5. Synthes
$3.2 Billion
KEY EXECUTIVES:
Dr. Hansjörg Wyss, Board Chairman
Michel Orsinger, President and CEO
Robert Donohue, CFO
Ciro Römer, President, Europe, Middle East and Africa & GlobalOperations
NO. OF EMPLOYEES: 9,947
GLOBAL HEADQUARTERS: West Chester, Pa.
It was a year most business executives would rather forget. Profits nosedived, stock prices plummeted, and investor anxiety grew faster than public outrage against CEO bonuses. In short, there wasn’t much to celebrate in 2008.
Executives at Synthes Inc., however, found a good reason to rejoice—the implant manufacturer reported record financial results in 2008, with net profit up by 20 percent and sales up nearly 16 percent.
“2008 was a year of great economic turmoil throughout the world, negatively impacting most industries and creating tremendous unemployment and uncertainty,” Hansjörg Wyss, Synthes board chairman and Michel Orsinger, president and CEO, told shareholders at the start of the company’s 2008 annual report. “While most politicians, CEOs, shareholders and investors would rather not be reminded about 2008…Synthes finds itself in a strong and advantageous position.”
Such a strong and advantageous position was made possible by a financially sound year, which featured an improvement in the company’s gross margin, a decrease in the global tax rate and a strong balance sheet that included no debt, substantial borrowing capacity and a considerable cash flow.
Net sales totaled $3.2 billion, a 15.7 percent increase compared with the $2.7 billion Synthes reported in 2007. Gross profit jumped 18 percent, going from $2.2 billion in 2007 to $2.63 billion in 2008, ended Dec. 31. Net earnings totaled $735 million, while operating income rose 19 percent to $1 billion.
North America generated the bulk of Synthes’ sales last year, contributing $1.92 billion in sales (which amounted to 60.2 percent of the company’s total sales). Within the United States, revenues were $1.8 billion, an 11.7 percent increase compared with the $1.6 billion in U.S. sales reported in 2007. Increased sales in the Spine product segment helped Synthes become the second-largest supplier of spinal products.
Some of the products helping to drive the growth in Synthes’ Spine business last year included the Zero-P, an implant used in the cervical spine to help fuse diseased discs; and the Prodisc-C, an implant designed to maintain the physiological range of motion in the cervical spine. The Prodisc-C is composed of three components—two cobalt chrome alloy endplates and an ultra-high molecular weight polyethylene inlay.
The company released dozens of new products in the United States last year that improved treatments for the shoulder, tibia (lower leg), clavicle, wrist and adolescent femur (upper leg). Some of the products were instruments that allow surgeons to treat fractures less invasively. One such product was the LCP Volar Column Distal Radius Plate, a device designed to fix complex wrist fractures. This item is a key addition to Synthes’ wrist fracture plate portfolio because it gives surgeons various options to treat these injuries, which the company claims is the most common kind of fracture in humans.
Cranio-Maxillofacial (CMF) sales were driven by the launch of the MatrixMANDIBLE fixation system, a plating system to fix the lower jaw, and the MatrixMIDFACE Pre-formed Orbital Plates, a facial plating product line. Both products complement the company’s MatrixMIDFACE and MatrixNEURO systems for complete craniofacial treatment. Executives said the entire Matrix brand product line is becoming “the new reference of Synthes’ core CMF products” and is key to helping the company increase its share of the worldwide CMF market.
Further market penetration of Synthes’ In-Space implant also helped boost sales in the Spinal segment last year. The In-Space device is designed to treat lumbar spinal stenosis through a minimally invasive lateral approach.
Synthes achieved sales growth in all major geographic areas last year. Europe, the Middle East and Africa generated $756.1 million, with Europe contributing 13.4 percent and the Middle East and Africa comprising 37.1 percent to total net sales.
Above-average growth was posted predominantly in Eastern Europe (Russia, Hungary and Poland), as well as in France and some northern European countries. The company established Synthes Turkey in early 2008; the sales and distribution operation established in Istanbul is expected to expand into other major centers throughout the country this year.
During the second half of 2008, Synthes established a direct market presence in northern Germany by ending its distributor agreement in the region and expanding its south German operation to handle additional market requirements. The German market is Europe’s biggest and represents more than a fifth of Synthes’ European business.
Net sales in Asia Pacific, the company’s third-largest market, grew 16.8 percent to $309 million. Executives attributed the increase to above-average growth in China, South Korea and India. Sales in New Zealand, Hong Kong and Singapore also grew at an above-average rate, according to the company.
Piggybacking its successful launch of the Asian PFNA femoral nail, Synthes introduced an Asian-specific spinal product last year called Lotus. The company expects the region to deliver strong sales growth in the next few years, as the firm opens its own manufacturing facility in Suzhou, near Shanghai, China (the second half of 2009). “We expect our local presence as a manufacturer and employer to have a positive impact on our reputation and business in Asia Pacific and facilitate the development of business in China, which is expected to become the largest medical device market in the world in the next few years,” the company’s 2008 annual report stated.
Synthes also is hoping to further develop its reputation in Latin America over the next few years. That region generated $136.6 million in sales last year.If its long-term business strategy is successful, Synthes may gain a reputation in the near future as a medical technology provider.
In March 2008, the firm acquired Innomedic GmbH, a German company that develops computer software and programs used in medical technology applications. The acquisition enables Synthes to gain experience in software development for medical technology applications.