Biomet Loss Widens but Sales Rise 5%

Closely held Biomet Inc. reported modestly higher sales of hip and knee replacements for its most recent quarter, providing hope to investors that the orthopedic market may be improving.Biomet’s results are closely watched because the company reports earlier than larger competitors—such as Zimmer Holdings Inc.,Stryker Corp and Johnson & Johnson —and could foreshadow industry trends. The company, which distributes products in about 90 countries, said hip sales increased 6% world-wide, excluding currency impacts, and 7% in the U.S. Knee sales grew 4% both world-wide and domestically. The U.S. market for replacement joints has been sluggish as people put off surgeries amid high unemployment rates.”We believe the U.S. hip and knee markets are stable and may even be slightly improving,” said Biomet President and Chief Executive Jeffrey R. Binder on the company’s post-earnings conference call.”The results are good news for the orthopedic companies, and in line with our thesis that utilization could pick up at the beginning of the year as the economy chugs along and health-care savings plans reset,” Joanne Wuensch, an analyst at BMO Capital Markets, said in a note.But Michael Weinstein, an analyst with J.P. Morgan Chase & Co., said the results, while positive, “suggest to us more stability than a pick-up.” He added that Biomet had a notably easy year-over-year comparison for its fiscal third-quarter results.For the quarter ended Feb. 29, Biomet reported a loss of $16.5 million, compared with a loss of $11.6 million a year earlier. Excluding merger and other special items, adjusted earnings fell to $55.1 million from $63.8 million. The company has seen its losses widen in recent quarters, weighed down by charges related to its $11.4 billion buyout in 2007 by a private-equity consortium including affiliates from the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG.Sales jumped 4.5% to $708.9 million on increases in the company’s sports medicine, extremities and trauma businesses. The spine and bone healing segment saw a 5% drop.
Last week, Biomet made a binding offer to acquire the global trauma business of Johnson & Johnson’s DePuy Orthopaedics Inc. for about $280 million in cash. Biomet also recently agreed to pay $23 million in penalties to settle U.S. allegations that it bribed doctors in Brazil, China and other countries over a period of years.