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Wednesday, June 14, 2017 2:35:54 AM
Global Spine Market Trends
spinal devices are observed to be the fastest growing segment with a CAGR of 9.3% during the study period. Smart implants, customized implants, and tissue engineering have been identified as the future of orthopedics.
Global Spine Market
Zimmer-Biomets current operating Manifesto
“We believe that current demographic and macroeconomic trends affecting the healthcare industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner,” said Dvorak
Strategic Acquisition
As patient outcomes figure more prominently in the bundled payment environment, healthcare institutions are under increased pressure to minimize inefficiencies along the entire episode of care while delivering superior quality of care and a positive patient experience," said Dr. Todd Dietrick, orthopaedic surgeon at Huntington Memorial Hospital in Pasadena, California. "Over the past year, we engaged Signature Solutions' expert consulting services to guide our clinical and operational teams to improve the value of our orthopaedic program by creating standards for patient optimization and surgical performance. The new technologies and digital software components will further enhance the utility of Signature Solutions and provide healthcare institutions with an all-in-one solution to optimize performance in a value-based care model."
Zimmer's Signature Solutions
Zimmer-Biomets objective is to improve patient care, which means offering the best products on market that are reasonably priced. This is precisely the need Si3N4 fills due to its reduced healing time (exceptional osteoconductive properties), its anti-bacterial properties that could save healthcare billions annually, & its soluble nature that allows any wear debris that does get into the body to be excreted via our normal bodily functions.
This is in line with the strategy to grow through inorganic means by focusing on mega acquisitions. Management is also striving to develop spine portfolio in order to cash in on the opportunities. Reportedly in the first quarter, Zimmer Biomet saw a 32.1% improvement in Spine and CMF segment. The company's spine offerings such as Mobi-C Cervical Disc prosthesis and Vitality Spinal Fixation System showed a considerable progress in performance.
Zimmer Biomet has been of late working to strengthen its foothold in the emerging markets that provide long-term opportunities. The company's strategic investments in these regions over several quarters with a view to enhance operational and sales performance are yielding results.
Zimmer Biomet Rides on Spine Business, Knee Challenges Stay
Our dental category sales decrease 8.6% compared to the prior year period. We are working to improve our dental performance in 2017. The global dental implant market remains an attractive opportunity with the mid-single-digit growth rate profile. We’ll remain focused on innovating and repositioning our dental portfolio including the commercialization of multi-tiered offerings for the evolving global marketplace.
Going forward, we will continue diversifying our knee offerings with differentiated new technologies to further complement this market-leading portfolio.
Q4 2016 ER Transcript
As it relates to dental, we continue to be attracted to that market, as I referenced. We see that market as being one that has the opportunity to grow mid single digits. It’s a bit higher growth in some of the so called value sub-segments of the market. We historically have not had any significant presence in that market; we need to develop one. And we’re repositioning the broad product portfolio that we have by virtue of the combination to do a better job of getting after that that market opportunity. And we expect to make progress in 2017, but look for that’s a show up an improved topline second half of the year and as we exit 2017.
Q1 2017 ER Transcript
Zimmer’s Spine & Dental Markets
From some examination of Zimmer’s 2016 10k one can see two major areas where Zimmer is not highly competitive. Dental and especially Spinal markets are lucrative market segments Zimmer very much wants to tap into. At the close of 2016 Zimmer had about 6% (662m) market share in spine. Their 2016 dental revenue was 427.9 or 10% market share.
Zimmer spine is divided into two basic divisions Americas Spine (oversee spines sales in North, Central, South America) & LDR which has more global presence. LDR revenue is expected to bring in 1-2% of Zimmer’s annual revenue, which does not represent huge growth. Dvorak’s plan is not overnight success but incremental gains; he’s playing the long game. Still, Zimmer will not change its position in the global spine market with its 2-4% CAGR growth with only 1-2% growth. Zimmer desperately needs products that can differentiate it from the competition. This also applies to dental where Dvorak is looking to establish a larger footprint.
2016 10k (pg: 3, 4, 21, 23, 25)
Emerging Markets
Zimmer’s 2nd major objective is capturing emerging markets. No area is expected to grow faster than Asia Pacific region with is estimated CAGR of 8.6% through 2024. The largest market is Japan, which currently comprises 44% of the Asian market. Zimmer does not currently have a spinal sales presence in Japan nor does LDR. The second largest market is China, which is growing at a faster rate than Japan. This is largely due to China’s large population gaining access to better healthcare. By 2021 the spine market in Japan, China, & India is expected to eclipse 2 billion annually and China is expected to be the leading market in Asia. You can bet that Zimmer’s strategy would be to align itself to capture the growth in these markets, who are very ceramic friendly.
China, India, Japan spine markets 2011-2021
Other key emerging markets are Russia, Mexico, & Brazil. Brazil’s spine market was estimated to be 490m in 2014 and is expected to reach 624m by the end of 2019 growing at a rate of 4.97%. Mexico market size was 278m in 2014 and is expected to be 354m by end of 2019. That’s a cagr rate of 4.91% . I bring up these 2 markets because Zimmer-Biomet has some legal difficulty stemming from bribes paid to local officials. Zimmer-Biomet is current under scrutiny in both these markets for what appears to be 3 more years. Acquiring Amedica and thus Sintex distribution deal may provide an opportunity for Zimmer to operate behind the scenes. This could help restore their image.
The Criminal Division’s Fraud Section reached this resolution based on a number of factors, including that Zimmer Biomet was in breach of the 2012 DPA between Biomet and the department. That agreement resolved an earlier investigation by the department into violations of the FCPA committed by Biomet, including the bribery of government officials in Argentina, Brazil and China as well as the falsification of the company’s financial records to conceal the true nature of the bribe payments . Pursuant to the 2012 DPA, Biomet had been required to retain an independent compliance monitor. The monitor’s term was extended for one year in 2015, due to both the bribery in Brazil and Mexico and the fact that the Zimmer Biomet compliance program did not meet the requirements of the 2012 DPA. At the conclusion of the extended period, the independent monitor was unable to certify that the company’s compliance program satisfied the requirements of the 2012 DPA and the department notified Zimmer Biomet that it was deemed to be in breach of the agreement. Zimmer Biomet fully cooperated with the current investigation and provided to the Fraud Section all relevant facts known to the company, including information about individuals involved in the misconduct. Nevertheless, because Zimmer Biomet failed to implement an effective compliance program and committed additional crimes while under a DPA and monitorship, the current DPA requires Zimmer Biomet retain an independent compliance monitor for a term of three years.
Zimmer Biomet Holdings Inc. Agrees to Pay $17.4 Million to Resolve Foreign Corrupt Practices Act Charges
How to Capturing Emerging Markets
One last thing I wanted to touch on was Weigao. Zimmer has a decent sized presence in China and does have some amount of sales structure in place to sell spine devices in China via LDR. However, it does not have a strong spine sales presence in China. Leveraging partnerships with local companies is key for expansion in China. Acquisitions are not necessarily the best way to go. I have attached the following research paper on how best to capture emerging markets. Very informative.
Medical Growth In Emerging Markets
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