08.04.23
Rank: #9
$913.8 Million
Prior Fiscal: $1.01 Billion
Percentage Change: -9.9%
R&D Expenditure: $62.6M
Best FY22 Quarter: Q1 $234.7M
Latest Quarter: Q1 $225.1M
No. of Employees: 2,700
Global Headquarters: Westminster, Colo.
KEY EXECUTIVES:
Dave King, Board Chairman
Vafa Jamali, President and CEO
Rich Heppenstall, Exec. VP, CFO, and Treasurer
Indraneel Kanaglekar, Sr. VP, Global Dental President
Rebecca Whitney, Sr. VP, Global Spine President
Ben Hutson, Sr. VP, Operations
Ann Vu, Sr. VP, Regulatory Affairs, Quality Assurance, and Clinical
Mike Minette, Sr. VP, Strategy and Corporate Development
Gaining independence is seldom easy.
It’s a long, costly, difficult process fraught with challenges, sacrifices, and setbacks. In business, the transit to self-autonomy can be as messy, volatile, and complicated as romantic breakups. Unlike the mortal world, however, these rifts are seldom as worthwhile.
A Bain & Co. study published late last year found that roughly half of all corporate spinoffs fail to create any new shareholder value two years post-breakup, and 25% destroy a significant amount of shareholder value.
“This happens despite their stated intentions to create value through greater management focus, additional growth opportunities, targeted capital allocation, and investment profiles that match a more specific investor base,” Bain & Co. partners Jeff Haxer, Dustin Rohrer, and Sam Rovit wrote in a December 2022 Harvard Business Review article. “Among the companies in our study, the average separation delivered as little as a 5% increase in combined market cap two years after spinning off. Companies in the bottom quartile completed separations that actually destroyed value by as much as 50% of the combined market cap.”
Such data are ill-boding for medtech’s recent spate of corporate divorcees. Nearly a dozen long-time marriages have ended in recent years, including Johnson & Johnson and its consumer health business (Kenvue); BD and its diabetes care division (Embecta); Danaher and its Environmental and Applied Solutions segment (Veralto Corporation); GE and its healthcare business (GE HealthCare); Enovis and its fabrication technology division (ESAB); and Zimmer Biomet Holdings and its dental and spine segments (ZimVie Inc.).
The latter split, finalized last March, was conducted to improve efficiency and allow both parties to focus on their core competencies (knee, hip, sports medicine, extremities, trauma, craniomaxillofacial/thoracic for Zimmer Biomet). “...both Zimmer Biomet and the new company...are going to be better positioned separate,” Zimmer Biomet President/CEO Bryan C. Hanson said in announcing the spinoff in February 2021. “I truly believe by separating out these businesses, we’re going to create two stronger companies, two companies that are going to be better positioned to meet customer needs and improve patient lives. And ultimately, very importantly, deliver greater value to our shareholders. The second thing, it’s going to drive increased growth and efficiency for both companies. Simply put, we expect these two companies with their simplified operating models and just reduced complexity and increased focus will be able to grow revenue, margin, and earnings per share faster than they would if we remain combined as one company.”
Faster, perhaps, from an entrepreneurial perspective but likely not quick enough for stakeholders. ZimVie President/CEO Vafa Jamali, a former Medtronic executive, has been forthright about the timetable for profitability, reminding analysts and investors during a Q4/full-year 2022 earnings call that a business turnaround would take “several years, not quarters.”
Several years indeed: In its first year (10 months technically) as an independent company, ZimVie’s net sales were down 9.9% and its operating loss (before income taxes) swelled 8.5% to $109.9 million, according to the company’s inaugural annual report. Net loss improved, however, dwindling 33% to $63.8 million.
Jamali attributed the fiscal 2022 sales decline to “separation dynamics” and multiple “challenging” macroeconomic factors.
