- Zimmer Biomet unveiled its dental and spine spinoff company, called ZimVie, on Monday; one year after the orthopaedic device maker announced plans to turn the two units into an independent business.
- During a virtual investor day, executives for ZimVie broke down each segment and outlined their growth strategy for the spinoff. ZimVie executives expect the company to bring in $1 billion of revenue in 2022, which is relatively zero growth compared to last year. In 2021, the spine segment is estimated to make up about 56% of revenues, with dental making up the rest.
- CEO Vafa Jamali touted the fact that the combined dental and spine spaces are an approximately $20 billion market, with opportunities for growth in the next several years. However, the spine business is projected to lose ground in the immediate future, offsetting low single-digit gains projected for the dental unit.
Zimmer announced plans to spin off its dental and spine businesses in February 2021. At the time of the announcement, CEO Bryan Hanson said that the move would allow Zimmer to better focus on the higher-growth hip and knee markets.
The news was the beginning of a trend last year in healthcare as companies like GE, Johnson & Johnson and Becton Dickinson also announced that they would be spinning off certain units to focus their companies.
ZimVie's projected $20 billion market opportunity is largely made up by the spine market at nearly $12 billion. However, there will likely be some hurdles before growth in the space.
CFO Rich Heppenstall told investors Monday that the spine business has been disrupted by the pandemic, after already losing some ground before COVID-19. According to Zimmer's fourth-quarter results, the dental and spine segment dropped by 4% compared to the prior year's quarter, but the unit did grow by nearly 13% last year.
"The spine business has been losing a couple points of share over the last few years, which is why we are guiding the spine business to the mid-single digits contraction in 2022," Heppenstall said.
Spine revenue is estimated at $540 million for 2021, down from $608 million in pre-pandemic 2019. Following an initial drop in the near term, executives project low-single-digit growth in three to five years.
The company will have to compete in a crowded market, facing off against large companies like Medtronic, Stryker, and J&J's DePuy Synthes as well as smaller, but growing, companies like Globus Medical and NuVasive.
Rebecca Whitney, ZimVie's president of the global spine unit, said that of the four submarkets making up the spine business, the company will be focusing on the minimally invasive surgery and motion preservation services, which "we see growing at a much faster rate than the market as a whole."
Whitney added that the unit is exiting several less profitable European and Asia Pacific countries to better focus the segment, although the specific countries were not given.
Interestingly, as Zimmer is going all-in on its Rosa robotic system for hip and knee procedures, ZimVie executives said that Rosa will not be a key part of growth plans for the spine segment despite having access to the system.
Jamali said that only a single-digit percentage of spinal surgeons have a robot, and there are even lower procedure adoption rates, making robotics not attractive currently. The CEO added that the industry has not brought a solution that is able to improve patient outcomes or improve how procedures can be done.
Rosa's implants have worked well for hip and knee procedures, Jamali said, but there needs to be a different solution for spine procedures.
The decision to forgo using Rosa comes as the robotics spine market is growing, with companies looking to take advantage of the low adoption rates.
While the spine business is expected to stumble out of the gate, ZimVie's dental side is expected to grow in the mid-single-digits in the near term and in the three- to five-year range. The dental business brought in an estimated $469 million in revenue last year.
ZimVie projected that the global market is about $8 billion, with submarkets expected to grow mid- to high-single digits through 2026.
Heppenstall said that while both the spine and dental businesses "suffered significant disruptions" due to the pandemic, the dental business bounced back rather quickly. According to Heppenstall, the U.S. dental markets "operated with minimal COVID disruption" in 2021, while some international markets with stricter lockdown protocols had periodic disruptions.
The CFO added that 2022 is expected to largely mirror 2021 for both the U.S. and the international markets with stricter pandemic protocols.
Regular trading for ZimVie is expected to begin on March 1 on NASDAQ, according to a Monday announcement.