and 5 percent in the United States during fiscal year 2008. Excluding instruments and the foreign currency effect, fiscal year 2008 hip sales increased 10 percent worldwide and 6 percent in the United States. Key products contributing to hip sales growth include the M2a-Magnum Acetabular System and the Taperloc Hip Stem, as well as the ReCap Total Resurfacing System that is marketed only outside the United States.
During fiscal year 2008, fixation sales increased 2 percent worldwide to $230 million. Fixation sales decreased 4 percent in the United States during fiscal year 2008. Spinal product sales increased 1 percent worldwide to $208 million during fiscal year 2008 and increased 2 percent in the United States.
In February last year, Jon Serbousek was named president of Biomet Orthopedics Inc., in charge of the U.S. total-joint reconstruction business. During the past eight years, Jon has held diverse general management roles with Minneapolis, Minn.-based Medtronic in the areas of Spinal Reconstruction, International, New Technology Development and most recently, worldwide vice president and general manager of biologics. Prior to Medtronic, Jon spent 13 years with DePuy in Warsaw, Ind., holding positions of vice president of Marketing and Product Development Joint Reconstruction; vice president, Spinal Operations; vice president and general manager, Arthroscopy and Sports Medicine, and a series of product development and engineering management positions.
At the beginning of the calendar year, criminal charges were dismissed against Biomet in March—along with DePuy, Smith & Nephew, and Zimmer Holdings Inc.—following completion of the terms of their deferred prosecution agreements reached in 2007 with the U.S. Attorney’s office following a total of $311 million in civil settlements for all four companies. Biomet’s share was $25 million. Prosecutors had accused the device makers of improperly paying consulting fees to surgeons between 2002 and 2006 to entice the physicians to use the companies' products. Stryker, based in Kalamazoo, Mich., which voluntarily cooperated with the investigation, also completed the terms of its non-prosecution agreement, however, it didn't take part in the civil settlement.
Though this episode may be passed, medical device companies—and orthopedic companies in particular—remain vigilant. Many states, including Massachusetts, have enacted medical device compliance laws. And controversial legislation also currently is being debated on Capitol Hill. It remains to be seen, however, how federal legislation will trump individual state laws and how individual state regulations will overlap each other, creating a regulatory compliance headache for companies.
In response to the current conditions, Biomet’s Binder recently told by AAOS Now, the journal of the American Academy of Orthopaedic Surgeons: “One thing that hasn’t changed is the need for industry to collaborate with surgeons in product development, clinical research, and training and education. We simply cannot make the kinds of improvements that benefit patients without close interaction. We have completely isolated our sales force from any involvement in our consulting relationships. We do not want even the appearance of a link between our consultants and their current or potential business with the company as customers."
According to Binder, if every state were to set forth its own set of disclosure laws, manufacturers would “face unmanageable and expensive disclosure requirements that simply create costs while providing information of dubious value.”
In June, Biomet reported preliminary results for fiscal 2009. Net sales increased 5 percent to $2.5 billion.