07.31.12
$579 Million
KEY EXECUTIVES:
Robert S. Vaters, President and CEO
Vicente Trelles, Exec. VP, Worldwide Operations, Shared Services and R&D
Brian McCollum, SR. VP of Finance and Chief Financial Officer
Michael Finegan, Sr. VP of Business Development and President, Biologics
Bryan McMillan, President, Spine Global Business
Luigi Ferrari, President, Global Orthopedics
Mark Boone, Sr. VP and Chief Compliance Office
NO. OF EMPLOYEES: 1,400
GLOBAL HEADQUARTERS: Lewisville, Texas
Chances are the executives at Orthofix International N.V. weren’t thinking of Britain’s Iron Lady when they were making their upper management decisions during the 2011 fiscal year, but nonetheless the year certainly was marked by a number of changes “at the top.”
And the very top is a good place to start. Robert S. Vaters was promoted from chief operating officer (COO) to president and CEO in August of 2011. Alan Milinazzo stepped down after six years at the helm, but remained on the company’s board. Earlier in the year Vaters had been promoted from chief financial officer (CFO) to COO.
“Since joining Orthofix as chief financial officer in 2008, Bob has delivered measurable business value in our key business drivers, proving himself a tireless worker and terrific leader through a series of increasingly challenging and successful assignments. The board believes Bob is the right person to lead our company during this next phase of our growth and we’re excited that he has accepted the position of president and CEO,” said Jim Gero, chairman of the Orthofix board of directors. “We’re also very thankful to Alan for everything he has done for Orthofix over the past six years and delighted that he will remain an essential advisor to us as a member of the board.”
In October, Bryan McMillan was promoted to president of the Spine Global business unit, where he had been serving as the executive vice president and general manager for the spinal implants division since February 2011. McMillan has been with the company since March 2010 in various roles of increasing management responsibilities. His new role makes him responsible for activities of the spinal implants and stimulation businesses, which previously were managed separately.
“Bryan has proven himself as an exceptional leader in our spinal implants business,” said Vaters. “I am certain that … he can further drive growth while creating synergies and cross-selling opportunities between our best in class spinal implants, biologics, and our market-leading spinal stimulation products.”
Vicente Trelles was appointed senior vice president of World Wide Operations and Shared Services. Trelles joined Orthofix with more than 25 years of experience in the medical device and pharmaceutical industries. Since 2006, Trelles served as partner of a healthcare private equity firm that he co-founded. From 2001 to 2006, he was an executive vice president and chief operations officer at Inamed Corporation, which was acquired by Allergan in March 2006. Prior to Inamed, he was an executive with Allergan, Baxter Healthcare and American Hospital Supply in Europe and the United States.
In March, Brian McCollum was promoted to chief financial officer. McCollum had been serving as the company’s interim CFO since January 2011. He’s been with the company for 10 years in various roles of increasing responsibilities, most recently serving as senior vice president of finance.
In spite of, or perhaps because of, the musical chairs in the front office in fiscal 2011 (ended Dec. 31), sales continued to expand. Net sales for the year were $579 million, up from $564 million in 2010. Net loss for the year was $1.1 million, or 6 cents per diluted share, compared to $44 million in net earnings for fiscal 2010. Adjusted net income (which excludes one-time items such as legal fees including $48 million related to government resolutions, etc.) was $51.1 million, or $2.75 per diluted share, for the year, up 30 percent from fiscal 2010. Spine sales made up $304 million of the total (down from $306 million in 2010). Implants made up $144 million (up 7 percent) of the spine sales total, while stimulation devices were 160 million (down 7.5 percent). Orthopedics netted $165 million (up from $154 million) and sports medicine earned roughly $109 million (up from $104 million in 2010).
The firm’s orthopedics and spinedivisions provide devices for adult and pediatric deformity correction, internal and external fracture fixation, biologics, regenerative stimulation, interbody fusion and minimally invasive surgery. In 2011, Breg Inc., Orthofix's sports medicine division, was still part of the picture. The unit, however, was divested in 2012 to Chicago, Ill.-based Water Street Healthcare Partners, a private equity firm, for just shy of $158 million.
