Here are 150 insights and notes on the second quarter financial reports of some of the most prominent orthopedic and spine device companies.
Medtronic
(First quarter of 2015)
1. Medtronic reported $7.2 billion worldwide revenue for the quarter, a 12 percent increase including an extra week benefit. However, foreign currency translation had a negative $529 million impact on revenue.
2. Revenue in the United States reached $4.1 billion, up 14 percent. United States revenue represented 57 percent of the company's entire revenue. The non-U.S. developed market revenue was up 10 percent to $2.1 billion.
3. Spine revenue grew 7 percent to $763 million in the first quarter.
4. The company's BMP line grew, but core spine was flat globally and declined slightly in the United States. The Interventional spine line declined as well globally.
J&J Orthopedics
5. Johnson & Johnson's orthopedics business reported $2.3 billion in sales for the second quarter.
6. Total sales for the orthopedics line were down 5.6 percent over the same period last year.
7. United States sales were up 2.1 percent, hitting $1.3 billion last quarter.
8. International sales took a huge dip — dropping 14.1 percent — last quarter. International orthopedics sales were $1 billion.
9. At the six months in, the orthopedics line reported $4.6 billion worldwide. That's a 4.7 percent drop from the first half of last year.
10. In the first six months of the year, international sales were down 12 percent and United States sales were up 1.7 percent for the orthopedics line.
Stryker
11. The company's consolidated net sales were up 2.9 percent in the quarter to $2.4 billion. The foreign currency exchange rates negatively impacted net sales by 4.7 percent. Excluding the 0.7 percent impact of acquisitions, net sales in the quarter increased 6.9 percent.
12. The company's net sales were up due to increased unit volume, but was offset by lower prices.
13. The net sales in the orthopedics line were flat at $1 billion. The foreign exchange rates also negatively impacted orthopedics line sales.
14. The Neurotechnology and spine sales were up 6.4 percent in the quarter, reaching $458 million.
15. The company's net earnings were up 206.3 percent in the quarter to reach $392 million. The diluted net earnings per share were $1.03, up 212.1 percent in the quarter.
16. Sales in the United States were up 9.4 percent to $1.7 billion. However international sales were down 9.9 percent to $716 million.
17. The company also reported each line within the orthopedics and spine lines:
• Knees: down 1 percent to $346 million
• Hips: down 2.1 percent to $320 million
• Trauma and extremities: up 4 percent to $309 million
• Spine: flat at $186 million
18. Stryker updated 2015 expected sales growth to 6.5 percent to 7.5 percent, including organic sales of 5.5 percent to 6.5 percent. Diluted earnings per share are expected to raise $1.20 to $1.25 in the third quarter and $5.06 to $5.12 for the full year.
NuVasive
19. The company's revenue increased 6.4 percent to $202.9 million.
20. The GAAP gross profit for the second quarter was $154.4 million and the gross margin was 76.1 percent. The gross profit was up over the same period last year.
21. Net income was $10.3 million, or $0.20 per share for the second quarter. During the second quarter of last year, the company reported $4.1 million net loss.
22. NuVasive reported $306.6 million in cash, cash equivalents and short and long term marketable securities for the quarter.
23. NuVasive updated revenue projects to $810 million for the full year, including $13 million of currency headwinds — approximately 6.2 percent growth compared to last year's revenue.
24. The adjusted EBITDA margin is approximately 25.2 percent, an increase of around 330 basis points compared to last year. The previous expectations for 2015 were 24.6 percent.
25. GAAP earnings per share are estimated around $1.18 for the entire year — higher than the prior expectations of $1.12.
LDR
26. Total revenue for the second quarter was up 19.4 percent to $41.5 million.
27. Exclusive technology products revenue grew 25.8 percent in the second quarter to $38.2 million.
28. United States revenue increased 26.4 percent to $33.3 million while international revenue dropped 2.3 percent to $8.2 million during the quarter.
