07.24.08
8. DJO Incorporated
$492 Million
KEY EXECUTIVES:
Ken Davidson, Chairman of the Board
Les Cross, CEO
Vickie Capps, Exec. VP, Chief Financial Officer and Treasurer;
International Sales and Marketing
Luke T. Faulstick, Exec. VP and Chief Operating Officer
NO. OF EMPLOYEES:
4,000HEADQUARTERS:
Vista, CAIn another example of the deal making and private-equity investment that characterized the medical device industry for much of 2007, the big news out of DJO Incorporated for the year was its buyout by Austin, TX-based ReAble Therapeutics in a deal worth approximately $1.5 billion.
ReAble (formerly known as Encore Medical) was itself purchased by private-equity investment firm The Blackstone Group (not to be confused with the spinal implant division of Orthofix, which has the same name) for $870 million in 2006. The merger of DJO and ReAble creates a new orthopedic powerhouse that should generate close to a billion dollars in revenue for 2008, according to CEO Les Cross. Out of the total price, $1.2 billion was in cash; the remainder was for the assumption of debt. The deal was announced in July 2007 and closed in November. As a result of the merger, DJO’s common stock ceased to trade on the New York Stock Exchange. In addition, once the deal was closed, ReAble Therapeutics was renamed DJO Incorporated and relocated its headquarters to Vista, CA (near San Diego), where DJO is based.
DJO specializes in rehabilitation products such as knee braces, pain management devices as well as regeneration and bone growth stimulation products for the non-operative orthopedic and spine markets. The device maker sells its products under the DonJoy, ProCare and Aircast brands through agents, distributors and a direct sales force to orthopedic and spine surgeons, orthopedic and prosthetic centers, as well as hospitals, physical therapists and other healthcare professionals.
Through its Orthopedic Rehabilitation division, ReAble provides electrical stimulation and other orthopedic products used for pain management, orthopedic rehabilitation, physical therapy, fitness and sport-performance enhancement. ReAble’s Surgical Implant division manufactures a range of reconstructive joint products for the hip, knee and shoulder. Following the merger, in an effort to continue the corporate re-branding effort, the implant division was renamed DJO Surgical.
“DJO and ReAble have established strong positions in the orthopedic and rehabilitation markets,” said Ken Davidson, formerly CEO of ReAble and currently board chairman of DJO. “The resources of the combined company will allow us to develop even better and more innovative products, and to take care of more of the needs of more patients and caregivers than ever before. The strategic fit, both in the US and overseas, is absolutely compelling.”
For fiscal 2007 (ended Dec. 31), DJO’s net sales were $492.1 million, reflecting an increase of 35.8%, compared with actual combined net sales of $362.3 million for 2006, driven by recent acquisitions (Aircast and Axmed in 2006), as well as continued growth in each of the company’s business segments, according to officials. Net loss for the year was $82.4 million, compared with an actual combined net loss of $88.4 million for 2006. The company attributed some of the loss to costs associated with the merger.
“Over the course of 2008, we will be highly focused on the elimination of duplicate corporate and general and administrative spending and opportunities to reduce our costs of goods sold,” said Cross. “We also have the opportunity to consolidate some of our business operations…for functions such as insurance reimbursement operations and manufacturing, as well as to drive best practices and efficiencies into all of our activities. We expect to generate over $50 million of cost savings as we complete these integration projects.”
As part of the newly integrated company, the DJO Surgical division announced in March this year that it received FDA clearance for the new X-alt cross-linked polyethylene liner for DJO Surgical’s FMP acetabular hip system. The FMP implant combines the company’s existing cobalt-chrome and ceramic femoral heads with a new wear-resistant, highly cross-linked polyethylene cup liner to form the hip ball-and-socket joint. According to the company, the cross-linked polyethylene liner reduced the generation of wear particles by 87% compared with DJO’s traditional polyethylene liner. Polyethylene wear debris in total hip replacement is a leading cause of osteolysis, an inflammatory response to wear particles that can lead to subsequent implant loosening in patients who have undergone hip replacement surgery. The X-alt was designed to reduce post-surgical hip dislocation by incorporating larger-diameter femoral heads. Larger-diameter heads increase the range of motion of the femoral shaft relative to the socket, reducing the chance that the femoral head will pop of the socket.