Tuesday, February 15, 2011

Will Globus Medical Go Public?

Recently, there are been speculation as to whether Globus Medical would go public.  As to our knowledge, there has been no S-1 filing with the Securities and Exchange Commission.  This information would be available on the website, www.sec.gov.  This form would contain a complete description of the security and the terms of the sale.  During the last year, word on the Street has been that Globus and Goldman were courting one another for a "dog and pony" show.  Whether or not Goldman will be the underwriter forming the syndicate remains to be seen.  Based on the recent activity at Globus, one can speculate that they are trying their hardest to execute an IPO.  The first sign that Globus was being coached or influenced by an investment bank was when they started to transition their business model from an independent to direct sales force.  Globus was willing to terminate their distribution agreements with some of their largest distributors.  Contrary to popular belief, it is cheaper to maintain a direct sales force than it is to support an independent distribution model.  Margins are much tighter with independent distributors, and investment bankers frown upon tight margins.  As a caveat, any distributor that intends on investing in a start-up company should consider having their own exit strategy because it is just a matter of time and revenue that the company will look to dissolve its relationship while evolving as Globus did.  But, will it be easy for Globus to go public?  Based on the recent activity that has been reported on this blog spot, TSB believes that the albatross that hangs around Globus's neck is that it has been in litigation for patent infringement with multiple companies.  Globus has litigated with Synthes, Warsaw Orthopedics and MDT, and has ongoing litigation with NuVasive.   Not an endearing feature for potential investors.  If anything now would not be the time to take a company public.  Why?

When one evaluates the stock market a booming market doesn't necessarily mean a healthy economy, especially in medical devices.  The market is commoditized and highly competitive yet for the "average investor" the margins are low.  TSB is not predicting a crash.  Yet, there must be some concern when the number of companies on the exchange has decrease by nearly 42% since 2008.  Given this trend, does the potential exist for additional contraction?  The number of IPO's has steadily declined.  So why would Globus be attractive, when most people want to invest in tech stocks like Facebook?  And why would David Paul want to take the company public when he is currently dealing with multiple distractions?  The biggest advantage to running a privately held company is that the management team can concentrate on running the company rather than answering endless questions from analysts and investors.  There is less pressure in meeting your quarterly earnings and the company avoids the regulatory burden of being a publicly run entity.  In the spine industry, legacy companies like MDT, Zimmer, Biomet and NuVasive  enjoy the pomp and circumstance of being publicly traded.

So will Globus go public?   The potential exists.  Will it happen in 2011?  In all likelihood, no.  If anything, TSB believes that Globus could be positioning itself for the sale of the company rather than taking it public, but that will not happen until there is some clarity and direction in the United States healthcare system.   Until then, fasten your seat belts and enjoy the ride.  TSB wants to know what its readers think?

60 comments:

  1. Thank you for the morning laugh but on the other hand, did see on MythBusters once where they were able to polish some horse manure into a shiny rock. Globus has made progress up in my area but the two reps are doing a great job of undermining each other while neither knows how to work a case. I've heard of bad-mouthing competitors but these two are comical. Sure their latest ex-Nuvasive hire is patiently waiting for them both to implode so he can reap their rewards. If this is how their representation is around the rest of the country, we can predict that sales will decline making IPO all but a dream.

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  2. As a Ex-Globus representative and vested shareholder I can report that I have received a couple of letters from the group in Audubon regarding the stock. One amending that the stock is transferable to family etc. in the case of death/disability and the other stating that the value of my shares has increased slightly. I dont think either of these has anything to do with Globus going public, but with the recent departure of R. Kienzle, loss of largest distributor last year it sure seems like the are posturing for an eventual IPO.

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  3. The question is not whether Globus will file the inevitable IPO. The question is who the biggest beneficiary of all that cash will be, Litigious Competitors or Surgeon Consultants.

    On a related noted: forget the stock market, I am looking to invest in a steak and legs joint out in Audubon, PA.

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  4. its an interesting argument that direct sales forces are cheaper. They may be in the forth or fifth year. but the 300 million or so to make them work comes out on the front end and is a risky move in a tight cash market.

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  5. Good luck w/ Sarbanes Oxley considering Globus's reputation.

    P.S. TSB, please find Biomet's ticker symbol for me... ;)

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  6. The problem is that Globus has been rattling is sabre now for two years on the threat of "i am gonna go public unless someone stops me"...the large strategics look at it and say, go ahead, we dare you...they have called Globus' bluff and aren't buying...so now, they either go out and have to make it in the public market for a couple of years and then an acquirer may come along....Going public to get an acquirer is a delicate game....yes you have to have products, pipeline and profit but you also have to have EXPERIENCED people(management not Goldman) taking the company out....if you don't the big boys will call your bluff and let you go out and pick you up cheaper on the back end.....how many times did Amedica try to do this? The best way to go public is to not spout off about it, suck it up, file the S1 and head to the market...if your company is as strong as you think it is, public markets will reward you...if it is strong and the markets agree, the strategics will come...If Globus is smart, they stay private and publicly commit to that strategy.

