08.05.13
$1.3 Billion
KEY EXECUTIVES:
Michael P. Mogul, President and CEO
Vickie L. Capps, Exec. VP, Chief Financial Officer and Treasurer
Donald M. Roberts, Exec. VP, General Counsel and Secretary
Stephen J. Murphy, Exec. VP, Sales and Marketing, International Commercial Business
Gerry McDonnell, Exec. VP, Global Operations
Steve Ingel, President, Bracing and Supports
Bryan Monroe, Sr. VP and General Manager, DJO Surgical
NO. OF EMPLOYEES: 5,200
GLOBAL HEADQUARTERS: Vista, Calif.
DJO Global is headquartered just north of San Diego, Calif., in the town of Vista, not too far from Highway 101, which hugs the southern California coast and runs parallel to the deep blue waters of the Pacific Ocean. It’s a pretty idyllic locale—if you enjoy a Mediterranean-esque climate and a laid-back way of life. Despite a setting perfectly suited for surfing or having a margarita in the sand, DJO goes about its business seriously.
Founded in 1978 as DonJoy, the company was started in a Carlsbad, Calif., garage by Mark Nordquist (who played nine seasons in the NFL as an offensive lineman for the Philadelphia Eagles and Chicago Bears), and a local lawyer named Ken Reed. The first products were simple sleeves made of sewn-together neoprene that were pulled over the knee, ankle and elbow joints for support. Thirty-five years later, the privately held company makes medical devices for musculoskeletal health, vascular health and pain management, and is the third-largest employer in Vista (following the local school district and the superior court).
It was a busy year (FY12 ended Dec. 31) for DJO—with a number of important product launches, acquisitions and regulatory decisions impacting the business.
Let’s start at the end. In December last year, the company announced plans to acquire Arden Hill, Minn.-based Exos Corp., which makes thermoformable external musculoskeletal stabilization systems. Exos’ bracing system is a waterproof, removable, adjustable and reformable solution for the treatment of fractures and other injuries that require stabilization. DJO had been the distribution partner for Exos since October 2011. Terms of the deal were not released.
Among the notable product releases for 2012, the company launched its Movation total knee arthroplasty (TKA) device in September. The Movation posterior-stabilized knee design (PS, used in posterior cruciate ligament deficient knees) is licensed from the Hospital for Special Surgery in New York, N.Y.DJO Surgical licensed the patent for a classic PS knee solution, and includes a constant-axis femoral component, contoured insert condyles for reduced rotational stress, reduced and rounded trochlear transition, and anatomic femoral and baseplate component. “Patients needing a knee replacement are approaching surgeons with more demanding activity requirements,” said Bryan Monroe, general manager of DJO’s Surgical division.“Our goal was to develop a knee system with features that we know have historically performed extremely well, but also incorporate assets that allow TKA patients to remain active, such as high flexion allowance, enhanced stability through flexion, and e-plus vitamin E polyethylene.”
Instrumentation to implant the Movation Knee was a key focus of the design team. Reducing the overall quantity of instruments and making the instrument flow efficient can contribute to a reduced surgery time, which benefits the patient, the surgeon and the hospital. Simpler quick-connect handles, color-coded buttons and magnetic attachments contribute to the improved flow and reliability of the procedure, according to the company. The Movation System made its full launch at the American Academy of Orthopaedic Surgeons annual meeting in Chicago, Ill., this year.
Summer 2012 brought the introduction of the OA Nano, which the company claims is the world’s lightest (14.2 ounces) off-loading knee brace for patients with mild-to-moderate osteoarthritis. The brace is sold under the DonJoy brand. The brace is designed to accommodate the needs of a younger, active and growing market. It is manufactured using nanoMAG TTMP, a metal that is as light as magnesium with the strength of aircraft-grade aluminum. OA Nano decreases pressure on the knee by offloading stress.
