Monday, May 16, 2011

Monday Bloody Monday

The silicon chip inside our head gets switched to overload
And nobody's going to work today, we're all going to stay at home
And daddy doesn't understand it, they always said we were good as gold
And we can see no reason, cause there are no reasons
What reason do you need to be shown
I don't like Monday's I want to shoot the whole day down

It's one of those Monday's fellow bloggers.  A tough day for the Orthovita sales force, a jubilant day for Stryker.  On Monday, May 16th,  the Almighty Stryker announced that it had acquired Orthovita for $316 million in cash or $3.85 per share.  A far cry from the days that "La Vita Loca" was hovering over $6.  Some analysts may believe that this was a responsive deal to what's been going on in the industry.  Fortunately for Stryker, they not only acquired Vitoss, but at the same time enhanced their portfolio with Vitagel a surgical hemostat, and Cortoss.  The need for an orthobiologic was desperately needed considering Stryker screwed the pooch on OP-1 to the tune of a few hundred million dollars at best, and their distributors have lost, or have been losing access to Actifuse, contrary to what many skeptics said wouldn't happen, when Baxter acquired Apatech.  It will only be a matter of time before many of the sales reps from Orthovita will be pounding the concrete down on 125th Street looking for employment.  Like any major deal, there will be collateral damage.  A nice way of saying prepare for your walking papers.

Kudos must go out to the brain trust at "La Vita."  Koblish, Marx and Smith were not only able to bring some good products to the marketplace, they were able to execute their objective.  Hopefully there weren't titanium fanged dogs thrown in with the deal.  If anything, maybe, just maybe, some of the wannabe companies in the industry will learn that the race doesn't necessarily go to the swiftest.  About a year ago, many industry professionals knew that there were deals to be had.  This could be the start of something beautiful as we gain consolidation momentum.  Good for some, unfortunate for others.  But remember what TSB always says, when one door closes, another one opens.  So in closing, TSB wants to know what our bloggers think, and how does this effect the industry and does solo flying biologic companies?

PS:  Our apologies for not getting this post out this a.m.... blogspot has been behaving like crapspot lately with technical difficulties, maybe it's time to initiate our own website.

38 comments:

  1. Well Styrker beat Globus to the punch This could be a big problem for Globus Globus will never have the opportunity to buy anyone with a descent portfolio

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  2. The only constant in business is change.

    Adapt or die.

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  3. Globus' largest void is in the biologics or biomaterial area (pardon the pun). For a company of its size, their biologics are a joke. I assume that they are unsure of what to do since their DBM debacle with Nubone.

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  4. I thought Stryker Spine was selling the Etex biologic products under their private label name of Bio MatrxGenerate and less Actifuse?

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  5. I have friends in Orthovita that have strong relationships. Stryker will loose a hunk of market share if they move for a fast takeover. Any descent rep can maintain 25% of his business if he flips companies.

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  6. I'm in a state of shock!!! Seems like you think Stryker made a good move. I know the orthovita rep in my territory has solid relationships. It will be interesting to see how this shakes out. Difficult position to be in though, while the Stryker reps lick their chops.

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  7. I have had a long term position in VITA since 2004. I sold a little when it crested $5.25 (seems like so long ago) and I speculated it would see those days again with the launch of CORTOSS. I'm OK with the $3.85 share price. I look back many years ago and I wonder if Tony and the boys regret turning away that $4.50-$4.75 offer 5+ years ago (It was disclosed in an annual report ... the offer was north of $4.50 but south of $5).

    Just glad it's finally over because I wasn't sure if we would ever see $3 again.

    I'd agree that if most Stryker distributors haven't already been cut loose by Baxter, they'll surely leave now per Stryker's direction.

    All in all this looks like a great move by Stryker and a prudent move by Tony and the boys that it was time to cash in the chips.

    Again you just have to wonder if Zimmer was left holding the bag.

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  8. Baxter is the big loser here. Actifuse is a great product, but unless Baxter is smart enough to unload it to a metal company, the product will simply die on the vine. Today's announcement just cut Baxter off at the knees, as its only remaining chance (Stryker distributors) are now on their way out, one way or the other.

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  9. Zimmer misses out once again. Would have been a nice addition to their bag. I guess they still have Dynesys though.

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  10. Why are you surprised? TSB knows a good deal when seen regardless what some skeptics think. As for regrets, no need to reminisce. You know what Frankie sang, I did it my way.

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  11. TSB- i know you feel that if "Nuva where going to be bought it would have happened already" but what we are starting to witness in front of our eyes is the begining of the consolidation era. NUVA will be bought, so will Globus. SYK and ZMH need a big aquisition to create seperation amonst these ankle biters. I know you can give a thousand reasons why not, but my feeling is SYK will make one more move and ZMH will follow with one as well. This will create a significant gap between the top 4 and the rest of the irrelevant companies out there(lanx,alphawreck,sea spine, blackstone..........) i could be wrong dont claim to be an expert but it does make sense

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  12. Too many NuVa people believe that TSB is a Nuva basher, unfortunately Alex thinks the stock is worth $50, and if the stock hit $50, I believe he would sell. But who will buy them? As for Globus, if the Great Vampire Squid hasn't been able to take them public after their dog and pony show, what is their next move? And who wants to roll the dice on a company that has more skeletons in its closet than Davey Jones' locker?

