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Orthopedic and Dental Industry News Complete Archive »

Orthopedic News Roundup 3-Aug-06 BY HUYEN NGUYEN, AUGUST 3, 2006

Biologics: IsoTis OrthoBiologics reported 2Q:06 revenue of $10.8 million, up 43% compared to $7.5 million in 2Q:05. Its U.S. division grew 22%, while international revenues grew 39%. The Company has three distribution channels: U.S. independent agents, international distributors and private label agreements. Management commented that private label sales have tripled since the start of the year and represent 10% of sales. IsoTis' current private label partners include: Alphatec Spine, PLUS Orthopedics, Aesculap Spine and AlloSource. IsoTis had a net loss of $6.2 million for the quarter, or a loss of $0.09 per share, impacted by foreign currency movements on intercompany loans. The Company anticipates full year 2006 revenues to grow between 25% and 30%.

Bracing: DJO Incorporated released its 2Q:06 financial results with revenues of $106.5 million, representing an increase of 54.8% compared to 2Q:05. Included in revenues were sales from Aircast and Axmed, companies acquired in early 2006. Non-GAAP net income was $6.5 million or $0.28 EPS, which was down by 6% compared to 2Q:05. DJO's international segment has benefited from these acquired companies; sales were up by 169% over 2Q:05. Overall, Aircast contributed to $24.7 million in total net revenues, while DJO's organic growth from the regeneration segment was ~20% over 2Q:05, benefiting from the direct sales strategy for their OL1000™ and SpinaLogic® product lines.

Large Joints: Encore Medical reported 2Q:06 sales of $95.9 million, representing an increase of 28.9% over 2Q:05. Encore reported $0.06 below analysts' expectations and reported a loss of $0.01 diluted earnings per share (EPS), or a net loss of $473,000 (continuing operations only). Operating income was $7.4 million, which was negatively impacted by expenses totaling $7.4 million in Q2. The Company has begun to integrate the operations of the recent Compex acquisition. During the quarter, Encore's Surgical Implant Division grew 11.7% to $15.3 million and the Orthopedic Rehabilitation Division grew 32.6% to $80.6 million. Management provided guidance for FY2006 between 14.5% and 15% of revenues. Encore did not provide much information on the Blackstone acquisition, but commented that it should close later this year.

In 2Q:06, Exactech reported sales of $26.6 million and net income of $2.1 million, representing an increase of 11% over 2Q:05 in both top and bottom line. Overall, product sales for the quarter were up with knee, hip and tissue services achieving single to mid-teens growth. Its U.S. division grew 9% while international sales grew 19%; these operations achieved success with several new product introductions, a change in its distribution model and a growth generated by their sales and marketing teams. In the upcoming months, Exactech plans to introduce several products in the hip, knee, extremity and biologics areas.

Spine: Yesterday, Medtronic, Inc. released its preliminary earnings results for 1Q:07 with revenues of $2.9 billion, representing an increase of 8% over 1Q:06. Spinal revenues for the quarter are $598 million, up 14% from the same period a year ago. The Company reiterated CMS' final report on In-Patient Hospital Reimbursement rates, stating that while other vascular products' reimbursement rates were low, the average spinal product reimbursements for Medtronic are scheduled to increase ~8%. Medtronic plans to release its final 1Q:07 results on August 22, 2006.

Other: In 2Q:06, CryoLife, Inc. reported a profitable quarter with diluted EPS of $0.00, beating analysts’ estimates by $0.07. Revenues were reported at $20.8 million, also beating the Street's estimates by $610,000. During the quarter, the Company incurred a charge of $400,000 in stock-based compensation and a gain of $800,000 related to the adjustment of reserves for product liability losses. In Q2, CryoLife's BioGlue sales were up 8% and Tissue processing increased 38% (driven by an increase in tissue procurement and an improvement in processing yields). Revenue from its orthopedic division was $1.8 million, an increase of 68% over 2Q:05. Management revised its previous guidance and adjusted FY2006 revenues to be between $80 million and $82 million, up from $76 million and $80 million.

Integra LifeSciences reported 2Q:06 revenues of $100 million, an increase of 43% over 2Q:05. Excluding miscellaneous charges, net income was $13 million, or a diluted EPS of $0.41. During the quarter, Integra's Neuro/Ortho Implants division achieved a 13% increase to $39 million. Within this division, Newdeal foot and ankle products increased ~35% year-over-year. The Company updated its guidance for FY2006 and FY2007 stating that excluding all miscellaneous charges, EPS for 2006 will be in the range of $1.69 to $1.76, and 2007 to be within a range of $2.00 to $2.15.

