The President of ZimVie Spine, recently conducted a Q&A session with MedTechDive, prompting me to ponder why anyone would take ZimVie’s advice seriously?.
ZimVie’s track record in the spine industry has been nothing short of dismal. It begs the question: are people blind to past performance and terrible execution?
To shed light on this matter, let’s delve into a quantitative analysis, comparing ZimVie’s acquisition costs with the company’s current valuation.
Let’s first examine ZimVie’s history of acquisitions:
1. 2008 – Spinal Concepts Acquisition from Abbott for $360 million: This strategic move provided Zimmer Biomet (ZimVie’s parent company) with access to Spinal Concepts’ innovative product portfolio, which included innovative interbody designs.
2. 2013 – Lanx Acquisition for $147 million: This acquisition expanded Biomet Spine’s technology portfolio by incorporating Lanx’s innovative products, such as the Timberline® Lateral Approach Fusion System and the Aspen® Minimally Invasive Fusion System. These additions complemented Biomet Spine’s existing product lineup, including the Lineum® OCT Spine System, MaxAn® Anterior Cervical Plate System, Cellentra™ VCBM, and the Polaris™ Translation™ Screw System.
3. 2016 – LDR Acquisition for $1.0 billion (6 X sales): acquired LDR, a prominent provider of motion preservation and fusion solutions for spinal surgery. This acquisition not only expanded Zimmer Biomet’s spine portfolio but also fortified its position in the motion preservation market.
4. 2020 – A&E Medical Corporation Acquisition for $250 million: In 2020, ZimVie’s parent company, Zimmer Biomet, acquired A&E Medical Corporation for $250 million. A&E Medical was a leading developer and manufacturer of sternal closure devices, and this acquisition granted Zimmer Biomet access to A&E Medical’s innovative product range, including the Prevail sternal fixation system.
Now, let’s add up the costs of these acquisitions:
- Spinal Concepts: $360 million
- Lanx: $147 million
- LDR: $1.0 billion
- A&E Medical Corporation: $250 million
Total Acquisition Costs: $1,757 million
Contrast this substantial investment with ZimVie’s current market capitalization:
Market Cap of ZimVie Today: $244 million
In addition to the glaring financial disconnect between ZimVie’s acquisitions and its current market value, a closer examination of the poor sales conversion following these acquisitions paints a disheartening picture. In 2007, before embarking on its acquisition spree, Zimmer Spine recorded sales of $197 million, while Abbott Spine contributed $109 million. Fast forward to 2014, after incorporating Lanx, the spine-only sales excluding bone healing stood at $243 million. By Q1-16, the rolling 4-quarter sales of LDR, a substantial acquisition, amounted to $168 million. When we sum up the sales figures of the base business plus all the acquired entities since 2007, we reach a total of $717 million. However, the projected spine sales for 2023, including bone healing, are a far cry from this figure, estimated to be in the range of $400 million. These dismal sales conversion rates cast a shadow on ZimVie’s acquisition strategy and its ability to translate investments into tangible revenue growth.
ZimVie’s stock performance since IPO is pitiful.
Furthermore, the company has been stuck at a $1 billion gross revenue mark for years, all while remaining unprofitable.
These figures underscore the disconnect between ZimVie’s acquisition expenditures and its current market value, raising valid concerns about the company’s performance and strategic direction in the spine industry.
Below is the original Q&A article on MedTechDive
ZimVie’s Rebecca Whitney sizes up the competition in cervical disc implants
The company is bringing new products to market as it faces more challengers in cervical disc replacement and tethering for scoliosis.
Since it spun out of parent company Zimmer Biomet last year, ZimVie has been looking to differentiate itself from its competitors in spine with a focus on mobility. The Westminster, Colo.-based orthopedics firm makes cervical disc implants and tethering systems to treat pediatric scoliosis, both of which grew in sales last year as the company’s core spine business declined due to competitive pressure.
The company also received FDA approval last month for a shorter version of its Mobi-C cervical implant, which allows for an optimally sized product for more patients.
