Orthopedic News Roundup 9-Mar-06
BY HUYEN NGUYEN, MARCH 9, 2006
Although management teams are preparing for AAOS, a few more companies reported earnings this week. We did a quick calculation and found that our internal Orthopedic Index PE year-to-date has stayed relatively flat at 27x. We expect that the AAOS meeting in two weeks will reignite Wall Street's enthusiasm for the orthopedic industry.
Earnings: If one takes a look at LifeCell's 5-day stock chart on Yahoo Finance, it looks like a ski slope but LifeCell just reported its 4Q:05 with sales growing more than 150% year-over-year. It struck us as odd that investors would view such strong results negatively so we analyzed Wall Street's reaction to this event. Anika Therapeutics reported its fourth quarter and year end results with product sales down by 13% and 8% respectively. While product sales were down for the year, its licensing and contract revenues helped boost total sales up 13% year-over-year. Net income for 4Q:05 was $823,000 with diluted EPS of $0.07 per share. Integra LifeSciences reported its 4Q:05 and FY:05 revenue growth at 18% and 21% respectively. Excluding restructuring charges, net income for the quarter was $12.1 million, or $0.37 per diluted share. Integra took in $4.8 million in Q4 from the extremity product line acquired from Newdeal and also received $1.3 million in royalty revenue from Medtronic for its Absorbable Collagen Sponge bone graft. The Company estimates that in 2006 total revenues will be between $365 million and $380 million and in 2007 between $420 million and $440 million. Inion Ltd. released its preliminary results for FY:05 with sales of €7.6 million, up 11% from FY:04. The Company estimates that in 2006, sales growth will be in the double-digit range, but it will not be as high as earlier guidance due to an underperforming distribution agreement with Stryker.
Appointments: Encore Medical announced the appointment of Brian T. Ennis to President of Empi and Compex Technologies. Mr. Ennis was with Wright Medical Group from 2001 to 2005 and Stryker Corp. from 1989 to 2000. Advanced Bio-Surfaces, Inc. (ABS) hired Mark Fisher as Vice President of Sales. Mr. Fisher was previously with Wright Medical as Senior Director of Sales. Smith & Nephew's Endoscopy, a division of Smith & Nephew PLC, appointed John Mullen as Vice President, U.S. Sales. Mr. Mullen has been with Smith & Nephew since 1992. A service provider for orthopedic surgical and rehabilitation company, VQ OrthoCare, has promoted Leslie Sorrells to Director of Reimbursement. TissueLink announced the election of Rick Randall, J. Neal Armstrong, and Winston P. Wallin to its Board of Directors. Mr. Randall is currently President and CEO of TranS1, Mr. Armstrong is an executive at Aspect Medical, and Mr. Wallin is Chairman Emeritus of Medtronic.
Clinical Update: OrthoLogic has moved up the release date of its Phase 3 clinical trial of Chrysalin® (TP508) in fracture repair to March 31, 2006 instead of the previously announced April 30, 2006.
Distribution Agreement: VERTEBRON Inc. and medArtis International have entered into an exclusive worldwide distribution agreement giving VERTEBRON exclusive US distribution rights to medArtis' tricalcium phosphate (TCP) and hydroxyapatite (HA) synthetic bone graft materials in various forms.
Financing: Amedica announced that it has raised $16.8 million in a Series C financing. Proceeds will be used to fund its first product rollout in 4Q:06 as well as continued efforts to build out its product portfolio.
Mergers & Acquisitions: The previously announced acquisition of Radionics, a division of Tyco Healthcare, by Integra LifeSciences has been completed. The deal was valued at $80 million in cash subject to certain adjustments. Radionics specializes in the area of radiology and neurosurgery.
Product Update: Smith & Nephew Trauma, a division of Smith & Nephew PLC, received a letter of approval from the FDA to have its SUPARTZ® Joint Fluid Therapy label amended. The label now allows physicians to prescribe this therapy for patients with osteoarthritis knee pain for as few as three weekly injections instead of five weekly injections as previously labeled.
Miscellaneous: With more and more disturbing news from the Biomedical Tissue Services case leaking out, a class action lawsuit is expected. The New York Health Plan Association (HPA) released its report on New York hospitals and confirmed that their financial state is surprising strong. According to The Wall Street Journal online edition, the medical device sector continues receive positive attention from investors as the industry attracts more venture capital. For those who do not understand all the specifics of the orthopedic industry, our analyst has provided a clarification of some common misconceptions in this industry.
