Wright Medical’s Sales More Than Double in First Quarter

Wright Medical Group’s merger with Tornier N.V. last fall really paid off. Literally.
 
First-quarter sales at the company—now called Wright Medical Group N.V.—more than doubled, reaching $181 million during the three-month period ending March 27. Combined pro forma net sales totaled $162.1 million during the first quarter of 2015. Gross profit skyrocketed 118.8 percent to $128.7 million, and Wright’s operating loss fell 11.3 percent to $29.3 million, according to the company’s latest earnings report. 
 
“All of our most important financial results exceeded our expectations. Global extremities and biologics pro forma constant currency net sales growth of 14 percent, adjusted EBITDA of $16.2 million and adjusted gross margins of 77.4 percent reflect the strength of our markets and our unique position in them,” President and CEO Robert Palmisano said. “We continued to execute our merger integration plans and with the early success we are seeing, we believe we are well positioned to continue our strong business momentum and to deliver on our synergy commitments as we progress through 2016.”
 
Net loss from continuing operations for the first quarter of 2016 totaled $39.3 million, or $(0.38) per diluted share.
 
The company’s net loss from continuing operations for the first quarter of 2016 included the after-tax effects of $11.1 million of transaction and transition costs, $11.4 million of inventory step-up amortization, a gain of $6.6 million related to mark-to-market adjustments on derivatives, $7.1 million of non-cash interest expense related to its 2017 convertible notes and 2020 convertible notes, and a $5.3 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition.
 
The company’s first quarter 2016 net loss from continuing operations, as adjusted for the aforementioned items, was $12.8 million. The company’s first quarter 2016 adjusted EBITDA was $16.2 million.
 
“Highlights in the quarter included strong contributions from the ongoing rollout of our SIMPLICITI shoulder system and AEQUALIS ASCEND FLEX convertible shoulder system and the ongoing launch of the INFINITY total ankle replacement system, which drove 31 percent sales growth in U.S. total ankle replacement for the first quarter of 2016,” Palmisano noted. “In addition, our U.S. biologics business grew 48 percent in the quarter, driven by the ongoing commercial activities for AUGMENT Bone Graft. Biologics is now the fastest growing segment of our business. We expect all of these products, which are still early in commercial rollout, will continue to be growth engines in 2016.” 
 
Global extremities and biologics sales surged 117.2 percent to $169.2 million, with much of that growth driven by the 14-fold increase in upper extremities revenue. Proceeds in that division went from $5.8 million in Q1 2015 to $70.9 million this year. Global sports medicine sales mushroomed 125.6 percent to $6.1 million, and biologics revenue jumped 36.5 percent to $36.5 million. Lower extremity sales rose 31.7 percent to $70.8 million.
 
International sales grew 176.1 percent to $56.4 million, while U.S. revenue swelled 116.7 percent to $124.5 million, driven by an astronomical increase in upper extremities proceeds. Cash and cash equivalents totaled $121.4 million as of the end of the first quarter of 2016.
 
“Following our merger, our increased size and scale allows us to leverage strong revenue growth into even stronger EBITDA growth. We have multiple opportunities through a robust new product pipeline to further accelerate our growth, continue to expand our markets and gain market share,” Palmisano said.
 
Company executives expect net sales for full-year 2016 of approximately $705 million to $715 million, an increase from the previous guidance range of $695 million to $705 million. The midpoint of this net sales guidance range assumes extremities and biologics pro forma constant currency growth of 14 percent, excluding the impact of revenue dis-synergies of approximately $25 million to $30 million. The company anticipates 2016 adjusted EBITDA from continuing operations of $30 million to $35 million, an increase from the previous guidance range of $20 million to $30 million. This range reflects approximately $10 million to $15 million of potential cost synergies expected to be realized in 2016 from the merger with Tornier.
 
The company anticipates adjusted cash earnings per share from continuing operations, including share-based compensation for full-year 2016 of $(0.64) to $(0.59) per diluted share.
 
The company estimates approximately 103 million diluted weighted average ordinary shares outstanding for fiscal year 2016.
 
“Despite the dis-synergy headwinds we expect to see for the remainder of the year, we are increasing our full year net sales and adjusted EBITDA guidance,” Palmisano said. “The strength of our core upper extremities and lower extremities businesses, plus our ability to execute on cost synergies ahead of schedule, gives us the confidence to increase our outlook for the full year.  We will continue to focus on executing our integration plans to realize our full potential and believe that the positive progress we have made since the merger close sets us up well for continued strong net sales growth and significant margin expansion this year, next year and beyond.”