AT A GLANCE
$836 Million
Prior Fiscal: $745 Million
Percentage Change: +12.2%
No. of Employees: 2,894

While the more traditional orthopedic markets—for example, knee and hip implants—enjoy modest year over year growth, the most substantial gains are seen in more recently emerging areas, such as extremities and biologics. Recognizing this several years ago, the executives at Wright Medical transitioned the company’s focus to be fixed on these two areas. This move included a merger in 2015 with Tornier, which was then absorbed into Wright. Fast-forward to the firm’s 2018 fiscal year, and the company enjoyed 12 percent gains over the prior year, a testament to the success of its vision to exclusively serve the two aforementioned orthopedic sectors.

The firm’s net sales total in 2018 topped $836 million, a double-digit percentage increase over 2017’s $745 million. What’s more, the company’s net sales in 2018 were a sizeable increase when compared to just four years earlier (the same time the Tornier acquisition was completed) in 2015, which saw a total of $405 million.

While the firm’s sales are almost a 3:1 ratio of those within the U.S. versus international, both regions saw double digit growth. The $624 million in the U.S. reflected a more than 12 percent gain over the prior fiscal period. Meanwhile, international sales grew 11.6 percent to result in a $213 million total.

Those sales are divided by Wright into four segments. The largest—upper extremities—also boasted the greatest gains between ’17 and ’18, rising from $335 million to $396 million. The increase was driven by several factors, including positive sales of the organization’s shoulder products in the U.S. and expanding international sales to direct markets and greater sales volume to distributor markets.

In comparison, the firm’s lower extremities portion saw a more modest gain over the prior fiscal year, posting $311 million in 2018 from $287 million in 2017. The additional sales were attributed primarily to 15 percent increased revenue of INFINITY total ankle replacement products in the U.S. and more sales to distributor markets internationally.

Biologics, which actually saw a higher percentage gain from international sales than U.S., enjoyed overall growth from $101 million in 2017 to $109 million in 2018. According to the company, the gains were a result of increased sales through international distributors and greater sales volume of its biologic products in the U.S.

The only segment of Wright to see a loss in sales between the two years was sports medicine and other. While the company didn’t offer an explanation for the decrease, it’s undoubtedly a portion of the company that’s not within the scope of its primary focus. Whether the segment that contributed $20 million to the firm’s sales total in 2018 will ultimately remain with Wright for the long term, or is divested to facilitate a dedication to the aforementioned core divisions as many other orthopedic device manufacturers have done, will remain to be seen.

An additional reason for the increased sales in 2018 was attributed to an acquisition Wright closed during the fiscal year. At the end of August, it was announced that Cartiva Inc. would be brought into the fold for $435 million in cash. Specifically, the purchase bolstered the portfolio of the lower extremities segment with unique, U.S. Food and Drug Administration (FDA)-approved technologies for foot and ankle procedures.

“We are delighted to add Cartiva’s technology, including its Synthetic Cartilage Implant, the first and only PMA product for the treatment of great toe osteoarthritis, to our lower extremities portfolio,” stated Robert Palmisano, Wright’s president and CEO. “We believe this technology is a perfect fit for our Lower Extremities business and adds a differentiated product that addresses a common condition that is treated by most foot and ankle surgeons and has strong patient demand.”

The Cartiva implant reduces joint pain without sacrificing the foot’s natural movement, unlike fusion, which is another treatment option for the condition. As a result of the less restrictive rehabilitation protocol with the product, a patient who receives the implant is able to typically return to more normal activities faster than patients who undergo the fusion procedure.

While bringing in technology that had been developed outside the firm is a fantastic strategy for growing a company’s offerings (and quite common within medtech), Wright supplemented that effort with several of its own product announcements during the year.

In the biologic space, the company gained premarket approval from the FDA for its injectable formulation of AUGMENT, a bone graft indicated for ankle and/or hindfoot fusion. The combination product, which consists of recombinant human platelet derived growth factor (rhPDGF-BB) and a blend of Type I collagen and Beta tri-calcium phosphate, was provided to physicians as an alternative to autograft. Upon receipt of the approval, the company finalized the product for market launch.

During the 2018 American College of Foot and Ankle Surgeons Scientific Conference, Wright announced the U.S. launch of its INVISION Total Ankle Revision System with PROPHECY Preoperative Navigation. According to the company, the solution is the first preoperative planning system with patient-specific instrumentation for ankle revision arthroplasty. The system helps surgeons rebuild bone lost through previous surgeries and provides modularity to help restore natural joint height.

Similarly pairing a U.S. product launch announcement with an industry event, Wright declared its PROstep Minimally Invasive Surgery System was available during the 2018 annual meeting of the American Orthopaedic Foot & Ankle Society. Specifically designed for foot and ankle surgery, the system provides a minimally invasive, procedurally integrated solution that features specifically designed implants and instrumentation for percutaneous surgery of the foot. It can be indicated for a variety of forefoot and hindfoot pathologies, including bunions—a painful foot deformity that is prevalent in approximately 23 percent of adults aged 18-65 years and 35.7 percent of those aged over 65 years.

$745 Million
NUMBER OF EMPLOYEES: 2,675

Metal-on-metal (MoM) hip implants came under fire several years ago after a number of foreign registries uncovered higher than average failure rates. As far back as April 2010, the U.K.’s Medicines and Healthcare products Regulatory Agency (MHRA) issued an alert urging patients with painful MoM hip replacements to undergo blood tests and imaging to assess the extent of the damage.

By May 2011, the FDA mandated manufacturers of MoM hip implants conduct postmarket surveillance. All the while, thousands of lawsuits were filed against the largest manufacturers by patients alleging injury. Some of the maligned MoM hips included Zimmer’s Durom Hip Cup (290 cases), DePuy’s ASR (8,858 cases) and Pinnacle hip implants (5,153 cases), and Biomet’s M2a Magnum hip implant (978 cases). DePuy even ended up reaching a multi-billion-dollar settlement with affected ASR implant patients.

