07.24.12
24. Synthes
$3.9 Billion
KEY EXECUTIVES:
Dr. h.c. mult. Hansjörg Wyss, Board Chairman
Michel Orsinger, President & CEO
Robert Donohue, Chief Financial Officer
Ciro Römer, President, Europe, Middle East & Africa & Global Operations
NO. OF EMPLOYEES: 11,426
GLOBAL HEADQUARTERS: West Chester, Pa.
Synthes Inc. certainly didn’t act like a company in transition last year. After announcing a historic $21.3 billion merger agreement with global healthcare conglomerate Johnson & Johnson, the Swiss surgical implant manufacturer routinely conducted business as if nothing had changed. And for the most part, nothing had changed.
Though the companies reached an agreement in late April, the merger was subject to anti-trust review in both the United States and European Union. It also required the blessing of Synthes shareholders, which occurred in mid-December, eight months after the deal was first announced.
The European anti-trust review—originally expected to move easily through the European regulatory system—hit a stumbling block in the fall after the deal was referred to a second-phase in-depth probe by the EU’s anti-trust unit. The referral gave authorities an additional four months to rule on the case (the final deadline was March 19, 2012).
Prompting the in-depth probe was European regulators’ concerns about the deal’s potential to monopolize the market and hurt innovation. Market dominance, however, likely was a motivating factor behind the merger—by purchasing Synthes, J&J was attempting to gain a majority of the estimated $5.5 billion global trauma device market.
Such a strategy did not sit well with EU anti-trust chieftains. Their initial investigation concluded the deal would combine two of Europe’s largest suppliers of spine devices and turn Synthes into the world’s largest producer of trauma products and devices for facial and skill factures. J&J, meanwhile, would become the global leader of shoulder replacements and components.
“The proposed acquisition would remove a competitor from some markets which are already concentrated,” EU anti-trust chief Joaquín Almunia said in a prepared statement last fall. “The commission needs to make sure that effective competition is preserved in order to maintain innovation and prevent harm to patients.”
The commission preserved competition by requiring J&J to sell its DePuy Orthopaedics Trauma business to Warsaw, Ind.-based Biomet Inc. for $280 million. The compromise was mutually beneficial for all three parties: It allowed J&J to finally close the deal for Synthes (in mid-June 2012, more than a year after its proposal) and it gives Biomet a stronger presence in the global trauma market, according to CEO Jeffrey R. Binder. Perhaps most importantly though, the sale eased European regulatory concerns about a trauma market monopoly.
“We obtained remedies to ensure that competition will remain strong in these markets for the ultimate benefit of patients and social security systems,’’ Almunia said in a statement.
Within a week of receiving the go-ahead from EU anti-trust officials, J&J had completed the Synthes deal and posted a welcoming message to visitors on the firm’s website. Conversely, Synthes Board President Hansjörg Wyss and President/CEO Michel Orsinger composed a farewell message to shareholders in the company’s 2011 annual report. In a joint letter, the pair reminded investors of the opportunities created by the merger and said the two companies’ combined forces would be better positioned to tackle future regulatory issues and competitive pressures.
“We should all keep in mind the opportunities brought about by this merger,” Wyss and Orsinger wrote. “In the wider context of an increasingly challenging healthcare environment, the combination of our core strengths will be a welcomed improvement in our capacity to tackle regulatory and competitive difficulties ahead. As a result, both our surgeon customers and our employees will reap benefits from this business combination. Above all, we will continue to do the things that made Synthes so successful.”
Some of the things that made Synthes successful in 2011 included a partnership with Eli Lilly and the introduction of a spate of new products, including the Dynamic Locking Screw and the ETN PROtect tibia nail. The Dynamic Locking Screw, according to Synthes, is designed to boost biological bone healing by allowing micro-motions that improve circumferential bone growth.
The Expert Tibial Nail PROtect, including its cannulation, is coated with a thin layer (approximately 50 µm) of gentamicin-laden polymer. The coating is abrasion-resistant and is designed to withstand most of the forces occurring during nail insertion. It is completely resorbed after roughly six months.
The company continued its foray into the craniomaxillofacial sector with the debut of ZipFix, a product that enables fast sternal closure after thoracic interventions.
Such innovations helped boost total revenue last year by 7.7 percent to $3.9 billion. Net earnings climbed 6.5 percent to $966.7 million, while research and development spending jumped 15.3 percent to $198.8 million. U.S. sales generated the bulk of Synthes’ revenue in 2011 (year ended Dec. 31), collecting $2.1 billion, a 2.7 percent increase compared with 2010. Other markets (which the company defines as “rest of the world”) contributed $1.8 billion to the bottom line, a staggering 14.3 percent spike compared with the $1.6 billion amassed from foreign customers in 2010.