The company may have had plans to jettison Breg, but not before the division rolled out a few products for the year, including the SlingShot 3 shoulder brace, the LPR ligament knee brace and the Mini Walker boot.
SlingShot has two patent-pending features including a unique shoulder harness that off-loads pressure from the neck and disperses it along the opposing shoulder and scapula, in addition to an abduction pillow that provides multiple options for clinicians to support the shoulder joint after surgery.
The LPR is designed to provide protection for post-surgery patients returning to normal activities, and non-operative patients who require additional ligament support. The LPR brace’s patent-pending triangle “truss” frame is made of aerospace aluminum, which adds strength while keeping the brace lightweight. The brace includes a series of vents and grooved channels in the frame pads that increase airflow, “grip” the skin, and improve brace suspension for better performance. The Mini Walker is for protection for stable fractures and ankle sprains in young patients, from 1 to 9 years old.
In the fall of 2011, the company made the full market release of its Collage osteoconductive scaffold bone graft substitute for use in spine and orthopedic indications.
“We are proud to announce the launch of Collage, our new synthetic platform based on highly-purified biocompatible materials of ß-TCP and type-1 collagen,” said Michael Finegan, President of Biologics. “We have been tremendously successful with Trinity Evolution and can now focus on broadening our portfolio of biologic products so that we can fulfill all the needs of our customers. The synthetic segment of the market is large, attractive, and presents a perfect complement to our existing biologic portfolio.”
The U.S. market for synthetic bone graft substitutes is estimated to include more than 320,000 procedures and is valued at approximately $360 million annually, according to a recent iData Research report.
The end of the fiscal year also brought certain legal matters to a close.
The announcements came in early 2012, but the company recorded most of the related charges in its 2011 financials. Orthofix finalized agreements to resolve a U.S. Department of Justice (DOJ) investigation into its bone growth stimulation business. The case included a federal lawsuit accusing Orthofix and several other medical device firms of misleading doctors into prescribing bone-growth stimulation devices to patients for longer periods of time than necessary, thereby defrauding government programs such as Medicare. The lawsuit claimed the devices generally are used only for three to six months, then left to collect dust in homes and clinics. The Boston Business Journal quoted one document noting, “These devices can often be found selling on eBay for $50.” Orthofix paid $43 million to close the federal investigation and enter into a five-year corporate integrity agreement with the U.S. Health and Human Services Department’s Office of Inspector General.
“I am very pleased with the substantial progress made regarding these three legal matters, which removes a significant amount of risk and uncertainty for the company,” Vaters said, noting that the company had made “significant improvements” to its compliance practices, personnel, and financial standing. “I look forward to a stronger focus on the company’s operations, including investments in R&D to position the company for long-term growth, while maintaining earnings improvement.”
In addition to the federal bone-growth stimulation investigation, the company also reached an agreement in principle with the U.S. Attorney’s Office in Massachusetts to pay $32 million to resolve an investigation into its Blackstone Medical subsidiary (Orthofix bought Blackstone in 2006). Blackstone was named in a number of lawsuits and Orthofix received several subpoenas from various government agencies concerning allegations that the spinal implant maker violated the federal False Claims Act by providing allegedly inappropriate payments and other items of value to physician consultants, U.S. Securities and Exchange Commission filings showed.
The company also reached an agreement in principle with the DOJ to settle criminal violations of the Foreign Corrupt Practices Act (FCPA) that it voluntarily reported to the U.S. government in June 2010 concerning its former Mexican orthopedic distribution entity. In the first quarter of 2011, the company spent $3 million to establish an accrual in connection with this case based on the results of its own internal investigation and an analysis of similar FCPA resolutions.