The problem with the MoM hips was that the metal ball and cup slide against each other while walking or running, or else metal was being released from other parts of the implant where components connected. Metal release caused tiny metal particles to wear off the device into the space around the implant. Wear and corrosion was also found to occur at the junction between the metal ball and taper of the stem. Some of the metal ions—cobalt and chromium—from the implant or released particles then entered the bloodstream. Over time, the metal around some implants caused damage to bone and/or tissue surrounding the implant and joint.

Wright Medical was embroiled in MoM hip implant legal proceedings for its Conserve implant beginning in 2012. The company had previously settled 1,300 product liability lawsuits in November 2016 for $240 million—and saw its shares climb nearly 4 percent after the announcement.

Following an Atlanta, Ga., federal bellwether trial that resulted in Wright paying retired ski instructor Robyn Christiansen $11 million, last October the company inked an $89 million comprehensive deal to settle all the remaining claims. The payouts will come in three tranches. The first for $7.9 million for certain claimants, the second for $5.1 million for the oldest claims, and $76.75 million for the rest. The final payment is scheduled for September 2019.

Wright Medical is no longer in hip or knee businesses after selling them to MicroPort Scientific in 2013, in order to pursue the higher growth markets of extremities and biologics. And the firm fortified its arsenal in this space by acquiring IMASCAP SAS for $89 million last December, bringing its software-based solutions for preoperative shoulder surgery planning into the fold.

IMASCAP’s Glenosys is the pre-op planning software behind Wright’s Blueprint 3D planning software, which allows simulation of a shoulder prosthesis’ position using CT imaging data. That way, the surgeon can visualize the shoulder in 3D and rotate through the entire range of motion in any direction. Then, prior to the surgery, the surgeon can optimize the plan adapted to the patient to choose the most apt implant. This virtual surgical plan benefits patients and clinicians alike by potentially reducing surgical time, generating improved outcomes, and bringing about less inventory.

“Wright, and previously Tornier, has been involved with IMASCAP for many years with our BLUEPRINT case planning software, and we have seen first-hand the innovation, creativity, and differentiated solutions the IMASCAP team has developed,” Wright CEO Robert Palmisano said in announcing the acquisition. “Software-enhanced solutions are the future, and with the acquisition of IMASCAP, we have the opportunity to take a significant lead in this area.”

IMASCAP had no revenues, so there was no measureable impact on the company’s $745 million of sales in fiscal 2017 (ended Dec. 31). Nevertheless, Wright continued its pattern of growth into this year, as last year’s proceeds represented an 8 percent rise over the prior year. This was chiefly driven by the company’s Upper extremities business, which generated $333 million last year, an impressive 16 percent revenue expansion.

Wright’s shoulder portfolio was the chief driver of this growth, thanks in part to last year’s release of the Aequalis Perform Reversed Glenoid System, which is designed to primarily address posterior glenoid deficiencies and deliver bone preservation via defect-mimicking augments. Shoulder fixation is accomplished via Perform’s central and peripheral screws, as well as the company’s proprietary Adaptis Integrated Porous Metal. The circular design and independent central screw also allows for an infinitely dialable construct.

The upper extremities business outpaced lower extremities for perhaps the first time in the company’s history. The segment was flat last year with $286 million in sales, only rising a slight $880,000 from the previous year. Hiring and training about 100 new direct quota-carrying domestic sales representatives and lower international sales volumes dragged the business down, despite a 17 percent hike in ankle replacement sales from new ankle products introduced at last year’s American Orthopaedic Foot and Ankle Society (AOFAS) annual meeting.

The Invision Total Ankle Revision System was developed specifically for total ankle revision arthroplasty. It can be leveraged as a standalone construct or in conjunction with Wright’s Infinity and Inbone components. Invision Total Ankle helps surgeons rebuild bone lost through previous surgeries and provides modularity to help restore natural joint height.

The Ortholoc 3Di Ankle Fracture Low Profile System offers a complete range of ankle fracture plates for the foot and ankle surgeon. With low-profile, anatomic plate designs and polyaxial screw locking, Ortholoc 3Di addresses a major need for one of the foot and ankle’s largest market segments. The Ortholoc 3Di Small Bone Plating System, the comprehensive plating solution designed to address metatarsal fractures—and named differently than what was announced at AOFAS—was formally launched last December.

The Mica Minimally-Invasive Foot & Ankle System was, at the time, the first minimally invasive solution specifically designed for foot and ankle surgery. The implants and instrumentation are explicitly meant for percutaneous foot surgery. The system can be used to treat multiple pathologies, including bunions, one of the most common orthopedic issues involving the foot.

The biologics business netted proceeds of $101 million last year, expanding 8 percent. International sales were particularly fruitful for this area with a healthy 18 percent upturn. This overseas surge was provoked primarily by new stocking distributors and accounts in China, and favorable impact from foreign currency exchange rates. Continued sales volume growth of the Augment Bone Graft also helped this segment continue its pattern of profitability.

Wright’s sports medicine and other business—composed of products used across several anatomic sites to mechanically repair tissue-to-tissue or tissue-to-bone injuries, and other ancillary products—posted $23 million in 2017, remaining flat from the year prior. Interestingly, this segment is the sole Wright business that garners more international sales than domestic—$15 million vs. $8 million.

$690 Million
NO. OF EMPLOYEES:  2,394

Extremities and biologics—two of fastest growing areas of orthopedic technologies. Not coincidentally, these same two areas have become the primary focus for Wright Medical Group. Over the last several years following a series of strategic transactions, the company has positioned itself to focus almost exclusively on these two market sectors.

Beginning in early 2014, Wright Medical divested its hip and knee business (i.e., OrthoRecon) to MicroPort Scientific Corporation. It followed that up with a substantial merger with a leading orthopedic OEM serving the extremities and biologics space—Tornier—which closed Oct. 1, 2015. In 2016 (the fiscal year closed Dec. 25), the company rapidly realized the synergies of that merger, having accomplished more than 80 percent of its approximately 300 integration milestones during the year.

Still seeking to further sharpen its pinpoint focus on the two markets, in July 2016, Wright announced that it was parting ways with its large joints business. Corin Orthopaedics Holdings Ltd. paid approximately $33 million for the hips and knees business. The legacy Tornier unit had become a portion of Wright following the merger. The business sold knee and hip implants primarily in France and other European countries with a product line that included Dynacup and Meije Duo hip implants, as well as HLS KneeTec and HLS Noetos knee implants.

