$3.9 Billion
NO. OF EMPLOYEES: 11,426

Synthes Inc. certainly didn’t act like a company in transition last year. After announcing a historic $21.3 billion merger agreement with global healthcare conglomerate Johnson & Johnson, the Swiss surgical implant manufacturer routinely conducted business as if nothing had changed. And for the most part, nothing had changed.

Though the companies reached an agreement in late April, the merger was subject to anti-trust review in both the United States and European Union. It also required the blessing of Synthes shareholders, which occurred in mid-December, eight months after the deal was first announced.

The European anti-trust review—originally expected to move easily through the European regulatory system—hit a stumbling block in the fall after the deal was referred to a second-phase in-depth probe by the EU’s anti-trust unit. The referral gave authorities an additional four months to rule on the case (the final deadline was March 19, 2012).

Synthes launched the ETN PROtect tibia nail last year, an antibiotic-coated implant designed to treat open tibia fractures with high infection risks. Image courtesy of Synthes Inc.

Prompting the in-depth probe was European regulators’ concerns about the deal’s potential to monopolize the market and hurt innovation. Market dominance, however, likely was a motivating factor behind the merger—by purchasing Synthes, J&J was attempting to gain a majority of the estimated $5.5 billion global trauma device market.

Such a strategy did not sit well with EU anti-trust chieftains. Their initial investigation concluded the deal would combine two of Europe’s largest suppliers of spine devices and turn Synthes into the world’s largest producer of trauma products and devices for facial and skill factures. J&J, meanwhile, would become the global leader of shoulder replacements and components.

“The proposed acquisition would remove a competitor from some markets which are already concentrated,” EU anti-trust chief Joaquín Almunia said in a prepared statement last fall. “The commission needs to make sure that effective competition is preserved in order to maintain innovation and prevent harm to patients.”

The commission preserved competition by requiring J&J to sell its DePuy Orthopaedics Trauma business to Warsaw, Ind.-based Biomet Inc. for $280 million. The compromise was mutually beneficial for all three parties: It allowed J&J to finally close the deal for Synthes (in mid-June 2012, more than a year after its proposal) and it gives Biomet a stronger presence in the global trauma market, according to CEO Jeffrey R. Binder. Perhaps most importantly though, the sale eased European regulatory concerns about a trauma market monopoly.

“We obtained remedies to ensure that competition will remain strong in these markets for the ultimate benefit of patients and social security systems,’’ Almunia said in a statement.

Within a week of receiving the go-ahead from EU anti-trust officials, J&J had completed the Synthes deal and posted a welcoming message to visitors on the firm’s website. Conversely, Synthes Board President Hansjörg Wyss and President/CEO Michel Orsinger composed a farewell message to shareholders in the company’s 2011 annual report. In a joint letter, the pair reminded investors of the opportunities created by the merger and said the two companies’ combined forces would be better positioned to tackle future regulatory issues and competitive pressures.

“We should all keep in mind the opportunities brought about by this merger,” Wyss and Orsinger wrote. “In the wider context of an increasingly challenging healthcare environment, the combination of our core strengths will be a welcomed improvement in our capacity to tackle regulatory and competitive difficulties ahead. As a result, both our surgeon customers and our employees will reap benefits from this business combination. Above all, we will continue to do the things that made Synthes so successful.”

Some of the things that made Synthes successful in 2011 included a partnership with Eli Lilly and the introduction of a spate of new products, including the Dynamic Locking Screw and the ETN PROtect tibia nail. The Dynamic Locking Screw, according to Synthes, is designed to boost biological bone healing by allowing micro-motions that improve circumferential bone growth.

The Expert Tibial Nail PROtect, including its cannulation, is coated with a thin layer (approximately 50 µm) of gentamicin-laden polymer. The coating is abrasion-resistant and is designed to withstand most of the forces occurring during nail insertion. It is completely resorbed after roughly six months.

The company continued its foray into the craniomaxillofacial sector with the debut of ZipFix, a product that enables fast sternal closure after thoracic interventions.

Such innovations helped boost total revenue last year by 7.7 percent to $3.9 billion. Net earnings climbed 6.5 percent to $966.7 million, while research and development spending jumped 15.3 percent to $198.8 million. U.S. sales generated the bulk of Synthes’ revenue in 2011 (year ended Dec. 31), collecting $2.1 billion, a 2.7 percent increase compared with 2010. Other markets (which the company defines as “rest of the world”) contributed $1.8 billion to the bottom line, a staggering 14.3 percent spike compared with the $1.6 billion amassed from foreign customers in 2010.

