08.04.14
$836 Million
KEY EXECUTIVES:
Peter J. Arduini, President, CEO and Director
Mark Augusti, Corp. VP and President, Orthopedics and Tissue Technologies
Glenn G. Coleman, Corp. VP and CFO
Brian Larkin, Corp. VP, President of Global Spine and
Orthobiologics, and Head of Strategic Development
Debbie Leonetti, Corp. VP and President, Instruments
John Mooradian, Corp. VP, Global Operations and Supply Chain
Robert D. Paltridge, Corp. VP and President, Advanced Wound Care
Dan Reuvers, Corp. VP and President, International
Joseph Vinhais, Corp. VP, Global Quality Assurance
Judith E. O’Grady, Corp. VP, Global Regulatory Affairs, and 3Corporate Compliance Officer
NO. OF EMPLOYEES: 3,300
HEADQUARTERS: Plainsboro, N.J.
High expectations are the key to everything.
—Sam Walton
In 1945, with a $20,000 loan from his father-in-law, plus $5,000 of his own, Sam Walton purchased a small variety store in Newport, Ark. Today, Walton’s legacy of setting sights high continues: In 2013, Wal-Mart Stores Inc. had sales of $466 billion.
The powers that be at Integra LifeSciences Holding Corp. have made setting high expectations for their company part of their credo. The firm, which started in 1989 and specializes in extremity reconstruction surgery, spine and orthobiologics, neurosurgery and general surgery technologies, is gunning for the competition. And with companies such as DePuy Synthes, Stryker Corp., Tornier Inc., NuVasive Inc., Globus Medical Inc., Wright Medical Group, Zimmer Holdings Inc. and Biomet Inc. all playing in the same sandbox, you can bet the battle for market share is constant and grueling. Just like in any fight for position, companies continually must look for an edge—adding product value, streamlining systems, reducing production costs, developing a strong research and development pipeline, etc.
Integra’s management outlines the firm’s goals this way: “We aspire to be a multi-billion dollar diversified global medical technology company that helps patients by limiting uncertainty for medical professionals, and is a high quality investment for shareholders. We will achieve these goals by delivering on our brand promises to our customers worldwide and by becoming a top player in all markets in which we compete.” High expectations indeed.
The billion-dollar mark may not be too far away. Over the years, the company consistently has continued to increase its top line, going from $551 million in 2007 to $836 million for its 2013 fiscal year (ended Dec. 31). And though the year-over-year amount of growth slowed between fiscal 2012 and 2013, the average annual revenue expansion between 2009 and 2013 has been $38.5 million. A billion dollars in sales is a little more than 4 years away at that rate. But the orthopedic market is anything but predictable these days. To keep things moving toward the firm’s goal, 2013 has been one of restructuring as Integra searches for economies of scale to sharpen its competitive edge. The year included implementation of a global resource management system, closure and consolidation of manufacturing sites, expansion of its international sales force (international sales were only 23 percent of the company’s sales in FY13), and the creation and the use of a recently created centralized sourcing group.
Through streamlined sourcing and procurement, the company expects to reduce its number of suppliers by 30 percent in the near future. Along with that, Integra has initiated inventory planning optimization plans to increase cycles and decrease working capital requirements. The goal of the structural efficiencies is to drive significant income savings and increase cash flows. Integra’s fiscal 2013 bottom line reflected the costs but also the beginnings of the benefits from these activities.
Revenue for fiscal 2013 was $836.2 million, an increase of $5.3 million, or 0.6 percent, compared to 2012. Excluding the contribution of revenues from discontinued products, revenues increased 1.2 percent compared to 2012. Currency had a negligible impact on revenues, officials noted. The company reported a net loss of $17 million, or 60 cents per diluted share, for 2013, compared to net income of $41.2 million, or $1.44 per diluted share in 2012. Sales for the company’s U.S.