A survey of 1,001 Americans older than 40 years of age conducted by Arlington, Va.-based Wakefield Research and DJO revealed that nearly three out of four (73 percent) have experienced knee pain in the last year. Surprisingly, nearly eight out of 10 Americans who don’t experience knee pain wrongly assume that they will never experience it. According to the National Arthritis Foundation, one in two people may develop symptomatic knee osteoarthritis. The survey also found that 58 percent of Americans older than 40 have ignored knee pain because they didn’t think that it was a big deal.
Among Americans who have experienced knee pain in the past 12 months, 41 percent aren’t doing anything to manage their knee pain, 36 percent are taking over-the-counter pain medicine, 17 percent regularly are taking prescription medicine, 14 percent are using cold compression therapy and only 12 percent are using a knee brace.
According to DJO, physicians increasingly advocate for a conservative care treatment regimen that preserves joints and helps patients avoid or stave off more expensive, addictive or riskier treatments.Noninvasive, non-addictive treatment options, such as knee bracing, can empower patients to proactively take control of their osteoarthritis without the cost, recovery time or potential for adverse events associated with surgical procedures or narcotic pain management, company officials noted.
The survey was conducted in May 2012, and polled respondents on their knowledge and perceptions of osteoarthritis, knee pain and treatment options.
At the beginning of the year, the company’s Surgical division rolled out the new RSP Monoblock shoulder system, an extension of its Reverse Shoulder Prosthesis shoulder system (RSP).The RSP Monoblock expands the indications for reverse shoulder arthroplasty to include fractures, which will increase the number of patients that can be treated with RSP. In addition, DJO Surgical released a number of conversion modules that will permit surgeons to easily transition from a primary total shoulder to a reverse shoulder arthroplasty, and from a reverse shoulder arthroplasty to a hemiarthroplasty (a shoulder replacement in which the broken humeral head is replaced with an artificial joint and the fractured bone is reconstructed around the artificial joint).These new modules enhance the surgeon’s ability to treat a number of modalities with the system and will allow for greater interoperative flexibility, according to the company.
Regulatory Letdown
Along with having your product reviewed and okayed for sale by the U.S. Food and Drug Administration, ensuring your system or device is reimbursed by the Centers for Medicare and Medicaid Services also can be an arduous process with significant revenue implications down the line depending upon the agency’s coverage decision.
In June last year, Medicare issued a non-coverage decision for the company’s transcutaneous electrical nerve stimulation (TENS) system for chronic low back pain (CLBP). According to the agency, the system “is not reasonable and necessary for the treatment of CLBP,” and therefore would not cover it. The treatment works by issuing electrotherapy—small electrical shocks—to the skin with the aim of pain management. In part due to Medicare’s decision, the company’s Recovery Sciences division has performed as well as the firm’s other units, such as Surgical or Bracing and Supports.
The Bottom Line
Fiscal 2012 was a record year for sales, with the company bringing in $1.3 billion compared with $1.07 billion for 2011. According to the firm’s leadership, the results of acquisitions made in 2011—Circle City Medical acquired in February and Dr. Comfort in April—helped significantly to add to the company’s coffers. Sales were slowed slightly by foreign currency exchange rates. Net sales for DJO’s Bracing and Vascular segment increased 8.2 percent to $441.3 million; net sales for the Recovery Sciences fell 2.3 percent to $334.6 million; International segment net sales increased 5.7 percent on a constant currency basis to $280.5 million; and the net revenue for the Surgical Implant segment increased 12.4 percent to just shy of $73 million.
Despite the sales gains, the company posted a net loss of $119.2 million, compared to a net loss of $214.5 million for 2011. For 2012, the company reported operating income of $92.9 million, reflecting significant improvement compared to an operating loss of $92.3 million for 2011. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $271 million, or 24 percent of net sales, an increase of 2.5 percent compared with $264.3 million, or 24.6 percent of net sales, for 2011. Adjusted EBITDA for 2012 was unfavorably impacted by $3.2 million related to changes in foreign currency exchange rates compared to the rates in effect in 2011. In constant currency and pro forma for the acquisitions and excluding the $4.2 million adjustment recorded in the fourth quarter of 2011, adjusted EBITDA for the year was $274.2 million, growth of 2.4 percent compared with $267.9 million for 2011.