European sales (which includes the Middle East and Africa) grew 2.3 percent in local currency while Latin American revenue surged 13 percent. Sales in Asia virtually exploded, ballooning 17 percent; contributing to the increase most likely was the more than 200 surgeon educational events Synthes held in the region last year. In China, where the firm opened its first manufacturing facility in 2010, executives made good headway on three novel clinical trials that eventually will enable Synthes to sell devices manufactured in China specifically for local patients. Bigwigs expect to launch the first of these products next year.

The company’s power tools business turned in a solid performance in 2011, thanks to the integration of products acquired in the November 2010 purchase of The Anspach Effort Inc. Synthes executives said Anspach’s focus on high speed surgical power tools for use in neurosurgery, spinal and ENT surgery would help Synthes expand its power tools product offering to hospitals and surgeons worldwide.

“We will establish a dedicated power tools division, with close to $200 million in total sales,” Orsinger said when the purchase was announced.

Synthes announced its collaboration with Eli Lilly and Company about two months after publicly acknowledging its merger with J&J. The two companies (Eli Lilly and Synthes) signed a joint development agreement to address the needs of patients with osteoporosis and bone fractures.

The agreement allows for the joint development and licensing of early stage compounds from Lilly to Synthes for use within orthopedic trauma, spine, craniomaxillofacial and reconstructive areas.

The early stage compounds have pre-clinical and in some cases clinical data packages and have the potential to aid in the local treatment and regeneration of the skeleton.

The two companies will jointly develop site-specific osteoinductive (i.e. bone healing) products based on Synthes’ biomaterials combined with Lilly’s biologics or pharmaceuticals.

Within a second development program, Synthes and Lilly jointly will conduct and fund the evaluation of additional orthopedic uses for Lilly’s osteoporosis drug Forteo (teriparatide [rDNA origin] injection), marketed as Forsteo in some countries outside of the United States.

Building upon a Phase II study that Lilly has already completed, Lilly and Synthes will collaborate on additional clinical studies to evaluate future uses for Forteo, including fracture healing.

In addition to the development component of the agreement, the collaboration also includes the U.S. co-promotion of Forteo to orthopedic surgeons, an important segment of physicians who treat patients with a fracture due to osteoporosis.

Lilly Bio-Medicines Bone/Muscle/Joint global development platform leader Johnston Erwin said the collaboration additionally will explore ways to treat fractures with Forteo in older patients and/or those who have osteoporosis and, longer term, will look for new ways to deliver medicine locally to the fracture site.

Forteo, a U.S. Food and Drug Administration-approved osteoporosis therapy, is used to treat postmenopausal women with osteoporosis who are prone to fractures. It also is used to increase bone mass in men with primary or hypogonadal osteoporosis who are prone to fractures.

$3.7 Billion
NO. OF EMPLOYEES: 11,426

Talk about apropos. The management team at Synthes Inc. couldn’t have picked a more fitting moniker for 2010, known internally as The Year of Challenges and Change. The challenges—not surprisingly—were triggered by several longstanding industry nemeses, namely: pricing pressures, shrinking reimbursement rates, a confusing and contradictory regulatory process, weak procedure demand, and an economy that to some extent, is still smoldering from four years of charred capital.

The second half of the nickname is rather self-explanatory, representative of all the changes that occurred at the Swiss surgical implant manufacturer last year as a result of the challenges that confronted the firm. Those challenges, for the most part, helped position the company for perhaps the most significant change in its 52-year history—becoming part of the Johnson & Johnson corporate family. The healthcare conglomerate purchased Synthes in late April (2011) for $21.3 billion to gain a majority of the estimated $5.5 billion trauma device market. The deal—the largest in J&J’s 125-year history—gives the New Brunswick, N.J.-headquartered firm a device company with an operating margin of 35 percent, the highest among medical-products manufacturers with stock values of more than $5 billion.
The purchase values Synthes at about 11.2 times this year’s forecast earnings before interest, tax, depreciation and amortization, according to Bloomberg data. Buyers of medical products companies paid a median of 11.5 times profit in the past five years, the data show.