Neurosurgery division (dural repair, ultrasonic aspiration, cranial stabilization, stereotaxy, neuro critical care) were $172.3 million, up from $171.3 million in fiscal 2012. Sales for Integra’s U.S. Extremities division (soft-tissue repair for nerve, tendon, skin and wound; fixation and joint replacement in foot, ankle, hand, wrist, elbow and shoulder) were $134.6 million, up from $122.8 million from the year before. Revenues from the U.S. Instruments division (general and specialty hand-held surgical instruments in the hospital and office-based settings, surgical headlights and retractors) were $159.6 million, down from $162.3 million. Sales generated by category called U.S. Spine and Other (minimally invasive spine systems, traditional spine fusion, orthobiologics and private label) were $179.9 million, down from $190.5 million. International sales of select product lines from the Neurosurgery, Instruments, Extremities and Spine divisions were $189.7 million, up from $183.9 million. Overall, in domestic and international markets, pure orthopedic implant and product sales were $374.6 million, up from $369.3 million. Neurosurgery products generated $278.7 million in sales, up slightly from $277.5 million. Instrument sales were $182.9 million, up from $184 million. Some neurosurgery and instrument products, however, are used in orthopedic-related procedures, which is why they’re included in the revenue considered for ODT’s annual ranking.
“Our organization overcame significant challenges in 2013, and I am excited about the opportunities ahead,” said Peter Arduini, president and CEO. “Our quality and operations teams are strengthened and stabilized, and our commercial teams are launching significant new products, including DuraSeal product lines and our Titan shoulder system. We look forward to making further headway on our strategic optimization and growth objectives in 2014.” (See more info about DuraSeal and Titan below.)
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for FY13 was $138.9 million, a decrease of 16.5 percent compared to the prior year.
The company is predicting 2014 revenues between $920 million and $940 million and earnings per diluted share to be between $1.46 and $1.64 and adjusted earnings per diluted share to be between $3.00 and $3.18. The guidance includes the contribution expected from the DuraSeal acquisition.
“Our plan for 2014 anticipates strong execution, both by our sales organizations and on the cost savings initiatives underway,” said Jack Henneman, chief financial officer. “We expect to improve both profit margins and cash flow substantially versus 2013.”
Research and development spending was about 6.2 percent of total revenue for FY13 ($52.1 million), on par with 2012’s percentage of 6.1 percent. A significant portion of R&D resources for the year was spent on shoulder-related product development efforts.
‘Dura’ble Goods
In late October of last year, Integra bought the Confluent Surgical product lines from Covidien plc. The brand includes surgical sealants, adhesion barriers, and—most notably—the DuraSeal, which is is used in spinal surgery and applied over stitches to prevent cerebrospinal fluid from leaking out of the incision site. The technology was approved by the U.S. Food and Drug Administration in 2009. The deal closed early this year.
Under the terms of the agreement, Covidien received an initial cash payment of $235 million from Integra at the close of the transaction. Additionally, Covidien may receive up to $30 million, contingent upon the achievement of certain performance measures related to the transition of the Confluent Surgical business to Integra.
“The addition of the DuraSeal product lines enables our sales force and distributor partners to provide their customers with a best-in-class dural sealant as they seek to support surgeon’s efforts to minimize cerebrospinal fluid leaks upon completion of the surgical procedure,” said Robert Davis, president of Integra’s U.S. Neurosurgery division. “This acquisition perfectly complements our global Neurosurgery growth strategy aimed at providing a broader set of solutions for surgical procedures in the head. Together with our broad DuraGen product line we are fortunate to have even more options to serve our customers and the individual needs of their patients.”
Covidien divested the product line to better align existing product categories and position them for growth.
Confluent Surgical products include: DuraSeal, DuraSeal Xact, VascuSeal and SprayShield, which—according to Covidien—generated approximately $65 million in revenue during 2012.
“This transaction adds scale to our business, leverages one of our strongest customer call points, and drives accretion to our gross margins,” Jack Henneman, Integra’s chief financial officer, said at the time.
Integra reports DuraSeal revenues in its U.S. Neurosurgery and International business segments, and has been providing revenue contribution from the acquisition in financial reports this year.
Product Rollouts
In 2013, Integra launched 20 new products in the United States and internationally. Among the notable product releases:
Toward the end of the fiscal year, the company announced plans to eliminate its manufacturing operations in Burlington, Mass., and Andover, England. Burlington operations will be consolidated into the company’s facilities in Cincinnati, Ohio, and York, Pa. The proposed changes in Andover include consolidating electronics assembly into Integra’s facility in Ireland and discontinuing certain non-core product lines.