29. The exclusive cervical products revenue was up 36.5 percent in the second quarter to $28.6 million. The growth is partially due to Mobi-C cervical disc sales growth.
30. LDR's lumbar products also grew 2 percent in the quarter to $9.6 million. The VerteBRIDGE fusion product sales grew for both lumbar and cervical spine lines.
31. Gross profits for the quarter were $34.7 million and the gross margin was 83.6 percent. There was an improvement in the gross margin due to geographic mix and better freight rate management.
32. The company's net loss for the quarter was $5.8 million, or $0.22 per share. This is up from $2.3 million net loss in the same period last year.
33. The adjusted EBITDA for the second quarter was -$700,000, compared with $700,000 over the same period last year.
34. LDR raised its expected revenue growth for the full year 19 percent to 20 percent, before the foreign exchange impact, to hit $168.1 million to $169.5 million.
35. At the end of the second quarter, LDR had $62.6 million in cash and cash equivalents and $74.4 in working capital. The company was $24.2 in debt.
Smith & Nephew
36. Smith & Nephew reported $1.16 billion in the second quarter, up 5 percent over the same period last year. There was a negative 9 percent impact due to currency headwind, but it was partially offset by a 6 percent benefit from acquisitions.
37. In the first half of the year, revenue was up 4 percent to $2.2 billion. The first half trading profit was $512 million.
38. In the second quarter, the company's business lines performed well:
• Sports medicine joint repair: 6 percent growth to $150 million
• Arthroscopic enabling technologies: 17 percent growth to $142 million
• Trauma and extremities: 3 percent decline to $125 million
• Other surgical business: 69 percent growth to $52 million
• Knee implants: Flat at $221 million
• Hip implants: 8 percent decline to $153 million
39. The United States revenue was up 11 percent to $549 million, while other established markets revenue dropped 11 percent to $426 million. The emerging markets also reported 11 percent growth to $193 million.
40. The company's acquisition of ArthroCare last quarter helped the "other surgical businesses" segment grow 7 percent. The company expects continued growth as a result of the acquisition. The business is performing at expectations and Smith & Nephew expects the acquisition to add $85 million to annual trading profit by 2017.
41. The JOURNEY II Total Knee System drove the 7 percent growth in the U.S. knee market. The marketing campaign for the VERILAST technology for both hips and knees also contributed to the growth.
42. In the first half of the year, trading profit was $512 million and the trading profit margin was 22.5 percent.
43. Reported operating profit for the first half of the year was $439 million after integration and acquisition costs. The company received $99 million in cash in June related to a patent infringement case with Arthrex.
K2M
44. K2M's revenue jumped 18.7 percent to $56.4 million for the second quarter. International revenue was up 4.5 percent to $14.9 million while domestic revenue was up 24.7 percent to $41.4 million.
45. By segment, the company’s domestic revenue growth was:
• U.S. Complex Spine growth: 23.6 percent
• U.S. Minimally Invasive Surgery growth: 34.5 percent
• U.S. Degenerative growth: 22.3 percent
46. The revenue increase was due to greater sales volume from new surgeons using the company’s technology in the United States and existing customers upgrading to newer product offerings. There was also growth in the international distributor markets and a domestic stocking order.
47. For the six months end, the United States revenue was up 21.6 percent to $76 million and international revenue was up 12.8 percent to $30 million. Total revenue grew 19 percent to $106.7 million.
48. For the first half of the year, the product line revenue was:
• U.S. Complex Spine growth: 21.6 percent to $31.3 million
• U.S. Minimally Invasive growth: 28 percent to $12.7 million
• U.S. Degenerative growth: 19.1 percent to $32.5 million
49. Loss from operations in the second quarter was $8.6 million, compared to a $12.8 million loss last year.
50. Operating expenses for the second quarter were up to $46.4 million due primarily to increased sales commissions as a result of increased sales volume and by higher employee years.