The deal, expected to close in the first half of 2012, is subject to antitrust review in both the United States and European Union, and requires the approval of Synthes shareholders. J&J plans to combine Synthes with its DePuy unit to form the largest part of its medical devices and diagnostics segment, the companies said.

With 50 percent of the market for sales of screws, plates, bone grafts and other products to treat skeletal injuries as well as “scale and margins,” analysts believe the blockbuster acquisition will complement J&J’s orthopedics business. J&J executives agree. “Very infrequently do you ever see an opportunity for a company like Synthes to come into play with J&J,” Johnson & Johnson CEO William J. Weldon said. “We thought this was an extraordinary opportunity and the time was right.”

Technically, the timing of the deal was somewhat off, occurring nearly five months too late to qualify for The Year of Challenges and Change. Such a blockbuster move, however, most likely is better off in its own category anyway (J&J’s Comeback Year, perhaps?) to keep it from overshadowing the various changes Synthes implemented last year to improve its bottom line by 8.6 percent.

One of those changes included the November acquisition of The Anspach Effort Inc., a privately held surgical tools manufacturer based in Palm Beach Gardens, Fla. Executives said Anspach’s focus on high-speed surgical power tools for neurosurgery, spinal, and ear, nose and throat procedures will help Synthes expand its power tools product offering to hospitals and surgeons. The deal also will help the firm gain market share.

Another notable change at Synthes that resulted from various industry challenges was the creation of the Thorax product segment, which has become the company’s fourth-largest portfolio in the Craniomaxillofacial (CMF) group (behind Neuro, Midface and Mandible). The Thorax portfolio includes sternal closure devices used to fix the sternum after open heart surgeries, and a plating system to fix rib fractures.

Synthes attempted to offset some of the negative growth in its spinal business last year with the launch of two new products—the Matrix Spine System and T-Pal Spacer System. The company describes its Matrix product as a pedicle screw fixation system for the lumbar spine that can be used in both open and minimally invasive procedures to fix deformities, relieve lower back pain and repair traumatic injuries. Synthes debuted the Matrix device in the United States in November.

The T-Pal system is a “kidney bean” style implant for use in minimally invasive transforaminal lumbar interbody fusion surgery. The device is, in effect, a “placeholder” for disc space once a diseased disc is removed, according to product literature.

A string of new CMF and trauma products helped Synthes maintain is market-leading position in both sectors last year. The Matrix Plating Systems, MatrixRIB System and MatrixORTHOGNA-THIC Plating System (a reconstruction system used to correct dental misalignments) drove CMF device sales growth, while the launch of more than 30 new Trauma products contributed to higher 2010 sales in that device group. Most of the new Trauma devices released last year were expansions of the company’s locking compression plate product lines, which now come with various screw angles to simplify placement, according to the company’s 2010 annual report. Synthes also debuted a large set of implants and instruments for orthopedic foot interventions called the Variable Angle LCP Forefoot/Midfoot system, a product line that increases offerings to foot and ankle surgeons.

Product initiatives, however, were not the only strategies Synthes employed to boost its market presence last year. The company launched its first iPhone and iPad application featuring product technique guides, surgical approach videos, and presentations. The iPhone and iPad application is designed to address the needs of surgeons and help sales representatives improve their performance.

Synthes also introduced a new Global Learning Management System, an initiative designed to improve the firm’s quality training system. Company executives said the Global Learning Management System provides 24-hour access to the firm’s library of soft skills and systems training curriculum and “supports the transfer of Synthes knowledge and technology around the world.”

Of all the strides Synthes made last year to enhance its ethics and compliance program (the Global Learning Management System was one of them), none were as significant as the sale of its Norian Corp. unit. The company sold the unit to settle criminal allegations that it illegally tested a bone-mending cement which caused the deaths of three patients. Under terms of the settlement, Norian pleaded guilty to a felony, was ordered to pay a $23.5 million fine, and faces exclusion from Medicare, the government’s health plan for the elderly and disabled.

The divestiture marked the first time the U.S. government ordered a medical device maker to sell a subsidiary in a health-fraud case, Gregory Demske, assistant inspector general for legal affairs with the U.S. Department of Health and Human Services, told Bloomberg.

In court papers, federal prosecutors accused Norian of conspiring to conduct unauthorized clinical trials of Norian-brand cements from May 2002 to late 2004. Three patients died from a rapid drop in blood pressure during surgeries, prosecutors said.

