DJO Inc.

HEADQUARTERS: Vista, Calif.

For DJO Inc., fiscal 2008 wasn't only the start of a new year. In many ways, the firm began the year as a new company. At the end of 2007, DJO Incorporated was bought out by Austin, Texas-based ReAble Therapeutics in a deal worth approximately $1.5 billion. ReAble (formerly known as Encore Medical) was itself purchased by private-equity investment firm The Blackstone Group for $870 million in 2006.

As a result of the deal, DJO’s common stock ceased to trade on the New York Stock Exchange. In addition, once the deal was closed, ReAble Therapeutics took the name DJO Incorporated and relocated its headquarters to Vista, CA (near San Diego), where DJO is based.

DJO specializes in rehabilitation products such as knee braces and pain management devices as well as regeneration and bone growth stimulation products for the non-operative orthopedic and spine markets. The device maker sells its products under the DonJoy, ProCare and Aircast brands through agents, distributors and a direct sales force to orthopedic and spine surgeons, orthopedic and prosthetic centers, as well as hospitals, physical therapists and other healthcare professionals. DJO’s Surgical division—which became part of the company after the ReAble deal—manufactures a range of reconstructive joint products for the hip, knee and shoulder. DJO Surgical is located in Austin.

And becoming a slightly restyled, larger company brought with it larger sales—almost double, in fact.

Net sales results for 2008 (ended Dec. 31) were $980.2 million, reflecting an increase of approximately 99.2 percent, compared with net sales of $492.1 million for 2007. The company said the hike was in large part due to the merger as well as other smaller key acquisitions and sales growth in most of its units, as well as continued growth across the company’s operating segments. On a pro forma basis, as if the merger had closed on Jan. 1, 2007, sales for fiscal 2008 would have reflected growth of approximately 5.9 percent, compared to pro forma sales of $925.3 million for the full year 2007.

Despite sales gains, the company reported a net loss of $97.8 million, compared to a net loss of $82.4 million for the full year 2007. The results for both years were impacted by significant purchase accounting adjustments, non-recurring charges and other adjustments related to the merger.

Company executives expect the new firm’s expanded product pipeline to continue to fuel growth and broaden the company’s reach.

One such new product was its new X-alt highly cross-linked polyethylene liner for DJO Surgical’s FMP acetabular hip system. The liner received U.S. Food and Drug Administration approval in March 2008 last year.

The FMP system combines DJO’s existing cobalt-chrome and ceramic femoral heads with a new wear-resistant, highly cross-linked polyethylene cup liner to form the hip ball and socket joint. According to the company, the new liner substantially increases the resistance to ball and socket wear compared to traditional polyethylene cup liners. In laboratory tests, the new cross-linked polyethylene liner reduced the generation of wear particles by 87 percent compared to the firm’s previous liner, the company reported. Polyethylene wear debris in total hip replacement is a leading cause of osteolysis, an inflammatory response to wear particles. Osteolysis can lead to subsequent implant loosening in patients who have undergone hip replacement surgery.

Also in March, the company rolled out its new Aircast Cryo/Cuff IC Cryo-compression system. The Aircast Cryo/Cuff IC is the first product from DJO to combine focused compression with cold therapy. The combination of cold and compression provides optimal control of swelling to minimize hemarthrosis, edema and pain. The Cryo/Cuff IC features a new integrated pneumatic pump within the cooler lid that provides automated compression along with cold therapy for use in post-operative recovery, trauma, athletic training and home use.

During fiscal 2008, the company also had a change in management. President Peter Baird left DJO “to pursue other opportunities,” according to a statement released by the firm. As of press time, no replacement had been named.

The company continued to grow in 2009, with the acquisition of its Australian distributor, DonJoy Orthopaedics Pty. Ltd., in early February. For the past several years, this distributor has focused on selling DJO’s orthopedic rigid bracing and soft goods. According to company officials, the business had grown to a size where it “made sense” for DJO to acquire it and sell directly to customers in the Australian market.

For the first quarter of 2009, the company reported net sales of $225.4 million, compared to $239.7 million for the first quarter of 2008.

Sales for the first quarter of 2009 were impacted by approximately $8.6 million due to unfavorable changes in foreign exchange rates. The company also reported that fewer shipping days in the first quarter of 2009—60.5 compared with 63 shipping days—also hurt comparative performance.

On the basis of constant currency and average daily sales, sales in the first quarter of 2009 grew approximately 2 percent compared with the first quarter of 2008.