08.02.07
10. Orthofix
$365 Million
Key Executives:
Alan W. Milinazzo, Group President and CEO
Thomas Hein, CFO
Scott Dodson, President, Orthopedic Division
Oliver Burckhard, President, International Division
Matt Lyons, President and CEO, Blackstone Medical
No. of Employees: 1,900
Headquarters: Curaçao, Netherlands Antilles
Founded in 1980, Orthofix seems to have made strategic acquisitions part of its formula for steady growth—particularly since the early 1990s. The 2006 fiscal year proved to be no exception. The company, headquartered in the Netherlands Antilles (with corporate administrative offices located in Huntersville, NC, a suburb of Charlotte), acquired Blackstone Medical in September 2006 for $333 million.
Based in Springfield, MA, Blackstone Medical (not to be confused with the private equity firm named Blackstone) merged its spinal implants and related biologic products with Orthofix’s spinal stimulation business. For 2007, the company expects its newly expanded spinal division to generate $260 million in revenue.
The addition of Blackstone’s product line provides Orthofix with several new device offerings, including cervical and lumbar plates and other fixation systems that incorporate the use of metal bracing and pedicle screws to stabilize the spine; interbody devices and vertebral body replacements used to restore the space between two vertebrae that has been lost as a result of degenerative disc disease or to replace the damaged vertebrae; and the only commercially available adult stem cell-based biologic bone grafting product for the growth of new bone around the spine.
For fiscal year 2006 (ended Dec. 31), revenue totaled $365 million, including Blackstone’s fourth-quarter contribution of $28 million, an increase of 17% compared to 2005. Notably, fourth-quarter revenue was a record $116.1 million, an increase of 45%.
The company, however, reported a net loss of $7 million, largely due to costs incurred during the Blackstone purchase, according to Orthofix. Excluding the impact of purchase accounting costs associated with the Blackstone acquisition as well as certain other items, the company said adjusted net income was $36.7 million.
“Orthofix’s results in the fourth quarter were, once again, in line with our expectations, with each of our business sectors reporting sales growth compared with the prior year,” said CEO Alan Milinazzo. “In addition to strong quarterly results from Blackstone, we continue to be encouraged by the improved performance of our other operations, including our orthopedics and sports medicine businesses.”
Spine sales for 2006 were $145.1 million, including Blackstone, which was a 43% increase compared to 2005. Excluding Blackstone, the company’s spine revenues grew 15% compared to 2005.
Orthopedic revenue for the full year 2006 was $95.8 million, an increase of 4%. Growth, the company said, was driven by higher sales in each of its three main product areas, including internal and external fixation devices, deformity correction products and bone-growth stimulators. The company’s sports medicine division reported $79 million in net sales for 2006, an increase of 8%. Orthofix’s sports medicine subsidiary, BREG, Inc. (acquired in December 2003) produces devices for functional knee bracing.
For 2007, the company is off to a strong start.
In February, Orthofix launched two new internal nailing systems. The VeroNail is a trochanteric nailing system for the treatment of hip fractures, and the Centronail is a new family of nails designed to reduce operating room time and increase surgeon flexibility during the treatment of long bone fractures such as those in the tibia or the humerus, according to the company.
For the first quarter of fiscal 2007 (ended March 31), Orthofix reported revenue of $117 million, an increase of 44%, thanks largely to its most recent acquisition. Reported first quarter earnings were $6.3 million.
First-quarter sales for the company’s spine sector grew 101% to $56.1 million. Implant and biologic revenues from Blackstone were $26.4 million, which was an increase of 43% compared with its first-quarter sales in 2006, prior to the acquisition by Orthofix. This growth was due to higher sales of implant products, including Icon minimally invasive pedicle screw systems, Unity anterior lumbar plating systems, Construx vertebral body replacement devices and Pillar interbody devices, the company said.
Additionally, revenue from Blackstone’s biologic portfolio increased as a result of higher sales of Trinity bone growth matrix. Revenue from Orthofix’s spine stimulation devices rose 7%, driven by sales of Cervical-Stim, which is the only FDA-approved stimulator for the cervical spine.
Revenue from Orthofix’s orthopedic business grew 21% percent, to $27.6 million, fueled by the continued growth of internal fixation and deformity correction devices, as well as 18% growth in sales of the Physio-Stim bone growth stimulator for non-union fractures, the company said. Revenue for the company’s sports medicine division rose 10% to $21.2 million.
For the full 2007 fiscal year, the company predicts total revenue of $487 to $502 million.