Zimmer Biomet Regains "Top-Line Momentum," Eyes Potential M&A Opportunities
Zimmer Biomet has regained “top-line momentum” following the full integration of Biomet, said CEO David Dvorak, and is well-positioned to continue sustained growth across multiple musculoskeletal markets through the rest of the year. After several large acquisitions this year — including Medtech SA and LDR Holdings — Zimmer Biomet’s future growth opportunities will capitalize on innovation opportunities provided by these acquisitions, said Dvorak.
One year after the Zimmer and Biomet merger, the company reported Q2 net sales of $1.93 billion, a staggering 66 percent increase year over year, and an overall 28 percent increase in adjusted earnings per share. Across multiple segments — hips, knees, spine, and sports medicine, the company experienced a significant uptick in sales and growth momentum, according to a press release.
“We successfully integrated and leveraged the combined expertise and cultures of the two organizations, while executing on a highly complementary portfolio of technologies, services, and solutions,” said Dvorak in an earnings call. “Our financial results have provided the tangible proof points that Zimmer Biomet reflects our initial vision of an ideal fit.”
Following the complete integration, Dvorak noted that the company is “poised to move forward” with innovation and commercial priorities that will sustain growth in the long term. These priorities include taking advantage of the expansion and development opportunities offered by the recent bolt-on acquisitions of LDR Holdings and MedTech SA.
In June, Zimmer Biomet inked a deal to buy LDR for $1 billion as a strategic move to bolster its spine business. The acquisition of the two-level Mobi-C cervical disc replacement system launched Zimmer Biomet into an “immediate leadership position” in one of the fastest-growing segments in a $10 billion spine market, said Dvorak on the call.
Similarly, Zimmer Biomet has also entered the field of robotic surgery with the acquisition of Medtech SA, which puts the company in direct competition with other recent market entrants, such as Medtronic, J&J, Smith & Nephew, and Verily. Medtech SA is the developer of the ROSA robot, used in 20 hospitals in Europe and currently indicated for use in brain and spinal surgeries. On the earnings call, Dvorak commented that Zimmer Biomet has plans to further develop the platform for more indications.
“Our integration priorities [for Medtech SA] will focus on building a strong foundation to support the expansion of this platform technology across our musculoskeletal portfolio,” said Dvorak.
An analyst told The Street that recent speculation points to NuVasive and its sizeable spine business as Zimmer Biomet’s next big target. NuVasive’s imminent leadership shakeup and recent M&A activity could indicate that that the company would be open to a merger or acquisition offer, according to the analyst.
Dvorak projected that Zimmer Biomet’s generated free-cash flow, in the next two years, will open up opportunities for additional acquisition activity, but he told analysts that those targets were still a ways away.
“I think you ought to think about us as feeling good about what we have under the umbrella right now,“ said Dvorak. “We’re focused on exploiting the opportunities that have come with deals we’ve done over the last couple of years.”