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Alphatec Financials Mixed for 2012

In a mix of a year that was good and bad for spine companies, Alphatec Holdings Inc. (parent company of Alphatec Spine Inc.) had a good year last year. The company recently released its financial results for the fourth quarter of fiscal year ending Dec. 31, 2012, and the numbers show an increase in revenue over the corresponding quarter the previous year.

Consolidated net revenues for the Q4 2012 were $52.7 million, an increase of 6.5 percent compared to $49.5 million reported for Q4 2011, or 7.9 percent on a constant currency basis.

Net revenues in the United States for the quarter were $34 million, up 4 percent, compared to $32.8 million reported for the same period in 2012. U.S. net revenues were driven by strong sales of the Alphatec’s biologics products and from revenues related to the company’s acquisition of Phygen, which contributed $1.2 million in revenue following the closing in November of 2012. Alphatec’s acquisition of the spinal implant manufacturer based in Irvine, Calif., was completed in September 2012, and cost $15.2 million in stock and cash.

International net revenues for the fourth quarter were $18.7 million, an increase of 11.6 percent compared to $16.8 million reported for the fourth quarter of 2011, or 15.7 percent on a constant currency basis. International sales growth continues to be driven by strong sales in Japan and Latin America, the company reported.

Overall, the quarter yielded $32 million in gross profit, compared to $25 million in the same quarter the previous year, giving a strong finish to 2012.

Though the quarter was strong, 2012’s overall performance was not that much different from 2011’s. Total revenues for 2012 was $196.3 million, down slightly from $197.7 million in 2011. Though 2012 ended at a net loss of $15 million, the company was able to curb losses year over year compared to a loss of $22 million in 2011.

Alphatec Spine gained a new CEO last year, Les Cross. “Since I became CEO last year, we have made significant changes to the organization through investments in leadership talent, operational process improvements, product licenses and an acquisition, which collectively contributed to our positive fourth quarter result and should provide a strong foundation going forward,” Cross said. “It was a challenging year for the entire organization to undertake Alphatec’s transformation, but with much of the heavy lifting now behind us our focus is on performance execution in 2013. The company’s employees have fully embraced a culture of continuous improvement to strengthen our competitive position.”

Alphatec intends to change the U.S. Food and Drug Administration (FDA) classification of its stem cell product Puregen from a biologics to a tissue-based product. “We have … been engaged in discussions with the FDA to understand the structure of a clinical trial that would be required to obtain regulatory approval for PureGen should it not be classified as a tissue-based product,” Cross explained.

The FDA recently conducted site inspections at both vendors that procure, process, store and ship Puregen. Cross said that the agency issued several Form 483 observations, which are issued when condition at a site may violate any part of the Food, Drug and Cosmetic Act. “While the product has been implanted in over 3,500 patients with no adverse event related to the product, we have voluntarily taken the prudent approach to not ship any additional product until the observations have been addressed to the FDA’s satisfaction, which we hope will take less than one month,” Cross assured shareholders in a statement.

Alphatec Spine develops products for the treatment of spinal disorders associated with trauma, congenital deformities, disease and degeneration. The company is based in Carlsbad, Calif.

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