Clinical Update:
Exactech, Inc. announced that its Optetrak® knee system with net compression molded polyethylene yielded superior results when compared to those reported by a competitor. Data in simulator testing showed that it has a wear rate of 1.46mg/Mc(1), which is 72% better than wear rates recently cited by a competitor. co.don® AG announced that its autologous 3-dimensional cultured cartilage - co.don chondrosphere®'s product (ACT-3D) - was successfully implanted in a patient with a cartilage defect in the ankle. Dr. Matthew Songer of Pioneer Surgical Technology has successfully implanted the NUBAC Intradiscal Arthroplasty™ System in patients with degenerative disc disease as part of an Investigational Device Exemption (IDE) study in the U.S. The NUBAC™ is the only intradiscal arthroplasty device for patients with degenerative disc disease utilizing articulating PEEK-on-PEEK material designed to achieve load sharing and uniform stress distribution under various physiological loading conditions.

Distribution Agreement:
Collagen Matrix, Inc. and Stryker Orthopaedics signed an exclusive worldwide (except Canada) distributing agreement for Collagen Matrix's Neuroflex™ Flexible Collagen Nerve Cuff and NeuroMatrix™ Collagen Nerve Cuff. Neuroflex™ and NeuroMatrix are safe, resorbable, collagen-based tubular matrices intended for use in the repair of severed peripheral nerves. Nerites Corporation (which develops coating technology for medical devices) and the Midwest Orthopaedic Research Foundation (MORF) signed a co-development agreement for Nerites' SurPhys™ and Medhesive™. SurPhys™ is an antifouling coating technology for medical devices and the Medhesive™ is an aqueous-compatible adhesives for internal tissue applications. Innocoll Pharmaceuticals Ltd., a subsidiary of Innocoll, Inc., announced it has signed a multi-country distribution agreement with BurnsAdler Pharmaceuticals, Inc. for its CollaRx GENTAMICIN SURGICAL IMPLANT, indicated for treatment and prevention of post-surgical infection in both hard and soft tissues. ThermoGenesis Corp. and Biomet Biologics, Inc. signed a development, license and supply agreement to combine ThermoGenesis' protein harvesting technology with Biomet's autologous therapies to manufacture autologous fibrin sealant in a peri-operative setting to help stop bleeding and bond tissue.

Acceleron Pharma, Inc. announced it closed a $30 million Series B financing led by OrbiMed Advisors. Proceeds will be used to advance ACE-011, an agent for the treatment of bone loss now in Phase 1 clinical trials, along with several other programs that address musculoskeletal, metabolic and cancer-related diseases. Based in Cambridge, Mass., Acceleron Pharma specializes in the field of regenerative therapeutics.

Mergers & Acquisitions:
Integra LifeSciences announced it has closed the previously announced acquisition of Kinetikos Medical, Inc. (KMI) for ~$40 million. KMI specializes in orthopedic implants and surgical devices for small joints in the upper and lower extremities.

Product Introduction:
HydroCision announced it has launched its SpineJet® XL MIS Fusion Preparation System in the U.S. This system is a fluidjet-powered device that simultaneously cuts, ablates and removes hard and soft tissue in preparation for graft implantation during minimally invasive lumbar interbody fusion procedures.

Regulatory Update:
Disc Dynamics Inc. received approval to begin its U.S. clinical study for its DASCOR™ Disc Arthroplasty System, an MIS nucleus replacement technology to treat lower back pain associated with degenerative disc disease. Currently, the DASCOR™ is CE Mark approved by the European Union and is available outside of the U.S. Portland Orthopaedics Limited received FDA approval for its M-COR primary hip. Plus Orthopedics Inc. is the exclusive U.S. distributor of the M-COR hip.

On Tuesday, the Center for Medicare and Medicaid Services (CMS) issued a final ruling on the Inpatient Prospective Payment System (IPPS) for FY 2007. The ruling outlined reimbursement rates for specialty procedures, including orthopedic surgery. Joint replacement procedure reimbursements increase 4% to 5%, with a spine fusion reimbursement increase of 8% to 10%.

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