Synthes, separately, was ordered to pay $808,000 as part of the settlement. Company executives, however, said the settlement would not have “any significant financial impact” on the firm’s 2010 earnings.

They were right. Net sales reached $3.7 billion last year and gross profit jumped 8.7 percent to $3 billion, according to the company’s 2010 annual report. Net earnings climbed 10.1 percent to $907,733, while basic and diluted earnings per share increased 10.2 percent to $7.65. “2010 was a year full of challenges and change for both our industry and our company,” Board Chairman Hansjörg Wyss and President and CEO Michel Orsinger said in a letter to shareholders within the company’s annual report. “In that context, Synthes’ performance and the progress made in most key financial metrics as well as in all major operational activities and all parts of the world are evidence of the strength and resilience of our company.”

The Middle East and Africa best demonstrated that resiliency in fiscal 2010 (year ended Dec. 31), as sales grew an astonishing 50 percent. Executives attributed the sales increase to a large tender bulk order from the Saudi Arabian government, made bi-annually on behalf of government-owned hospitals.

Severe winter weather in Europe helped drive a 10.5 percent increase in sales to $850.2 million, while overall revenue in the Asia/Pacific region climbed at a similar rate, growing 10.3 percent to $424.4 million. The lion’s share of the company’s Asia/Pacific business came from Japan, which comprised 40 percent of the total revenue last year. Australia and New Zealand customers made up an additional 20 percent of sales.

Latin American sales growth came in at 14.6 percent on a constant currency basis, with Brazil and Mexico performing particularly well last year. North America recorded the lowest sales growth but nevertheless garnered the most revenue for the company. The $2.1 billion in North American sales comprised nearly 60 percent of the company’s total revenue for the year.

$3.4 Billion
NO. OF EMPLOYEES: 10,705

When executives at Synthes Inc. released the firm’s 2009 earnings earlier this year, President and CEO Michel Orsinger set a rather ambitious goal for both himself and the company. “My personal focus this year,” he told his colleagues and shareholders, “is on keeping the innovation cycle high and on increasing the effectiveness of our sales force.”

Based on Synthes’ 2009 results, Orsinger may have an easier time achieving his goal than he anticipates. Dozens of new product introductions (more than 30 in the Trauma segment alone) and an expanded sales force helped boost sales by 6.3 percent to $3.4 billion in 2009 (year ended Dec. 31). Gross profit rose 6.2 percent to $2.8 billion, according to Synthes’ 2009 annual report.

“In 2009, Synthes delivered a good result,” Orsinger and Board Chairman Hansjörg Wyss said in their letter to shareholders that was included in the annual report. “The global financial crisis that began in 2008 continued to have a negative impact on the incidence level of fractures, due to less participation in activities that tend to result in orthopedic trauma. And while the company was not immune to the economic downturn, we still demonstrated strong resilience.”

Synthes is one of the few orthopedic companies that demonstrated such resilience last year. Besides increasing its operating income by 7.6 percent and earnings per share by 75 cents, the company managed to overcome the economic roadblocks that dampened sales throughout most of the orthopedic sector and improve its position in the global trauma market (now estimated to be at 50 percent). Executives attributed the gain in trauma market share to the company’s sales force, its product lineups and the barrage of new device debuts last year.

Those debuts included the release of the LCP Two Column Variable Angle Distal Radius Plate, the LCP Distal Fibula Plate, the Angular Stable Locking System for Intramedullary Nails, and an array of Headless Compression Screws. Synthes claims the Angular Stable Locking System represents a milestone in nail development, executives claim, because it gives surgeons the ability to create a locked structure that offers angular stability for intramedullary nails.

Last year’s debuts were not limited to products, though. The Trauma segment introduced a new leader—I.V. Hall, a 12-year Synthes veteran responsible for Global Trauma Product Development during the last four years. Hall succeeded Rick Gennett as segment president.

Spine growth was derived from the Synapse system, the Zero-P implant and the expansion of Prodisc-C, an implant made up of three components—two cobalt chrome alloy endplates and an ultra-high molecular weight polyethylene inlay. Another significant sales contributor was the Vertebral Body Stenting system, a minimally invasive surgical technique designed to treat osteoporotic vertebral compression fractures.