“Our large joints business has excellent products and significant market share in key European markets with a loyal customer base. However, this business is not in line with our strategy to be the premier extremities and biologics company,” Robert Palmisano, president and CEO of Wright Medical, said in a statement regarding the sale. “Post-closing, we will be able to devote our full resources and attention on accelerating growth opportunities in the high-growth extremities and biologics markets and believe this will enhance our ability to create significant shareholder value.”

That focus even permeated the company’s 2016 annual report, with Palmisano kicking it off in his letter with a single-minded message to shareholders, customers, and employees: “Our Focused Excellence approach has enabled us to transform our company to become the leader in the fastest-growing orthopedics markets: upper extremities, lower extremities, and biologics.”

The strategy’s success could be readily observed in the company’s financials for FY16. In the United States (the OEM’s overwhelmingly strongest commercial market), it saw gains in both Upper and Lower Extremities businesses of 14.3 percent and 7.6 percent respectively, over the firm’s 2015 sales in these categories. More impressive was the sales increases seen in the Biologics business. Experiencing a 43.6 percent increase over 2015, the business unit contributed $75 million to Wright’s $690 million total for the year. The company’s fourth business unit—Sports Medicine & Other—remained flat compared to the year prior with $8.4 million in sales. This division offers products used across several anatomic sites to mechanically repair tissue-to-tissue or tissue-to-bone injuries. In many cases, the products complement the upper and lower extremities product portfolios. Overall, the U.S. sales experienced an increase of 14.3 percent over year prior to finish at $507 million.

Primarily responsible for driving the remarkable growth seen in the U.S. Biologics unit was the launch of Wright’s Augment Bone Graft, which was commercially launched in the fourth quarter of 2015. Augment is an alternative to autograft for ankle and/or hindfoot fusion indications, saving the patient and surgeon the time and healing involved with an additional procedure that would be required to harvest the tissue. The biologic product, which was acquired from BioMimetic Therapeutics Inc. in March 2013, had previously faced a rejection from the U.S. Food and Drug Administration (FDA) in 2013 in response to the company’s PMA submission. Two years later, the technology gained the necessary approval and was launched.

“The FDA approval of Augment marks a capstone achievement that demonstrates the strength of our science and provides a breakthrough therapeutic option as an alternative to autograft in ankle and hindfoot fusion procedures,” said Palmisano. “This approval also underscores the significant effort and perseverance from our clinical trial investigators and Wright’s clinical, regulatory, and legal teams to bring the product to market. This success can be attributed to everyone involved in the clinical trial, especially the study investigators and coordinators; our R&D, regulatory, and clinical teams; our partners and suppliers; and most importantly, the patients who participated in the landmark prospective, randomized study comparing Augment Bone Graft to autograft.”

While the company’s international sales aren’t as substantial as those in the United States, they still represent a significant portion of the company’s overall sales for the year. Growth, unfortunately, was not as optimistic as the U.S. sales either, but overall, international still saw a 6.6 percent gain over 2015 to total $183 million. That number breaks down in a similar manner to the U.S. splits, with Lower Extremities ($63 million) and Upper Extremities ($87 million) representing the bulk of the company’s business. Those sales totals represent a 6.7 percent increase for Lower Extremities over 2015, while Upper Extremities experienced the greatest growth among international sales between the business units at 11.8 percent compared to FY15. Biologics ($19 million) and Sports Medicine & Other ($15 million), on the other hand, both saw sales decline in international markets by 5.7 percent and 4.1 percent respectively, compared to the prior year.

Before wrapping up what had amounted to a relatively successful year in terms of market growth and sales increases, new product launches, and gained efficiencies from the 2015 Tornier merger, Wright Medical resolved some pending legal issues with regard to its wholly owned subsidiary Wright Medical Technology.

The company entered into a Master Settlement Agreement (MSA) for litigation involving metal-on-metal hip implants. The settlement resolved 1,292 specifically identified Conserve, Dynasty, or Lineage revision claims. The settlement amounted to $240 million for Wright, but the company estimates that, as of Sept. 25, 2016, there were approximately 600 outstanding metal-on-metal hip revision claims that would not be included in the MSA settlement.

“We are very pleased to have reached this settlement agreement,” commented Palmisano. “This settlement addresses approximately 85 percent of the known U.S. revision claims that do not have potential statute of limitations issues and removes a great deal of the uncertainty that has been associated with this litigation.”

$415 Million
NUMBER OF EMPLOYEES: 2,295

Additive manufacturing—or, as it’s  colloquially known, 3D printing—stands to make an enormous impact on joint replacement. Many physicians are confident in 3D printing technology’s influence on orthopedics in particular. Patient-specific guides produced to facilitate surgery ensure that a template fits in place with precision—even with a difficult bone deformation.

Dr. Ryan Meineke, an orthopedic surgeon operating at Scripps Memorial Hospital in Encinitas, Calif., makes use of custom surgical guides like Wright Medical’s PROPHECY preoperative navigation guides to reduce surgery times for total ankle replacements, such as Wright’s INFINITY Total Ankle System. According to Meineke, the 3D model’s accuracy can reduce operating time by removing a number of the intricacies involved in total joint replacement.

“The shorter the amount of time you can be in the operating room, the safer it is for the patient,” he said in a July 2015 interview with The San Diego Union-Tribune. “Now, it’s cut the skin, put the guide on, and start cutting the bone. It really reduces the number of complexities we have to deal with.”

Using computed tomography scans, modeling software, and 3D printing to reduce surgery time is quite remarkable in its execution. Here’s how an ankle joint procedure might look, aided and abetted by 3D printing:

1. 1. A CT scan of the surgical site designs a 3D-printed guide to best fit the patient’s bone.

1. 1. Surgical pins are placed through the guide, into the bone.

1. 1. The guide lifts away, replaced by a template to direct cutting.

1. 1. A section is cut away, then the process is repeated for the joint’s other bone.

