Zimmer Biomet CEO Bryan Hanson clears the air on CFO transition, focuses on robotics during Q2 earnings call

Spinal Tech

Zimmer Biomet reported relatively flat overall net sales at $1.9 billion for the second quarter. Knee and hip sales were up slightly while spine and craniomaxillofacial sales dropped 6.2 percent.


During the second quarter earnings conference call, as transcribed by Seeking Alpha, Zimmer Biomet President and CEO Bryan Hanson spoke about the company's CFO transition, robotic technology and potential growth for the spine business after a disappointing quarter. 

On June 19, the company announced its CFO, Daniel Florin, would retire as of July 1, succeeded by Suketo Upadhyay. Mr. Florin remains with the company as an advisor to ensure a smooth transition. There has been some speculation around the move, and Mr. Hanson addressed the rumors before speaking to the company's quarterly performance during the second quarter earnings call.

"I'm sure we have had a lot of people talking about the CFO transition. People have been writing quite a bit about it, even some people thought that maybe the CFO transition might signal that we didn't have confidence in our guidance," said Mr. Hanson. "This morning has already proven that's not to be the case. This truthfully is just Dan's intent to spend more time with his family — and who are we to get in the way of that aspiration?"

Mr. Hanson said that Mr. Florin provided advanced notice of his intent to retire and help with the transition. Both Mr. Florin and Mr. Upadhyay were on the earnings call. The company updated its guidance to reflect confidence in its turnaround and investment for growth.

Zimmer Biomet has also focused on growth with its ROSA robotics platform, specifically the ROSA Knee, which is in limited launch. "The ROSA Knee system is receiving very high marks out of the gate and feedback from surgeons is very positive," said Mr. Hanson. "While the overall number of placements in the second quarter remained relatively small, it's clear we have a solution that is attractive to our surgeon partners as evidenced by the surgeon feedback we received from the hundreds of procedures that we've performed since launch."

He also said the company expects to increase investment in robotic research and development as well as commercial infrastructure.

"We want to lean into the investment and make sure that we are increasing investment in research and development to be able to fill some of the gap areas that we have in robotics, but I think more importantly to move head," said Mr. Hanson. "You know, we don't want to just fill gaps that exist in robotic applications today. We want to be able to bring a more integrated ecosystem of robotics that will differentiate us beyond what other players have. And so that's where some of [the] R&D money is going."

New product launches in spine, including ROSA Spine, could boost the company's spine business. Spine sales were down 6.2 percent in the second quarter, which Mr. Hanson said the company wasn't happy about. He blamed "difficult comps" for the decline and said Zimmer Biomet was working through the challenges to consolidate the spine channel consolidation. Coupled with the new product launches expected to occur in the first half of 2020, the newly structured spine line is expected to improve.

The company has also made leadership changes in the spine business. "When you're making a significant decision to consolidate [a] channel, there's always risk associated with that, but truthfully I'd rather take the risk, do the right thing for the channel and make sure that we take advantage of it in the future," said Mr. Hanson. "So, I feel good about all the decisions that have been taken. I feel good about the fact that we've moved through a lot of channel consolidation. Now it's just making sure that that channel gels and ensuring that we've chosen the right distributive partners to double down on and that will just take some time to determine whether that is in fact the case."

Mr. Hanson also mentioned that one potential roadblock in deploying the robotic technology was surgeon education. He said the company has reported in at least one case a surgeon didn't understand how to do patient registration correctly and had to transition the procedure back to the traditional technique.

Surgeons did provide positive feedback about the process, which does not include preoperative CT scans for pre-surgical planning. Instead, surgeons can take 2D X-rays and use them for the pre-surgical planning.

"[That's a] pretty big difference that the competition doesn't have," Mr. Hanson said. "I've heard a lot of people say, and it does frustrate me, that [ROSA] is not quite as good as the market leader, but it's a good enough system. I think it's completely the opposite. The feedback that we're getting is that it is a better system than what's out there and people are excited about that."

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