51. Gross profit for the quarter was up 20 percent to $37.7 million, or 67 percent of sales. The medical device excise tax was $0.7 million, or 1.2 percent of the total company sales this year.
52. The company expects total constant currency revenue growth 15 percent to 17 percent year-over-year, hitting $214 million to $218 million.
53. Total net loss for the full year is expected to hit $34 million to $38 million, lower than $59.6 million in 2014.
Amedica
54. The total product revenue hit $1.1 million, an 18 percent decrease year-over-year. The decrease was primarily due to a 23 percent drop in non-silicon nitride products for the three month's end as a result of a few key surgeons declining their activity level. The company is also focusing marketing efforts on the silicon nitride products.
55. Silicon nitride sales decreased by $300,000 — 13 percent over the same period last year. The decline was primarily attributed to the loss of a few key surgeons during the quarter, offset partially by increased recruiting efforts for the sales organization. There are now new surgeons using silicon nitride products, and Amedica expects the new surgeon participation to outweigh the year-to-date declines for the second half of the year.
56. The cost of revenue for the quarter decreased by $200,000, or 15 percent compared to the second quarter last year, primarily as a result of reduced sales.
57. The gross margin was 78 percent of total sales, compared with 80 percent last year. Although product costs reduced through production efficiencies and lower overhead costs, the decline in gross margins was due to private label sales during the second quarter of 2015, which have lower gross margins due to lower selling prices.
58. The operating expenses for the second quarter were down 60 percent from the same period last year, reaching $6 million. The decline is due to the company's efforts to simplify the organization and align financial objectives earlier in the year as well as lower costs. There was a $6.6 million reduction in stock-based compensation expense during the second quarter.
59. Amedica reported a net loss of $5.9 million in the second quarter, compared with $13.2 million in the prior-year period.
60. The cash and cash equivalents totaled $12.4 million. Total principal debt obligations were $23.4 million.
61. The company maintained previous estimates for total annual revenue in the $19 million to $20 million range, with silicon nitride sales growing 15 percent to 20 percent on the year.
62. The company expects to deliver $5 million to $7 million of annualized operating profit benefit from the financial and operational alignment initiatives.
63. The company is taking steps to maintain compliance with debt covenants in the fourth quarter of this year and become operating cash flow breakeven during the second half of 2016. The company also maintained previous guidance of four OEM or private label partners to be announced this year.
Mazor Robotics
64. For the six months end, Mazor reported net loss at $7.3 million, slightly lower than $7.7 million reported at the end of last year.
65. Revenue increased 31 percent in the first half of this year, totaling $12.3 million compared to $9.4 million over the same period last year. System sales growth and increasing recurring revenues drove this growth.
66. Recurring revenue totaled $5.9 million in the first half of this year, attributed growing utilization of the Renaissance system in the United States and globally.
67. The gross margin for the six months end was 78.1 percent, compared with 78.9 percent over the same period last year.
68. In the second quarter, revenue increased 74 percent to $7.8 million, compared with $4.5 million a year ago.
69. Revenue generated in the United States increased from $3.1 million in the second quarter of 2014 to $6.5 million in the most recent report. The company sold six Renaissance systems in the United States during the second quarter, compared with two last year.
70. International revenue decreased from $1.4 million to $1.3 million in the second quarter, selling only one Renaissance system and one upgrade to the international market.
71. Recurring revenue from system kit sales, services and other increased to $3.2 million in the second quarter, up 48 percent over the same period last year.
72. The total operating expenses were $8.4 million, up from $7.7 million in the second quarter last year due to increased investments in sales, marketing and research and development activities.
73. Operating loss for the second quarter was $2.2 million, compared with $4.1 million in the second quarter last year. Net loss for the second quarter hit $2.1 million, down considerably from the $4.1 million in the second quarter last year.