Though it is not reflected in the 2009 annual report or final sales figures, spinal device sales most certainly were affected by a recall of the company’s Synex II Central Body components. Synthes officials announced the recall on Nov. 12 after the U.S. Food and Drug Administration discovered that six of the firm’s Ti Synex II devices had collapsed only several months after they were implanted.

Synthes continued to maintain its market-leading position in the cranio-maxillofacial (CMF) market sector last year as the Matrix line of products (the Neuro, Midface and Mandible) drove sales growth. The newest member of the Matrix family is the MatrixRIB Fixation system, which is used to repair and stabilize rib fractures, fusions and osteotomies of normal and osteoporotic bone.

Along with product initiatives, Synthes strengthened its market presence in other ways last year. In August, executives announced a strategic agreement with Kensey Nash Corp., an Exton, Pa.-based medical device firm that develops new technologies in regenerative medicine. The agreement gives

Synthes the right to market and distribute Kensey Nash’s extracellular matrix (ECM) porcine dermis product for soft tissue reconstruction in ventral hernias and head and neck procedures. Executives said the agreement will allow the firm to build “a valuable franchise with a series of ECM products.”

Synthes expanded its presence in the Asia Pacific market by completing construction of a manufacturing plant in Suzhou, China, in September. The plant manufactures products for local (China) markets.

Synthes further strengthened its foothold in the Latin American arena by creating logistics points in Brazil to help improve service and optimize costs. The logistics points enabled the company to reach areas and regions that previously had been inaccessible. The success of its first logistics point in the state of Rio Grande do Sul was so successful that Synthes is planning to open five additional points by the end of 2010.

The logistics point in Rio Grande do Sul perhaps helped Synthes achieve a sales growth rate of 19 percent in Brazil. Colombia posted an increase of 25 percent, but that growth was tempered by flat or declining revenue in countries where the company has distributors. Executives blamed the low growth rates in these areas on tight credit in Chile and Venezuela and the postponement of non-emergency surgery by southern hemisphere hospitals due to the H1N1 pandemic.

Overall, Latin American sales grew 13.3 percent last year in local currency, a figure that is slightly below the company’s historical average and also below executives’ expectations for future revenue growth.

North America accounted for nearly two-thirds (60.7 percent) of Synthes’ total 2009 sales, generating $2 billion in revenue. Europe contributed $788.5 million, a 4.3 percent increase compared with the $756.1 million the region reported in 2008. The Asia Pacific region posted the largest sales growth, as new products and technologies and the company’s expanding sales force made inroads in emerging markets. Synthes’ CMF business grew more than 20 percent in the Asia Pacific region, due mostly to the introduction of the Matrix product line, executives said. Sales in the Asia Pacific region totaled $357 million, a 15.5 percent jump compared with the $309 million the region reported in 2008.

Sales throughout the rest of the world decrease 7.4 percent to $190 million.

An unexpected legal windfall of $21 million also added to Synthes’ bottom line in 2009. The company received the money from Medtronic Inc. for infringing the patent for its ProDisc-L artificial disc replacement device. In late August, a U.S. District Court judge in Tennessee permanently forbid Medtronic from infringing on the patent and ordered the device giant to pay Synthes’ attorneys’ fees.

The firm’s ProDisc-L also has been at the center of a legal battle with the New Jersey attorney general. An investigation conducted by the attorney general’s office in 2008 concluded that doctors who were working for Synthes and also were in charge of clinical trials for the ProDisc Total Disc Replacement System, the ProDisc-L and the ProDisc-C did not disclose their financial stake during some of the trials.

An agreement Synthes signed with the New Jersey Attorney General’s Office in May 2009 requires the company to disclose all financial relationships with doctors conducting clinical trials of its products, and bans it from tying their compensation to the outcome of such trials. The pact resolves allegations that Synthes failed to disclose financial conflicts of interest among clinical trial researchers.

Synthes agreed under the settlement to pay clinical investigators “fair market value” compensation for their clinical trial work and any other consulting services they provide to the company. It also agreed to reimburse the Garden State $236,000 for the cost of the investigation.

Roughly one month after resolving its dispute with New Jersey, Synthes found itself in more legal trouble, only this time it came from Pennsylvania authorities. The U.S. Attorney for the Eastern District of the Keystone State accused the company with the off-label promotion of Norian XR, a spinal product the firm discontinued in 2004. Though Synthes is cooperating with the government’s investigation, executives insist the company did nothing wrong and that any marketing of Norian XR was conducted properly.