European sales (which includes the Middle East and Africa) grew 2.3 percent in local currency while Latin American revenue surged 13 percent. Sales in Asia virtually exploded, ballooning 17 percent; contributing to the increase most likely was the more than 200 surgeon educational events Synthes held in the region last year. In China, where the firm opened its first manufacturing facility in 2010, executives made good headway on three novel clinical trials that eventually will enable Synthes to sell devices manufactured in China specifically for local patients. Bigwigs expect to launch the first of these products next year.
The company’s power tools business turned in a solid performance in 2011, thanks to the integration of products acquired in the November 2010 purchase of The Anspach Effort Inc. Synthes executives said Anspach's focus on high speed surgical power tools for use in neurosurgery, spinal and ENT surgery would help Synthes expand its power tools product offering to hospitals and surgeons worldwide.
“We will establish a dedicated power tools division, with close to $200 million in total sales,” Orsinger said when the purchase was announced.
Synthes announced its collaboration with Eli Lilly and Company about two months after publicly acknowledging its merger with J&J. The two companies (Eli Lilly and Synthes) signed a joint development agreement to address the needs of patients with osteoporosis and bone fractures.
The agreement allows for the joint development and licensing of early stage compounds from Lilly to Synthes for use within orthopedic trauma, spine, craniomaxillofacial and reconstructive areas.
The early stage compounds have pre-clinical and in some cases clinical data packages and have the potential to aid in the local treatment and regeneration of the skeleton.
The two companies will jointly develop site-specific osteoinductive (i.e. bone healing) products based on Synthes’ biomaterials combined with Lilly’s biologics or pharmaceuticals.
Within a second development program, Synthes and Lilly jointly will conduct and fund the evaluation of additional orthopedic uses for Lilly’s osteoporosis drug Forteo (teriparatide [rDNA origin] injection), marketed as Forsteo in some countries outside of the United States.
Building upon a Phase II study that Lilly has already completed, Lilly and Synthes will collaborate on additional clinical studies to evaluate future indications for Forteo, including fracture healing.
In addition to the development component of the agreement, the collaboration also includes the U.S. co-promotion of Forteo to orthopedic surgeons, an important segment of physicians who treat patients with a fracture due to osteoporosis.
Lilly Bio-Medicines Bone/Muscle/Joint global development platform leader Johnston Erwin said the collaboration additionally will explore ways to treat fractures with Forteo in older patients and/or those who have osteoporosis and, longer term, will look for new ways to deliver medicine locally to the fracture site.
Forteo, a U.S. Food and Drug Administration-approved osteoporosis therapy, is used to treat postmenopausal women with osteoporosis who are prone to fractures. It also is used to increase bone mass in men with primary or hypogonadal osteoporosis who are prone to fractures.
$3.9 Billion
KEY EXECUTIVES:
Dr. h.c. mult. Hansjörg Wyss, Board Chairman
Michel Orsinger, President & CEO
Robert Donohue, Chief Financial Officer
Ciro Römer, President, Europe, Middle East & Africa & Global Operations
NO. OF EMPLOYEES: 11,426
GLOBAL HEADQUARTERS: West Chester, Pa.
Synthes Inc. certainly didn’t act like a company in transition last year. After announcing a historic $21.3 billion merger agreement with global healthcare conglomerate Johnson & Johnson, the Swiss surgical implant manufacturer routinely conducted business as if nothing had changed. And for the most part, nothing had changed.
Though the companies reached an agreement in late April, the merger was subject to anti-trust review in both the United States and European Union. It also required the blessing of Synthes shareholders, which occurred in mid-December, eight months after the deal was first announced.
The European anti-trust review—originally expected to move easily through the European regulatory system—hit a stumbling block in the fall after the deal was referred to a second-phase in-depth probe by the EU’s anti-trust unit. The referral gave authorities an additional four months to rule on the case (the final deadline was March 19, 2012).
Prompting the in-depth probe was European regulators’ concerns about the deal’s potential to monopolize the market and hurt innovation. Market dominance, however, likely was a motivating factor behind the merger—by purchasing Synthes, J&J was attempting to gain a majority of the estimated $5.5 billion global trauma device market.
Such a strategy did not sit well with EU anti-trust chieftains. Their initial investigation concluded the deal would combine two of Europe’s largest suppliers of spine devices and turn Synthes into the world’s largest producer of trauma products and devices for facial and skill factures. J&J, meanwhile, would become the global leader of shoulder replacements and components.
“The proposed acquisition would remove a competitor from some markets which are already concentrated,” EU anti-trust chief Joaquín Almunia said in a prepared statement last fall. “The commission needs to make sure that effective competition is preserved in order to maintain innovation and prevent harm to patients.”
The commission preserved competition by requiring J&J to sell its DePuy Orthopaedics Trauma business to Warsaw, Ind.-based Biomet Inc. for $280 million. The compromise was mutually beneficial for all three parties: It allowed J&J to finally close the deal for Synthes (in mid-June 2012, more than a year after its proposal) and it gives Biomet a stronger presence in the global trauma market, according to CEO Jeffrey R. Binder. Perhaps most importantly though, the sale eased European regulatory concerns about a trauma market monopoly.
