15 things to know about Zimmer Biomet

Written by Anuja Vaidya | June 30, 2015 | Print  |

Zimmer Biomet is a formidable force in the orthopedic device market. Here are 15 things to know about the musculoskeletal healthcare magnate.

1. Justin O. Zimmer established Zimmer in 1927 to develop aluminum splints and other orthopedic equipment. In its first year, the company had sales of $160,000. In 1929, the company entered the international market when a Scottish surgeon ordered $1,200 worth of splints.


2. Mr. Zimmer's company grew into a giant of the orthopedic device industry and prior to its merger with Biomet employed nearly 8,500 people serving 100 countries.


3. Biomet was established in 1977 in Warsaw, Ind., with an aim to be highly responsive to the changing needs of orthopedic surgeons and to set new standards for quality and clinical durability. Biomet's IPO was in 1982 and the company now employs nearly 9,000 people and distributes products to nearly 90 countries.


4. The much anticipated Zimmer-Biomet merger closed in late June. Zimmer acquired Biomet for $14 billion in a cash and equity transaction. The combined companies' corporate name is Zimmer Biomet Holdings and the company began trading on the New York Stock Exchange and SIX Swiss Exchange under the ZBH ticker symbol on June 29.


5. The merger makes Zimmer Biomet the leading innovator in the $45 billion musculoskeletal healthcare market.


6. Zimmer Biomet expects to reach net annual synergies of around $350 million by 2018 — three years after the deal finalizes — and expects $135 million in the first 12 months. The transaction is expected to be double-digit accretive to the Company's adjusted earnings per share in the first year.


7. In order for the FTC to approve the merger, Smith & Nephew acquired Zimmer's unicondylar knee system in a transaction that is expected to close within three days after the Zimmer-Biomet merger closes. The terms of the agreement were not disclosed. DJO Global also acquired assets from Zimmer. The company purchased the Biomet Cobalt Bone Cement, Optivac Cement Mixing Accessories and Discovery Elbow System. Terms of the transactions were not disclosed.


8. David Dvorak is president and CEO of Zimmer Biomet. He championed the Biomet acquisition as Zimmer's CEO. Prior to taking the helm at Zimmer in 2007, Mr. Dvorak served as group president, global businesses and chief legal officer. Prior to joining Zimmer, Mr. Dvorak served as senior vice president, general counsel and corporate secretary for STERIS.


9. Other members of the Zimmer Biomet leadership team include Robin T. Barney, senior vice president, global operations and logistics; Tony Collins, vice president, corporate controller and chief accounting officer; Stuart Kleopfer, president, Americas; and Daniel P. Florin, senior vice president and CFO.


10. Before the acquisition, Zimmer offered more than 130,000 orthopedic products for treating hips, knees, shoulders, elbows, foot and ankle and spine conditions. Additionally, the company offers trauma and dental devices as well as surgical and operating room solutions. Some of its key products include the Zimmer Persona Knee, the Trabecular Metal Acetabular Revision System and the APEX Spine System.


Biomet's product portfolio included hip and knee reconstructive products; sports medicine, extremities and trauma products; and spine technologies, among others. A key product for Biomet is the Vanguard XP Total Knee System.


11. Zimmer's first quarter of 2015 financial results showed net sales of $1.13 billion, which was a 2.3 percent decrease over the same period last year. However, net earnings were $177.1 million, a slight decrease from the same time last year. Operating cash flow for the first quarter was $73 million, which included a $97.6 million payment to settle a pre-issuance hedge contract associated with a previous senior notes offering.


12. Excluding Biomet-acquired revenue, the second quarter constant currency revenue growth is expected to reach 1 percent to 1.5 percent. The full year 2015 revenue is expected to increase 1.5 percent to 2 percent compared to pro forma 2014 revenues.


13. Pre-acquisition, for the third quarter of fiscal year 2015, Biomet reported net sales decreased 2.6 percent to $800.9 million from $822.5 million during the same period in 2014. U.S. net sales increased 1.1 percent during the third quarter to $514.8 million, while Europe net sales decreased 12.3 percent to $175.1 million.


14. In recent Kalorama Information report, Zimmer joined DePuy Synthes, Stryker and Medtronic to make up 70 percent of the total revenue for 2014 in the global orthopedic device market. Now that Zimmer's acquisition of Biomet is final, the merged company will be a leader in the large joint arena and increase its standing in extremities.


15. Analyst Mike Matson, of Needham & Co., called the transaction a "home run." "Zimmer's overall orthopedic market share increases from 10 percent to 17 percent pushing it past Stryker into the No. 2 position behind Johnson & Johnson."


Zimmer Biomet's worldwide share in the following segments is expected to increase:


•    Knees — from 27 percent to 40 percent,
•    Hips — from 22 percent to 32 percent
•    Trauma — from 5 percent to 10 percent
•    Spine — from 2 percent to 4 percent
•    Extremities — from 11 percent to 20 percent


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