Thursday, May 31, 2012

Globus and Atlas Shrugged and Shrugged and Shrugged

Poor Atlas, the Titan giant has been burdened with holding up Globus' spirits as the company attempts to finalize its  initial public offering. "Oy vey," Atlas is going to get tired from carrying Globus' around during this dog and pony show. With all the hoopla surrounding a potential IPO, it seems Globus had to put the brakes on its original intent, so that it could up the ante from $100 million to $150 million. Hopefully the consultants from the Great Vampire Squid, Piper Jaffray, BOFA, et al will fare better than the genius' at Morgan Stanley that led the Face-broke sham. Price this right and you will attract investors, get greedy and the repercussions will come back and bite you in the ass.  Think Alpha Wreck. Considering that investor confidence is at an all time low in light of the recent Facebroke fiasco it will be interesting to evaluate how the Globus IPO plays out.  If one takes the time out to read the preliminaries  in the S-1 filing, Globus has done a nice job in managing its finances when it comes down to running a company.  Of course those that have become collateral damage during the process will say otherwise. But the reality is that at this juncture its all about the financial data that counts.  If anyone wonders why the Street sunk its teeth into medical devices look no further. In what other industry can a company generate on average 81% gross margins across the board? Containing COGS at 19% speaks volumes about production efficiencies at Globus. In addition, Globus has been able to stabilize their SG&A costs at 42% over the last few years, a sign that it has moved away from total independent distribution model. TSB anticipates that the SG&A will eventually come down a few points based on the current cost containment environment in medical devices. Like everything else what goes up must come down. So the question must be asked, why does Globus need another $50 million?  Could they be anticipating potential litigation settlements with other companies? Let's face it, based on this company's track record, anything is possible. Choir Boys they ain't, but then again they're not running a church or mission are they?

On the surface Globus has a pretty good war chest considering it generated $331.5 million in sales with profits north of $60 million. Globus brags that they hold the title as the fastest growing company in the industry, but I bet the Purple People Eaters would beg to differ. The concern that TSB has regarding Globus is whether they are perceived as an innovator, or are they really nothing more than an imitator on steroids? As NBA players love to say, "no question" Globus makes beautiful instruments and understands the value that visual appearances make when selling a system.  Yet, TSB must ask our readers, what has the competition attempted to copy from Globus' portfolio? How about informing John Q. Public, a potential investor, about the scope of these 5-10 projects that you intend on marketing over the next three years.  Mystique Smishtique. There should be some transparency if you want the dow.  Please, spare us the standard line that this information is proprietary. One has to wonder, what makes this company so unique outside of being managed well? Is there one product in their portfolio that is a game breaker? We would love to see the number of surgeon investors and consultants that have effected tremendous growth at Globus because without their exuberance Globus CAGR wouldn't be anywhere near where it plays.  Will they run, or will they stay after the IPO? Will everyone have reaped a windfall?

When Globus reaches their IPO milestone, how many shares of Common A will they be offering and at what price?  TSB wants to know what our readers think?

As Henry Butler sings on the latest Jeff Golub album,

Hey tell everybody TSB's back in town, I got a dollar and a quarter just rarin' to clown
But don't let nobody play me cheap, I got fifty cents more that I'm going to keep, so
Let the Good Times Roll,  I don't care if you're young or old, Let the Good Times Roll!

22 comments:

  1. Globus will have a story to tell the investors and that will make a difference. I agree the profits are very appetizing. IMHO Globus will do well at initial offering, but after a few months the dust will settle and the tire tracks will start smoking. It was a running joke at Globus that as soon as someone vested, soon after you would hear tires squealing out of the parking lot. David has done an excellent job with his vision of Globus, even with the other baboons on the management team.
    If Globus has a product that I could say is unique, it would be the PEEK corpectomy spacers. I have heard of a few companies trying to make that work, but unable to keep the implant from collapsing under load. Everything else is just copies of the top 2-3 systems on the field. I would be hesitant to say this is a failure of the engineers at Globus, but more of a management direction. I would take the top engineers at Globus over most of the other companies any day of the week (KP, KM, JP, EK, etc...) all good people.
    Revolve= Longitude, Sextant, Viper
    0 Profile= Synthes, STALIF
    Lateral = NuVasive
    Revere Pedicle Screws= Synthes
    Providence ACDF = Skyline
    Continental ALIF = DePuy

    Soon to be endoscopic = Richard Wolf/JoiMax

    I did hear they are offering 500.00 for "feedback" re: their lateral system to anyone who can write their name! Hasn't that been out for 3+ years?