DJO Global
74. The company’s net sales hit $310.8 million, a 1 percent decline compared with the same quarter last year. The 2015 sales were negatively impacted by $14 million related to charges in foreign currency exchange rates compared with the same period last year.
75. The adjusted EBITDA for the second quarter was $73.7 million, 23.7 percent of net sales.
76. DJO reported a net loss of $78 million, up over a $25.4 million net loss last year. The net loss was impacted by significant non-cash items, non-recurring items and other adjustments.
77. The surgical implant segment net sales were $28.1 million in the second quarter, an 11.9 percent net sales growth driven by strong hip and shoulder sales.
78. The international segment reported $75.6 million in net sales.
79. At the end of the quarter, DJO reported cash balances at $48.4 million and available liquidity of $111.5 million under its $150 million revolving credit.
80. In the second quarter, the company launched the DonJoy Performance in the consumer sports channel, making its sports medicine products available to consumers.
81. The company recently acquired Cobalt Bone Cement and the Discovery Elbow to enhance existing orthopedic implant lines.
82. The company reconfirmed 2015 guidance at mid-single digit revenue growth and updating adjusted EBITDA growth rates to high-single digits.
83. This year the company is building momentum for MotionCare products for patients with arthritis.
Orthofix
84. Orthofix net sales were flat $101 million, with diluted earnings per share from operations hitting $0.21.
85. Net sales by business line were:
• BioStim: up 3 percent to $40.7 million
• Biologics: up 10 percent to $15.2 million
• Extremity fixation: down 6 percent to $25.6 million
• Spine fixation: down 5 percent to $19.3 million
85. The gross margin was 78.3 percent, compared with 74.8 percent over the same period last year, and gross profit was up by $3.4 million, hitting $79 million for the quarter. The change is due to foreign exchange rates and lower charges for inventory shrinkage in 2015 when compared with the same period last year.
86. The operating expenses increased from $68.9 million last year to $74.1 million for the second quarter this year. An increase in general and administrative expenses as the company invested in infrastructure, increased share-based compensation, costs related to legal judgment and an increase in professional fees and personnel costs within the finance department as part of the control remediation efforts drove this change.
87. Adjusted EBITDA from continuing operations was $17.2 million, or 17.1 percent of net sales. In the same period from last year, the adjusted EBITDA was $16.2 million, or 16.1 percent of net sales.
88. Cash and cash equivalents were $55.9 million, compared to $71.2 million for the same period last year. Orthofix is in negotiations to renew its credit facility, which expires Aug. 30, 2015.
89. The company reported estimated net sales for 2015 growing to $390 million to $395 million.
90. Projected adjusted EBITDA for 2015 is estimated to hit $57 million to $60 million.
Integra LifeSciences
91. The second quarter revenue increased 5.5 percent over the same period last year to $244.1 million.
92. The company reported net income for the second quarter at $26.3 million, or $0.79 per diluted share. This is up over the net income in the second quarter of 2014, at $22.2 million or $0.68 per diluted share.
93. The adjusted EBITDA for the second quarter was $50.5 million, or 20.7 percent of revenue. This exceeds the adjusted EBITDA from the same period last year, which reached $43.4 million or 18.8 percent of revenue.
94. Integra generated $18.1 million in cash flows from operations in the second quarter and invested $13.1 million in capital expenditures.
95. After the SeaSpine acquisition was complete July 1, the company updated its full-year 2015 guidance. The company now expects revenue to hit $870 million to $885 million.
96. Integra's specialty surgical solutions revenue was up 7 percent to $146 million. Orthopedics and tissue technologies increased 10 percent to $63 million while spine revenue decreased 7 percent to $33.5 million.
97. The company also acquired TEI on July 17. "Our teams worked hard to complete the spin-off of SeaSpine ahead of schedule and close the strategic acquisition of TEI," said Integra President and CEO Peter Arduini. "We are optimistic about the top-line growth acceleration and margin improvement these transactions will add to Integra."