KEY EXECUTIVES:
Robert S. Vaters, President and CEO
Vicente Trelles, Exec. VP, Worldwide Operations, Shared Services and R&D
Brian McCollum, SR. VP of Finance and Chief Financial Officer
Michael Finegan, Sr. VP of Business Development and President, Biologics
Bryan McMillan, President, Spine Global Business
Luigi Ferrari, President, Global Orthopedics
Mark Boone, Sr. VP and Chief Compliance Office
NO. OF EMPLOYEES: 1,400
GLOBAL HEADQUARTERS: Lewisville, Texas
“People think that at the top there isn’t much room. They tend to think of it as an Everest.
My message is that there is tons of room at the top.”
— Margaret Thatcher
My message is that there is tons of room at the top.”
— Margaret Thatcher
Chances are the executives at Orthofix International N.V. weren’t thinking of Britain’s Iron Lady when they were making their upper management decisions during the 2011 fiscal year, but nonetheless the year certainly was marked by a number of changes “at the top.”
And the very top is a good place to start. Robert S. Vaters was promoted from chief operating officer (COO) to president and CEO in August of 2011. Alan Milinazzo stepped down after six years at the helm, but remained on the company’s board. Earlier in the year Vaters had been promoted from chief financial officer (CFO) to COO.
“Since joining Orthofix as chief financial officer in 2008, Bob has delivered measurable business value in our key business drivers, proving himself a tireless worker and terrific leader through a series of increasingly challenging and successful assignments. The board believes Bob is the right person to lead our company during this next phase of our growth and we’re excited that he has accepted the position of president and CEO,” said Jim Gero, chairman of the Orthofix board of directors. “We’re also very thankful to Alan for everything he has done for Orthofix over the past six years and delighted that he will remain an essential advisor to us as a member of the board.”
In October, Bryan McMillan was promoted to president of the Spine Global business unit, where he had been serving as the executive vice president and general manager for the spinal implants division since February 2011. McMillan has been with the company since March 2010 in various roles of increasing management responsibilities. His new role makes him responsible for activities of the spinal implants and stimulation businesses, which previously were managed separately.
“Bryan has proven himself as an exceptional leader in our spinal implants business,” said Vaters. “I am certain that … he can further drive growth while creating synergies and cross-selling opportunities between our best in class spinal implants, biologics, and our market-leading spinal stimulation products.”
Vicente Trelles was appointed senior vice president of World Wide Operations and Shared Services. Trelles joined Orthofix with more than 25 years of experience in the medical device and pharmaceutical industries. Since 2006, Trelles served as partner of a healthcare private equity firm that he co-founded. From 2001 to 2006, he was an executive vice president and chief operations officer at Inamed Corporation, which was acquired by Allergan in March 2006. Prior to Inamed, he was an executive with Allergan, Baxter Healthcare and American Hospital Supply in Europe and the United States.
In March, Brian McCollum was promoted to chief financial officer. McCollum had been serving as the company’s interim CFO since January 2011. He’s been with the company for 10 years in various roles of increasing responsibilities, most recently serving as senior vice president of finance.
In spite of, or perhaps because of, the musical chairs in the front office in fiscal 2011 (ended Dec. 31), sales continued to expand. Net sales for the year were $579 million, up from $564 million in 2010. Net loss for the year was $1.1 million, or 6 cents per diluted share, compared to $44 million in net earnings for fiscal 2010. Adjusted net income (which excludes one-time items such as legal fees including $48 million related to government resolutions, etc.) was $51.1 million, or $2.75 per diluted share, for the year, up 30 percent from fiscal 2010. Spine sales made up $304 million of the total (down from $306 million in 2010). Implants made up $144 million (up 7 percent) of the spine sales total, while stimulation devices were 160 million (down 7.5 percent). Orthopedics netted $165 million (up from $154 million) and sports medicine earned roughly $109 million (up from $104 million in 2010).