“I want to express my gratitude to our colleagues in Burlington and Andover, for whom we have the greatest respect, for their dedication and hard work over the years,” said CEO Arduini. “Unfortunately, we believe these moves are necessary to remain competitive due to increased costs and regulatory requirements in the medical device market.”
The consolidations will begin reducing operating expenses in 2015, company officials predicted.
As an extension of the product streamlining initiatives the company announced in third quarter of 2012, Integra discontinued several products and product lines in the U.S. Instruments segment that officials categorized as “low-margin and low-growth.” Also discontinued were “small, non-strategic and/or low-margin product lines” manufactured in Integra’s Burlington and Andover facilities, reported in the Instruments, Neurosurgery and U.S. Spine segments. The firm also eliminated low-margin, low-growth product lines in the U.S. Extremities, U.S. Neurosurgery, and International business segments “for the purpose of simplifying the product offering and reducing complexity,” company brass said.
In addition, Integra is consolidating two surgical instrument sites in Germany into one state-of-the-art facility in Rietheim-Weilheim, Germany.
In September, the company reported that it had fully resolved violations cited in a FDA warning letter relating to its Plainsboro, N.J., manufacturing facility, which had been operating subject to an FDA warning letter from December 2011 that related to quality systems and compliance issues. Following an inspection in August last year, the FDA determined that the company’s remediation activities were effective and its quality management system was adequate. Arudini said the resolution was a “measure of the progress we have made toward transforming our quality systems around the company” and that the investments the company has made and would continue to make are “producing results that are fundamental” to the firm’s long-term goals.
In February, the company received an FDA warning letter for its plant in Añasco, Puerto Rico, related to quality-systems issues. The warning letter cited concerns relating to process validations, corrective and preventative actions, and document controls. The Añasco facility manufactures several of Integra’s collagen products, including DuraGen dural graft matrix and several OEM products sold to strategic partners through the company’s private-label business. In April, Integra initiated a voluntary recall of certain products manufactured in Añasco between December 2010 and May 2011 and between November 2012 and March 2013. Specific lots of these products, including DuraGen products, were recalled because the company identified that there may have been deviations from approved processes in their production. There were no reports of adverse patient events attributable to the recalled products.
According to Integra’s management, the company made “substantial investments” in its quality and global operations organizations throughout 2013.
“Those investments have had a strong, positive impact throughout our organization, and, indeed, on the culture of our company,” Arduini wrote to shareholders at the beginning of 2014. “Our leadership team has reinvigorated both organizations and placed quality first in all we do throughout the company. These investments—capital, training, focus and emphasis—have resulted in the lifting of our warning letter in our Plainsboro, N.J., facility, enhancements to our Puerto Rico facility, and overall changes to our quality systems at all of our manufacturing facilities.”
2014: So Far, So Good
For the first quarter of 2014 (ended March 31, the most recent reported before press time) total revenues were $215.1 million, an increase of $18.4 million compared to the first quarter 2013. Net income was $2.2 million, or 7 cents per diluted share, for the first quarter of 2014, compared to a net loss of $6 million, or 22 cents per diluted share, for the first quarter of 2013. The company released the Integra Titanium Bone Wedges, designed for internal fixation for bone fractures or osteotomies in the foot and ankle. In addition, Integra hired Mark Augusti as a corporate vice president and president of the company's Orthopedics and Tissue Technologies businesses. Prior to joining Integra, Augusti served as CEO of Durham, N.C.-based Bioventus—a biotechnology spin-off from Smith & Nephew.