“We are pleased to end 2012 with full year constant currency growth in net sales of 4.5 percent compared to pro forma net sales for 2011. Our successful new product launches and improving commercial execution continue to drive strong momentum across most of our businesses and provide a solid foundation for incremental growth in 2013,” said Mike Mogul, DJO’s president and CEO. “I want to especially congratulate our Bracing and Vascular, Surgical Implant and International teams, for delivering strong organic growth of 8.2 percent, 12.4 percent and 5.7 percent, respectively, in 2012.
Although we continue to face market challenges in our Recovery Sciences business unit, with sales declining 2.3 percent in 2012 compared to 2011, the strength of the sales results from our other businesses compensated for those headwinds in 2012.”
Mogul is bullish on DJO’s prospects for the current fiscal year in progress.
“We have a very exciting slate of new products for 2013 … and we are targeting total company full-year revenue growth rates of at least 5 percent for the full 2013 year,” he said. “[For 2013] we expect to absorb the impact of both the Medicare CLBP decision and the new medical device excise tax and still deliver growth in adjusted EBITDA that is at least as high as our revenue growth.”
So far in 2013, the company seems to be making good on Mogul’s claims.
For the second quarter of 2013 (ended June 29), sales were $294.7 million, up 3.1 percent, with net sales of $286 million for the second quarter of 2012.
KEY EXECUTIVES:
Michael P. Mogul, President and CEO
Vickie L. Capps, Exec. VP, Chief Financial Officer and Treasurer
Donald M. Roberts, Exec. VP, General Counsel and Secretary
Stephen J. Murphy, Exec. VP, Sales and Marketing, International Commercial Business
Gerry McDonnell, Exec. VP, Global Operations
Steve Ingel, President, Bracing and Supports
Bryan Monroe, Sr. VP and General Manager, DJO Surgical
NO. OF EMPLOYEES: 5,200
GLOBAL HEADQUARTERS: Vista, Calif.
DJO Global is headquartered just north of San Diego, Calif., in the town of Vista, not too far from Highway 101, which hugs the southern California coast and runs parallel to the deep blue waters of the Pacific Ocean. It’s a pretty idyllic locale—if you enjoy a Mediterranean-esque climate and a laid-back way of life. Despite a setting perfectly suited for surfing or having a margarita in the sand, DJO goes about its business seriously.
Founded in 1978 as DonJoy, the company was started in a Carlsbad, Calif., garage by Mark Nordquist (who played nine seasons in the NFL as an offensive lineman for the Philadelphia Eagles and Chicago Bears), and a local lawyer named Ken Reed. The first products were simple sleeves made of sewn-together neoprene that were pulled over the knee, ankle and elbow joints for support. Thirty-five years later, the privately held company makes medical devices for musculoskeletal health, vascular health and pain management, and is the third-largest employer in Vista (following the local school district and the superior court).
It was a busy year (FY12 ended Dec. 31) for DJO—with a number of important product launches, acquisitions and regulatory decisions impacting the business.
Let’s start at the end. In December last year, the company announced plans to acquire Arden Hill, Minn.-based Exos Corp., which makes thermoformable external musculoskeletal stabilization systems. Exos’ bracing system is a waterproof, removable, adjustable and reformable solution for the treatment of fractures and other injuries that require stabilization. DJO had been the distribution partner for Exos since October 2011. Terms of the deal were not released.
Among the notable product releases for 2012, the company launched its Movation total knee arthroplasty (TKA) device in September. The Movation posterior-stabilized knee design (PS, used in posterior cruciate ligament deficient knees) is licensed from the Hospital for Special Surgery in New York, N.Y.DJO Surgical licensed the patent for a classic PS knee solution, and includes a constant-axis femoral component, contoured insert condyles for reduced rotational stress, reduced and rounded trochlear transition, and anatomic femoral and baseplate component. “Patients needing a knee replacement are approaching surgeons with more demanding activity requirements,” said Bryan Monroe, general manager of DJO’s Surgical division.“Our goal was to develop a knee system with features that we know have historically performed extremely well, but also incorporate assets that allow TKA patients to remain active, such as high flexion allowance, enhanced stability through flexion, and e-plus vitamin E polyethylene.”