“Companies and spinoff situations generally face significant disruption in their first year as a standalone entity,” Jamali told conference call participants. “This is especially the case when the business is heavily entangled with the parent company. We made the choice against a choppy macro environment to focus on what we could control within the business and accelerate our separation in the first year, to ultimately accelerate our independence.”
Alas, ZimVie’s controllable world was rather limited last year, leaving it vulnerable to such random forces as pricing and competitive pressures, coronavirus case surges, and fewer distributor bulk orders impacted finances. Spine was particularly impacted by numerous hard-to-control factors, including various market exits, certain product/brand discontinuations, Chinese demand slowdown (resulting from volume-based procurement policies), ERP- and other IT-induced operational disruptions, and third-party net sales relinquished to Zimmer Biomet.
All those elements combined to reduce FY22 Spine sales $90.5 million (16.8%, $449.8 million total) despite two product launches in the fourth quarter and a policy decision in July to extend coverage for the firm’s anterior vertebral body tethering to Anthem Blue Cross Blue Shield members.
ZimVie unveiled its first spinal solution in October with the debut of the Virage Navigation System, an Occipital-Cervico-Thoracic (OCT) fixation product featuring the company’s 360-degree Omnidirectional Extreme-Angle Screw. The Virage system, according to ZimVie, simplifies rod alignment and minimizes operating time, as its screws allow for 112 degrees of conical motion range and facilitate optimal screw placement.
Compatible with commercially available navigation systems, Virage allows for the navigation of bone preparation instruments and polyaxial screws in the spine. It also complements the company’s previously released Vital Navigation System for the thoracolumbar spine.
Virage guides surgical planning by creating a three-dimensional map between points on the patient and corresponding points on the patient’s images, thereby tracking the patient’s position and surgical instruments in real-time. Using an array, the system displays real-time positioning and trajectory of tracked instruments relative to the patient’s anatomy. Surgeons can use this information to plan and determine the entry point, trajectory, and final instrument position to obtain the best possible spinal implant position.
“The Virage Navigation System plays a crucial role in ZimVie’s enabling technology strategy, rounding out our ability to navigate pedicle screws in the entire spine,” ZimVie Global Spine President and Senior Vice President Rebecca Whitney said upon the product’s release.
Three weeks (early November) after commercializing the Virage system, ZimVie launched the TSX Implant in the United States. TSX Implants are designed for immediate extraction and loading protocols as well as placement predictability and primary stability in soft and dense bone. The product incorporates features with more than two decades of real-world, clinical data to deliver peri-implant health, crestal bone maintenance, long-term osseointegration, and prosthetic stability.
Integrated with ZimVie’s digital workflows and engineered with surgical and restorative versatility, the TSX Implant uses a hybrid of the new company’s proprietary dual acid-etched (DAE) and MTX surface technologies to balance peri-implant health needs in the coronal and sub-coronal regions. Minimally rough coronal surfaces like DAE may lower the risk of biofilm formation and peri-implantitis while offering excellent osseointegration potential to maintain crestal bone. Meanwhile, the subcoronal MTX surface offers high osteoconductive potential with more than two decades of clinical success.
Besides the advanced surface technology, the TSX Implant’s progressive threads and taper are designed to follow the patient’s prepared osteotomy and provide a precisely positioned and aesthetically restored implant with high primary stability. The next-generation implant is compatible with the Encode Emergence 3-in-1 Healing Abutment, Impression Coping, and Scanbody System. To help surgeons master implants with greater efficiency and more predictability, the TSX Implant is surgically compatible with familiar soft and dense bone protocols, existing tools, and ZimVie’s digital dentistry platform.
“We created the TSX implant to improve patient experience and enhance clinicians’ confidence in successful procedures that can be delivered more efficiently,” ZimVie Dental President and Senior Vice President Indraneel Kanaglekar stated upon the product’s U.S. release. “We continue to invest in bringing new products to market that broaden our suite of digitally integrated, efficient, and versatile workflows designed to improve patient health and satisfaction.”