KEY EXECUTIVES:
Peter J. Arduini, President, CEO and Director
Mark Augusti, Corp. VP and President, Orthopedics and Tissue Technologies
Glenn G. Coleman, Corp. VP and CFO
Brian Larkin, Corp. VP, President of Global Spine and
Orthobiologics, and Head of Strategic Development
Debbie Leonetti, Corp. VP and President, Instruments
John Mooradian, Corp. VP, Global Operations and Supply Chain
Robert D. Paltridge, Corp. VP and President, Advanced Wound Care
Dan Reuvers, Corp. VP and President, International
Joseph Vinhais, Corp. VP, Global Quality Assurance
Judith E. O’Grady, Corp. VP, Global Regulatory Affairs, and 3Corporate Compliance Officer
NO. OF EMPLOYEES: 3,300
HEADQUARTERS: Plainsboro, N.J.
High expectations are the key to everything.
—Sam Walton
In 1945, with a $20,000 loan from his father-in-law, plus $5,000 of his own, Sam Walton purchased a small variety store in Newport, Ark. Today, Walton’s legacy of setting sights high continues: In 2013, Wal-Mart Stores Inc. had sales of $466 billion.
The powers that be at Integra LifeSciences Holding Corp. have made setting high expectations for their company part of their credo. The firm, which started in 1989 and specializes in extremity reconstruction surgery, spine and orthobiologics, neurosurgery and general surgery technologies, is gunning for the competition. And with companies such as DePuy Synthes, Stryker Corp., Tornier Inc., NuVasive Inc., Globus Medical Inc., Wright Medical Group, Zimmer Holdings Inc. and Biomet Inc. all playing in the same sandbox, you can bet the battle for market share is constant and grueling. Just like in any fight for position, companies continually must look for an edge—adding product value, streamlining systems, reducing production costs, developing a strong research and development pipeline, etc.
Integra’s management outlines the firm’s goals this way: “We aspire to be a multi-billion dollar diversified global medical technology company that helps patients by limiting uncertainty for medical professionals, and is a high quality investment for shareholders. We will achieve these goals by delivering on our brand promises to our customers worldwide and by becoming a top player in all markets in which we compete.” High expectations indeed.
The billion-dollar mark may not be too far away. Over the years, the company consistently has continued to increase its top line, going from $551 million in 2007 to $836 million for its 2013 fiscal year (ended Dec. 31). And though the year-over-year amount of growth slowed between fiscal 2012 and 2013, the average annual revenue expansion between 2009 and 2013 has been $38.5 million. A billion dollars in sales is a little more than 4 years away at that rate. But the orthopedic market is anything but predictable these days. To keep things moving toward the firm’s goal, 2013 has been one of restructuring as Integra searches for economies of scale to sharpen its competitive edge. The year included implementation of a global resource management system, closure and consolidation of manufacturing sites, expansion of its international sales force (international sales were only 23 percent of the company’s sales in FY13), and the creation and the use of a recently created centralized sourcing group.
Through streamlined sourcing and procurement, the company expects to reduce its number of suppliers by 30 percent in the near future. Along with that, Integra has initiated inventory planning optimization plans to increase cycles and decrease working capital requirements. The goal of the structural efficiencies is to drive significant income savings and increase cash flows. Integra’s fiscal 2013 bottom line reflected the costs but also the beginnings of the benefits from these activities.
Revenue for fiscal 2013 was $836.2 million, an increase of $5.3 million, or 0.6 percent, compared to 2012. Excluding the contribution of revenues from discontinued products, revenues increased 1.2 percent compared to 2012. Currency had a negligible impact on revenues, officials noted. The company reported a net loss of $17 million, or 60 cents per diluted share, for 2013, compared to net income of $41.2 million, or $1.44 per diluted share in 2012. Sales for the company’s U.S.
Neurosurgery division (dural repair, ultrasonic aspiration, cranial stabilization, stereotaxy, neuro critical care) were $172.3 million, up from $171.3 million in fiscal 2012. Sales for Integra’s U.S. Extremities division (soft-tissue repair for nerve, tendon, skin and wound; fixation and joint replacement in foot, ankle, hand, wrist, elbow and shoulder) were $134.6 million, up from $122.8 million from the year before. Revenues from the U.S. Instruments division (general and specialty hand-held surgical instruments in the hospital and office-based settings, surgical headlights and retractors) were $159.6 million, down from $162.3 million. Sales generated by category called U.S. Spine and Other (minimally invasive spine systems, traditional spine fusion, orthobiologics and private label) were $179.9 million, down from $190.5 million. International sales of select product lines from the Neurosurgery, Instruments, Extremities and Spine divisions were $189.7 million, up from $183.9 million. Overall, in domestic and international markets, pure orthopedic implant and product sales were $374.6 million, up from $369.3 million. Neurosurgery products generated $278.7 million in sales, up slightly from $277.5 million. Instrument sales were $182.9 million, up from $184 million. Some neurosurgery and instrument products, however, are used in orthopedic-related procedures, which is why they’re included in the revenue considered for ODT’s annual ranking.