SeaSpine
98. SeaSpine reported $33.5 million in revenue for the second quarter of 2015, a 6 percent decrease over the same period last year.
99. Orthobiologics revenue is projected to increase 1 percent to $17 million.
100. The spinal fusion hardware revenue will be down 13 percent to $16.5 million for the second quarter.
101. Gross profit for the second quarter was 56.6 percent, a slight decrease compared to the same period last year. Operating expenses increased $9.5 million to $35 million.
102. Research and development expenses were relatively flat at $2 million for the second quarter.
103. Net loss was $17.7 million, up from a $5.4 million net loss over the same period last year.
104. Full-year revenue is expected to reach $133 million to $139 million, flat or down 4 percent compared with the same period last year. This is unchanged from the previous guidance Integra LifeSciences projected.
105. SeaSpine became an independent company July 1 and is investing in innovation and growth initiatives. The orthobiologics platform is the leading platform.
106. The company does not expect to incur significant amounts of spinoff and transition service costs in future years.
Alphatec Holdings — parent company of Alphatec Spine
107. Alphatec's consolidated net revenue dropped 12.3 percent compared to the same quarter last year, hitting $46.6 million. Consolidated revenues were impacted by $3.6 million in the second quarter due to declined valuation of Japanese Yen and Euro against the U.S. dollar.
108. The net revenues in the United States were down 21.1 percent, hitting $27.2 million for the second quarter. International revenues were up 4 percent to $19.4 million.
109. The gross profit declined 23.8 percent in the second quarter, hitting $27.5 million, primarily due to lower U.S. sales volume, foreign currency translation effects and global geographic mix.
110. The gross margin declined 8.9 percentage points compared to the same period last year due to unfavorable variation in regional and product mix. The international margins are typically lower, along with write-offs related to manufacturing and product lifecycle management.
111. The company reported GAAP net loss for the quarter at $3.9 million, or $0.04 per share, up from last year when then net loss was $2.9 million.
112. The total operating expenses were $30.4 million, a decrease from the same period last year. Alphatec reported lower commission expenses as a result of lower U.S. sales volume and savings in marketing, research and development and G&A functions.
113. The company expects to see constant currency revenue from the full year hit -2.5 percent to 1.3 percent compared with the same period last year. This represents revenue of $202 million to $210 million.
114. Alphatec expects 2015 EBITDA to reach $22 million to $26 million.
Exactech
115. Exactech reported a 4 percent decrease in second quarter revenue, reaching $61.5 million.
116. Net income was also down to $3.7 million from $4.2 million compared to a year ago.
117. Weakened Euro and Japanese Yen relative to the U.S. dollar impacted the second quarter financial report.
118. The revenue for each business line was:
• Extremity implant: 8 percent increase to $20.5 million
• Knee implant: 10 percent decrease to $19 million
• Hip implant: 2 percent decrease to $10.9 million
• Biologic and spine: 9 percent decrease to $5.9 million
• Other revenue: 15 percent decrease to $5.2 million
119. For the six months end, revenue decreased 3 percent to $122.9 million. Net income was down 7 percent to $7.8 million.
120. In the first half of the year, Exactech faced strong currency headwinds and worked to optimize inventory flow and supply service levels. The company executed some disruptive but "necessary" changes within its domestic sales channel. The company also invested heavily in new products, many of which will be used in the second half of the year.
121. Sales in the United States were down 2 percent in the first half of the year to $82.5 million. U.S. sales for the second quarter were also down 2 percent to $41.3 million.
122. United States sales represented 67 percent of total sales.
123. Gross margins decreased as expected for the second quarter due to pricing and currency impacts. The total operating expenses for the quarter were down 4 percent to $36 million.
124. The company updated revenue guidance for the full year to reach $246 million to $250 million.
Wright Medical
125. The company's net sales increased 11 percent to $80.4 million in the second quarter.
126. The company reported net loss from continuing operations for the quarter at $37.3 million, down from $53.6 million last year. The company reported $18.5 million unrealized loss related to market-to-market adjustments on contingent value rights in connection with the BioMimetic acquisition.