Kanaglekar made similar remarks after the company unveiled the T3 PRO Tapered Implant and Encode Emergence Healing Abutment in the United States last June. The T3 PRO is the newest addition to ZimVie’s dental implant lineup and builds on the proven solutions of the T3 Tapered Implant. Likewise, the Encode Emergence Healing Abutment is based on the company’s 3-in-1 Encode Impression System, which provides clear intraoral scans and aesthetics, and is designed for patient comfort and healing.
Launched 10 years ago, ZimVie’s T3 Implants have been used in more than two million procedures. The T3 PRO’s advanced design delivers high primary stability and allows for immediate function, and its hybrid surface features the proprietary Osseotite on the implant collar, which is also superimposed on the grit-blasted implant body, according to the company.
The T3 PRO’s hybrid surface and optional integrated platform switching design has been shown to provide early and long-term peri-implant bone support Additionally, T3 PRO boosts surgical performance with modernized collar design for placement depth adjustment, and self-tapping threads for controlled insertion. These elements deliver an ideal torque profile and improved tactile feel during placement.
The advent of digital dentistry has fueled demand for customized restoration, and Encode Emergence technology simplifies the digital workflow. The 3-in-1 healing abutment, impression coping, and scan-body provides efficiency by reducing the need for multiple abutment removals (dis/reconnects) in the treatment process while improving hard and soft tissue preservation. Redesigned emergence profiles on the abutment facilitate natural gingival tissue healing for great aesthetics. With its intuitive, unique codes on the top surface and a matte appearance, the Encode Emergence Healing Abutment allows for clear intraoral scanning and great restoration precision. In addition, the pink color more closely matches that of the gingiva than uncolored titanium healing abutments, ultimately enhancing the patient’s aesthetic appearance post-surgery.
In spite of the two new dental products, Zimvie’s Dental division posted a deficit in fiscal 2022, though it was significantly smaller than its Spine sibling. Sales slipped 1.9% to $459.6 million.
$913.8 Million
Prior Fiscal: $1.01 Billion
Percentage Change: -9.9%
R&D Expenditure: $62.6M
Best FY22 Quarter: Q1 $234.7M
Latest Quarter: Q1 $225.1M
No. of Employees: 2,700
Global Headquarters: Westminster, Colo.
KEY EXECUTIVES:
Dave King, Board Chairman
Vafa Jamali, President and CEO
Rich Heppenstall, Exec. VP, CFO, and Treasurer
Indraneel Kanaglekar, Sr. VP, Global Dental President
Rebecca Whitney, Sr. VP, Global Spine President
Ben Hutson, Sr. VP, Operations
Ann Vu, Sr. VP, Regulatory Affairs, Quality Assurance, and Clinical
Mike Minette, Sr. VP, Strategy and Corporate Development
Gaining independence is seldom easy.
It’s a long, costly, difficult process fraught with challenges, sacrifices, and setbacks. In business, the transit to self-autonomy can be as messy, volatile, and complicated as romantic breakups. Unlike the mortal world, however, these rifts are seldom as worthwhile.
A Bain & Co. study published late last year found that roughly half of all corporate spinoffs fail to create any new shareholder value two years post-breakup, and 25% destroy a significant amount of shareholder value.
“This happens despite their stated intentions to create value through greater management focus, additional growth opportunities, targeted capital allocation, and investment profiles that match a more specific investor base,” Bain & Co. partners Jeff Haxer, Dustin Rohrer, and Sam Rovit wrote in a December 2022 Harvard Business Review article. “Among the companies in our study, the average separation delivered as little as a 5% increase in combined market cap two years after spinning off. Companies in the bottom quartile completed separations that actually destroyed value by as much as 50% of the combined market cap.”
