Zimmer Biomet narrowly beats Q4 expectations, looks to Rosa knee soft launch
- Zimmer Biomet on Friday reported $2.07 billion in fourth quarter sales, an increase of 0.1% over the prior year's quarter. The device company’s spine and craniomaxillofacial unit led business divisions with a 2.1% increase for the quarter.
- The device manufacturer, which received 510(k) clearance for its Rosa system for robotically-assisted total knee replacement surgeries last week, saw knee-related Q4 revenue of $729 million, an increase of 0.1% compared to 2017.
- RBC Capital Markets analysts predicted in a note to investors this week the company’s second half of 2019 is primed for faster growth once Rosa and other new knee product launches kick in. On the company’s earnings call, executives noted Zimmer plans to "do a limited launch out of the gate" for six months before building out a full launch for the Rosa knee system.
Zimmer has been pushing to improve its quality systems as it works with FDA to have its Warsaw, Indiana plant reinspected at the end of 2019 following an FDA warning in August, according to CEO Bryan Hanson.
Adjusting for constant currency, Zimmer slightly beat expectations for its quarter, according to an RBC Capital Markets note to investors.
"ZBH's slight 4Q18 reported revenue beat was pretty broad based," the note said.
The company also laid out its 2019 guidance: projected sales growth has a range of -0.5% to +0.5%, with headwinds from foreign currency in the first half of 2019. Adjusted diluted earnings per share are expected to be $7.70 to $7.90.
"As previously discussed (most recently at JPM), virtually all of the negative foreign currency impact will be experienced in the first half of 2019, weighted much more heavily in the first quarter as compared to the second quarter," Cole Lannum, Zimmer SVP of investor relations, wrote to investors.
Zimmer has already accrued a $170 million payment to settle patent litigation with Stryker, but the payment will likely happen in 2019, according to Lannum.
Full year sales came in at nearly $8 billion, an increase of 1.7% over 2017, partially driven by Zimmer’s 4.6% fourth quarter growth in Asia Pacific sales.
"Overall, our financial results for the full year were in-line with our expectations for the progress of the turnaround of the business, and increase our confidence in achieving our 2019 objectives," Hanson said in a statement. "We look forward to delivering on our near-term commitments to transition to offense and drive enhanced shareholder value, including the launch of a number of exciting new products and platform technologies to expand our ecosystem of differentiated solutions."
The company is waiting on FDA approval on a separate Rosa system for spine robotics, according to Hanson. He said the company thinks it will get approval "sometime in the second quarter."
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