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  7. What ever became of all the rumors that Depuy or Stryker was going to purchase globus? It seems they all fizzled. The question is can they survive on only spine? any company looking to be traded publicly needs to grow and with only a spine product line that is getting to be a difficult demand. They have done a great job so far but is that beginning to slow? I havent seen earnings so I dont know.
    Also, They really arent a first to market company...always second ( a very quick second though) so they cant hang there hat on proprietary growth like NUVA has. I dont think a new company with only hip and knee products can survive publicly and lets face it, thats where spine is headed. Not that spine is going away just that it will be much harder to rely on it as a "growth" driver and it will become a companies mature base of business.

    I think they will sell. They need to. Unless NUVA branches into other ortho/neuro segments they will too.

    In closing, its funny to me that with all the business Globus has been able to grab, no one is willing to buy them to improve their standing in spine sales. Think about it: Stryker would become #2, Depuy would be #1, Synthes #2, Nuva #2 or #3. But yet no one seems to believe that the price of Globus is worth it. Even thought market presence is probably the biggest business driver available. just a thought.

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  8. Globus might have some skeletons in the closet, but that doesn't necessarily mean they can't go public. With sox, the key is disclosure. As long as they are willing to air their practices to the public and account for them appropriately, and the invests and underwriters know what they are getting, it is theoretically ok. Companies a lot worse than globus have gone public.

    The bigger question is their value proposition. Their closest comp is alphatec and that IPO flopped. Alphatec tried to hang their hat on the "aging spine" stuff. What is globus's unique value other than they are a bread and butter spine company destined to be second fiddle to the big boys? Why buy that stock? Until they can answer that question effectively, there will be (or should be) no IPO.

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  9. What if you disclose practices for which the statute of limitations has not run out yet?

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  10. NUVA - a legacy company. HA!

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  11. The only reasons you buy a company are to buy their unique technology, or buy their business. Globus has none of the former, but has the latter. Problem is, everyone in the industry knows that as soon as you buy their business, their surgeon shareholders will run for greener pastures. So nobody in the industry is stepping up. Question is, will John Q. Public realize that as well? Or will their sales growth and "pure play" spine nature be able to sell a few shares before anyone finds out? (And at least until the lockout period expires.)

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  12. TSB, seriously? Do you even know what "legacy company" means?

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  13. I question the direct sales force being cheaper. Are you factoring in liabilities? benefits? recruiting?

    Why isn't Depuy direct?

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  14. they are never going public. it's a crock of shit to keep docs aboard, and it worked for long enough. ships goin down now. the sharks are throwing lawsuits at them left and right. do you have a life raft?

    stay classy san diego

    sincerely,

    bone thugs n harmony

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  15. 2 other spine companies will go public before globus...

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  16. 12:47 ahem, I mean lexicographer, enlighten us, what does legacy company mean for those of us that are not as endowed with your vocabulary?

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  17. It's so amusing to read this post when this has been a topic on here on several occassions and the take away is this:

    "The more things change, the more they stay the same".

    Many have said it several times on this site,, Globus will not go public because if they do,, the end result will be "Alphatec-esque" as noted above.

    After Nuvasive's recent ass whooping after missing their # for the 1st time,, those on the Street of Dreams showed no mercy which may & should have the crew in Audubon, PA concerned. If recent reports are correct,,, Globus closed 2010 w/ roughly $300M in revenue, while NUVA came in around $485M,, and NUVA's reward is that the stock is trading at $29 & change,,

    What would or could Globus' share price be??

    The dream of Globus going pubic and then having a substantial market cap are LONG gone,, best case scenario would have them bringing an IPO out in the $9-12 range,, and even in this market and for many of the reasons cited by TSB & others, that number is highly unpredictable.

    Bottom line,, those that are vested, pray for a buyout w/ some other company coming in and offering a substantial premium for the business,, it may be your best hope at this point.

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  18. Regarding cost of direct versus distributor- I have experience with managing both and would agree with MM that direct is more more favorable to the P&L WHEN they exceed their quota. With direct you typically have a lower commission burden as a percent of sales but you have a number of fixed overhead expenses that you don't have with distributors. If they blow out their numbers and you've budgeted expenses at quota, all is great. When they fall short, you still have to cover the fixed costs and the picture is not so pretty. With distributors, your cost is directly related to their sales volume so there is less downside risk. At the end of the day, both models work and I always like to go with the best available option in a given market.