Such data are ill-boding for medtech’s recent spate of corporate divorcees. Nearly a dozen long-time marriages have ended in recent years, including Johnson & Johnson and its consumer health business (Kenvue); BD and its diabetes care division (Embecta); Danaher and its Environmental and Applied Solutions segment (Veralto Corporation); GE and its healthcare business (GE HealthCare); Enovis and its fabrication technology division (ESAB); and Zimmer Biomet Holdings and its dental and spine segments (ZimVie Inc.).
The latter split, finalized last March, was conducted to improve efficiency and allow both parties to focus on their core competencies (knee, hip, sports medicine, extremities, trauma, craniomaxillofacial/thoracic for Zimmer Biomet). “...both Zimmer Biomet and the new company...are going to be better positioned separate,” Zimmer Biomet President/CEO Bryan C. Hanson said in announcing the spinoff in February 2021. “I truly believe by separating out these businesses, we’re going to create two stronger companies, two companies that are going to be better positioned to meet customer needs and improve patient lives. And ultimately, very importantly, deliver greater value to our shareholders. The second thing, it’s going to drive increased growth and efficiency for both companies. Simply put, we expect these two companies with their simplified operating models and just reduced complexity and increased focus will be able to grow revenue, margin, and earnings per share faster than they would if we remain combined as one company.”
Faster, perhaps, from an entrepreneurial perspective but likely not quick enough for stakeholders. ZimVie President/CEO Vafa Jamali, a former Medtronic executive, has been forthright about the timetable for profitability, reminding analysts and investors during a Q4/full-year 2022 earnings call that a business turnaround would take “several years, not quarters.”
Several years indeed: In its first year (10 months technically) as an independent company, ZimVie’s net sales were down 9.9% and its operating loss (before income taxes) swelled 8.5% to $109.9 million, according to the company’s inaugural annual report. Net loss improved, however, dwindling 33% to $63.8 million.
Jamali attributed the fiscal 2022 sales decline to “separation dynamics” and multiple “challenging” macroeconomic factors.
“Companies and spinoff situations generally face significant disruption in their first year as a standalone entity,” Jamali told conference call participants. “This is especially the case when the business is heavily entangled with the parent company. We made the choice against a choppy macro environment to focus on what we could control within the business and accelerate our separation in the first year, to ultimately accelerate our independence.”
Alas, ZimVie’s controllable world was rather limited last year, leaving it vulnerable to such random forces as pricing and competitive pressures, coronavirus case surges, and fewer distributor bulk orders impacted finances. Spine was particularly impacted by numerous hard-to-control factors, including various market exits, certain product/brand discontinuations, Chinese demand slowdown (resulting from volume-based procurement policies), ERP- and other IT-induced operational disruptions, and third-party net sales relinquished to Zimmer Biomet.
All those elements combined to reduce FY22 Spine sales $90.5 million (16.8%, $449.8 million total) despite two product launches in the fourth quarter and a policy decision in July to extend coverage for the firm’s anterior vertebral body tethering to Anthem Blue Cross Blue Shield members.
ZimVie unveiled its first spinal solution in October with the debut of the Virage Navigation System, an Occipital-Cervico-Thoracic (OCT) fixation product featuring the company’s 360-degree Omnidirectional Extreme-Angle Screw. The Virage system, according to ZimVie, simplifies rod alignment and minimizes operating time, as its screws allow for 112 degrees of conical motion range and facilitate optimal screw placement.
Compatible with commercially available navigation systems, Virage allows for the navigation of bone preparation instruments and polyaxial screws in the spine. It also complements the company’s previously released Vital Navigation System for the thoracolumbar spine.
Virage guides surgical planning by creating a three-dimensional map between points on the patient and corresponding points on the patient’s images, thereby tracking the patient’s position and surgical instruments in real-time. Using an array, the system displays real-time positioning and trajectory of tracked instruments relative to the patient’s anatomy. Surgeons can use this information to plan and determine the entry point, trajectory, and final instrument position to obtain the best possible spinal implant position.
