Wright Medical Group, Inc. Reports 2015 First Quarter Financial Results
First Quarter Global Foot and Ankle Net Sales Increase 17% As Reported and 21% Constant Currency
First Quarter Global Sales Increase 10% As Reported and 14% Constant Currency
First Quarter Global Total Ankle Replacement Sales Increase 49% As Reported
MEMPHIS, Tenn., April 29, 2015 (GLOBE NEWSWIRE) — Wright Medical Group, Inc. (Nasdaq:WMGI) today reported financial results for its first quarter ended March 31, 2015. As a result of the completed sale of the hip and knee business to MicroPort Medical B.V., a subsidiary of MicroPort Scientific Corporation (MicroPort), this business is now reported as discontinued operations.
Net sales totaled $77.9 million during the first quarter ended March 31, 2015, representing a 10% increase as reported and 14% increase on a constant currency basis compared to the first quarter of 2014.
Robert Palmisano, president and chief executive officer, commented, “We are off to a very strong start in 2015 in the most important parts of our business. Specifically, our U.S. foot and ankle business posted another quarter of significant growth acceleration, driven by improved sales force execution and strong contribution from new products. In addition, the ongoing launch of our INFINITY total ankle system drove global total ankle growth of 49% in the quarter, underscoring the excellent results we are seeing from the combination of our leading technology, our Rapid Adoption Process, which is focused on conversions from fusions to total ankle implant procedures, and our emphasis on physician education. Together, these contributed to the strong sales trajectory and positive momentum we continue to see this quarter and believe we will continue to see throughout 2015. We also saw continued gains in U.S. foot and ankle sales force productivity, which now stands at approximately $1.1 million per sales rep, or double the level it was before we transitioned to a direct organization. Given our sustained focus and attention in this area, I am confident that we can reach a meaningfully higher level in the future.”
Net loss from continuing operations for the first quarter of 2015 totaled $46.2 million or ($0.91) per diluted share, compared to net loss of $30.3 million or ($0.62) per diluted share in the first quarter of 2014.
Net loss from continuing operations for the first quarter of 2015 included a $13.5 million unrealized gain related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, a gain of $6.9 million related to mark-to-market adjustments on and settlement of derivatives, $25.2 million of charges related to the write-off of unamortized debt discount and deferred financing costs associated with the settlement of 2017 Convertible Notes, $4.5 million of non-cash interest expense related to the 2017 Convertible Notes and 2020 Convertible Notes, and $11.0 million of transaction and transition costs. Net loss from continuing operations for the first quarter of 2014 included a $14.3 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, $7.4 million of due diligence, transaction and transition costs, $2.3 million of non-cash interest expense related to the 2017 Convertible Notes, and an unrealized loss of $1.0 million related to mark-to-market adjustments on derivatives. These 2014 charges were offset by a $12.4 million U.S. tax benefit within continuing operations recorded as a result of the U.S. pre-tax gain recognized within discontinued operations due to the sale of the OrthoRecon business.
The Company’s first quarter 2015 net loss from continuing operations, as adjusted for the above items, was $25.9 million, a decline from a net loss of $16.6 million in 2014, while diluted loss per share, as adjusted, decreased to ($0.51) in the first quarter of 2015 from ($0.34) in the first quarter of 2014. The attached financial tables include a reconciliation of U.S. GAAP to “as adjusted” results.
The Company’s first quarter 2015 adjusted EBITDA from continuing operations, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was negative $11.8 million, compared to negative $6.2 million in the same quarter of the prior year. The attached financial tables include a reconciliation of U.S. GAAP to “as adjusted” results.
Cash and cash equivalents and marketable securities totaled $465.2 million as of the end of the first quarter of 2015, an increase of $235.3 million compared to the end of the fourth quarter of 2014, which was driven by the completion of the 2020 convertible debt offering.
Update on Augment® Bone Graft
The Company previously announced that an Augment® Bone Graft vendor received a Form 483 at completion of an FDA pre-approval facility inspection, which occurred in January of 2015. Late in March 2015, the vendor was notified by the FDA that its facility will be reinspected and must be in substantial compliance with the current Good Manufacturing Practice (cGMP) regulation as a condition for approval of the Augment® Bone Graft Premarket Approval Application (PMA). The Company has notified FDA that the vendor is prepared for the reinspection and asked that it be scheduled on or after May 4, 2015. Assuming a satisfactory inspection result, the Company believes final approval of Augment® Bone Graft now appears more likely in the second half of 2015.
Update on Proposed Merger with Tornier
As we previously announced, Wright received a Second Request from the FTC in connection with the proposed merger with Tornier on January 28, 2015. The Second Request asked for further information regarding certain lower extremity products that accounted for, in the aggregate, global revenue of approximately $21 million, and U.S. revenue of approximately $14.9 million in the twelve months ended September 30, 2014. Tornier has been actively pursuing divestiture of the Tornier lower extremity products cited in FTC’s Second Request, which are the Tornier Salto Talaris and Salto XT ankle replacement products and the Tornier silastic toe replacement products. In addition to obtaining FTC clearance, the proposed transaction remains subject to customary closing conditions, including approval by both Wright and Tornier shareholders. The company presently intends to schedule the shareholder votes in mid-June of 2015. From a timing standpoint, while an end of second quarter 2015 closing is still possible, we continue to believe a third quarter close is more likely.
Palmisano concluded, “We are continuing to work closely with the vendor to resolve the observations following an FDA inspection at the vendor’s facility to receive final FDA approval for AUGMENT® Bone Graft. We also remain focused on our 2015 commitments, including executing our Vital Few initiatives, which will further strengthen and expand our market-leading competitive position. In addition, we believe our pending merger with Tornier will enhance shareholder value through the creation of the premier high-growth Extremities-Biologics company that is uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopaedics.”
Wright Medical Group Outlook
The Company continues to anticipate net sales for 2015 of approximately $325 million to $335 million, representing constant currency growth of 13% to 16% from 2014.
The Company continues to anticipate 2015 adjusted EBITDA from continuing operations, as described in the GAAP to non-GAAP reconciliation provided later in this release, of negative $(22.0) million to negative $(27.0) million.
Wright Medical Group continues to anticipate adjusted earnings per share from continuing operations, including stock-based compensation, for full-year 2015 of $(1.67) to $(1.77) per diluted share, based on approximately 51.1 million shares outstanding. While the amount of the non-cash stock-based compensation charges will vary depending upon a number of factors, the Company currently estimates that the after-tax impact of those expenses will be approximately $0.24 per diluted share for the full-year 2015.
Wright Medical Group plans to provide updated guidance when the pending merger with Tornier closes.
The Company’s earnings target and adjusted EBITDA from continuing operations targets exclude possible future acquisitions; other material future business developments; non-cash interest expense associated with the 2017 and 2020 Convertible Notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; impairment charges, mark-to-market adjustments to the CVRs and non-cash mark-to-market derivative adjustments; and charges associated with the February 2015 refinancing of our convertible debt. Further, this earnings target and adjusted EBITDA target excludes any expenses, earnings or losses related to the OrthoRecon business.
Wright Medical Group’ anticipated ranges for net sales, earnings and adjusted EBITDA from continuing operations are forward-looking statements, as are any other statements that anticipate or aspire to future events or performance. They are subject to various risks and uncertainties that could cause the Company’s actual results to differ materially from the anticipated targets. The anticipated targets are not predictions of the Company’s actual performance. See the cautionary information about forward-looking statements in the “Safe-Harbor Statement” section of this press release.