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  19. you don't need to be a lexicographer to know that a 10 year old one trick pony can't be categorized as a legacy company

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  20. I work for Stryker. We didn't buy Globus b/c they are in more legal trouble then what they're worth. I'm sure that's why Depuy, Synthes, etc. will not touch them either.

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  21. I'm sure companies with hybrid's like MDT would love to get rid of their distributors for the mere fact they are a liability and wield too much power. They have not added a distributor in years yet they have converted sales forces to direct.

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  22. Globus Report Card

    Products: B+ viable stuff with "synthes flavor"
    Innovation: C nothing blowing my skirt up
    Sales force: C maybe a D
    Management: D at best
    Risks due to litigation are a HUGE RED FLAG

    I'm a stock market guy........ I could care less about your industry shenanigans. To be honest, your spine industry should have its own TV show. The bottom line is money and value. There is nothing at Globus that I would bet on with my money or my client's money. NOTHING.

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  23. Really? are we doing this again? Globus goes public. This horse has lost all of its journalistic and blogistic life over a year ago. Let's skip to something more relevant that has not been blogged about like "Open Pedicle Screws"

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  24. I was hoping for a blog on the "latest & greatest in cervical plating".

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  25. Globus this and NuVasive that...who gives a rats ass about these 2 wannabe ne'er do wells . The sharks they lured early with the promise of the "Danek days" are loosing teeth faster than a Great White in a feeding frenzy. Those that still have their wits about them and haven't socked enough gold away are in a furious money-grab situation. TSB will have to seek out a new blog site because this one will be as passe as arguing over stop-cocks and tubing.

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  26. 3:01pm - you are either a complete idiot (in which case, please unplug your keyboard) or are making fun of the other idiots on this blog (in which case, kudos). Please be clear on which one you are next time. Thanks.

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  27. what about alphawreck?

    thats my favorite company name

    regards,

    RIP Nuvasive.

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  28. Why is there such a mass exodus of Medtronic reps right now ? The guys that are leaving are the heaviest hitters in their territory too.

    WTF ! Spineblogger..Hook a dog up. Give a dog a bone. You love Medtronic, right?

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  29. 6:31
    Much like animals running before a tsunami the smart ones feel the vibrations way before the wave hits. Hope you can swim.

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  30. Synthes purchase Globus? Meaning Synthes would essentially pay a ransom for their own prints?

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  31. I still hear Globus reps bragging about the big payout from their stock options, while saying what a wonderful company it is. In the mean time, one rep slithers around stalking surgeons, the manager is on a hiring frenzy getting all of the competitors on board and the associate reps sleeps with a few surgeons if she can get them drunk enough. Wonderful corporate culture. Reality TV at it's best! History shows us that most of these guys only last a year or maybe a little more. When they do go public, sure they will send out the press release from an annual meeting they are planning in Jonestown, Guyana. Sure all the drinks are free!

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  32. I "think" I know the answer to this and its not on the topic of Globus going public but here goes. Does Globus allow its reps to carry other spine companies in their bags? A local rep I know for Globus is also selling on occasion an entirely different companies screws on price point. He actually sells them to the same surgeons that he sells GLobus screws to as well??

    I know if I got caught doing that CHIT I would get Da boot, but is this something they turn the cheek on?

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  33. How many stock options do they give to the new reps?

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  34. Dont worry folks, Brett Murphy will turn the ship around! Look what he's done out west!

    How many ex-Globus reps & managers stretch from Denver to Seattle to San Fran?

    Yet the buck never stopped with the ole' jarhead. Hooah Brett! you gonna backfill your position with Bill V?

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  35. Most Globus reps and distributors carry other products, it's widely known. I've asked some distributors in my area and some have set up companies under a different name to do it, but one thing is certain, they all are doing it. Globus must allow it.

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  36. That is precisely what their top distributor was axed for this time last year, selling competing products...

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  37. Wasn't there top distributor L5 Surgical run by the DD of Pontecorvo and Antonelli?

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  38. why would Globus go public...so everyone can have access to their financials and see that the company is really worth a Happy Meal? One of the reasons no one has acquired them is because it's impossible to know their true value. Another spine company (ie: Stryker, who wanted to make a play) is going to pay 3x "sales" based on consulting agreements and surgeon stock plans. Everyone will cash out and the new company will be stuck with the bill. Its a house of cards. They are the Bernie Madoff of this industry

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  39. 4:37, that was the reason Globus gave, but it clearly wan't the real reason, because if so Globus would have axed every distributor in the country. They all are selling non-Globus products, some competitive, some complimentary. Some have set up corporations with a different name to bill from, others don't even try to hide it. It doesn't seem to be a big deal.

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  40. 2:31. That is why the all just ate an 18 & 2 sh*t sandwich

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  41. Hey first poster- where do you live? I have seen something similar and wonder if we're thinking of the same people!!