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  13. Like i said, i agree with both of ypur points as for the other 500 you could probably make. I just think this absolutly needs to happen. It will be impossible to catch the big 2 through natural growth. The only way is aquisition. Besides nuva or globus who even makes a dent? If this companies want to be big players nuva or globus need to be bought.

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  14. make no mistake - Zimmer is an ankle biter in Spine. If they broke out their Spine sales in US vrs. International revenue numbers, you would clearly see the Abbott purchase was a complete waste of $.

    Dvorak has done a great job in shoring up the stock price and buying back stock. However he has failed totally with every move he makes in Spine and the analysts give him a "hall pass" every quarter by accepting the same BS excuses as to why they suck so much in Spine.

    If Zimmer makes a purchase, they would be wise to purchase Tornier and sell off Spine to another anklebiter.

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  15. It's amazing how well Globus has done with no real biologic. Perhaps they would be at NUVA level if they had osteocel or some flagship biologic. The revenue alone plus the pull-through metal/peek sales. I see everone dogs them for not going public in a tough environment but i must say KUDOS to the Globus team.

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  16. 4:45, 5:57, the word that both of you are looking for is Decent, Not descent. Don't they teach proper grammar at spine rep school?

    I agree with tsb, Nuva isn't going to be bought, and the stock wont get to $50. Rumor has it their mainly-direct sales force may move to more of a distributor model. Bad move?

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  17. in my opinion, only reason to by nuva is a pure market share grab. no company will consider it at current market cap, me too products, and gaap accounting changes. once stock price levels off around $15 there may be a few interested. unfortunately for all of the shareholders, no where to go but down. SELL, SELL, SELL.

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  18. Every post in every comment section on this blog is the same- bash Globus, bash NUVA, On and on and on... What gives people?? Is this really all there is to talk about? Consolidation is coming. Stryker makes a very good move here- Globus Has NO HOPE of making deals like this so whoever said they missed the boat (first comment) is an idiot. Where do you think they'd get the cash for this???

    The winners in this race will be the companies that act now while there is tremendous pricing pressure, earning pressure, sales pressure, etc- Stryker, DePuy, and a few others have great long-term vision when it comes to creating market share and strengthening their positions. More blood in the water to come.

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  19. I was contacted to be a distributor for Chicago's Nuvasive reps. Should I investigate? 30% commission. What is Nuva corporate like to deal with?

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  20. Whatever 5:02! No chance this would happen. What makes you qualified to take on Nuvasives sales force anyway???

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  21. Yea 5:02! Shame on you. Unless you are an ex-pharma rep with a degree in PT you are not qualified to take on the nuva highly trained sales force. Lets not forget that the top performing areas are all distributors? Hmmmm -maybe a good idea afterall.

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  22. I would love to hear some discussion about other companies that might be attractive acquisition targets besides NUVA and Globus. There seems to be a number of smaller companies out there with at least some products that are improvements on "me too" products that might help invigorate some of the low performers like Zimmer Spine. Anybody have any thoughts on which small companies have anything beneficial to some of the bigger players? You can buy revenue, but if it is the same products you are currently selling, you are going to end up with half the revenue you just bought.

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  23. It was best stated by 7:13 that this is the "consolidation era" for medical device companies. These companies can no longer "buy the business" so what do they do? They buy the business. ??? Instead of paying the surgeons they are buying competitive reps and companies.

    My prediction is that the next big acquisition is: Zimmer buys Globus. 8:37 is right Dvorak has done some very good work in shoring up ZMH as far as stock goes but Zimmer Spine from an organizational standpoint is a total mess, especially after the Abbott purchase. Zimmer Spine has always been the bastard child of ZMH (just as trauma was to Depuy). Dvorak is a lawyer and anything run by a lawyer takes much longer than necessary (I think its a billing thing taught in law school). Zimmer Spine has a few great niche products (Dynesys, Trabecular Metal, Universal Clamp) but no lateral system, no true MIS system, no expandable cage, no spinous process fixation, and no zero profile cervical/lumbar devices. GMI is a spine company that fills all those holes. I think the same goes for NuVa but it seems NuVa would cost more at $50/share and why pay more for the same thing?

    Another strong possibility is that ZMH could buy Lanx. I don't think its a smart idea, but I never claimed ZMH to be a smart company.

    I don't think anyone should count out Smith & Nephew. Weren't they "the other prospective buyer" for Synthes? If this is true then they still have a substantial stack of cash and are interested in making a move in spine.

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  24. just go sell something. we have enough soothsayers in this industry already Spine-a-domas, or is that spine-a-dum-ass... what we really need is growth.

    "Coffee is for closers..."

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  25. Where would ATEC fall in this "Consolidation Era"? Does anyone think they have products that would help a larger company make a move? Or is is too soon to tell how their new products (Solus, Puregen, Arc) will perform?

