Orthofix reported a 2.4 percent increase in year-over-year sales for the second quarter and 11.8 percent increase in the spinal fixation business sales.
However, biologics sales decreased 6.3 percent and the company reported a slight drop in extremity fixation sales. The company has gone through significant organizational changes over the past nine months, and Orthofix President and CEO Brad Mason as well as CFO Doug Rice examined them during the second quarter conference call.
Here are seven key quotes from the conference call, as transcribed by Seeking Alpha:
Brad Mason on spine sales reorganization and integrating Spinal Kinetics: "Three months ago, we began a reorganization of international spine sales management in anticipation of the Spinal Kinetics acquisition. As part of the integration plan, Spinal Kinetics management now have the responsibility for all OUS spinal implant sales, in addition to the Spinal Kinetics M6 disc. Long term, we believe this change will be very beneficial. However, this disruption did have an impact in the period that is expected to continue for the next quarter or two."
Doug Rice on the international spine market: "We're still going to be challenged on international spine. That's probably about $1.5 million or so that we're expecting headwind in the second half of the year. If you will factor that all in, we're still looking at the 12 percent to 14 percent growth rate with Spinal Kinetics included in there."
BM on Spinal Kinetics FDA approvals: "We remain on track with the Food and Drug Administration approval process and continue to target final approval in 2019 with midyear still being the most likely timing. In the meantime, the Spinal Kinetics business is performing as planned."
BM on the RIVAL foot and ankle plating system issues: "We launched RIVAL and had some issues that have caused us to pull back. And it's only a couple of components, but that's all it takes to have the distributors and physicians hesitate. So we're going to get that right and then re-launch in the future."
BM on the drop in constant currency net sales for the extremities business: "Our extremities fixation business reported net sales increased 0.2 percent and constant currency net sales decreased 4 percent. The factors impacting the period included an increase in unshipped orders at the end of June of approximately $1.5 million, compared to typical quarter-end due to the late timing of several large orders that were expected earlier in the quarter…and a miss of $500,000 in the quarter versus our plan due to the delay in the rollout of the RIVAL foot and ankle plating system. We expect this delay to continue for the remainder of the year."
BM on why there was a shipping delay: "It was just some late documentation that came in for a lot of orders. That part of it was holiday-related, believe it or not, coming into the 4th of July holiday. But the sales agents out in the field have to, once the order is approved and we've got insurance authorization, that's an open order, then they have to go apply that medical device. They have to get the signatures on the letters of medical necessity, assign benefits, prescriptions, things like that, and get all that in. And I think some people left on holiday a bit early, but we have a team now that will be making calls toward the end of each period. But one more important thing to note is we don't culturally push at the period ends for sales. I think it's a bad habit to get into. IT can create conflict for employees that I don't want to have happen."
BM on biologics: "Biologics, we're still struggling in one of the territories. We'll rebound there. I don't expect a lot of rebound this year. I think it will be more beginning of next year. But in the past, I've erred, and things have come in quicker than I expected."