Alphatec’s Grand Slam Second Quarter

For the second quarter of 2023, Alphatec Holdings, Inc. (ATEC) dramatically reclaimed the position of #1 market share gainer in the spine industry by reporting a stunning 32% increase in procedure volume with a 7% increase in revenue per case.

Alphatec, under the leadership of Mr. Patrick Miles, was the #1 market share gainer during COVID ravished 2020, then again in 2021 and now, almost certainly, will be the #1 market share gainer for 2023. Globus Medical took the crown away from Alphatec in 2022, but Alphatec has snatched it back.

Here are the numbers:

• Q2 Sales: $117 million. That’s 39% higher than last year’s second quarter—and well above the forecasts from Wall Street’s analyst corps, who, it’s worth mentioning, are truly enamored with the company.
• Q2 Surgical Sales Growth: 41% to $102 million.
• Q2 Gross Profit: 73.2%, up 340 basis points from last year’s 69.5%.
• Earnings Before Interest, Taxes and Amortization (non-cash) Expenses: $1.5 million up dramatically from the Street’s consensus of a $(1.8) million loss.

But wait, there’s still more. Here’s what one of the top Wall Street analysts, David Saxon CFA with Needham and Company LLC, wrote to institutional investors: “We believe there could still be more upside given conservative procedure volume growth assumptions. We also believe upside on the top-line could allow ATEC to see a faster profitability ramp. Given these points, we reiterate our Buy rating and raise our price target to $20 from $19.”

Wall Street’s analysts are updating their models and consensus for the full year seems to be coalescing around $460 million for the full year and then $545 million for 2024.

What is the secret behind Alphatec’s performance? Three reasons, I think:

1. Focus on surgeon training – 150 surgeons were trained in the second quarter alone;
2. An obsession on material improvements in spine surgery – Miles and his team are very good at avoiding distractions. They have one job and one job only. “ATEC’s 100% spine focus gives us a unique ability to create comprehensive, ground-up procedures that directly improve spine care,” said Miles;
3. Advanced, but integrated, imaging and other digital tools – EOS and navigation-enabled robotics. In short, Alphatec is among a handful of spine companies who are leading surgeons from an artisanal practice to the modern approach of integrating engineered processes.