1. 1. The artificial joint fits neatly where the cuts were made into the bone. Surgery is quickened because time spent figuring out where to cut into the bone is removed.

It hasn’t been fully determined what benefit this translates to for patients, however. Increasing precision with 3D printing may reduce operating time, but could add about $1,000 to the surgery’s cost, according to Dr. Jason Koh, an orthopedic surgeon in Illinois at NorthShore University Health System. “It does seem like custom cutting guides can definitely improve implant position, but there is clearly some cost associated with it, and since our existing technologies do very well, it’s going to take some time to demonstrate long-term benefit,” Koh commented to the Union-Tribune.

Netherlands-based Wright Medical probably isn’t worrying too much about the cost of anything right now; the company generated $415.6 million in sales in fiscal year 2015 (ended Dec. 27), an impressive 39.4 percent growth from the year prior. The majority of this increase was attributed to a landmark merger with Tornier N.V., which officially closed Oct. 1, 2015, with the all-stock deal valued at $3.3 billion. The merger has ushered in a milestone that Wright President and CEO Robert Palmisano dubbed “the New Wright Medical.”

“The culmination of this merger marks a significant milestone for our company, creating the premier, high-growth Extremities-Biologics company uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopedics—Upper Extremities, Lower Extremities, and Biologics,” Palmisano stated in the company press release announcing the merger’s completion.

Tornier brought an extensive portfolio of joint replacement and soft tissue repair technologies for the upper extremities. As expected, the merger with Tornier fortified Wright’s upper extremities business quite significantly in FY15. Though not the company’s main source of revenue, it’s certainly headed north—upper extremities sales in the United States totaled $58.7 million, and international sales totaled $24.8 million, respectively soaring a whopping 283.8 and 119.1 percent over the previous year. In total, the company’s upper extremities business gained $60.6 million from Tornier products acquired in the merger. U.S. Food and Drug Administration (FDA) clearance of Tornier’s Simpliciti Shoulder System in March 2015 further added to the product anthology. Simpliciti is a bone sparing total shoulder arthroplasty system with an ultra short-stem design without a metal implant extending into the distal humeral canal, which reduces risk of a mid-shaft humerus fracture following implantation.

Though somewhat dwarfed by the double and near tripling of the upper extremities business, the effects of the merger were still felt on the rest of Wright’s business divisions to a lesser—but still significant—extent. Sales for FY 2015 in the lower extremities business (the company’s main revenue source) reached $187.1 million in America and $51.2 million internationally, growing 25.9 and 8.9 percent respectively. Lower extremities assets gained in the merger were responsible for $9.2 million of the sales increase globally, but a number of new and established products featured during the 2015 American Academy of Orthopaedic Surgeons (AAOS) Annual Meeting had parts to play in the increase:

• • The INFINITY Total Ankle Replacement (TAR) System continued to reinforce Wright’s arsenal of Total Ankle replacement offerings with a lower profile design and straightforward surgical approach.

• • Product line extensions for the INBONE TAR System, which broaden options for surgeons with a smaller talar dome for patients with small anatomy. Uncoated tibia stems and a revision poly insert were also introduced.

• • The aforementioned PROPHECY Pre-Operative Navigation Alignment Guides, to precisely size, place, and align INFINITY and INBONE TAR components.

• • A flatfoot osteotomy solution, OTHOLOC 3Di Flatfoot plates feature 3Di medial displacement calcaneal osteotomy plating.

• • 510(k) clearance of the SALVATION External Fixation System—designed to address fractures, nonunions, and complex foot and ankle deformities.

The September, FDA approval of AUGMENT Bone Graft—an alternative to autograft to ankle and/or hindfoot fusion procedures—added another therapeutic option to Wright’s Biologics repertoire. According to Dr. Christopher DiGiovanni, lead U.S. investigator for AUGMENT’s North American pivotal trial and chief of the Foot and Ankle Service in the Department of Orthopaedic Surgery at Massachusetts General Hospital, Harvard Medical School, “…AUGMENT offers clear patient benefit by enabling a healing rate and safety profile equivalent to autogenous bone graft—while simultaneously avoiding the additional surgery required to harvest autograft bone graft tissue that can result in site-specific complications and/or prolonged harvest site pain in some patients.”

AUGMENT sales in the fourth quarter of 2015 contributed to an 11.2 percent growth in U.S. Biologics sales, producing $50.6 million in revenue. Although AUGMENT’s international sales performed admirably, they could not offset volatile foreign currency, which precipitated a 5 percent loss (Wright’s only segment reporting a decline) from the previous year with $19.6 million in sales. Sports medicine and other products drew $13.2 million globally in 2015, a 36 percent growth from 2014. Wright also added a new product category to its offerings in 2015 due to the merger with Tornier, in the form of a “large joint” segment. 2015 global sales of large joint products totaled $10.1 million.

As of Jan. 30, 2016, 1,126 lawsuits were pending in the MDL and JCCP pertaining to Wright’s metal-on-metal hip products, mostly in the company’s CONSERVE line. The first MDL bellwether trial began on Nov. 9, 2015, and culminated in favor of the plaintiff, who was awarded $11 million total in compensatory and punitive damages. However, the company believed “there were significant trial irregularities” and contested the result. Wright filed a post-motion for a new trial or reduction of damages, which is still pending.

$484 Million
NO. OF EMPLOYEES: 1,400

Robert J. Palmisano certainly is true to his word. Last spring, he warned shareholders that changes were coming.

Big changes.

“While we have many strengths, we have much work to do to realize the full potential that I believe this company is capable of reaching,” Palmisano said in Wright Medical Technology Inc.’s 2011 annual report. “We have already taken many positive steps to better position the company for success, including strengthening our compliance program and implementing a plan to reduce operational costs. And we will be implementing a number of important changes over the next several months to transform our business and maximize the opportunities we have. The changes…will require significant investment in 2012, which will negatively impact our full-year 2012 results. However, we believe these investments will generate significant future returns…”

Palmisano kept his promise, implementing a host of changes last year to transform the Arlington, Tenn.-based firm into a “high-growth, high-margin, high cash-generating” business. And, as he predicted, those changes annihilated earnings: Net sales and gross profit each fell 5.7 percent in 2012, bottoming out at $483.7 million and $333.3 million, respectively. The company’s OrthoRecon division sustained the worst destruction, posting a 10.8 percent sales loss for the year; Extremities revenue grew, but only marginally as biologics product and upper extremities device sales suffered double-digit losses.

