Biomet Turns Profit Corner

Biomet, Inc.’s revenue grew by 7.7% in the past quarter. The company also reported net income of $67 million, a turnaround from a loss of $221 million a year earlier. The company turned a profit just in time to be acquired by Zimmer Holdings. Inc., scheduled for early 2015.

Biomet’s knee sales rose 5.1%, hips increased by 3.5%, sports, extremities and trauma (S.E.T) climbed 5.9% and spine was up a whopping 21.7%.

Good for Ortho

As the first major orthopedic maker to report quarterly results, it’s tempting to extrapolate Biomet’s results to the overall orthopedic market. However, BMO Capital Market analyst Joanne Wuensch says due to inconsistent reporting calendars, the results can be difficult to read through for other device makers. But, says Wuensch, the first look is “quite good for the group.”

Management noted several products that contributed to the growth, particularly the Vanguard Knee portfolio, including its Vanguard XP Bicruciate Knee, which was introduced at the last meeting of the American Academy of Orthopaedic Surgeons. In hips, the demand for the company’s new G7 Acetabular System was cited, including several thousand G7 procedures completed globally, and in the month of May, 29% of the surgeons using the G7 were reported as new Biomet hip customers. The company also received approval to market the G7 Bispherical Acetabular Cup in Europe during the quarter.

For spine, management highlighted that the 2003 Lanx acquisition was going well and that sales trends were positive as a result, quantifying that 200-250 basis points of the overall growth rate was from the acquisition.

S.E.T. highlights noted by Wuensch included the Signature Patient-Specific glenoid instruments (almost 50% of U.S. shoulder patients that used these products in the last month were new customers) and a new total foot system (launched in the quarter, with a comprehensive set of plates). Sales of the JuggerKnot brand products also contributed to the growth. In the trauma business, the company launched the DVR Volar Rim Plate ePAK, an upper extremity trauma device during the quarter. The company said that extremities grew double digits for the 26th straight quarter.

Bank of America analyst Bob Hopkins observed that U.S. recon sales were slightly below his expectations. He attributed that, at least in part, to a degree of potential distraction related to the pending acquisition by Zimmer. Zimmer and Biomet sales reps are still competing in the field. Hopkins also believes Biomet’s results support his view that the ortho market remains healthy, and will likely grow faster in 2014 than it did in 2013.