127. Wright's second quarter 2015 adjusted EBITDA from continuing operations was negative $10.9 million, compared with negative $11.6 million.
128. Cash and cash equivalents and marketable securities totaled $427.9 million as of the end of the second quarter, a significant increase from $198 million at the end of 2014.
129. Both Wright Medical and Tornier shareholders approved the pending merger between the two companies; however, the companies still need approval from the U.S. Federal Trade Commission. Tornier is pursuing a divesture of certain U.S. lower extremity product lines. The transaction is expected to close before the third quarter ends.
130. Second quarter global foot and ankle sales increased 17 percent. The second quarter global total ankle replacement sales were up 67 percent.
131. The company anticipates net sales to reach $325 million to $335 million for 2015, a 13 percent to 16 percent growth over 2014.
132. The anticipated 2015 adjusted EBITDA from continuing operations is expected to be negative $22 million to negative $27 million.
InVivo Therapeutics
133. InVivo reported a $10.4 million net loss for the quarter, up from $3.6 million for the same period last year. A derivative warrant liability of around $4.6 million, reflecting changes in the fair market value of the derivative warrant liability, impacted the quarter's results.
134. Cash and cash equivalents at the quarter's end were $25 million. The company received $4 million from the exercise of warrants issued in the company's May 2014 public offering during the second quarter of 2015.
135. For the first half of 2015, InVivo reported a $26.2 million net loss, or $1.02 per diluted share. This is up significantly from $8.7 million for the first half of last year.
136. The company received $6.9 million from warrant exercises in the first six months of 2015, representing around 69 percent of the warrants issued during the May 2014 public offering.
137. In June, one month after its public listing on NASDAQ, the company was added to Russell Global, Russell 3000, Russell 2000 and Russell Microcap Indexes. Then in July, the company posted positive results from two patients one month and six months after treatment.
ConforMIS
138. ConforMIS achieved $19.2 million in total revenue, which includes a $3.5 million settlement related to patent litigation. This is a 72 percent increase over the same period last year.
139. Achieved product revenue was $15.8 million, up 41 percent year-over-year. The company reported product revenue from sales of iTotal CR, iUni and iDuo was up $4 million over the same period last year. The product sales of iTotal PS, which was only launched on a limited basis in the United States this past February, was $600,000 in the second quarter.
140. The company completed an initial public offering and received around $140 million in net proceeds in July.
141. ConforMIS reported a net loss at $10.9 million, or $2.51 per share. This is slightly higher than $10.5 million reported in the same period last year.
142. Total operating expenses increased $4.8 million to $19.4 million. This is a 33 percent increase driven primarily by higher sales and marketing, and general and administrative expenses.
143. GAAP gross profit increase was $4.5 million, or 110 percent over the same period last year.
144. The company expects $72 million to $74 million in total revenue for 2015, which is a 50 percent to 54 percent increase over 2014. This includes $3 million of currency headwind in the company's revenue results.
145. The product revenue is expected to reach $68 million to $70 million, up 42 percent to 46 percent over 2014. The royalty revenue for 2015 is expected to reach $4 million.
Histogenics
146. The second quarter net loss attributable to common stockholders was $7.6 million, or $0.58 per share. This is lower than $11.8 million and $19.85 per share last year.
147. Research and development expenses hit $5.9 million in the second quarter, up from $4.7 million over the same period last year. There was increased activity and enrollment in the NeoCart Phase III clinical trial.
148. The company reported $45.2 million in cash, cash equivalents and marketable securities. The company believes its current cash position will fund operations into 2017.
149. There were new investigators joining the NeoCart trial last quarter, including Kaiser Permanente patients in California.
150. The company hired Jon Lieber and Gloria Mathews in the C-suite.