The year, however, wasn’t a total write-off—net income rose to $5.2 million from a 2011 deficit of $5.1 million and operating income increased more than five-fold to $24.1 million. Wright also trimmed $6.3 million in expenses by completing its deferred prosecution agreement (DPA) with the U.S. Attorney’s Office in New Jersey. The orthopedic device manufacturer agreed to the deal in September 2010 to avoid prosecution for allegedly paying kickbacks to surgeons to use its hip and knee products. Wright voluntarily extended the one-year DPA for an additional 12 months in September 2011 after executives admitted the firm “willfully breached material provisions” of the accord that previous May. The disclosure forced the resignation of several high-level managers as well as former CEO Gary D. Henley, who joined the company in 2006.

Federal monitor James B. Tucker, former U.S. Attorney for the Southern District of Mississippi, has supervised Wright’s compliance to the deferred prosecution pact for the last two years. The firm now is subject to terms of a corporate integrity agreement it reached with the Office of Inspector General of the U.S. Health and Human Services Department through Sept. 29, 2015.

“While exiting the (deferred prosecution agreement) is an important milestone, executing an effective and efficient compliance system and promoting the highest standards of ethical and legal conduct in all of the markets that we serve will remain a focal point for the company,” Palmisano said.

Though the DPA was not incorporated into the company’s 2012 earnings forecast (odd, considering Palmisano knew it would expire last fall), its resolution is nevertheless an important cornerstone of Wright’s transition to a leaner, more efficient (and profitable) organization. Executives’ three-pronged plan for prosperity entails accelerating foot and ankle sales gains; building a growing, global OrthoRecon business; and improving cash flow over the next four years.

Palmisano expedited foot and ankle product growth last year by tripling the number of surgeons trained on Wright devices, boosting productivity rates of his sales force (from $600,000 to $700,000 per rep) and flooding the market with nine new inventions. The novelties included the Ortholoc 3Di Ankle Fracture System, Quickdraw Knotless Soft Tissue Fixation System, Prophecy Inbone Pre-Operative Navigation Alignment Guides for ankle replacements, Claw II Polyaxial Compression Plating System, and Ortholoc 3Di Reconstruction Plating System for foot and ankle surgery.

The Ortholoc 3Di Ankle Fracture System is described by Wright as a comprehensive single-tray ankle fracture solution that addresses various fracture types and classifications. The system, through the company’s 3Di polyaxial locking technology, features multiple anatomically-contoured plates and a comprehensive set of instruments that help surgeons match the appropriate implant construct with patient anatomy and fracture type.

3Di polyaxial technology also is used in the Ortholoc 3Di Reconstruction Plating System to adjust screw trajectory to patient anatomy and affix anatomical plates strongly to bone. The plates, screws and specialized surgical instruments in this system are used in fracture fixation, osteotomies and foot fusions; they represent the next-generation version of the original system cleared in 2010 by the U.S. Food and Drug Administration (FDA).

Wright’s Quickdraw system is designed specifically for soft tissue reattachment procedures of the foot and ankle. Composed of the Belay and Mini-Belay Knotless Suture Anchors, Rappel-Line Surgical Suture and instruments, the Quickdraw system helps simplify suture management and placement, enabling surgeons to quickly repair ruptured or detached foot and ankle ligaments (even the supremely challenging Achilles tendon).

The Claw II Compression Plating System, which uses Ortholoc 3DSi Polyaxial Locking screws for stability, allows surgeons to precisely match a greater number of patient anatomies. “The advancements offered with the new Claw II system, such as variable-angle locking screws and anatomically contoured plates for fusions and osteotomies of the forefoot and midfoot, will enable surgeons to choose the appropriate implants to meet the patient’s unique circumstances,” W. Hodges Davis, M.D., a foot and ankle orthopedic surgeon with OrthoCarolina Foot and Ankle Institute in Charlotte, N.C., noted when the system debuted in March 2012.

The Claw II and Ortholoc 3Di Reconstruction Plating System helped Palmisano keep his word to shareholders, fueling a 14.1 percent rise in foot/ankle product sales (to $122.8 million). Wright’s foot/ankle portfolio was the only product category that posted a gain in 2012 (year ended Dec. 31)—most others suffered losses of 10 percent or more.

The Ortholoc 3Di Ankle Fracture System features multiple anatomically contoured plates and a comprehensive set of instruments to precisely match foot and ankle implants with patient anatomy. Roughly 170,000 ankle fractures are surgically treated each year. Image courtesy of Wright Medical Technology.

The largest shortfall occurred in Biologics, which lost 12.8 percent of its 2011 sales to end the year with $60.4 million in revenue. Executives blamed the poor showing on a licensing agreement with Kinetic Concepts Inc. that prevented the firm from marketing its Graftjacket Regenerative Tissue Matrix product during the first half of 2012. The matrix is used to treat chronic foot wounds in diabetic patients.

Palmisano is hoping to reverse Biologics’ fortunes with the Augment Bone Graft, a bioengineered product that Wright acquired in its $380 million purchase of Franklin, Tenn.-based BioMimetic Therapeutics Inc. Approved only in Canada, Australia and New Zealand, the recombinant protein product is designed to be an alternative to using a patient’s own tissue (autograft) in foot/ankle fracture surgeries. The FDA has not yet sanctioned the product—in May, an advisory panel supported the safety and effectiveness of Augment, despite concerns from FDA staff that a synthetic protein might spur growth of existing cancer cells. The panel, however, suggested the company conduct additional studies of the product.

“If approved, Augment Bone Graft can leverage the distribution capabilities of our foot and ankle sales organization and physician training capabilities and help accelerate the transformation of our business,” Palmisano told shareholders in the company’s 2012 annual report. “If approved, it will represent an opportunity of approximately $300 million in the U.S. market alone to treat hindfoot and ankle fusions.”

