Orthopedic News Roundup 10-Aug-06
BY HUYEN NGUYEN, AUGUST 10, 2006
Earnings:
Biologics: Orthovita reported 2Q:06 product sales came in at $11.2 million, up 32% compared to 2Q:05. On a non-GAAP basis net loss for the quarter was $5.1 million, or a loss of $0.10 per share. The Company did not meet analysts' EPS estimates ($0.07 loss), but did meet consensus revenues. Sales growth was attributed to the VITOSS® FOAM and VITAGEL™ product portfolios in the U.S. ~61% of the total product sales were from VITOSS® FOAM platform co-developed with Kensey Nash Corporation and ~17% were from VITAGEL™. Patient enrollment for its CORTOSS U.S. pivotal vertebroplasty clinical trial is currently ahead of schedule and is expected to complete enrollment by year's end.
Osteotech's reported 2Q:06 total revenues were $25.3 million, basically flat compared to 2Q:05. Net income for the quarter was $0.8 million, or $0.04 diluted earnings per share. The Company met analysts' expectation in both revenues and EPS. The DBM segment was down slightly to $13.7 million from $14 million in 2Q:05, due to lower domestic unit sales volume and continued pricing pressures in its domestic sales efforts. The Base Tissue Segment was also down slightly, $10.8 million from $11.0 million in 2Q:05 due to a 31% decline in service fees generated by processing allograft bone tissue for clients in the second quarter of 2006 as compared to 2005. Osteotech also suffered a decline in its Grafttech® bio-implant sales due to lower demand and increased competition.
Regeneration Technologies' 2Q:06 failed to meet analysts' revenue and income estimates. Its revenues were $18.3 million and suffered a net loss of $1.6 million, or a loss of $0.05 diluted EPS. The Company recorded a stock-based compensation expense, before taxes, of $0.02 for the quarter. Its Spinal Construct sales for the quarter were $8.6 million, a decline of 6.6% and were impacted by the timing of orders by its largest distributor. Bone graft substitutes were basically flat and reported at $3.7 million. Sports medicine sales increased 78.5% to $3.6 million, principally due to higher fees recognized through its direct distribution and an increase in the volume of ancillary tendon distributions. General orthopedics revenues were down by 15% to $226,000. Its other revenues, consisting of tissue recovery fees, biomedical laboratory fees, manufacturing royalties, shipping fees, distribution of reproductions of allografts to distributors for demonstration purposes and restocking fees, were also down and at $631,000 compared to $688,000 for the second quarter of the prior year period.
For the first time, BioMimetic Therapeutics, Inc. reported financial results as a public company. Its 2Q:06 reported sales were $1.1 million, which included $0.7 million from sales to its distributing partner and $0.2 million sublicense fee income. There were no product revenues for 2Q:05, since its product was not approved until November 2005. BioMimetic reported a net loss of $3.9 million, or a loss of $0.42 diluted EPS. This loss reflected the ongoing investment to advance the pipeline of product candidates for musculoskeletal injuries including periodontal, orthopedic, spine and sports injury applications. Through its IPO, the Company raised a total of $36.8 million in gross proceeds, and its cash balance as of June 30, 2006 was $58.5 million. During the quarter, BioMimetic completed enrollment in two pilot clinical studies with GEM OS1 for the treatment of foot and ankle fusions (U.S. and Canada) and distal radius (wrist) fractures (Sweden).
Sports Medicine: In 2006, ArthroCare reported 2Q:06 total and product revenues both increased 28% over 2Q:06 and were $66 and $64 million respectively. Non-GAAP net income for the quarter was reported as $9.0 million, or $0.33 per diluted EPS. Based on this result, the Company beat analysts' estimates by $0.05 EPS and net income estimates by $1.6 million. In the Sports Medicine segment, the Company experienced 25% growth and represented 65% of total product revenue for the quarter. The Spine business increased modestly and represented 9% of total product revenue in 2Q:06. The Company forecasts that revenue for FY2006 in the range of $255 million to $265 million and GAAP diluted EPS in the range of $1.10 to $1.20.
Appointment:
Spine Wave, Inc. has hired Carmen Diersen as its Chief Financial Officer. Ms. Diersen was previously an Executive Vice President and CFO with American Medical Systems. Encore Medical appointed Brian T. Ennis as its Executive Vice President - President, Empi. Since March, 2006, Mr. Ennis has served as President of the Empi business unit of Encore (see Encore's press release in Mergers & Acquisitions).