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  42. I'm sure they are the same people if you live in he most literate city in the nation, you are surrounded by lakes and MSD suits. BTW, thanks to the globus rep that informed everyone that they will be hiring more feet on the street soon. Some of us were forced to sign even longer non-competes in this area. I hope she has an iron-clad NC like the rest of us do now also.

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  43. Annual Revenues $500M.
    Surgeon Investors granted roughly 20 Million Shares
    350 Nationwide Reps Direct or Indirect Granted roughly 15 Million Shares.
    3x Multiple Makes Market Cap 1.5B with 35 Million Shares "Sunk" in the IPO.....
    Kyphon pioneered Kyphoplasty Procedure
    NUVA paved the way for the Lateral approach
    Globus pioneered "me too" products and custom instruments in 5 days....I'm going to have to IPO Globus at $3.50 and Downgrade the stock to an underperform due to every stakeholder looking to sell sell sell rather than buy

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  44. Lots of companies could buy Globus and get bigger- OK. Lets see- DePuy buys and becomes #1. With all the J&J mfg issues? They're going so conservative so fast that they're not going to be doing anything that smells of risk anytime soon. No Way. Synthes? Well, as much pleasure as it would give Synthes to drive a spike through the heart of Globus the thieves would walk away rich.

    Too much of what Globus tried to do that was innovative- and the reason to attibute market value- has been stillborn, ineffective and/or in too small a segment to be meaningful.

    The list of people waiting to sell stock at first opportunity is so long that the only benefit to an IPO would be if you quickly begin shorting it.

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  45. 5:21 where do you get your number from? And you forget to add VC & management's shares..

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  46. 8:29

    Tif really screwed us all...

    Mr. Bois is sitting fat and happy with his huge guarantee...waiting for Willy to axe a.k.a Jack and Tif...sad deal...

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  47. 6:41
    If Depuy bought Globus, they would be nowhere near #1. If Depuy bought Synthes spine, they still wouldn't be #1.

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  48. sure she'll do well with the atec boys since she's selling for them as well while keeping her docs entertained.

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  49. not a surprise, Sigsbee is a tool....has no management skills...

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  50. I work for Stryker Spine. Deal was on the table according to one of the VP's with a purchasing price 3x sales. The board and legal approved the proposal and Jay Lawson (the president at the time who left shortly after the deal was denied). When the deal went through regulatory affairs, they found that the company was a mess-everything from distribution and testing, surgeon relationships and consulting arrangements. Stryker legal said flat out, if we are audited once we buy Globus it will be a disaster and Stryker backed out.

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  51. lol@globus; gotta love karma and an RA department that knows their due diligence.

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  52. I work for Stryker Spine as well, the bottom line is everyday, these big companies such as MDT,J&J,SYN,BioMet,Zimmer and Stryker are looking to aquire companies such as NUVA and Globus if they havent been aquired yet its for 2 reason. 1. Just flat out not worth the money(NUVA) or 2. The company is just not worth all the dirt(Globus).

    Bottom line is and i think everyone realizes this and if you havent just retire from the buisness. Our industry is obviously changing by the second, reinbursments are down and CAP pricing is just reality. Unless you are working for a company that can provide a benefit to the hospitals or can service every aspect of a hospital your assed out.

    Way of the future ladys! Unless your working for a multi-divisional company such as SYK, MDT, J&J, Syn, Zim, Biomet pack it in. The days of just a spine company are coming to an end, and Globus unfortunatly is going to be made an example of. No shot they go public. I predict they get aquired in a year or so for about 35-50% less then they are asking today. Just my opinion

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  53. where did jay lawson go?

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  54. @ 6:57, have seen a lot of it it in Carolinas.

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  55. You all realize that the chatter surrounding Globus has been essentially the same for 4+ years, right? Dirty, sinking ship, gone in no time, etc. No skin in the game for me, but it's interesting to watch everybody pretend to be a know it all "insider" with all the answers.

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  56. Feb 20th, 5:42pm
    You are correct. Globus can't get past regulatory scrutiny with SYK, JNJ or MDT. Manufacturing paperwork is a mess and other messy stuff prevent any suitors. They've all peeked behind the curtain - it aint pretty.

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  57. I recently heard a rumor that Globus was looking to go public by end of 3rd quarter of 2011. Strange that they would be considering this especially with their CFO resigning unexpectedly in April. Can a company go public without a CFO?

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  58. DePuy/Synthes could buy Stryker and Nuvasive and STILL not be #1, people. Look at the real numbers.

    MSB still owns the spine market by miles. As of last year's numbers, MSB still has roughly 39?% market share while JJ, Syn, SYK and NUVA combined had about 30%.

    Good luck catching up...

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  59. anyone interested in a private sale of 50,000 shares of Globus stock?

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  60. We offers prime services and solutions, with the goal of providing the best and latest technology in Knee Pain at highly competitive prices.

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