Q1 Trends:
Buoyed by sales of knee and hip replacements and improving procedure rates, Zimmer Biomet started the year with a “phenomenal quarter where pretty much everything went better than expected,” CEO Bryan Hanson said on a Tuesday earnings call.
The company reported a 10% increase in revenue and net income 16 times what it was a year earlier, which Hanson attributed to better-than-expected procedure recovery, improved management of supply constraints, new product launches, and little impact from the COVID-19 pandemic in the quarter.
Given a strong performance by orthopedics competitors and an easy comparison in 2022, “we were expecting a good print,” J.P. Morgan analyst Robbie Marcus wrote in a research note, adding the company’s revenue growth “comes in well ahead of our expectations.”
Sales of knee implants increased by 15% in the quarter, and hip implants increased 9.3%. Zimmer Biomet’s U.S. sales increased by 13%, while international sales increased by 7%.
Stifel analyst Rick Wise said that in the context of the “Big 4” orthopedic companies, Zimmer Biomet’s large joint performance had the second-fastest quarterly growth reported this earnings season.
“To us, this performance should help ‘close-the-door’ on any lingering concerns about Zimmer Biomet’s ability to maintain or grow market share,” Wise wrote in a research note.
Cementless knee launch
Zimmer Biomet launched a new cementless knee product, the Persona OsseoTi Keel Tibia, during the quarter. The implant allows surgeons to decide during an operation if a procedure needs to be cemented, based on the patient’s bone quality. A full launch is planned for the middle of the year, Hanson said.
Currently, Zimmer Biomet has cementless knee market penetration in the mid-teens, but the company believes it can get to 50% or higher, the CEO said.
“Make no mistake, this is a real driver for not just our knee franchise but for the overall company, so we’re very excited,” he added.
Persona IQ update
The company continues to plan for a full market launch of its Persona IQ system, which involves knee implants with embedded sensors, at the end of 2023. COO Ivan Tornos said the company has signed additional contracts across the U.S.
During a limited market release, the company has been working on how to best analyze the data being collected and understand its clinical value. It has also been working on making the customer experience seamless and figuring out how to monetize the device.
“In those four key areas, we've made tremendous advancements, and I do believe we're going to be in a position to launch at the end of the year,” Tornos said.
Ossis acquisition
Zimmer Biomet on Monday struck an agreement to acquire Ossis, a New Zealand-based company that makes personalized 3D-printed implants. Ossis also makes complex hip replacements, including second-time hip replacements and replacements involving bone tumors and trauma. The companies did not disclose the terms of the agreement.
Zimmer Biomet has been partnering with Ossis since the summer of 2021, when it brought on the company as its Asia Pacific partner for patient-specific 3D-printed titanium hip joint replacements and other pelvic bone replacement surgeries. The partnership was expanded last year.
Forecast raise
Zimmer Biomet increased its top- and bottom-line forecast for 2023. It now expects revenue to increase by 5% to 6%, compared to its previous expectations of a 1.5% to 3.5% increase.
The company also expects adjusted diluted earnings per share of $7.40 to $7.50, an increase from its previous forecast of $6.95 to $7.15.
Zimmer Biomet’s shares rose 3.42% to $143.58 in Tuesday morning trading.