Rebecca Whitney, ZimVie’s global spine president, talked about the company’s latest FDA approval and how it is differentiating itself from the competition.
MEDTECH DIVE: What’s the significance of the new FDA approval for Mobi-C?
WHITNEY: We are the market leader in the cervical disc replacement market, which is something we’re very passionate about. And this smaller version, that we are in the process of launching, it’s shorter. We’ve been selling this version in the European market for quite some time. We saw a need to bring that sort of version into the United States market, which is the largest portion of the global market for cervical disc and spine. The reason we did this is because about 15% to 20% of patients are smaller stature or have smaller anatomy, where that smaller height is going to be the most optimal device size for their treatment.
What is the market for cervical disc replacement in the U.S.?
It’s not as developed as it should be still, even after having solutions out there for a while. The way we think about the market is, if you think about everyone who has a cervical spine issue, there are really two ways to treat it:
There’s the historical gold standard, which is ACDF [anterior cervical discectomy and fusion], and then there’s cervical disc replacement. And we know that about one in three times a patient will actually receive a cervical disc, when two out of three times, even if they’re perfectly indicated, they’re still being fused. And the fusion will solve the clinical problems most of the time, but it comes with some trade-offs in terms of range of motion and flexibility.
Our number one priority is to continue to develop that market by educating more surgeons and more patients that there’s another option out there and it’s not just fusion. We think the market right now is about $350 million globally, but we think it could be a billion.We’re only about a third of the way there in terms of developing that market and making sure that every patient that’s properly indicated has the choice to receive a cervical disc replacement.
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What factors go into the decision between a cervical disc replacement or spinal fusion?
What we’ve found is, the perfect scenario for us is when the patient is informed and knows they have choices, [and] the surgeon is informed and trained up on both procedures. When that happens — and the patient is indicated — they’ll usually end up with a disc replacement. If we have a patient who doesn’t know to ask, and we have a surgeon who has never been trained, [or] maybe has been trained but prefers fusion … that case is likely going to get fused. And so it’s a combination of surgeon preference, comfort with the procedure, and frankly patients advocating for what they want.
How much does Mobi-C contribute to your revenue?
It’s a great product for us. It’s our single biggest brand for ZimVie Spine, as well as all of ZimVie. We’re a full-line spine player … but where we really set ourselves apart is in these motion-preserving solutions: Mobi-C and then we have the Tether, which is a non-fusion solution for pediatric scoliosis.
Those two products are our motion preservation segment. Collectively, that’s about 25% to 30% of our revenue. That’s where we’re a little different from other spine players, in that we have such a heavy percentage of our business that’s not in the fusion bucket.
How is coverage in other countries?
It varies by country. France is a good example. It is one of the biggest healthcare markets in Europe. They’ve really taken off with Tether, which is great. Just three months ago, we won the French reimbursement status for Mobi-C, which were the only cervical discs that have this now, which means that any patient in France who wants or needs a cervical disc can get it paid for. Just last month, we got a similar approval in Belgium. So we’re definitely starting to see this global kind of clinical history is helping us to win over [coverage].
In Asia, we’re having really strong success in our most important countries like Taiwan, Japan and Korea.
What does the competition look like in cervical fusion and scoliosis treatments?
We are the market leader in both of those spaces still, and we’re very proud of that. We’ve had new entrants and new competitors come into the cervical disc space over the last few years. And that’s been a good thing, because our philosophy is we still need to develop that huge market. And so we welcome having others that share our passion to say, hey, collectively, let’s go inform patients and surgeons that there’s a better way out there. Inside of that, though, we’ve got to be sure that our devices and our programs are as competitive as anybody is to keep our market-leading position.
With Tether, it’s a similar story, but we’ve been the only product on the market in the U.S. until about two months ago, when Globus introduced [their Reflect system]. They’ve had their tether available outside of the U.S., but they’ve now brought that to the U.S. We see it as a really good thing for the category, because hopefully, it’s going to give more kids access to this.
Screws and rods and cervical plates, those are never going anywhere. So our whole philosophy is if we lead with differentiation, and then we pull through the rest of our business, that’s the way we go to market.