$3.2 Billion
NO. OF EMPLOYEES: 9,947

It was a year most business executives would rather forget. Profits nosedived, stock prices plummeted, and investor anxiety grew faster than public outrage against CEO bonuses. In short, there wasn’t much to celebrate in 2008.

Executives at Synthes Inc., however, found a good reason to rejoice—the implant manufacturer reported record financial results in 2008, with net profit up by 20 percent and sales up nearly 16 percent.

“2008 was a year of great economic turmoil throughout the world, negatively impacting most industries and creating tremendous unemployment and uncertainty,” Hansjörg Wyss, Synthes board chairman and Michel Orsinger, president and CEO, told shareholders at the start of the company’s 2008 annual report. “While most politicians, CEOs, shareholders and investors would rather not be reminded about 2008…Synthes finds itself in a strong and advantageous position.”

Such a strong and advantageous position was made possible by a financially sound year, which featured an improvement in the company’s gross margin, a decrease in the global tax rate and a strong balance sheet that included no debt, substantial borrowing capacity and a considerable cash flow.

Net sales totaled $3.2 billion, a 15.7 percent increase compared with the $2.7 billion Synthes reported in 2007. Gross profit jumped 18 percent, going from $2.2 billion in 2007 to $2.63 billion in 2008, ended Dec. 31. Net earnings totaled $735 million, while operating income rose 19 percent to $1 billion.

North America generated the bulk of Synthes’ sales last year, contributing $1.92 billion in sales (which amounted to 60.2 percent of the company’s total sales). Within the United States, revenues were $1.8 billion, an 11.7 percent increase compared with the $1.6 billion in U.S. sales reported in 2007. Increased sales in the Spine product segment helped Synthes become the second-largest supplier of spinal products.

Some of the products helping to drive the growth in Synthes’ Spine business last year included the Zero-P, an implant used in the cervical spine to help fuse diseased discs; and the Prodisc-C, an implant designed to maintain the physiological range of motion in the cervical spine. The Prodisc-C is composed of three components—two cobalt chrome alloy endplates and an ultra-high molecular weight polyethylene inlay.

The company released dozens of new products in the United States last year that improved treatments for the shoulder, tibia (lower leg), clavicle, wrist and adolescent femur (upper leg). Some of the products were instruments that allow surgeons to treat fractures less invasively. One such product was the LCP Volar Column Distal Radius Plate, a device designed to fix complex wrist fractures. This item is a key addition to Synthes’ wrist fracture plate portfolio because it gives surgeons various options to treat these injuries, which the company claims is the most common kind of fracture in humans.

Cranio-Maxillofacial (CMF) sales were driven by the launch of the MatrixMANDIBLE fixation system, a plating system to fix the lower jaw, and the MatrixMIDFACE Pre-formed Orbital Plates, a facial plating product line. Both products complement the company’s MatrixMIDFACE and MatrixNEURO systems for complete craniofacial treatment. Executives said the entire Matrix brand product line is becoming “the new reference of Synthes’ core CMF products” and is key to helping the company increase its share of the worldwide CMF market.

Further market penetration of Synthes’ In-Space implant also helped boost sales in the Spinal segment last year. The In-Space device is designed to treat lumbar spinal stenosis through a minimally invasive lateral approach.

Synthes achieved sales growth in all major geographic areas last year. Europe, the Middle East and Africa generated $756.1 million, with Europe contributing 13.4 percent and the Middle East and Africa comprising 37.1 percent to total net sales.

Above-average growth was posted predominantly in Eastern Europe (Russia, Hungary and Poland), as well as in France and some northern European countries. The company established Synthes Turkey in early 2008; the sales and distribution operation established in Istanbul is expected to expand into other major centers throughout the country this year.

During the second half of 2008, Synthes established a direct market presence in northern Germany by ending its distributor agreement in the region and expanding its south German operation to handle additional market requirements. The German market is Europe’s biggest and represents more than a fifth of Synthes’ European business.

Net sales in Asia Pacific, the company’s third-largest market, grew 16.8 percent to $309 million. Executives attributed the increase to above-average growth in China, South Korea and India. Sales in New Zealand, Hong Kong and Singapore also grew at an above-average rate, according to the company.