Instrumentation to implant the Movation Knee was a key focus of the design team. Reducing the overall quantity of instruments and making the instrument flow efficient can contribute to a reduced surgery time, which benefits the patient, the surgeon and the hospital. Simpler quick-connect handles, color-coded buttons and magnetic attachments contribute to the improved flow and reliability of the procedure, according to the company. The Movation System made its full launch at the American Academy of Orthopaedic Surgeons annual meeting in Chicago, Ill., this year.
Summer 2012 brought the introduction of the OA Nano, which the company claims is the world’s lightest (14.2 ounces) off-loading knee brace for patients with mild-to-moderate osteoarthritis. The brace is sold under the DonJoy brand. The brace is designed to accommodate the needs of a younger, active and growing market. It is manufactured using nanoMAG TTMP, a metal that is as light as magnesium with the strength of aircraft-grade aluminum. OA Nano decreases pressure on the knee by offloading stress.
A survey of 1,001 Americans older than 40 years of age conducted by Arlington, Va.-based Wakefield Research and DJO revealed that nearly three out of four (73 percent) have experienced knee pain in the last year. Surprisingly, nearly eight out of 10 Americans who don’t experience knee pain wrongly assume that they will never experience it. According to the National Arthritis Foundation, one in two people may develop symptomatic knee osteoarthritis. The survey also found that 58 percent of Americans older than 40 have ignored knee pain because they didn’t think that it was a big deal.
Among Americans who have experienced knee pain in the past 12 months, 41 percent aren’t doing anything to manage their knee pain, 36 percent are taking over-the-counter pain medicine, 17 percent regularly are taking prescription medicine, 14 percent are using cold compression therapy and only 12 percent are using a knee brace.
According to DJO, physicians increasingly advocate for a conservative care treatment regimen that preserves joints and helps patients avoid or stave off more expensive, addictive or riskier treatments.Noninvasive, non-addictive treatment options, such as knee bracing, can empower patients to proactively take control of their osteoarthritis without the cost, recovery time or potential for adverse events associated with surgical procedures or narcotic pain management, company officials noted.
The survey was conducted in May 2012, and polled respondents on their knowledge and perceptions of osteoarthritis, knee pain and treatment options.
At the beginning of the year, the company’s Surgical division rolled out the new RSP Monoblock shoulder system, an extension of its Reverse Shoulder Prosthesis shoulder system (RSP).The RSP Monoblock expands the indications for reverse shoulder arthroplasty to include fractures, which will increase the number of patients that can be treated with RSP. In addition, DJO Surgical released a number of conversion modules that will permit surgeons to easily transition from a primary total shoulder to a reverse shoulder arthroplasty, and from a reverse shoulder arthroplasty to a hemiarthroplasty (a shoulder replacement in which the broken humeral head is replaced with an artificial joint and the fractured bone is reconstructed around the artificial joint).These new modules enhance the surgeon’s ability to treat a number of modalities with the system and will allow for greater interoperative flexibility, according to the company.
Regulatory Letdown
Along with having your product reviewed and okayed for sale by the U.S. Food and Drug Administration, ensuring your system or device is reimbursed by the Centers for Medicare and Medicaid Services also can be an arduous process with significant revenue implications down the line depending upon the agency’s coverage decision.
In June last year, Medicare issued a non-coverage decision for the company’s transcutaneous electrical nerve stimulation (TENS) system for chronic low back pain (CLBP). According to the agency, the system “is not reasonable and necessary for the treatment of CLBP,” and therefore would not cover it. The treatment works by issuing electrotherapy—small electrical shocks—to the skin with the aim of pain management. In part due to Medicare’s decision, the company’s Recovery Sciences division has performed as well as the firm’s other units, such as Surgical or Bracing and Supports.