Upper extremity products (those targeting the hand, wrist, elbow and shoulder) sustained the second-largest loss in the Extremities business last year. Revenue fell 10 percent to $24.9 million; those deficits, along with equally damaging ones in Biologics and “Other” products, limited overall growth in the Extremities business to 1.6 percent, or $3.3 million.

Palmisano attempted to jump-start growth in the company’s ailing OrthoRecon business by separating it from the Extremities division and establishing a separate leadership team, and enhancing its hip and knee product portfolio. But sales still fell significantly: Total OrthoRecon revenue slipped 10.8 percent to $269.6 million, hip sales plummeted 13.1 percent to $150.5 million and knee proceeds slid 7.3 percent to $114.8 million.

Executives attributed traced the abysmal hip sales to an 18 percent decline in domestic hip revenue from lower volume and customer losses. International hip sales fell 8 percent, thanks mostly to reduced volume in Europe and poor reimbursement rates in Japan. Those same forces contributed to the decline in knee revenue as well, though bigwigs also blamed the poor performance on “sales dis-synergies related to the U.S. sales force conversion initiative.”

Despite the sizeable losses in its OrthoRecon business, Wright managed to generate $49.5 million in free cash flow by reducing inventories, capital expenditures and working capital. The accomplishment, according to Palmisano, proves the company is heading in the right direction to improve its long-term profitability.

“Our transformation has begun and it is working,” he concluded in the 2012 annual report. “There is great reason for optimism as we continue with this transformation. We are a much different company than we were one year ago, and we have an opportunity to drive significant improvement again this year. We have both a clear goal and a clear ability to improve our performance as our strategy gains traction. This outlook, combined with the potential impact of the BioMimetic acquisition, makes us very optimistic about our ability to drive significant revenue and earnings growth in 2014 and beyond.”

$519 Million
NO. OF EMPLOYEES: 1,400

Diamonds—the traditional gift given to celebrate a 60th anniversary. They might be a girl’s best friend, but they don’t have too many end-uses in orthopedics. With or without diamonds, fiscal 2010 still shined for Wright Medical Technology Inc., which marked six decades in the orthopedics for the company. In 1950, the company’s first product was a rubber walking heel for leg casts invented by the company’s founder Frank O. Wright. What a difference 60 years make. Today, the company, which is located just outside Memphis in Arlington, Tenn., is a leader in the foot and ankle market, continues to add to its biologics offerings and grow its core hip and knee businesses.

Net sales for the fiscal year (ended Dec. 31) were approximately $519 million, up 6 percent from $488 million in 2009. Reported net income was $17.8 million, up from $12.1 million. Wright’s management pointed to its extremity product line as part of the reason for year’s gains. Sales for the sector grew 16 percent to $124.5 million. Domestically, the company’s U.S. extremity business experienced year-over-year growth of 14 percent, primarily due to the continued success of its Inbone total ankle system, increased sales of the Ortholoc polyaxial trauma plating system (launched in late 2009) and increased sales of the Valor ankle fusion nail system, launched in June 2010. Sales of hip products grew 5.3 percent to $176.7 million, driven by increased international sales of the Profemur hip system, primarily within Japan and Europe. Knee products increased sales by 5.5 percent to $128.8 million. Revenue from biologics products stayed relatively flat at $79.2 million up from $79.1 million. Though the company experienced increased sales of its Pro-Stim osteoinductive bone graft substitute, which had a limited launch in late 2009 and a full commercial launch in October 2010, revenue was offset by continued declines of the Graftjacker tissue repair and containment membranes and Allomatrix line of injectable tissue-based bone graft substitutes.

Wright also found sales growth in international markets. Though 60 percent of the company’s revenues were generated in the United States, sales outside the country increased by 11 percent to $209 million during 2010, driven by continued growth in Asian markets and the majority of the company’s European markets, as well as increased presence in Australia, the company reported.

New product rollouts were constant throughout the year.

In June, the company implemented the full commercial release of its Valor hind-foot fusion nail system, which Wright dubbed the “most comprehensive and advanced” surgical product for fusion of the ankle joint. The system was designed in conjunction with ankle surgeons to facilitate ankle fusion in the treatment of skeletal deformity, late-stage arthritis, or complications resulting from diabetes. Since its initial pre-market availability in November 2009, the system has been limited to use in a few centers in the United States gathering early clinical results. Valor comes in different sizes and anatomical screw positions to provide optimal fixation for each patient’s unique anatomy and condition. Each fusion nail also incorporates an internal compression device that allows the surgeon to control the compression between bone surfaces, optimizing the conditions for fusion.

The company also released the XPansion micro-grafting system for split-thickness skin grafting via a minimized donor site. The system uses single-use disposable instrument kit for harvesting, expanding, and applying split-thickness skin micro-autografts for the treatment of chronic and acute wounds. The instruments were invented by Elof Eriksson, M.D., Ph.D., chief of plastic surgery at Brigham & Women’s Hospital in Boston, Mass., and professor at Harvard Medical School. The current standard of care for skin grafting procedures usually is performed in the operating room under general anesthesia.

Conventional techniques use a powered cutting blade or “dermatome,” which can result in a large, painful donor site. The XPansion system provides the effectiveness of conventional auto-grafting techniques, according to the company, but in an outpatient setting. The unique ability to “micro-morselize” a very small skin graft with the this system delivers wound site coverage of up to 100 times the size of the donor site graft, compared with only 9-10 times the size of the donor graft with the conventional dermatome techniques. The benefit is exponentially greater wound coverage with reduced patient morbidity, delivered at a lower-cost facility setting, officials noted.

In July, Wright rolled out the Evolution medial-pivot knee system, its next-generation in medial-pivot knees, featuring enhanced instrumentation, more sizing options and a posterior stabilized option. The new knee builds upon twelve years of clinical experience with the Advance medial-pivot knee. Wright’s medial-pivot technology is designed to replicate the stability and function of the natural knee. “The unique feature of both the medial-pivot knees is the ball-in-socket mechanism on the medial side,” said David Blaha, M.D., orthopedic surgeon based in Ann Arbor, Mich. “The ball-in-socket mechanism is designed to mimic the anatomy of the normal knee to promote more natural stability and motion.” It also was designed to ease rehabilitation and address stability concerns that may be experienced by some total knee replacement recipients. Often, total knee replacement patients complain that their replaced knee does not feel normal, citing noises or a sensation of the joint slipping, especially as they descend stairs.