Piggybacking its successful launch of the Asian PFNA femoral nail, Synthes introduced an Asian-specific spinal product last year called Lotus. The company expects the region to deliver strong sales growth in the next few years, as the firm opens its own manufacturing facility in Suzhou, near Shanghai, China (the second half of 2009). “We expect our local presence as a manufacturer and employer to have a positive impact on our reputation and business in Asia Pacific and facilitate the development of business in China, which is expected to become the largest medical device market in the world in the next few years,” the company’s 2008 annual report stated.

Synthes also is hoping to further develop its reputation in Latin America over the next few years. That region generated $136.6 million in sales last year.If its long-term business strategy is successful, Synthes may gain a reputation in the near future as a medical technology provider.

In March 2008, the firm acquired Innomedic GmbH, a German company that develops computer software and programs used in medical technology applications. The acquisition enables Synthes to gain experience in software development for medical technology applications.

$2.8 Billion
NO. OF EMPLOYEES: 9,070

In yet another solid year for Synthes, the company grew sales 15.3% to $2.8 billion in 2007, up from $2.4 billion in 2006. Net income was nearly $613 million, an increase of more than 20% from $509 million recorded for 2006. The steady climber has had a compound annual net sales growth rate of 22.4% in the past 10 years and shows no signs of slowing down—especially with some key product approvals last year.

The manufacturer of instruments, implants and biomaterials for surgical fixation, correction and regeneration of bone and soft tissues capped off a successful year in December with FDA approval for its ProDisc-C Total Disc Replacement, making Synthes the first company to offer both a lumbar and a cervical disc replacement in the United States. (This approval follows Synthes’ fall 2006 launch of ProDisc-L, used in more than 1,000 US surgeries in 2007.) Synthes’ biomaterials offerings also were strengthened by FDA clearance in October for the chronOS Strip flexible ceramic bone substitute.

As for many in the industry, Synthes invested in its future growth through acquisitions. In December, the company bought privately held N Spine for approximately $30 million (with additional payments of up to $45 million, depending on milestone achievements), enabling Synthes to enter the posterior spinal dynamic stabilization market to treat degenerative disc disease and stenosis. San Diego, CA-based N Spine’s 6-mm diameter dynamic stabilization rod is compatible with Synthes’ Pangea and Click’X pedicle screws, making the acquisition a strategic fit for the companies’ products.

The most profitable region by far was North America, which contributed $1.7 billion in sales, representing 62% of the company’s total sales. Within the United States, revenues were $1.67 billion, a 12.6% increase compared with $1.48 billion in the prior year. Trauma was the biggest growth driver in North America; new introductions in this business segment included the Volar Column Distal Radius Plate System and the Expert Lateral Entry Femoral Recon Nail Systems. Within the Spine division, new product launches included Antegra (a plating system used to stabilize degenerated lumbar spine segments anteriorly) and Synapse (instruments and implants for posterior stabilization of the upper spine). Spine growth also was aided by a continued rollout of SynFix-LR. Cranio-Maxillofacial (CMF) sales were driven by the MatrixNEURO system, which should continue to be successful in 2008 as indications are expanded, as well as increased use of Synthes’ sternal fixation and reconstruction system.

Europe, which contributed nearly one-quarter of total sales, produced $637.3 million in revenue for 2007. In spite of competition and pricing/reimbursement pressures—not to mention unseasonably warm weather (and thus, fewer snow- and ice-related injuries)—the company grew its business with 13.4% local currency growth compared with 2006. Trauma growth came from the completion of the Expert Nail lines, as well as introductions including the LCP DHS, LCP DHS Blade and the EPOCA shoulder prosthesis. Spine also saw introductions with In-Space and Vertecem, along with new additions to product lines launched in 2006, such as Pangea. CMF, meanwhile, had the highest growth percentage, thanks to the MatrixNEURO system, the launch of the Sternal Closure systems and improved supply chains for the Patient Specific Implant.

Net sales in Asia-Pacific, the company’s third-largest market, were $248.4 million. In its annual report, Synthes noted that it achieved market leadership in the Japanese Trauma market for 2007 (though government price cuts significantly affected Trauma there by 10%-15%), and China and India have become the fastest-growing countries for the company’s products in emerging Asian markets.