The firm’s orthopedics and spinedivisions provide devices for adult and pediatric deformity correction, internal and external fracture fixation, biologics, regenerative stimulation, interbody fusion and minimally invasive surgery. In 2011, Breg Inc., Orthofix's sports medicine division, was still part of the picture. The unit, however, was divested in 2012 to Chicago, Ill.-based Water Street Healthcare Partners, a private equity firm, for just shy of $158 million.
The company may have had plans to jettison Breg, but not before the division rolled out a few products for the year, including the SlingShot 3 shoulder brace, the LPR ligament knee brace and the Mini Walker boot.
SlingShot has two patent-pending features including a unique shoulder harness that off-loads pressure from the neck and disperses it along the opposing shoulder and scapula, in addition to an abduction pillow that provides multiple options for clinicians to support the shoulder joint after surgery.
The LPR is designed to provide protection for post-surgery patients returning to normal activities, and non-operative patients who require additional ligament support. The LPR brace’s patent-pending triangle “truss” frame is made of aerospace aluminum, which adds strength while keeping the brace lightweight. The brace includes a series of vents and grooved channels in the frame pads that increase airflow, “grip” the skin, and improve brace suspension for better performance. The Mini Walker is for protection for stable fractures and ankle sprains in young patients, from 1 to 9 years old.
In the fall of 2011, the company made the full market release of its Collage osteoconductive scaffold bone graft substitute for use in spine and orthopedic indications.
“We are proud to announce the launch of Collage, our new synthetic platform based on highly-purified biocompatible materials of ß-TCP and type-1 collagen,” said Michael Finegan, President of Biologics. “We have been tremendously successful with Trinity Evolution and can now focus on broadening our portfolio of biologic products so that we can fulfill all the needs of our customers. The synthetic segment of the market is large, attractive, and presents a perfect complement to our existing biologic portfolio.”
The U.S. market for synthetic bone graft substitutes is estimated to include more than 320,000 procedures and is valued at approximately $360 million annually, according to a recent iData Research report.
The end of the fiscal year also brought certain legal matters to a close.
The announcements came in early 2012, but the company recorded most of the related charges in its 2011 financials. Orthofix finalized agreements to resolve a U.S. Department of Justice (DOJ) investigation into its bone growth stimulation business. The case included a federal lawsuit accusing Orthofix and several other medical device firms of misleading doctors into prescribing bone-growth stimulation devices to patients for longer periods of time than necessary, thereby defrauding government programs such as Medicare. The lawsuit claimed the devices generally are used only for three to six months, then left to collect dust in homes and clinics. The Boston Business Journal quoted one document noting, “These devices can often be found selling on eBay for $50.” Orthofix paid $43 million to close the federal investigation and enter into a five-year corporate integrity agreement with the U.S. Health and Human Services Department’s Office of Inspector General.
“I am very pleased with the substantial progress made regarding these three legal matters, which removes a significant amount of risk and uncertainty for the company,” Vaters said, noting that the company had made “significant improvements” to its compliance practices, personnel, and financial standing. “I look forward to a stronger focus on the company’s operations, including investments in R&D to position the company for long-term growth, while maintaining earnings improvement.”
In addition to the federal bone-growth stimulation investigation, the company also reached an agreement in principle with the U.S. Attorney’s Office in Massachusetts to pay $32 million to resolve an investigation into its Blackstone Medical subsidiary (Orthofix bought Blackstone in 2006). Blackstone was named in a number of lawsuits and Orthofix received several subpoenas from various government agencies concerning allegations that the spinal implant maker violated the federal False Claims Act by providing allegedly inappropriate payments and other items of value to physician consultants, U.S. Securities and Exchange Commission filings showed.
The company also reached an agreement in principle with the DOJ to settle criminal violations of the Foreign Corrupt Practices Act (FCPA) that it voluntarily reported to the U.S. government in June 2010 concerning its former Mexican orthopedic distribution entity. In the first quarter of 2011, the company spent $3 million to establish an accrual in connection with this case based on the results of its own internal investigation and an analysis of similar FCPA resolutions.