“The Virage Navigation System plays a crucial role in ZimVie’s enabling technology strategy, rounding out our ability to navigate pedicle screws in the entire spine,” ZimVie Global Spine President and Senior Vice President Rebecca Whitney said upon the product’s release.
Three weeks (early November) after commercializing the Virage system, ZimVie launched the TSX Implant in the United States. TSX Implants are designed for immediate extraction and loading protocols as well as placement predictability and primary stability in soft and dense bone. The product incorporates features with more than two decades of real-world, clinical data to deliver peri-implant health, crestal bone maintenance, long-term osseointegration, and prosthetic stability.
Integrated with ZimVie’s digital workflows and engineered with surgical and restorative versatility, the TSX Implant uses a hybrid of the new company’s proprietary dual acid-etched (DAE) and MTX surface technologies to balance peri-implant health needs in the coronal and sub-coronal regions. Minimally rough coronal surfaces like DAE may lower the risk of biofilm formation and peri-implantitis while offering excellent osseointegration potential to maintain crestal bone. Meanwhile, the subcoronal MTX surface offers high osteoconductive potential with more than two decades of clinical success.
Besides the advanced surface technology, the TSX Implant’s progressive threads and taper are designed to follow the patient’s prepared osteotomy and provide a precisely positioned and aesthetically restored implant with high primary stability. The next-generation implant is compatible with the Encode Emergence 3-in-1 Healing Abutment, Impression Coping, and Scanbody System. To help surgeons master implants with greater efficiency and more predictability, the TSX Implant is surgically compatible with familiar soft and dense bone protocols, existing tools, and ZimVie’s digital dentistry platform.
“We created the TSX implant to improve patient experience and enhance clinicians’ confidence in successful procedures that can be delivered more efficiently,” ZimVie Dental President and Senior Vice President Indraneel Kanaglekar stated upon the product’s U.S. release. “We continue to invest in bringing new products to market that broaden our suite of digitally integrated, efficient, and versatile workflows designed to improve patient health and satisfaction.”
Kanaglekar made similar remarks after the company unveiled the T3 PRO Tapered Implant and Encode Emergence Healing Abutment in the United States last June. The T3 PRO is the newest addition to ZimVie’s dental implant lineup and builds on the proven solutions of the T3 Tapered Implant. Likewise, the Encode Emergence Healing Abutment is based on the company’s 3-in-1 Encode Impression System, which provides clear intraoral scans and aesthetics, and is designed for patient comfort and healing.
Launched 10 years ago, ZimVie’s T3 Implants have been used in more than two million procedures. The T3 PRO’s advanced design delivers high primary stability and allows for immediate function, and its hybrid surface features the proprietary Osseotite on the implant collar, which is also superimposed on the grit-blasted implant body, according to the company.
The T3 PRO’s hybrid surface and optional integrated platform switching design has been shown to provide early and long-term peri-implant bone support Additionally, T3 PRO boosts surgical performance with modernized collar design for placement depth adjustment, and self-tapping threads for controlled insertion. These elements deliver an ideal torque profile and improved tactile feel during placement.
The advent of digital dentistry has fueled demand for customized restoration, and Encode Emergence technology simplifies the digital workflow. The 3-in-1 healing abutment, impression coping, and scan-body provides efficiency by reducing the need for multiple abutment removals (dis/reconnects) in the treatment process while improving hard and soft tissue preservation. Redesigned emergence profiles on the abutment facilitate natural gingival tissue healing for great aesthetics. With its intuitive, unique codes on the top surface and a matte appearance, the Encode Emergence Healing Abutment allows for clear intraoral scanning and great restoration precision. In addition, the pink color more closely matches that of the gingiva than uncolored titanium healing abutments, ultimately enhancing the patient’s aesthetic appearance post-surgery.
In spite of the two new dental products, Zimvie’s Dental division posted a deficit in fiscal 2022, though it was significantly smaller than its Spine sibling. Sales slipped 1.9% to $459.6 million.