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  26. Alphatec is too dirty and internally is a mess. Scient'x was a innovative company 10 years ago but that was a terrible purchase that weighs negatively on them. They are not a well respected company which takes it out of the running for any of the big players. Not to mention they are not well liked by the FDA.

    They only distribute Puregen and do not own the technology so that is no help to them.

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  27. Perhaps it's time for DePuy to get off of their ass and start thinking about biologics. Their future in metal looks good, but it'll be a while before the Synthes deal closes. Until then, it's just good old Healos!

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  28. Synthes biologics are nothing to get exited about either. DBX is well outdated in the DBM world and ChronOs is not any better than other commodity calcium phosphate synthetics.

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  29. Alphatec's Puregen only has 15k cells per cc (12k/cc in the large size). This is less than 10% of competitive products. Has anyone seen their data that they use to support their claim that their cells are twice as potent as MSCs from bone marrow. What lie! They tested the Puregen against 5-6% of the number of MSCs found in Osteocel/Trinity in an intramuscular rat model. They can't tell you if it was the cells in Puregen that caused the bone growth or the rat's stem cells (most likely). They should have used a subcutaneous model. To top it off, even with the bogus test, they scored a 2 where the DBM I use scores a 3 or 4 regularly.

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  30. If Alphawreck doesn't hit their huge Puregen quota they can say goodbye to their exclusive distribution contract. Just like their stock price I would bet they will disappoint.

    Any truth to the rumors that Integra is getting ready to make a big purchase?

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  31. Integra, a big purchase? Come on, get real.

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  32. Is there anyone selling any biologic product (other than Infuse) who gets calls to come in to a case when another company's metal is going in?

    In my opinion, the synthetic and allograft derived bone grafting products on the market fail to distinguish themselves effectively from one another and fail, furthermore, to offer compelling human data that supports their use vs. competitive products (e.g. VitossBA vs. Actifuse vs. Mastergraft vs. ChronOs).

    That said, any metal company that doesn't have a bone void filler/bone graft extender in their portfolio is leaving money on the table. In a surgical case no self respecting spine rep should ever stand for a competitive bio product being opened in their metal case if they have something to offer.

    Orthovita was the only company with a direct sales force that I ever observed being able to pull some kind of Jedi mind trick and make a surgeon use their product vs. what a metal rep was carrying--the amazing thing is that they were almost always priced higher than an equivalent synthetic product!!

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  33. By Dennis Askew
    Published: May 17, 2011 9:07:59 AM PDT
    Print Email 0 Comment(s) - Post a Comment
    Rating N/AWhen a stock climbs up in share valuation, on revenues and growth, month after month and quarter after quarter, it’s something I love to see in the free markets:

    Flying off-the-radar is Alphatec Holdings Inc (NASDAQ:ATEC) which was trading in the $2 range at the end of November and is currently trading in the $3.37 range, a gain of 68.5% in a little more than five months on a strong, classic, textbook run up. ATEC has a less than average number of short sellers, 3.25%, to apply any downward pressure to the ascent and the Company has positive, double digit sales and EPS projections quarter over quarter. In the near term (3 mos), I don’t think the stock is going to get any cheaper and that its run up will continue; headed for $4. This is a really well managed company. Alphatec Holdings Inc makes and sells products for the surgical treatment of spine disorders, primarily focused on the aging spine. Back problems in an aging U.S. population? Quite a growth initiative.

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  34. @ 4:46 "...Alphatec Holdings Inc makes and sells products for the surgical treatment of spine disorders, primarily focused on the aging spine..."
    No wonder their stock is on the rise! They are selling this stuff to fix peoples backs. BRILLIANT!!!
    Can you imagine if all the other spine companies would've thought of that? Wow!

    Go back to asking your reps for their TPS reports dude.

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  35. Stryker distributors just struck gold with the Orthovita acquistion. No longer will they have to sell products like Integra and Actifuse that have no clinical literature to support their exhorbient prices. Orthovita is the only company that can actually prove bone growth. Good luck Apatech and Integra...back to square one!

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    Replies
    1. Absolute garbage about Vitoss literature have you bothered reading their papers...they are using 60's tech!! Bio active glass as well as BTCp both have a very rapid dissolution rate...the graft simply does not stay around long enough to be effective particularly in the older patient!!

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  36. ATEC
    Revenue of $49.7 million; 40.8% growth over Q1 2010;
    Pro Forma revenue growth of 6.6% over Q1 2010; 5.2% Growth on a Constant Currency basis
    -- Adjusted EBITDA of $4.4 million
    -- Net Loss of $1.9 million, or ($0.02) per share and Non-GAAP Net Income of $0.1 million, or $0.00 per share

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  37. SYK distributors struck gold? Ovita is a 65% margin business. By the time SYK factors in S G & A, their cut and a bit of R/D there will be little left for SYK distributors. Certainly not the 25% or greater commission they already have in the bag. They hold the leverage here.
    However, as an Ovita rep I have no delusions that they will keep me around. Time to find another dedicated biologic company and bring 50% of my Ovita business with me.

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