Biomet

$2.4 Billion

KEY EXECUTIVES:

Jeffrey R. Binder, President and CEO

Daniel P. Florin, Sr. VP and CFO

Jon C. Serbousek, Sr. VP, President, Biomet Orthopedics

Glen A. Kashuba, Sr. VP and President, Trauma and Spine

Gregory W. Sasso, Sr. VP and President, Biomet SBU Operations

Steven F. Schiess, Sr. VP and President, Biomet

NO. OF EMPLOYEES: 7,000

GLOBAL HEADQUARTERS: Warsaw, Ind.

Biomet has had its share of corporate drama over the past few years—from changes in top management to the blockbuster $11 billion private-equity takeover deal that took the company private in 2007. Fiscal 2008 (ended May 31, 2008) was comparatively less dramatic.

“Robust sales in our core orthopedic reconstructive device segment enabled Biomet to grow faster than the global market during each of our first three quarters [of 2008], and we finished the year with another quarter of strong reconstructive sales growth,” said Jeffrey Binder, president and CEO.

Binder also noted that the company’s microfixation, sports medicine and biologics businesses reported “excellent growth” for the year. “Biomet’s strong finish to fiscal year 2008 provides us with a solid foundation to capitalize on future growth opportunities during fiscal year 2009 and beyond,” he added.

For fiscal 2008, net sales increased 13 percent worldwide to $2.4 billion. Excluding instruments and the foreign currency impact, net sales increased 10 percent worldwide. During fiscal year 2008, the company incurred special charges related the research and development and costs related to the merger of approximately $1.45 billion. Reported operating loss for fiscal year 2008 was $750.5 million, compared with operating income of $489.6 million for the same period last year. Excluding special charges in both years, adjusted operating income for fiscal year 2008 was $702 million, or 29.5 percent of sales, compared with $622 million for fiscal year 2007, an increase of approximately 13 percent.

Adjusted earnings before interest taxes depreciation and amortization (EBITDA) for fiscal year 2008 was $829 million, or 34.8 percent of sales compared with adjusted EBITDA of $719 million, or 34.1 percent of sales for fiscal year 2007, an increase of 15 percent.

During fiscal year 2008, reconstructive device sales increased 17 percent worldwide to approximately $1.75 billion. Reconstructive device sales in the United States increased 10 percent (12 percent excluding instruments), and international reconstructive device sales increased 26 percent. Excluding instruments and the impact of currency, worldwide reconstructive devices sales increased 13 percent. By reconstructive segment, knee sales increased 19 percent worldwide during fiscal year 2008 and increased 14 percent in the United States. Excluding instruments and on a constant currency basis, knee sales increased 17 percent both worldwide and in the United States. The Oxford Partial Knee System and the Vanguard Complete Knee System were the growth drivers for knees during the year, the company reported. Hip sales increased 13 percent worldwide and 5 percent in the United States. Excluding instruments and the foreign currency effect, fiscal year 2008 hip sales increased 10 percent worldwide and 6 percent in the United States. Key products contributing to hip sales growth include the M2a-Magnum Acetabular System and the Taperloc Hip Stem, as well as the ReCap Total Resurfacing System that is marketed only outside the United States.

Fixation sales increased 2 percent worldwide to $230 million. Fixation sales decreased 4 percent in the United States during fiscal year 2008. Spinal product sales increased 1 percent worldwide to $208 million during fiscal year 2008 and increased 2 percent in the United States.

In February last year, Jon Serbousek was named president of Biomet Orthopedics Inc., in charge of the U.S. total-joint reconstruction business. During the past eight years, Serbousek has held diverse general management roles with Minneapolis, Minn.-based Medtronic in the areas of Spinal Reconstruction, International, New Technology Development and most recently, worldwide vice president and general manager of biologics.

Prior to Medtronic, Serbousek spent 13 years with DePuy in Warsaw, Ind., holding positions of vice president of Marketing and Product Development Joint Reconstruction; vice president, Spinal Operations; vice president and general manager, Arthroscopy and Sports Medicine, and a series of product development and engineering management positions.

Criminal charges were dismissed against Biomet in March 2009—along with DePuy, Smith & Nephew, and Zimmer Holdings Inc.—following completion of the terms of their deferred prosecution agreements reached in 2007 with the U.S. Attorney’s office following a total of $311 million in civil settlements for all four companies. Biomet’s share was $25 million. Prosecutors had accused the device makers of improperly paying consulting fees to surgeons between 2002 and 2006 to entice the physicians to use the companies' products. Stryker, based in Kalamazoo, Mich., which voluntarily cooperated with the investigation, also completed the terms of its non-prosecution agreement, however, it didn't take part in the civil settlement.

In response to the current conditions, Biomet’s Binder recently told AAOS Now, the journal of the American Academy of Orthopaedic Surgeons: “One thing that hasn’t changed is the need for industry to collaborate with surgeons in product development, clinical research, and training and education. We simply cannot make the kinds of improvements that benefit patients without close interaction. We have completely isolated our sales force from any involvement in our consulting relationships. We do not want even the appearance of a link between our consultants and their current or potential business with the company as customers."

In June, Biomet reported preliminary results for fiscal 2009. Net sales increased 5 percent to $2.5 billion.