Several spine and orthopedic device companies recently released their latest financial reports. Here are 10 things to know about Zimmer's 2014 first quarter financial results and Medtronic's fiscal year 2014 fourth quarter earnings.
Zimmer
1. The company reported net earnings of $221.5 million in Q1, up from $218.6 million during the same period last year. The company also reported net sales of $1.2 billion, up slightly from Q1 2013 where the company saw net sales of $1.1 billion.
"Zimmer produced solid results during the first quarter, providing further validation of our long-term growth and stockholder value creation strategies," said David Dvorak, Zimmer president and CEO in the news release. "As we continue focus on the execution of our quality and operational excellence initiatives, we believe that the company is well positioned for continued growth in the evolving global healthcare landscape through the ongoing development and commercialization of innovative and clinically relevant solutions."
2. In April, the boards of Zimmer and Biomet approved the definitive merger agreement, in which Zimmer will acquire Biomet for $10.35 billion in cash and $3 billion in Zimmer stock. Additional costs connected to the pending transaction with Biomet were excluded from the adjusted earnings measure, according to the financial results news release.
"Competition just got tougher as Zimmer will effectively surpass Stryker to attain the number two spot in orthopedic sales and is now in prime position to compete with market leader Johnson & Johnson," said Frost & Sullivan Advanced Medical Technologies Research Analyst Tara Shelton after the acquisition was announced. "With the deal not closing until early 2015, the effect has yet to be seen in regards to future employment, commodity pricing and innovation."
3. Zimmer's earnings guidance was updated in this most recent report "to give effect to a change in the anticipated number of diluted weighted average shares outstanding for 2014." The number is expected to increase since the discontinuation of previously guided share repurchases ahead of the Biomet transactions. The company now expects full-year 2014 diluted earnings per share at $4.90 to $5.10; prior full-year 2014 guidance for adjusted diluted earnings per share was $6.10 to $6.30.
4. For the first quarter of 2014, Zimmer's spine sales were at $48.3 million, up 1 percent over the same period last year. Overall net sales were also up 1 percent in the Americas — to $638.7 million — and up 6 percent in Europe to $236.9 million. The European sales growth was driven by an increase in reconstructive and knee sales in those markets. Trauma, on the other hand, experienced a 3 percent decline overall.
5. At the end of April, Zimmer launched the Optio-C Anterior Cervical System. The global orthopedic devices market is expected to reach $41.2 billion in 2019, according to a report released by Research and Markets. It is expected to grow at a compound annual growth rate of 4.9 percent from 2013 to 2019. Zimmer was named one of the major players in the market.
Medtronic
6. Medtronic announced net earnings of $448 million in Q4 of FY 2014, down from net earnings of $969 million during the same period last year. The company reported net earnings of $3.1 billion for the fiscal year ended April 25, 2014, down from the $3.5 billion earned for FY 2013.
The company announced net sales of $4.6 billion in Q4 of 2014, up slightly from Q4 of 2013 when net sales were $4.5 billion. For the fiscal year ended April 25, 2014, Medtronic reported net sales of $17 billion.
7. Medtronic's total reported U.S. revenue for its BMP business was $105 million in the fourth quarter, down from $113 million in the third quarter of this year. Full year BMP sales were reported as $409 million. Worldwide revenue for the BMP business totaled $124 million in Q4, dropping 11 percent from last year. Fully year BMP revenues amounted to $471 million.
8. Medtronic also recently announced that it has agreed to settle its inventories of filed and unfiled product liability claims related to Infuse Bone Graft. Under the terms of the agreement, Medtronic, subject to certain conditions, will resolve the claims of an estimated 950 claimants for a total payment of approximately $22 million.
The agreement is not in any way an admission of liability or validity of any defense in the litigation by Medtronic; the company continues to stand behind Infuse, which has been used by more than one million patients over the past decade. The company anticipates it will take special charge in the range of $120 million to $140 million in its fourth quarter.
9. Medtronic's total reported U.S. revenue for the fourth quarter of 2014 is $2.4 billion, and for FY 2014 is $9.2 billion. Medtronic reported Q4 worldwide revenue of $4.6 billion and full year revenue of $17 billion, up $500 million from the same period last year. "We remain focused on delivering consistent and dependable growth across all of our businesses through our three growth vectors: new therapies, emerging markets and independent services and solutions," said Omar Ishrak, Medtronic chairman and CEO.
10. The total reported U.S. revenue for Medtronic's core spine business was $429 million, down from $437 million during the same period last year. Worldwide, its core spine business amounted to revenues of $2.6 billion for fiscal year 2014 in total. The Core Spine depends on the Surgical SynergySM program of enabling technologies, including imaging, navigation and powered surgical instruments, to differentiate itself.
"There are tremendous opportunities ahead as we transform Medtronic from being primarily a device provider today into a premier global medical technology solutions partner tomorrow," said Mr. Ishrak, noting confidence in the company's ability to drive more value into their systems.
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