“Our organization overcame significant challenges in 2013, and I am excited about the opportunities ahead,” said Peter Arduini, president and CEO. “Our quality and operations teams are strengthened and stabilized, and our commercial teams are launching significant new products, including DuraSeal product lines and our Titan shoulder system. We look forward to making further headway on our strategic optimization and growth objectives in 2014.” (See more info about DuraSeal and Titan below.)
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for FY13 was $138.9 million, a decrease of 16.5 percent compared to the prior year.
The company is predicting 2014 revenues between $920 million and $940 million and earnings per diluted share to be between $1.46 and $1.64 and adjusted earnings per diluted share to be between $3.00 and $3.18. The guidance includes the contribution expected from the DuraSeal acquisition.
“Our plan for 2014 anticipates strong execution, both by our sales organizations and on the cost savings initiatives underway,” said Jack Henneman, chief financial officer. “We expect to improve both profit margins and cash flow substantially versus 2013.”
Research and development spending was about 6.2 percent of total revenue for FY13 ($52.1 million), on par with 2012’s percentage of 6.1 percent. A significant portion of R&D resources for the year was spent on shoulder-related product development efforts.
‘Dura’ble Goods
In late October of last year, Integra bought the Confluent Surgical product lines from Covidien plc. The brand includes surgical sealants, adhesion barriers, and—most notably—the DuraSeal, which is is used in spinal surgery and applied over stitches to prevent cerebrospinal fluid from leaking out of the incision site. The technology was approved by the U.S. Food and Drug Administration in 2009. The deal closed early this year.
Under the terms of the agreement, Covidien received an initial cash payment of $235 million from Integra at the close of the transaction. Additionally, Covidien may receive up to $30 million, contingent upon the achievement of certain performance measures related to the transition of the Confluent Surgical business to Integra.
“The addition of the DuraSeal product lines enables our sales force and distributor partners to provide their customers with a best-in-class dural sealant as they seek to support surgeon’s efforts to minimize cerebrospinal fluid leaks upon completion of the surgical procedure,” said Robert Davis, president of Integra’s U.S. Neurosurgery division. “This acquisition perfectly complements our global Neurosurgery growth strategy aimed at providing a broader set of solutions for surgical procedures in the head. Together with our broad DuraGen product line we are fortunate to have even more options to serve our customers and the individual needs of their patients.”
Covidien divested the product line to better align existing product categories and position them for growth.
Confluent Surgical products include: DuraSeal, DuraSeal Xact, VascuSeal and SprayShield, which—according to Covidien—generated approximately $65 million in revenue during 2012.
“This transaction adds scale to our business, leverages one of our strongest customer call points, and drives accretion to our gross margins,” Jack Henneman, Integra’s chief financial officer, said at the time.
Integra reports DuraSeal revenues in its U.S. Neurosurgery and International business segments, and has been providing revenue contribution from the acquisition in financial reports this year.
Product Rollouts
In 2013, Integra launched 20 new products in the United States and internationally. Among the notable product releases:
- The company introduced the Integra Laminoplasty System following U.S. Food and Drug Administration (FDA) 510(k) clearance. The system includes a set of implants and instruments designed for use after open-door laminoplasty procedures in the cervical and thoracic spine (C3-T3). The system incorporates several plate and screw options, enabling surgeons to treat varying patient anatomies. It also includes multiple plate insertion and drill guide options, and a new retentive screwdriver. Laminoplasty procedures treat spinal stenosis by relieving pressure on the spinal cord. The open-door laminoplasty procedure relieves pressure by first cutting the lamina on both sides of the affected vertebrae (a hinge on one side and a groove on the other), and then prying the released segment of lamina open. A laminoplasty plate is attached to the lamina, to help retain the open position while it heals. The plate also is used to hold bone graft material in place and prevent it from expulsion and impinging on the spinal cord.