Other regions contributed $153 million in net sales for 2007. Latin America, which had particularly strong spine sales, saw sales growth of approximately 19% in local currencies. The strongest markets in the region were Brazil and Columbia. Spine introductions led the division’s growth there, as did Power Tools.

Overall, the year was strong in a time of transition, when Michel Orsinger took over the CEO spot from Hansjörg Wyss (who remains chairman). More than 600 additional employees (+7.3%) joined Synthes’ ranks in 2007.

The first quarter of 2008 continued a strong sales showing, with an 18.7% increase in net sales over the prior year to $781 million. All divisions and major geographical regions posted double-digit gains, and the company had a new addition after it acquired Innomedic, a German software developer for med-tech applications, for an undisclosed sum. Profits should continue to be strong in 2008 given Synthes’ commitment to education for its customers and markets it serves. Last year, Synthes held more than 1,600 courses globally for more than 30,000 participants.

$2.4 Billion
No. of Employees: 8,451

With multiple additions to its product line and a consistent focus on international growth, Synthes, a Swiss medical device manufacturer with US headquarters in Pennsylvania, achieved double-digit sales in its trauma, spine and cranio-maxillofacial (CMF) lines. For FY 2006, net sales were $2.4 billion, up 15.1% from 2005.

Sales in North America were higher than any other division and contributed $1.5 billion toward the company’s overall total. Global sales presented remarkable figures in FY 2006 as well, with products in Europe, Asia Pacific and various other countries achieving sales of $519 million, $220 million and $127 million, respectively.

With the addition of 824 new employees last year, Synthes is climbing the ladder to continued growth—this progression follows a similar pattern seen in 2005, when the company increased its workforce by nearly 14%.

Each of the company’s business units had noteworthy achievements in 2006.

Synthes’ trauma unit, the company’s largest division, sustained a market share of 55%, aided by the introduction of 40 new products in 2006. The expansion of the Locking Compression Plate (LCP) system was an integral factor in sustaining growth. Since 2002, Synthes has introduced 32 different LCP product lines and, in the fourth quarter, expanded these existing systems. In intramedullary nailing, the Expert Lateral Femoral Nail was the main market launch in FY 2006. The introduction of the Headless Compression Screw in the sub-segment for mini-fragments was characterized by the company as another important highlight.

Synthes’ CMF division maintained a 50%-plus market share in North America, with one of the top growth drivers being the Low Profile Neuro System. However, introductions of the Sternal Fixation System, the Patient Specific Implant and the PlusDrive System also contributed to the company’s success.

Spine growth was derived from the Interbody Fusion, Anterior Thoracolumbar, Cervical and Biomaterials product portfolios. Synthes’ spinal division concentrated its efforts on the launch of its Prodisc-L artificial lumbar disc after the FDA approved the device for US markets (it already was available in Europe). Synthes reported that in 2006, the company introduced more high-impact spine products than any previous year.

Along with product initiatives, Synthes strengthened its market presence in other ways. While continuing its ongoing collaboration with the AO Foundation, Synthes acquired various assets of the group, including the Synthes trade names, brands, as well as patents and know-how, in August. In addition, Affinergy Inc., a Duke University spinoff with a proprietary site-specific biological delivery system, signed an exclusive development and license agreement with Synthes in September to work across all three of Synthes’ markets.

The company received some mixed news last fall regarding a patent infringement lawsuit. In early October, a judge ruled that Synthes’ Trochanteric Fixation Nail (TFN) devices and Proximal Femoral Nail (PFN) products infringed on a Smith & Nephew patent. However, later that month, the court amended the prior decision by allowing Synthes to continue selling TFN devices with the caveat that the company could not sell or promote the use of the present TFN products to treat intertrochanteric fractures.

Looking at 2007, the company faced some upheaval with a notable realignment in executive management. Michel Orsinger, former president and COO of the company for the past two-and-a-half years, was promoted to the post of CEO in April. Synthes’ former CEO, Hansjörg Wyss, will remain as chairman of the board.

Regarding the future, Synthes pointed out in its 2006 annual report that it has never achieved less than 10% organic sales growth and does not expect 2007 to be any different. The beginning of 2007 already reflects higher net sales of $658 million reported in the first quarter, an increase of 14.2% from the same period last year. The company credits its expanding product lines in all three of its divisions as the leading catalyst.