On the biologics side of its business, Wright introduced the Pro-Stim injectable inductive bone graft, a composite grafting material that is injected through a small needle or digitally implanted, hardens, and is replaced by the patient’s new bone over time. Pro-Stim provides surgeons with the osteoconductive base material—a patented combination of calcium sulfate and calcium phosphate materials—but adds a high volume of osteoinductive demineralized bone matrix to the formulation to speed the healing and remodeling process, according to the company. The system originally received U.S. Food and Drug Administration (FDA) clearance in September 2009, but it was released in a controlled fashion to select institutions to confirm human effectiveness during a 13-month period. In Wright’s pre-clinical testing, Pro-Stim outperformed autograft bone, considered the grafting gold standard, at eight weeks.

“Our pre-clinical model showed accelerated healing compared to autograft, suggesting a superiority to autograft that could be very beneficial for human use in the restoration of skeletal or bone defects,” said Thomas Turner, D.V.M., assistant professor at Rush University Medical Center in Chicago, Ill., and principle investigator for the pre-clinical model. “In fact, the new bone repair noted in the ProStim-treated defects was equivalent, if not better than, normal un-operated bone, indicating fast, efficient remodeling to a more normal state.”

At the end of the fiscal year, Wright Medical began the limited release of the Pro-Toe VO hammertoe fixation system. “Hammertoes are a significant problem for individuals around the globe,” said Bob Fencl, director of foot and ankle marketing for Wright. “In the U.S. alone, it is estimated that 10 to 20 percent of the population suffers from hammertoes with more than 500,000 patients requiring surgical treatment each year.” The full rollout occurred during the first half of this year.

In the area of research and development, Wright Medical was awarded a $2.4 million grant from the U.S. Department of Defense to fund a clinical study of Osteoset T bone graft substitute pellets in combat-related open fracture wounds. Osteoset T is a surgical-grade calcium sulfate bone graft substitute impregnated with 4 percent tobramycin sulfate. It is available in pellet form and is physically equivalent to Osteoset bone graft substitute, which does not contain tobramycin and was cleared by the FDA in 1996. Osteoset T bone graft substitute, which is not approved for use in the United States, is designed to release tobramycin at a predictable rate and act as a resorbable scaffold for new bone.

“Blast injuries suffered during combat can result in severe, open fracture wounds needing acute care.

Infection of bone and surrounding tissue pose great threats to the limb salvage and overall health of our wounded soldiers,” said Scott B. Shawen, M.D., director of orthopedic foot and ankle surgery at Walter Reed Army Medical Center in Washington, D.C., and principal investigator of the study. “Given the propensity for infection and potential subsequent amputation in many traumatic military injuries, current practices need to be improved upon with novel treatments and techniques.” Following FDA and Institutional Review Board approval, the investigational device exemption clinical study enrolled members of the U.S. military who have suffered combat-related open fractures. A successful study would pave the way for Wright Medical to submit a pre-market application for Osteoset T bone graft substitute in the United States.

2010 also brought resolution—for a time at least—to some legal issues plaguing Wright Medical since 2007. In September, the company entered into a deferred prosecution agreement with the United States Attorney’s Office for the District of New Jersey and a civil settlement agreement with the United States. These agreements were part of the government’s investigation into the Wright’s consulting arrangements (illegal kickbacks) with surgeons relating to its hip and knee products in the United States. Under the agreement, the government agreed not to prosecute the company in connection with the matter if Wright satisfied its obligations during a 12-month term. As part of the agreement, the company paid $7.9 million, without any admission of guilt. The company also entered into a five-year corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services. An independent monitor was appointed to review and evaluate the company’s compliance with the arrangement.

Fast forward to this Spring and the picture is a little less “resolved.” In April, Gary Henley abruptly resigned as CEO, a post he’d held since 2006. The board accepted Henley’s resignation, but deemed it to be without “good reason” under the terms of his employment agreement, making him ineligible for severance. He was followed out the door by Frank Bono, the company’s chief technology officer and senior vice president. Bono was fired for “failing to exhibit appropriate regard for Wright’s ongoing compliance program.” Board Chairman David D. Stevens was appointed as interim president and CEO, while retaining his role on the board.

A month later, three more Wright executives cleaned out their desks. Raymond C. Kolls, senior vice president, general counsel and secretary was replaced by Thomas L. McAllister, who was appointed interim general counsel and secretary. Alicia M. Napoli, vice president, Clinical & Regulatory Affairs, resigned and was replaced by Max K. Mortensen. Aurelio Sahagun now serves as vice president, commercial operations for Europe, the Middle East and Africa, succeeding Cary P. Hagan. Like Henley, all three executives resigned without good reason, according to the company, adding that the management changes were unrelated to its operational performance, financial condition or financial reporting.

A day later, the company said the federal prosecutor for New Jersey accused it of “knowingly and willfully” breaking its deferred prosecution deal. As a result, Wright officials said the company could face “significant liability” including potential criminal and civil litigation. It also faces possible exclusion from federal healthcare programs such as Medicare, “which would have a material adverse effect on our financial condition.”

Additional details on the company’s status with the government were slated to be discussed during an earnings conference call scheduled just after press time. In July, the company adopted a new code of business conduct. The code provides a new description of prohibited activities with healthcare professionals, covers prohibited off-label promotion of the company’s products and enhances the company’s policies on confidential patient information, among other things.

$488 Million
NO. OF EMPLOYEES: 1,000

Executives at Wright Medical Technology characterize their company as a “small market-share player.” If that’s so, it’s a niche that the company fills quite nicely.

The company may not record billion-dollar bottom lines, but the Arlington, Tenn.-based firm has maintained a laser-like focus in market categories it has aggressively pursued with profitable results. When many companies were jostled from their foundations by the economic upheaval of 2009, Wright stayed the course.