Business Update:
Biomet Inc. announced it has retained Heidrick & Struggles, an executive search firm, and The McLoughlin Company, an advisor on institutional management, to assist with finding the right candidate for its new President & CEO, succeeding Dane A. Miller, Ph.D. who resigned earlier this year. ApaTech announced it has established a direct sales force in the UK to sell Actifuse, its next generation bone graft product to the spine market. ApaTech sales representatives will serve 20 spine centers in England and Wales and will be supported by two commission agents in Scotland and Northern Ireland.
Clinical Update:
As part of its clinical evaluation, Regeneration Technologies announced that its interbody device, the Sterling® Impacted Cortical Spacer was for the first time successfully implanted in a human. The Company plans to enroll 24 patients with one-year post operative follow-up for this trial. The Sterling® spacer combines RTI's patented BioCleanse® Tissue Sterilization Process with xenograft tissue.
IPO Update:
Osiris Therapeutics Inc. raised $38.5 million when it went public last Friday. The Company offered 3,500,000 shares of its common stock at a price of $11.00 per share and up to an additional 525,000 shares have been made available to the underwriters to cover over-allotments, if any. The total valuation of the company is $299 million. The stock is trading under the symbol "OSIR."
Legal:
Alphatec Holdings, Inc. announced that it has executed a settlement agreement with Abbott Spine, Inc. The litigation was related to a complaint filed by Abbott Spine in which it alleged that Alphatec interfered with a contract that Abbott had with independent sales agents and Abbott's customer relationships in Arizona. The terms of the settlement are confidential.
Encore Medical reported that in July 2006, two class action complaints were filed against Encore and its directors. One of the actions also names Blackstone Capital Partners V L.P., Grand Slam Holdings, LLC, and Grand Slam Acquisition Corp. as defendants. Both complaints seek to prevent the proposed acquisition of Encore by Blackstone on grounds that Encore's directors breached their fiduciary duties by agreeing to an allegedly inadequate acquisition price. (see Encore's press release in Mergers & Acquisitions).
Mergers & Acquisitions Update:
Orthofix International N.V. has signed an agreement to acquire Blackstone Medical, Inc. for $333 million in cash, or ~5.5x Blackstone's revenues. According to Orthofix management, the acquisition is expected to be dilutive to 2007 GAAP earnings and to be accretive to 2008 GAAP earnings. The deal is expected to close in the September timeframe.
OsteoMed L.P. announced that it has acquired Skeletal Kinetics, L.L.C. into the Colson Associates family of medical companies, for an undisclosed amount. This acquisition will support OsteoMed's current strategic initiatives targeting the bone biologics market.
Encore Medical Corporation announced the Federal Trade Commission has granted an early termination of the waiting period under Hart-Scott-Rodino Antitrust Improvements Act of 1976 for Blackstone's proposed acquisition of Encore. This indicates the merger has been cleared for antitrust review, but still remains subject to several other closing conditions. The Companies anticipate closing the merger prior to the end of 2006.
Product Introduction & Update:
Clearant, Inc. announced it has expanded its product portfolio of allograft implants available through its direct sales force to include Clearant Process® sterile soft tissue implants for allograft sport medicine surgeries. This increases its addressable market from $100 million (cervical spinal implants) to $350 million (both soft tissue and cervical spinal implants). Smith & Nephew's Endoscopy division announced the launch of its new DYONICS® ARTHROPAK™ Customized Procedure Kits, which contain medical devices used in the most common arthroscopic procedures. This kit will increase operational efficiencies and lower overall costs by helping to reduce the amount of time facility staff spend ordering and pulling supplies for each procedure. Globus Medical, Inc. introduced the SUSTAIN® O, a new addition to its family of line of spacers. SUSTAIN® O is constructed of radiolucent polymer (PEEK) and has a unique design. Limited sets have been utilized, and a full roll out is planned for August. ORTHOsoft announced that for 1H:06, the Company achieved a new milestone, navigating more knee and hip surgeries in six months than in all of 2005.
Regulatory Update:
ReGen Biologics, Inc. received a letter from the FDA in reference to its 501(k) submission for its collagen scaffold device, in which the FDA refused to assign a Class II designation. The FDA indicated that the device is not substantially equivalent (NSE) to existing Class II devices. The Company has submitted an appeal the FDA ruling, and stated that there are additional avenues available for FDA clearance, including completing their original Pre-Market Approval (PMA) application. Archus Orthopedics, Inc. received a U.S. Patent for the surgical method of removing some or all of a natural facet joint and replacing it with a prosthesis anchored in the pedicle.
Service Agreement:
U.S. Spine entered into an agreement with HealthTrust Purchasing Group (HealthTrust) to be U.S. Spine's vendor for spinal implants and instrumentation. This will allow U.S. Spine's distributors access to hundreds of hospitals and healthcare affiliated with HealthTrust. The agreement was effective on July 1, 2006.