“We obtained remedies to ensure that competition will remain strong in these markets for the ultimate benefit of patients and social security systems,’’ Almunia said in a statement.
Within a week of receiving the go-ahead from EU anti-trust officials, J&J had completed the Synthes deal and posted a welcoming message to visitors on the firm’s website. Conversely, Synthes Board President Hansjörg Wyss and President/CEO Michel Orsinger composed a farewell message to shareholders in the company’s 2011 annual report. In a joint letter, the pair reminded investors of the opportunities created by the merger and said the two companies’ combined forces would be better positioned to tackle future regulatory issues and competitive pressures.
“We should all keep in mind the opportunities brought about by this merger,” Wyss and Orsinger wrote. “In the wider context of an increasingly challenging healthcare environment, the combination of our core strengths will be a welcomed improvement in our capacity to tackle regulatory and competitive difficulties ahead. As a result, both our surgeon customers and our employees will reap benefits from this business combination. Above all, we will continue to do the things that made Synthes so successful.”
Some of the things that made Synthes successful in 2011 included a partnership with Eli Lilly and the introduction of a spate of new products, including the Dynamic Locking Screw and the ETN PROtect tibia nail. The Dynamic Locking Screw, according to Synthes, is designed to boost biological bone healing by allowing micro-motions that improve circumferential bone growth.
The Expert Tibial Nail PROtect, including its cannulation, is coated with a thin layer (approximately 50 µm) of gentamicin-laden polymer. The coating is abrasion-resistant and is designed to withstand most of the forces occurring during nail insertion. It is completely resorbed after roughly six months.
The company continued its foray into the craniomaxillofacial sector with the debut of ZipFix, a product that enables fast sternal closure after thoracic interventions.
Such innovations helped boost total revenue last year by 7.7 percent to $3.9 billion. Net earnings climbed 6.5 percent to $966.7 million, while research and development spending jumped 15.3 percent to $198.8 million. U.S. sales generated the bulk of Synthes’ revenue in 2011 (year ended Dec. 31), collecting $2.1 billion, a 2.7 percent increase compared with 2010. Other markets (which the company defines as “rest of the world”) contributed $1.8 billion to the bottom line, a staggering 14.3 percent spike compared with the $1.6 billion amassed from foreign customers in 2010.
European sales (which includes the Middle East and Africa) grew 2.3 percent in local currency while Latin American revenue surged 13 percent. Sales in Asia virtually exploded, ballooning 17 percent; contributing to the increase most likely was the more than 200 surgeon educational events Synthes held in the region last year. In China, where the firm opened its first manufacturing facility in 2010, executives made good headway on three novel clinical trials that eventually will enable Synthes to sell devices manufactured in China specifically for local patients. Bigwigs expect to launch the first of these products next year.
The company’s power tools business turned in a solid performance in 2011, thanks to the integration of products acquired in the November 2010 purchase of The Anspach Effort Inc. Synthes executives said Anspach's focus on high speed surgical power tools for use in neurosurgery, spinal and ENT surgery would help Synthes expand its power tools product offering to hospitals and surgeons worldwide.
“We will establish a dedicated power tools division, with close to $200 million in total sales,” Orsinger said when the purchase was announced.
Synthes announced its collaboration with Eli Lilly and Company about two months after publicly acknowledging its merger with J&J. The two companies (Eli Lilly and Synthes) signed a joint development agreement to address the needs of patients with osteoporosis and bone fractures.
The agreement allows for the joint development and licensing of early stage compounds from Lilly to Synthes for use within orthopedic trauma, spine, craniomaxillofacial and reconstructive areas.
The early stage compounds have pre-clinical and in some cases clinical data packages and have the potential to aid in the local treatment and regeneration of the skeleton.
The two companies will jointly develop site-specific osteoinductive (i.e. bone healing) products based on Synthes’ biomaterials combined with Lilly’s biologics or pharmaceuticals.
Within a second development program, Synthes and Lilly jointly will conduct and fund the evaluation of additional orthopedic uses for Lilly’s osteoporosis drug Forteo (teriparatide [rDNA origin] injection), marketed as Forsteo in some countries outside of the United States.
Building upon a Phase II study that Lilly has already completed, Lilly and Synthes will collaborate on additional clinical studies to evaluate future indications for Forteo, including fracture healing.
In addition to the development component of the agreement, the collaboration also includes the U.S. co-promotion of Forteo to orthopedic surgeons, an important segment of physicians who treat patients with a fracture due to osteoporosis.
Lilly Bio-Medicines Bone/Muscle/Joint global development platform leader Johnston Erwin said the collaboration additionally will explore ways to treat fractures with Forteo in older patients and/or those who have osteoporosis and, longer term, will look for new ways to deliver medicine locally to the fracture site.
Forteo, a U.S. Food and Drug Administration-approved osteoporosis therapy, is used to treat postmenopausal women with osteoporosis who are prone to fractures. It also is used to increase bone mass in men with primary or hypogonadal osteoporosis who are prone to fractures.
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