MAKO Surgical Posts Solid Third Quarter Earnings

It looks as if MAKO Surgical Corp. has fully recovered from its rough patch. The Fort Lauderdale, Fla.-based orthopedic device company increased revenues 46 percent and boosted its gross profit 30 percent to $17.2 million during the third quarter of 2012. The results represent a significant improvement over the first two quarters of the year, when lower-than-expected sales of its surgical robot forced the company to cut its full-year sales forecast and sent the value of its shares tumbling as much as 34 percent.

Gross margin for the third quarter of 2012 was 59 percent, consisting of a 48 percent margin on procedure revenue, a 62 percent margin on RIO system revenue and an 89 percent margin on service revenue.

MAKO sold 15 RIO systems in Q3 2012, which increased the number of installed RIO systems worldwide to 141 (with 138 in the United States). The company’s Robotic Arm Interactive Orthopedic system (RIO) uses computed tomography scanning to map a patient’s anatomy. During surgery, RIO provides a digital tracking system that constantly monitors and updates the patient’s anatomy, thereby allowing surgeons to make real-time adjustments to better place implants and restore biomechanical alignment and joint motion.

The first two quarters of 2012 have been worrisome for MAKO. Both periods showed a decline in RIO sales compared with the same quarters last year—the firm placed only nine units in Q2, three short of its goal (and three shy of its 2011 Q1 total).

However, data has shown that the utilization of MAKO’s key product has been increasing. As surgeons gain experience and become more confident with the machine, they are using it more.

According to MAKO, during 2,413 “MAKOplasty” procedures were performed during the third quarter (period ended Sept. 30), of which 2,322 were performed at domestic sites. Of the 2,322 domestic procedures, 302 were total hip arthroplasty (THA) procedures. The 2,413 total MAKOplasty procedures performed during the third quarter represent a 7 percent decrease compared with Q2 2011 data. Through Sept. 30, 2012, more than 20,000 MAKOplasty procedures had been performed since the technique debuted in June 2006.

The company also has diligently been working to build a strong suite of clinical evidence that shows the benefits of using RIO in partial knee and total hip arthroplasty. There currently are more than 70 clinical studies in process.

In Q3, MAKO launched the RIO 2.5 software, which is designed to improve the efficiency of the MAKOplasty partial knee application, speed up the registration process, and generally improves ease of use. MAKO also released the MAKOplasty THA 2.0 software, which reportedly enables a direct anterior approach for MAKOplasty total hip procedures, as well as the use of the MAKO Restoris PST cup and tapered stem implant, designed in collaboration with Cedar Knolls, N.J.-based Pipeline Orthopedics.

“We made progress in the third quarter towards re-establishing our growth trajectory in RIO system placements and have begun to put the building blocks in place to drive MAKOplasty procedure volume and utilization,” said Maurice R. Ferré, M.D., president and CEO of MAKO. “We recognize that it will take time for the constructive improvements we are making to fully manifest; however, we believe these changes will ultimately optimize our business and provide for our long term success.”

The company is confident it can sell a total of 42 to 48 RIO unit sales this year. The firm is getting close—at the end of Q3, the company has sold a total of 30.