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First Quarter's Recon Revenue Growth Rate - so far 20-24% BY EDITOR, APRIL 21, 2003

As the following table illustrates, revenue growth rates for the first week of earnings season are ranging from 15% for Interpore Cross to 32% for Synvisc' (sold by Genzyme Biosurgery). The DePuy and Stryker (#1 and #2 orthopedic market share, respectively) reconstruction product sales rose between 20% and 24% from prior year levels.

Revenue growth drivers were new products, specifically;

• Unicompartmental knee components (Stryker)
• Mobil bearing knee (DePuy)
• Zia II, Zia Thoraclumbar and Reflex cervical (Surgical Dynamics subsidiary Stryker)
• Cementless Stems (Stryker and DePuy)
• GEO Interbody Spacer (Interpore Cross)
• C-Tek Cervical Plating system (Interpore Cross)

Company commentaries:

Stryker:

• 40% earnings growth, beat consensus by 2 cents


• OP-1 in Phase II clinical trials for Spine. By the time OP-1 is approved, it may be competing with much cheaper, easier to use Chrysalin. Just when it looked like InFuse was the main competition.


• New, broad line of allograft (which complements all of Stryker's knee, hip, shoulder, foot and ankle metal implant business) from Regeneration Technologies including meniscus, a full line of interference screws, pins and other hardware and a line of fresh allograft soft tissue.


• Spinal implant growth 114% domestic, 36% international, 79% overall. Clearly the Stryker management style is benefiting SDI.


• 765 sales reps - pushing to increase number to 800 by the end of this year.

Interpore Cross:

• $10 million Net Income vs. $0.6 million in the same period last year. Yes, it includes the DePuy payment. But, earnings up 50% without the payment.


• Premier hospital buying group, representing 1,800 hospitals, approves two spinal implant vendors - Interpore and Sofamor Danek. Not DePuy Acromed, not Stryker's SDI, not Synthes. Interpore.


• YOY spinal implant sales +26%


• GEO structure spinal interbody fusion implant becoming the company's hottest product since the C-Tek cervical plate


• Two more firms have signed license agreements with Interpore for variable locking screw.


• Range of new products prompting management to forecast accelerating revenue growth in second half of 2003.


• Final 2003 earnings likely to reach $10-15 million - up from last years $4.2 million - per management's guidance.


• Achilles heel? Marketing. Time for Plan B, or is it C at AOM and Biologics.

Genzyme Biosurgery

• $65.6 million in revenues, up 23% - and lose $14 million?


• Operating expenses for the quarter rose 11% to $48.9 million. But as a percent of sales, they came in at 83% of sales, down from 97% in last year's first quarter. This is good?


• And when will Genzyme turn a profit? Even management is reluctant to hazard a guess.


• Three bright spots - Synvisc, Seprafilm and Carticel.


• Synvisc, the synovial fluid substitute for arthritic knees, reported a 32% rate of revenue increase for the quarter to $26 million.


• Carticel, the living cell cartilage repair treatment reported a 54% rate of revenue increase to $6.5 million.


• Seprafilm, the anti-adhesion film, reported a 24% rate of revenue increase to, we estimate, approximately $10 million in sales.


• This company has a fair number of issues clouding its future - profitability and corporate focus, we'd say, rise to the top of the pile.

DePuy

• Reading JNJ's tea leaves takes a while but initial impressions are that market share is up in sports medicine (Mitek subsidiary), down in hip reconstruction and stable in knee - only because of a building interest in the mobile bearing knee.


• Spinal market share down as growth "only" 20%. Sofamor Danek, Interpore and Stryker's SDI all reported higher rates of revenue growth. Even upstarts like Blackstone Medical making inroads. How did Acromed, #2 market share in spine, lose the Premier contract? Synthes, #3, made a significant statement with its $350 million purchase of prosthetic disc innovator Spine Solutions. What's new or innovative at DePuy Acromed?