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    Replies
    1. At least 2 of the engineers you mention are very well paid group managers at globus. I speculate that you already are aware of this fact. Their roles have everything to do with "management direction". They are just as responsible as those in C level management roles for developing unique and successful products. DP personally selected these people because they reflect his vision. If you do not agree with DP you are out the door.

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  2. Just because you file s-1 doesn't mean you have to go public and After watching fb they have to be shitting! Plus with all the lawsuits coming and all the shares they've already issued this stock will plummet!

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  3. They disclosed in the S-1 that they're not SOX compliant and can't estimate when they will be. Um, isn't that a problem?...

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  4. As far as the stock is concerned when and if the IPO occurs the underwriters don't give a s*%t what happens, they will already have gotten their pound of flesh, Ha Ha Ha Ha Ha

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  5. Too bad the real estate market sucks. All the Globus boys in my territory are going to have to put their waterfront / golf course properties on the market and take the no-limit credit cards away from their wives when this IPO hits the fan. The surgeons are going to want the money they invested back, plus a little more. Time to find out who your friends are.

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    Replies
    1. You get all that at Gobus? Are they hiring?

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  6. Their COGS are so healthy because they manufacture in India.

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    Replies
    1. That's why the instruments break all the time .....the answered from the globus rep...we can make customs instruments for you....

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    2. why do they say all of their suppliers manufacture their products in the United States?

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  7. Globus' premiere product is Caliber. That is their only marquee headliner - and it isn't even their IP; Globus 'borrowed' the exact IP from an unknowing physician. He is not happy. That will be interesting to the fallout from that.

    Globus is banking on their facet replacement system and lumbar disc replacement device combo to lead the charge in the next five years. They believe that lumbar arthroplasty has failed due to the challenge of getting around the facets. Once the facets are replaced, the lumbar arthroplasty should work.

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    Replies
    1. Is that where some of their consultants get their info

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    2. Good post, seems like you have looked behind the curtain. I also know they have been heavily copying endoscopic stuff i.e. JoiMax/Richard Wolf.
      I wondered how the Caliber spacer came about being that not one of the "design" team surgeons actually used expandable spacers in practice! It appears to be a common thread with Globus, which is to have a bunch of "design" team surgeons who barely ever do the procedure/implant the design project is focused on. Instead, the focus on the biggest $ Surgeons be that a Surgeon who implants a ton or a Surgeon who can influence other Surgeons. Nobody said Globus was not business savvy!

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    3. Most competent arthoplasty Surgeons (wait is that an oxymoron?) do facet blocks on potential patients to determine if the facets will continue to be pain generators. IF the facets are a pain generator and the Surgeon does an arthoplasty device w/o addressing the facets, your patients will be very upset. The biggest problem with Arthoplasty and those sexy post-op X-Rays is follow-up!

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  8. TSB, it is an easy answer as to why they have been successful with me-too products on steroids. They have an offer in every segment that's better than most. The promote their asses off, support the crap out of everything and when they had to opportunity to capture distributors who had a base of business in a larger area, vs. the let's make a deal one surgeon at a time approach, limit of four surgeons, so famous in most areas. So much is timing, and there was a need. The saw it, went after it and took it to the bank.

    Not in that business, not a part of Globus, so have not interest in their success or failure, but it has been fun to watch from the outside - to watch Medtronic go, "what the ....

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  9. Not in the business, not interest in their success of failure, c'mon 7:10 how do you know all of this? Self promotion?

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  10. Here here 7:13 another bs artist on this blog

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  11. Heard revere pedicle screw system was patent pending and they just lost out on the patent shortly after filing for the IPO. They lost it to a small company named Altus Spine. The IP was origionally Vertibron's and Altus purchased it after they went under.

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  12. I understand (it is public record) they are being sued for their Kyphoplasty system they missapproiated from one of their original surgeons. Hope they like dressing in suits instead of designing new products.

    Another surgeon not happy.

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