Zimmer Biomet Holdings Inc. fell in line with other orthopedic device companies that saw better than expected results for the 2020 third quarter. The company reported total revenue of $1.93 billion, up 1.1% from the same period in 2019. The knee franchise, with $649 million in sales, was the biggest outperformer, beating the Street consensus of $586 million.
Year over year, knee declined 1.4% – far better than the 46.5% hit the division took in Q2, as nonessential surgeries continued to resume during the pandemic. The outcome was driven by U.S. sales, up 0.9%. EMEA and Asia performance, down 0.5% and 0.1%, respectively, also showed signs of recovery.
Still, Q3 knee results trailed those of two competitors, as Cowen analyst Joshua Jennings noted: Stryker knee sales grew 2%, while Johnson & Johnson’s inched up about 1%. He explained, however, that Zimmer Biomet’s third-quarter decline in knee was far less than that experienced by Smith & Nephew plc, which was down by nearly 10%.
Hip sales grew 4.4% year over year to $484.1 million, beating the consensus of $422 million. SET (sports medicine, surgical, extremities and trauma) increased 2.5% to $360 million, while dental, spine and CMFT (craniomaxillofacial and thoracic) generated sales of $296 million, up 6.5%.
While the recovery from COVID-19 continued in the third quarter, the company noted the pace of elective procedures slowed toward the end of the period.
Taken as a whole, “the beat was broadly anticipated given results from JNJ, SNN, and SYK, but the magnitude of the beat was better-than-expected,” Wells Fargo senior analyst Larry Biegelsen wrote in a note.
Situation remains fluid
Reflecting on the impact of the pandemic, Bryan Hanson, president and CEO of the Warsaw, Ind.-based company, called the stronger than expected procedures recovery “encouraging,” but noted “challenges and fluidity around COVID-19 persist as we move into the end of the year.”
Given those uncertainties, the company did not provide full-year financial guidance.
With that said, Hanson noted that the company has passed the 200 mark in worldwide placements of its Rosa robotic surgical navigation and positioning system for the knee, and the placement pipeline remains very strong. “Remember, we’re way underpenetrated in robotics for our business and across all of orthopedics,” Hanson said. “So, the tailwind associated with Rosa, in our opinion, is going to be around for a while, and it feels very good right now.”
The Persona Revision knee system also continues to gain traction, he said, with sales on track to hit $100 million this year.
Zimmer Biomet views the system as a high-growth opportunity. “Revision is truly a tip-of-the-spear product,” Hanson said. “When we convert a competitive surgeon to our Revision system, we absolutely have the right to hunt for their primary knee business, and that’s exactly what we’re going to do.”
Turning to hips, the CEO pointed to strong performances by Avenir Complete surgical technique, noting the implant has helped Zimmer Biomet leverage the high-growth direct interior approach submarket in hips.
In the upper extremities business, the Signature One Planner saw a greater than 50% increase in surgeon registrations during the quarter, “and we already have one in four cases using presurgical planning for shoulder replacement,” Hanson said.
Newly acquired assets
Hanson also pointed to investments in priority and right-to-win areas to drive long-term growth. During the quarter, the company completed two acquisitions totaling roughly $80 million in initial spend and up to $98 million in total consideration – Incisive LLC, a privately held operating room solutions company based in San Pablo, Calif., and Relign Corp., a privately held arthroscopy company with headquarters in Campbell, Calif.
“Both assets will contribute revenue to the SET segment,” SVB Leerink’s Richard Newitter wrote, noting “Relign Corp.’s offerings include the consolidation of three differentiated arthroscopy tower components into a single system, and address a portfolio gap in the sports medicine market. These assets will allow ZBH to target procedures in the ASC setting, as there is an ongoing shift to this site of care.”
Separately, Zimmer Biomet reported preliminary results from a clinical trial showing that its Mymobility digital platform with Apple Watch demonstrated similar outcomes to traditional care models for primary knee arthroscopy while requiring fewer physical therapy visits (p<0.0001). Moreover, patients in the Mymobility arm reported fewer emergency department visits and lower rates of hospital readmission.
The postmarket, prospective, multicenter, longitudinal cohort study aims to determine if mobile app-guided education and exercise, paired with monitoring data captured by consumer wearables, is a viable – and potentially improved – alternative to standard care physical therapy for hip and knee arthroscopy.
Patients randomized to the treatment arm were provided an Apple Watch and the Mymobility smartphone app, while controls received standard of care, typically with physical therapy. The researchers found no significant difference in early outcomes assessed, which included 90-day knee range of motion, KOOS Jr scores, 30-day single leg stance time, time up and go time and need for manipulation under anesthesia.
“We’re pleased to see that early evidence from a randomized, controlled clinical study shows that Mymobility demonstrated comparable treatment outcomes and lower health care utilization, which could translate to lower costs associated with postoperative recovery,” said Adolph Lombardi, Jr., president of JIS Orthopedics in New Albany, Ohio, and one of the study investigators. “Using tools like Mymobility to virtually communicate with our patients and remotely track and manage post-op recovery is especially critical now, with limited in-person interactions due to the pandemic.”
The results were presented Thursday at the 2020 American Association of Hip and Knee Surgeons annual meeting in Dallas.