Zimmer Biomet Will Diversify Offerings, Fix Supply Chain In 2017
By Jof Enriquez,
Follow me on Twitter @jofenriq
Zimmer Biomet will offer an expanded product portfolio and fix product supply chain woes in 2017, as the company tries to build on solid revenue growth in the fourth quarter of 2016.
Net sales amounted to $2.013 billion for the period, up 4.1 percent year-on-year. For the whole of 2016 — the first full year since the merger — overall net sales leapt 28.1 percent, compared to 2015 to $7.684 billion, the Indiana-based company reported. Full-year profit was $302.9 million, doubling from $147 million the previous year.
“Our performance was driven, in part, by the reacceleration of our Knee and Hip businesses, as well as the ongoing strength of our S.E.T. [sports medicine, surgical, extremities and trauma] category and Asia Pacific region,” said David Dvorak, president and CEO of Zimmer Biomet, in a news release.
“We will continue to drive growth across our broad musculoskeletal portfolio in 2017, as we remain focused on delivering against our net synergy commitments and making ongoing progress towards optimizing and harmonizing our supply chain, and manufacturing and quality systems,” he added.
Synergies from the merger are forecast to deliver $310 million of cumulative net benefit by year-end 2017.
Dvorak told analysts in an earnings call that Zimmer Biomet intends to diversify offerings for knee and other anatomical sites with “differentiated new technologies.” Last year’s acquisition of Medtech SA, with its ROSA robotics platform, adds another tool to further that end.
“And to the extent there are anatomical sites that that technology can be applied to in a manner that satisfies three key conditions in our view, improves the quality of the outcome; enhances the efficiencies from a cost standpoint; and drives throughput, patient volume through those providers’ ORs, then those would be applications that we would look to develop and commercialize off of that ROSA platform,” said Dvorak, according to the earnings call transcript on Seeking Alpha.
As for exact timelines for planned launches, Dvorak declined to set specifics, saying that the company will only reveal an internal development project “when it make sense from a competitive standpoint.”
He did tout the company’s value-based Signature Solutions that features “the use of our intelligent instrumentation devices” and whose launch will be broadened this year.
“As part of Zimmer Biomet’s Signature Solutions, we will remain focused on the expansion and enhancement of our industry-leading intelligent instrumentation options, which in 2016 were utilized in nearly 100,000 procedures worldwide,” said Dvorak.
Last year’s acquisition of LDR Holdings and its two-level Mobi-C cervical disc replacement system is also expected to be a growth driver in 2017. The Mobi-C prosthesis is now the most widely covered device for one- and two-level cervical disc replacement by commercial health insurers in the United States, according to the company.
“I think it’s a real door opener for the rest of the Zimmer Biomet spine portfolio,” said Dvorak. “We’re very excited about the sustainability of Mobi-C growth, the cross-sell opportunity as we continue to integrate those sales forces, the teams are excited to have that in our bag, the full bag, and we view that as a terrific growth driver in the $10 billion spine market.”
Zimmer Biomet experienced some supply chain constraints last year, preventing it from meeting customer demand efficiently for its artificial hip and knee joint replacement products. The company then started to rectify the issues, including implementing remediation to fully address the observations at their Warsaw facility articulated in an FDA Form 483.
In 2017, Dvorak said the measures will continue, and they “expect to make substantial progress in remediating supply constraints during the first half of this year as we prioritize production for key cross-sell brands, clear our back orders and restore safety stocks. As part of our effort to implement certain regulatory compliance enhancements, we are making operational process improvements in one of our major production facilities.”