- Wright Medical on Friday posted a second consecutive quarter of slower revenue growth in financial results released just days after news that Stryker was buying the company, for $4 billion or $5.4 billion including debt.
- The Amsterdam-based orthopaedic device maker has been struggling with distribution problems affecting its Cartiva treatment for osteoarthritis of the big toe. In its third-quarter regulatory filing, Wright reported Cartiva sales decelerated to about $4.8 million in the United States and $0.9 million internationally, compared to Cartiva sales of about $8 million in the second quarter.
- Still, Wright management continues to project future growth for Cartiva, saying in the filing that the benefits of transitioning the business to the company's direct U.S. lower extremities sales force from its former distributors will take time to be reflected in sales results.
Wright was coming off a bad run before Stryker last week said it would acquire the company. With Wright's stock slumping 20% after the company's second-quarter earnings release, Stryker saw its opportunity.
The acquisition adds complementary device offerings in upper and lower extremities to Stryker's orthopaedics line. Wright Medical's shoulder business is seen as a particularly good fit for Stryker, and potential growth platforms in biologics and digital technologies were also a draw.
As Stryker CEO Kevin Lobo put it on a call last week to discuss the deal with investors, the company had been eyeing Wright Medical as a possible acquisition target for a long time.
Wright Medical has been reeling after a research report by RBC Capital Markets analysts in July and a retrospective review of Cartiva SCI synthetic cartilage procedures in a small group of patients by Cedars Sinai Medical Center both highlighted patient dissatisfaction with implant outcomes. RBC's report cited feedback from foot and ankle specialists who said patients were experiencing problems such as post-operative pain, trouble with degree of motion in the toe, and the implant slipping.
However, Wright Medical CEO Robert Palmisano in August said distributor issues were responsible for disappointing sales of Cartiva in the second quarter. Wright Medical bought the Cartiva line in October 2018 and has been transitioning sales of the product to its own direct sales force.
In September, RBC analysts followed up with a second critical report relaying input from foot and ankle surgeons they spoke with at a major medical meeting who indicated they had not achieved results with Cartiva that were on par with those reported in the company's clinical trial.
In Wright's discussion of third-quarter results, the company said the process of discontinuing Cartiva sales through distributors was completed Aug. 1, and the company believes it is making progress maintaining most of those accounts while still growing the existing business. "We believe Cartiva is well positioned for future growth as it addresses large markets with significant unmet needs and strong patient demand," the company said in the filing.
Wright's third-quarter filing also revealed slowing overall sales growth as the lower extremities results weighed on the business. Third-quarter net sales rose 9.4% to $212.4 million, up from $194.1 million a year ago. U.S. lower extremities net sales increased 7.2% to $61.7 million, while U.S. upper extremities were a bright spot, with sales rising 18.1% to $77.2 million. By comparison, second-quarter net sales were up 11.8%. U.S. lower extremities saw sales growth of 12.4% in the second quarter, and upper extremities grew 14.2%.