Biomet (BMET:NASDAQ) Beats the Street by $0.01 in EPSand $16 Million in Revenues
BY JOHN CHOPACK, JULY 12, 2004
Biomet announced that revenues totaled $447 million for the 4Q:04 and $1.6 billion in 2004 representing a 19% and 16% increase, respectively. Adjusted earnings (for the acquisitions of Merck Joint Venture and Interpore Cross) per share totaled $0.37 for the 4Q:04 and $1.33 for FY2004 which was an increase of 23% and 21%, respectively.
Coming off a quarter in which Biomet beat analyst expectations by $16 million in revenues and $0.01 in EPS, Dane Miller pulled an unprecedented maneuver. After expressing his comfort with analysts' estimates of $413-444 million in revenues and $0.34-0.35 in EPS for the 1Q:05 and $1.75-1.91 billion in revenues and $1.48-1.50 in EPS for FY2005, analysts questioned if expectations should be higher. Dane Miller followed, 'If the analyst community decides to increase our revenue projections, we'll probably support that too.' That's confidence!
During the Company's FY2004, its stock performed better than it has in recent years providing investors a 68% increase in capital gains. In a clear attempt to motivate additional Biomet buying, the Company announced it had been authorized to automatically repurchase $2.5 million of common stock regardless of market conditions during 2005. The board also approved the purchase of an additional $100 million in outstanding common stock during the upcoming fiscal year. Biomet was aggressive in purchasing its own stock during 2004, buying $609 million worth of common stock.
The increase in 4Q:04 revenues were supported by increasing product sales and favorable foreign currency which increased 13% and 6%, representing all of the 19% revenue growth.
- Spinal products and orthobiologics increased by 32% during the 4Q:04, driven by sales of cervical plates and allograft spacers. The Company announced that it would be beginning an IDE for its Regan pryrocarbon artificial disk for the lumbar spine in 2Q:05 and the cervical spine in 4Q:05.
- Extremity product sales increased by 29% worldwide and 25% in the US. The Copeland humeral surface replacement, the Bio-Modular Shoulder and the Discovery Elbow were the specific drivers of revenue growth within the segment.
- Knee sales increased 24% worldwide and 22% domestically which was driven by the recent release of the new Vanguard system and the introduction of 350 sets of the Microplasty Mini Knee Instrumentation during 2004. The Company also received FDA approval for its Oxford Mobile Bearing Unicompartmental Knee which is expected to be released during the 2Q:05. The Oxford has been utilized for well over a decade and shown a 98% survival rate at 10 years.
- Hips increased by 16% worldwide and 9% in the U.S. We suspect that domestic hip growth was negatively impacted by further penetration of ceramic-on-ceramic hip systems of Stryker, Wright and Encore. Biomet indicated that it could be in the market with a ceramic-on-ceramic hip later this calendar year or beginning of next. The Company's M2A Metal-on-Metal system increased by 44% and all metal-on-metal systems now represent 34% of all hip articulating units sold in the US.
Biomet had one immaterial hiccup, but one that should be closely watched. The Company had to revise its estimates of future collections of insurance receivables at its EBI subsidiary. We believe this is directly related to problems with reimbursement collection of EBI's bone stimulation products. The Company increased its reserve for uncollectible insurance receivables by $25 million. Biomet stated that although insurance companies have had an increasing resistance to pay reimbursement, it doesn't expect this to have a material financial impact going forward.
