Alphatec Growth Slowed by Weak Yen

Carlsbad, Calif.-based spine device company Alphatec Spine Inc. achieved growth in the first financial quarter of fiscal year 2013, “in spite of ongoing spine market challenges,”

According to Les Cross, chairman and CEO of Alphatec Spine, “Revenue growth of more than 4 percent over the first quarter of last year, or more than 6 percent on a constant currency basis, was above market, and we achieved this excellent result in spite of ongoing spine market challenges.”

Net revenues for the first quarter were $50.4 million, while last year the same quarter brought in $48.5 million. The company’s U.S.-based net revenues were $33.1 million, growing 1.5 percent from the same quarter last year, driven in part by Alphatec’s acquisition of spine implant manufacturer Phygen LLC. The acquisition cost $15.2 million, and Phygen reportedly contributed $2 million in revenue. International net revenues for were $17.4 million, representing growth of 9.3 percent compared to $15.9 million reported for the same period in 2012. Excluding the effect of foreign currency conversion, net revenues increased 16.4 percent.

During a conference call discussing the quarter results, Vice President and Chief Financial Officer Mike O’Neill said, “The Phygen conversion has not in Q1 gone as quickly as we would have hoped. Having said that, there’s been a significant amount of activity and effort from [Senior Vice President of U.S. Commercial Operations Tom McLeer’s] part of the organization to really start driving some of the physician conversion as well. So I think we’re gaining more traction than we had, and we still have expectations that Phygen is going to be a significant contributor to our top line in 2013. And so that’s still fundamentally part of the guidance, and frankly it contributes to the growth in the overall portfolio of the business.”

In terms of future mergers and acquisitions, Cross said he and McLeer have “quite a shopping list that we’re working our way through,” though they have nothing official to announce yet. “I think most people would agree we need to get the Phygen integration behind us and deliver the expected results, but as that happens I think you can expect to see us continue to look around both in and outside the United States,” Cross added.

During the conference call, executives pointed to the significant devaluation of the Japanese yen, which affected Q1 results by more than $1 million. The company does not expect the yen to improve very much in 2013, so the aggregate revenue impact to the remainder of 2013 could potentially be as high as $4 million. Alphatec manages its Asia-Pacific market from offices in Japan. The Japanese subsidiary performed very well according to Cross, but the weak yen slowed that growth significantly. The Japanese subsidiary posted growth of 9.2 percent.

Looking forward, Alphatec expects revenue for 2013 to be in a range between $204 million and $210 million on a constant currency basis, or approximately 4 to 7 percent growth compared to 2012.