- Integra’s Proximal Humeral Fracture Plate System was released in October of FY13 in the United States. The system joined the firm’s growing portfolio of shoulder fracture solutions, which includes a primary and reverse system with a unique platform press-fit stem. According to the company, the Proximal Humeral Fracture Plate System includes two distinctive, anatomic proximal humeral plates in one tray, allowing the surgeon to intra-operatively choose between various fixation options for common to more complex and unique fracture patterns. The two plates also are designed to simplify positioning and minimize soft tissue interference. The system’s low-profile plate is designed to be placed lower on the humerus (the largest bone in the arm) to minimize subacromial and soft-tissue impingement (which helps the motion of the rotator cuff in activities such as overhead work), while the greater tuberosity plate provides a higher placement option, with 12 proximal screw holes to maximize the fixation coverage of the humeral head. Both plates include four holes, specifically designed to provide stable fixation in the calcar neck and help protect against varus tilt and settling of the humeral head.
- The company’s Extremities division also launched the full Titan shoulder system—FDA 510(k) clearance was granted in July 2013—which includes total, reverse and humeral plating systems, greatly expanding the firm’s shoulder portfolio. The first post-clearance patient implantation took place in September last year. The reverse shoulder system is built on a unique platform stem. This platform stem simplifies the conversion of a primary total shoulder, or hemi for fracture, to a reverse shoulder, without the need to remove a stem that is well fixed in the patient’s bone. The system offers fully interchangeable components, which allow all primary, reverse, and fracture humeral bodies to be used with either the press-fit or cemented platform stems, the company said. The flexibility is designed to provide surgeons with minimally invasive intra-operative options, and the ability to offer continued care for the lifetime of the patient. The Titan release opens a “significant new market,” Integra officials noted—one that offers a healthy growth rate sustained by increases in reverse and revision procedures. To gain a greater share of the market the company estimates is worth $865 million this year and $1.3 billion by 2017, Integra has been investing in its sales operation and surgeon training to support the shoulder franchise. Company bigwigs also reported investing in “early stage technology” that is intended to strengthen the shoulder portfolio in years to come.
- Integra released its Hollywood VI intervertebral body fusion device (IBD) system, which primarily is used in transforaminal lumbar interbody fusion (TLIF), a surgical procedure designed to help alleviate pain and nerve compression by fusing and stabilizing adjacent vertebrae in the lower back. The Hollywood VI IBD incorporates a variable insertion feature, which enables surgeons to choose the appropriate delivery angle for the implant and gives more flexibility in managing varying patient anatomy, according to the company. It includes a new, longer, 30-millimeter implant that increases the bone graft volume by 33 percent compared to the current 27 millimeter implant, and provides a larger platform to help promote spinal fusion. “Integra has developed a TLIF cage that is simple to insert, due to the variable angle insertion mechanism, while maximizing fusion rates by aggressively increasing graft space within the cage, compared to its competitors,” said Thomas N. Scioscia, M.D., OrthoVirginia in Richmond, Va. IBDs are designed to help provide stability for spinal fusion after a diseased disc is surgically removed. They are small, hollow spinal implants that are inserted into the intervertebral space to restore physiological disc height and allow fusion between vertebral bodies. The graft window in the device is packed with bone and provides an environment in which natural bone growth can occur, which then enables fusion of the vertebral segments.
- Integra introduced its Compact Cranial Closure System, which provides titanium implants for non-loadbearing (non-facial) operative cranial neurosurgical procedures. Included with the system is a new compact disposable powered driver, a pre-sterilized, disposable, battery powered screwdriver that is used for rapid fixation of the implant’s plates and screws. Both products have received 510(k) clearance from the FDA. According to the company, the closure system’s benefits include a small and simple tray design that enhances efficiency in the operating room and the hospital sterilization department, and low-profile plates that are thin but strong titanium alloys offering improved patient aesthetics. Cranial closure occurs immediately following repair of the dural lining surrounding the brain. Neurosurgical cranial fixation sets are used in more than 200,000 cranial procedures in the United States annually, including treatment of head trauma injuries, biopsies and tumor removal, according to figures cited by the company.
