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Orthopedic News Roundup 5-Aug-05 BY HUYEN NGUYEN, AUGUST 5, 2005

This week we finish off the first half of 2005 reporting season with 17 orthopedic companies* released their financial numbers. In 2Q:05, in an aggregated total, orthopedic revenues increased 16% ($3.8 billion vs. $3.2 billion) and a 25% increased in net income ($623 million vs. $499 million) compared to 2Q:04. With the exception of few who have not yet reported, we expect these companies^ to report later this month.

Here is the wrap-up for this week: Please refer to the table (below) for sales and earnings.

Biologics: Allograft company, Regeneration Technologies ("RTI"), reported another quarter loss at $1 million, which was a slight improvement from previous quarter. In 2Q:05, all of RTI's tissue distribution products, with the exception of cardiovascular, sales were down by 27%: spinal implants declined by 21%, sports medicine 12% and general orthopedic 43%. However, RTI's outlook remains positive with a new direct distribution initiative that was implemented earlier in the year. Another troubled allograft company, CryoLife Inc., who recently settled a $23 million lawsuit, reported mid-year earnings this week. In 2Q:05 and the first half, the Company's primary product, BioGlue®, increased by 7% and 10%, respectively; sales for orthopedic tissues increased by 90% for the quarter. Now that the lawsuit is behind them, CryoLife is looking forward to future growth, the Company forecasts sales for BioGlue® to be in the range of $39 to $40 million for the full year.

Large Joints: The #1 leader in arthroscopy, Smith & Nephew PLC, reported sales for 2Q:05 with endoscopy revenues grew by 7% and advanced wound management grew 6% year-over-year. Orthopedics revenues, for the quarter, increased by 18%: knee grew 20%, hip 16% and trauma 13% year-over-year. The company maintains a positive outlook with orthopedics sales continuing a momentum of 18% growth for the second half of 2005. Austin, Tex.-based orthopedic company, Encore Medical, who recently acquired both Osteoimplant Technologies, Inc. and Empi, reported 166% revenues growth in 2Q:05. Its surgical division grew by 33% and rehabilitation business grew over 200% year-over-year. All these strong growth primarily attributed to the recently acquired businesses as well as internal growth.

Sports Medicine: A patented Coblation technology company, ArthoCare Corp., reported strong earnings with top line grew 37% for the quarter and bottom line grew 53%. Sports medicine business division grew by 43% and spine grew 8% in 2Q:05 compared to 2Q:04. The Company is updating its revenues forecast for the year to be growing at least 35% more than FY2004. Sports medicine will continue to grow at least 30% during 2005 with Opus division independently will grow at least 50%. Spine is expected to grow at least 20% for the remainder of the year.

Other: OEM supplier, Symmetry Medical, reported 2Q:05 revenues increased by 32% to $70 million compared to 2Q:04. Net income rose to $8.6 million, an increased of 67% year-over-year. The Company's forecast for the year to be in the range of $253 million to $259 million and diluted EPS of $0.91 to $0.94.

Acquisition and Divestiture: An MIS technology company, NuVasive has acquired the technology and assets of Pearsall Limited, a UK-based company from AMI Holdings, Inc. The acquisition could total up to $31.5 million in cash and stock, depending upon FDA approval. Pearsall has a textile disc-nucleus replacement device called Neodisc™. HealthTronics, whose primary business is in the urology market, announced a divestiture of its Orthopaedic Electrocorporeal Shockwave Lithotripsy ("ESWL") business to SanuWave, Inc. for $10.4 million.

Appointment: Mark H. Burroughs was named successor to Michael J. Jeffries as the new Executive Vice President, Chief Financial Officer and Secretary of Osteotech effective December 31, 2005. Mark Burroughs joined Osteotech in 2000 and currently serves as Vice President Finance, Treasurer.

Clinical: A HealthpointCapital portfolio company, Scient'x, its USA division announced that it will submit an IDE application to begin clinical trial on the Discocerv™ cervical disc replacement in 4Q:05. The Discocerv™ has a ceramic-on-ceramic bearing insert with titanium alloy endplates; it was CE marked in several European countries. At the 12th International Meeting on Advanced Spine Techniques (IMAST) in Alberta, Canada, a multi-center study on the Minimally Invasive Lumbar Interbody Fusion (MiLIF®) procedure using Endius's Atavi® System and FlexPosure® MIS Retractor technology was presented. Medical imaging company, MEDSTRAT, received 510(k) clearance to market its echoeSYSTEM™), the company's patent-pending orthopedic Picture Archive Communication System (PACS) software.

Financing Activity: A start-up spinal implant company, Innovative Spinal Technologies, Inc., announced a private placement equity of $39 million in Series B funding. The deal was led by OrbiMed Advisors, MPM Capital, and JP Morgan Partners. Check out our own analysis on this deal.

Legal: To reiterate last week's press release from Medtronic, Biomet released its own press release regarding the ruling from the United States Court of Appeals for the Federal Circuit on the polyaxial screws patent infringement lawsuit.

Partnership: An image-guided surgery company, BrainLAB Inc., announced a partnership agreement with Biomet to co-develop applications for computer-assisted orthopedic surgery (CAOS).

Miscellaneous: In the current issue of Podiatry Today, ArthroCare's Topaz™ Microdebrider was named #2 on the list of top ten current and emerging innovation technologies. At Purdue University, a team of biomedical engineers have developed hydraulic machines and software to test spinal implants wear. Another blow to the Charite disc saga, CMS has denied add-on payment to cover the cost of disc replacement surgery. Read our analysis on the ruling. More and more young athletes are suffering from osteoarthritis, but with the rise in technology innovations, doctors now have more options to treat these active patients. Suffering from arthritis pain? Introducing the BioBeam™ 940, a photo-therapy technology for relieving pain. Do you have an orthopedic story to tell? The AAOS is celebrating its 75th anniversary by collecting stories from patients, physicians, orthopaedic nurses and industry to publish on its website, as well as combining stories for books and films.