The Bottom Line
Fiscal 2012 was a record year for sales, with the company bringing in $1.3 billion compared with $1.07 billion for 2011. According to the firm’s leadership, the results of acquisitions made in 2011—Circle City Medical acquired in February and Dr. Comfort in April—helped significantly to add to the company’s coffers. Sales were slowed slightly by foreign currency exchange rates. Net sales for DJO’s Bracing and Vascular segment increased 8.2 percent to $441.3 million; net sales for the Recovery Sciences fell 2.3 percent to $334.6 million; International segment net sales increased 5.7 percent on a constant currency basis to $280.5 million; and the net revenue for the Surgical Implant segment increased 12.4 percent to just shy of $73 million.
Despite the sales gains, the company posted a net loss of $119.2 million, compared to a net loss of $214.5 million for 2011. For 2012, the company reported operating income of $92.9 million, reflecting significant improvement compared to an operating loss of $92.3 million for 2011. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $271 million, or 24 percent of net sales, an increase of 2.5 percent compared with $264.3 million, or 24.6 percent of net sales, for 2011. Adjusted EBITDA for 2012 was unfavorably impacted by $3.2 million related to changes in foreign currency exchange rates compared to the rates in effect in 2011. In constant currency and pro forma for the acquisitions and excluding the $4.2 million adjustment recorded in the fourth quarter of 2011, adjusted EBITDA for the year was $274.2 million, growth of 2.4 percent compared with $267.9 million for 2011.
“We are pleased to end 2012 with full year constant currency growth in net sales of 4.5 percent compared to pro forma net sales for 2011. Our successful new product launches and improving commercial execution continue to drive strong momentum across most of our businesses and provide a solid foundation for incremental growth in 2013,” said Mike Mogul, DJO’s president and CEO. “I want to especially congratulate our Bracing and Vascular, Surgical Implant and International teams, for delivering strong organic growth of 8.2 percent, 12.4 percent and 5.7 percent, respectively, in 2012.
Although we continue to face market challenges in our Recovery Sciences business unit, with sales declining 2.3 percent in 2012 compared to 2011, the strength of the sales results from our other businesses compensated for those headwinds in 2012.”
Mogul is bullish on DJO’s prospects for the current fiscal year in progress.
“We have a very exciting slate of new products for 2013 … and we are targeting total company full-year revenue growth rates of at least 5 percent for the full 2013 year,” he said. “[For 2013] we expect to absorb the impact of both the Medicare CLBP decision and the new medical device excise tax and still deliver growth in adjusted EBITDA that is at least as high as our revenue growth.”
So far in 2013, the company seems to be making good on Mogul’s claims.
For the second quarter of 2013 (ended June 29), sales were $294.7 million, up 3.1 percent, with net sales of $286 million for the second quarter of 2012.
DJO Surgical Partners with University of Utah to Improve Implant Prostheses The DJO Surgical business unit of DJO Global and the University of Utah in Salt Lake City signed a license agreement that will enable DJO Surgical to develop a percutaneous osseointegrated prosthesis (POP) for above-the-knee amputees. An alternative to traditional socket technology, POP involves an implant in the femur that protrudes through the skin and attaches to a prosthetic limb. Prior POP development efforts have encountered difficulty with infection at the site where the implant protrudes through the skin. Based at the University of Utah, Roy Bloebaum, Ph.D., and his team of researchers have developed a device using DJO Surgical’s new proprietary titanium P2 porous coating, which acts as both the bone in-growth as well as the seal material on the implant that provides a “soft tissue seal” around the device to prevent bacteria from entering the body. Backed by an animal study involving more than 80 sheep implanted with this device, no infections were found after one year and the implant showed excellent mechanical strength. Development work on the human implant already has started and clinical trials are expected to begin in approximately two years.The initial trial sites are expected to be within the U.S. Department of Veterans Affairs and most of the patients are expected to be war veteran amputees.The U.S. Department of Defense officials have been vocal about much-needed advancements in amputee care and have provided grant money to find solutions. “We are excited to sign this partnership agreement with the University of Utah and Dr. Bloebaum,” said Bryan Monroe,senior vice president and general manager of DJO Surgical. “With the combination of our proprietary titanium P2 porous coating and Dr. Bloebaum’s unique approach for POP, we believe that we have developed a winning solution that will have a monumental impact on the lives of amputees.” |