How Conformis plans to reduce debt, reach profitability in 2019 — 5 insights

Spinal Tech

Medical device company Conformis will implement various strategies in 2019 to improve its overall business model and achieve profitability in 2021.

The organization-wide actions include:

1. Expense management — To leverage improvements in gross margin, company expense reductions will affect sales and marketing, research and development, and general and administrative departments.

As a result, Conformis believes there will be a reduction in the use of cash by operating activities from approximately $10 million per quarter during 2018 to less than $4 million per quarter in 2019.

2. New product development — The company plans to continue to execute its new product development programs focusing on the Conformis Hip System, iTotal G3 and cementless Press Fit knee.

3. International expansion — Recognizing demand for its custom orthopedic knee replacement implants outside the U.S., Conformis identified opportunities to expand its distribution in certain international markets to help offset sales' weakness in Germany.

4. Organizational transformation — Conformis reduced 10 percent of its workforce this month. The company expects to incur employee severance charges and other exit costs of an estimated $700,000 in the fourth quarter and to generate annual personal expense savings of more than $4 million in 2019.

5. Debt reduction and restructuring — Conformis entered into an amendment of its loan and security agreement with finance firm Oxford Finance. Conformis used cash to pay down $15 million of its $30 million debt facility, reducing the loan's total amount owed and associated interest moving forward.

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