Toward the end of the fiscal year, the company announced plans to eliminate its manufacturing operations in Burlington, Mass., and Andover, England. Burlington operations will be consolidated into the company’s facilities in Cincinnati, Ohio, and York, Pa. The proposed changes in Andover include consolidating electronics assembly into Integra’s facility in Ireland and discontinuing certain non-core product lines.
“I want to express my gratitude to our colleagues in Burlington and Andover, for whom we have the greatest respect, for their dedication and hard work over the years,” said CEO Arduini. “Unfortunately, we believe these moves are necessary to remain competitive due to increased costs and regulatory requirements in the medical device market.”
The consolidations will begin reducing operating expenses in 2015, company officials predicted.
As an extension of the product streamlining initiatives the company announced in third quarter of 2012, Integra discontinued several products and product lines in the U.S. Instruments segment that officials categorized as “low-margin and low-growth.” Also discontinued were “small, non-strategic and/or low-margin product lines” manufactured in Integra’s Burlington and Andover facilities, reported in the Instruments, Neurosurgery and U.S. Spine segments. The firm also eliminated low-margin, low-growth product lines in the U.S. Extremities, U.S. Neurosurgery, and International business segments “for the purpose of simplifying the product offering and reducing complexity,” company brass said.
In addition, Integra is consolidating two surgical instrument sites in Germany into one state-of-the-art facility in Rietheim-Weilheim, Germany.
In September, the company reported that it had fully resolved violations cited in a FDA warning letter relating to its Plainsboro, N.J., manufacturing facility, which had been operating subject to an FDA warning letter from December 2011 that related to quality systems and compliance issues. Following an inspection in August last year, the FDA determined that the company’s remediation activities were effective and its quality management system was adequate. Arudini said the resolution was a “measure of the progress we have made toward transforming our quality systems around the company” and that the investments the company has made and would continue to make are “producing results that are fundamental” to the firm’s long-term goals.
In February, the company received an FDA warning letter for its plant in Añasco, Puerto Rico, related to quality-systems issues. The warning letter cited concerns relating to process validations, corrective and preventative actions, and document controls. The Añasco facility manufactures several of Integra’s collagen products, including DuraGen dural graft matrix and several OEM products sold to strategic partners through the company’s private-label business. In April, Integra initiated a voluntary recall of certain products manufactured in Añasco between December 2010 and May 2011 and between November 2012 and March 2013. Specific lots of these products, including DuraGen products, were recalled because the company identified that there may have been deviations from approved processes in their production. There were no reports of adverse patient events attributable to the recalled products.
According to Integra’s management, the company made “substantial investments” in its quality and global operations organizations throughout 2013.
“Those investments have had a strong, positive impact throughout our organization, and, indeed, on the culture of our company,” Arduini wrote to shareholders at the beginning of 2014. “Our leadership team has reinvigorated both organizations and placed quality first in all we do throughout the company. These investments—capital, training, focus and emphasis—have resulted in the lifting of our warning letter in our Plainsboro, N.J., facility, enhancements to our Puerto Rico facility, and overall changes to our quality systems at all of our manufacturing facilities.”
2014: So Far, So Good
For the first quarter of 2014 (ended March 31, the most recent reported before press time) total revenues were $215.1 million, an increase of $18.4 million compared to the first quarter 2013. Net income was $2.2 million, or 7 cents per diluted share, for the first quarter of 2014, compared to a net loss of $6 million, or 22 cents per diluted share, for the first quarter of 2013. The company released the Integra Titanium Bone Wedges, designed for internal fixation for bone fractures or osteotomies in the foot and ankle. In addition, Integra hired Mark Augusti as a corporate vice president and president of the company's Orthopedics and Tissue Technologies businesses. Prior to joining Integra, Augusti served as CEO of Durham, N.C.-based Bioventus—a biotechnology spin-off from Smith & Nephew.