November 8, 2018 | 11:20 AM by Jay Kunstman |

Behind The Numbers – Wright Medical Group (WMGI)

Wright Medical Group designs, manufactures, markets, and sells extremities and biologics products. More specifically, it offers joint implants and bone fixation devices for the shoulder, elbow, wrist, hand, foot, and ankle, and biologics products that are used for supporting the treatment of damaged or diseased bones, tendons, and soft tissues, as well as to stimulate bone growth.

As I showed in this morning’s First Read, here was the breakdown for Q3:

-EPS of ($0.09) vs ($0.15) estimate – Beat
-Revenue of $194.1M vs $186.1M estimate – Beat
-Net Sales increased 13.8%

Upper Extremities – This segment came in higher by 19%, with management saying they had excellent growth from their SIMPLICITI shoulder and PERFORM Reversed glenoid, which both grew faster than their overall shoulder growth.

They also set new records in Q3 for the number of surgeons planning on saving cases in BLUEPRINT, and registration of new BLUEPRINT users was strong and continued to grow. “As of Q3, approximately 30% of our shoulder customers and shoulder cases are using BLUEPRINT, which is a significant acceleration from approximately 20% last quarter. BLUEPRINT has proven to be integral to our ability to convert competitor surgeons, and we believe that impact will increase as we execute our plans to make the system easier to use and release additional enhancements.”

Lower Extremities/Biologics – Lower Extremities showed growth acceleration of 12%, driven by accelerating growth of 22% in Total Ankle. Additionally, management stated that the launch of AUGMENT Injectable is off to a strong start and provided an excellent boost to their U.S. biologics business, which grew approximately 11% this quarter, up from 5% in the second quarter of 2018.

Cartiva – Back in late-August, Wright Medical announced it had entered into a definitive agreement to acquire Cartiva, a private orthopedic medical device company focused on treatment of osteoarthritis of the great toe, for $435M. In JPMorgan’s post-earnings note this morning, they highlighted that the quarter also provided a few incremental data points on this recent acquisition.

“For the fourth quarter, Wright expects a ~$7M contribution from Cartiva, which implies a ~30% Y/Y decline from 4Q17 based on Cartiva’s financials that were also provided this afternoon. This decline was explained as a quarter of anticipated disruption as Wright retains a little more than half of the company’s distributors that account for ~80% of sales, while contracts with the lower volume distributors will not be renewed and Wright will take sales and distribution activities in-house. Despite this small blip (we had modeled ~$9M in Cartiva sales for 4Q), the company reiterated its projection for $47M in 2019 and continues to view Cartiva’s Synthetic Cartilage Implant (SCI) product as accretive to its Lower Extremities business for the long-term.”

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