“As we reflect on 2009, I am happy to say that we not only survived that period of challenge, but we actually entered 2010 with a more solid business than ever,” President and CEO Gary Henley wrote to shareholders at the end of the year. “We worked hard to strengthen our foundation and ensure our ability to remain a vibrant and competitive growth company in the global orthopedic marketplace.”

Given the numbers posted for fiscal 2009 (ended Dec. 31), the company hit its mark.

Global revenue increased 5 percent to $487.5 million. U.S. sales grew 6 percent compared with 2008, and Wright’s international business grew 2 percent, led by continued good performance by its Japanese subsidiary, officials said.

Overall sales for the firm’s extremities product line posted double-digit gains, increasing 21 percent ($107.4 million) compared with 2008. Growth for the hip and knee businesses was more modest, increasing 4 percent ($167.9 million) and 2 percent ($122.2 million), respectively. Sales of biologic products declined 4 percent ($79.1 million).

Wright reported that domestic extremity product net sales increased 25 percent, primarily as a result of the Charlotte foot and ankle system, in addition to the Darco plating systems, as well the firm’s Inbone and Rayhack products, which were acquired in April 2008 and September 2008, respectively. Increased sales for hips largely were due to the Profemur hip system and Dynasty acetabular cup system implant, which was launched during the second quarter of 2008. Sales of the Advance knee systems—primarily in international markets—totaled 5 percent growth, which partially was offset by declines in the company’s more mature knee product offerings.

Domestic net sales of biologics decreased 2 percent, due to slow sales of the Allomatrix product line. The drop, however, was offset by increased sales of the Pro-Dense injectable regenerative graft and Graftjacket tissue repair products.

One of Wright’s more noteworthy tendencies is the rate at which it adds to and revamps its product line.

A steady number of product launches characterized the company’s throughout the year.

In April, the company rolled out its Prophecy pre-operative navigation guides for knee arthroplasty—part of the growing market for patient specific implants and procedures. The system allows surgeons to use basic CT or MRI imaging technology to plan precise implant placement and alignment before they enter the operating room. Instead of using traditional instruments to align the knee during surgery, Prophecy uses computer imaging to develop patient-specific guides that follow the unique curvature of the patient’s bone anatomy. The process begins weeks before surgery. The goal not only is to improve accuracy, but to decrease patient anesthesia time and provide greater function and long-term implant success, company officials said.

The Coretrak articulating external fixator for foot surgery was the company’s new product offering in August. According to the company, the device also addresses a growing need for minimally invasive solutions that enhance the body’s natural ability to heal, which is particularly important for the growing population of diabetics who already are at a high risk for surgical complications.

Yet another addition to Wright’s line of extremity products was the Ortholoc polyaxial locked plating system for the surgical treatment of foot and ankle fractures. The device consists of three instrument and plating trays to help surgeons stabilize and fixate bone injuries of either the forefoot, calcaneus or ankle region. Polyaxial “locking” allows the surgeon to tailor the angle of screw placement into the plate for best anatomic fit and then “lock” the screw to the plate, according to the company.

In September, the U.S. Food and Drug Administration (FDA) provided 510(k) clearance of the Pro-Stim injectable osteoinductive bone graft substitute. The product is a composite grafting material that is injected through a small needle, hardens and is replaced by the patient’s new bone over time. Full rollout of Pro-Stim didn’t take place until this year. Company officials hope the Pro-Stim will “significantly expand” Wright’s share of the bone graft market.

October brought the launch of the Dynasty BioFoam acetabular cup system for hip replacement surgery. This addition to the Dynasty line of products features proprietary bone-like titanium with a roughened texture that “bites” into bone for enhanced immediate fixation when compared to traditional porous beads. The BioFoam material employs a trabecular structure intended to mimic bone and contribute to bone in-growth and biological fixation. The company first introduced BioFoam cancellous titanium fixation for its Advance knee system in 2008.

In early November, the FDA gave the OK for Wright’s Conserve Plus total hip resurfacing system, which provides a bone-conserving alternative to traditional total hip replacement. Other companies, such as Smith & Nephew, already had reached the market with resurfacing products. The FDA’s approval was for the configuration the company specified in its original premarket approval application (PMA). Wright immediately planed to file for additional indications via a PMA supplement. Conserve Plus is designed to offer pain relief and restoration of function while retaining as much healthy bone as possible and preserving future surgery options, including a primary total hip replacement. It’s an option aimed at younger, more active patients.

November also brought the rollout of the Valor ankle fusion nail for fusion of the ankle joint primarily caused by arthritis, skeletal deformity or diabetes. The nail fuses three bones in the foot and ankle: the calcaneus, the talus and the tibia. It’s also available in multiple implant sizes, lengths and configurations. Each nail implant incorporates a device that allows surgeons to control the compression between the bone surfaces, which is designed to maximize the likelihood of a solid fusion, thereby alleviating pain, according to the company.

Product introductions weren’t the only news coming out of the company in November. Wright also “introduced” its new chief financial officer (CFO). Lance A. Berry was named senior vice president and CFO, replacing John Bakewell, who left to take a position with another company. Berry joined Wright in 2002 and served as vice president and corporate controller.

$465 Million

NO. OF EMPLOYEES: 1,000

Double-digit growth is enviable in any market. But given recent economic challenges, double-digit gains are particularly noteworthy. Wright Medical, based in Arlington, Tenn., not only showed overall company sales growth, but also significant upticks in individual sector sales.

Net sales for fiscal 2008 grew 20 percent, totaling $465.5 million, compared with $386.9 million in 2007. The company reported that its knee, hip, biologics and extremity product lines achieved 17 percent, 20 percent, 8 percent and 43 percent growth rates, respectively. Net income increased to $3.2 million in 2008 from $1 million in 2007, as increased profitability from higher levels of sales and decreased restructuring charges were mostly offset by $7.6 million ($4.7 million net of taxes) of costs associated with ongoing U.S. governmental inquiries, the write-off of $2.5 million of acquired in-process research and development charges and a tax provision of $12.8 million to adjust valuation allowance, primarily for deferred tax assets associated with net operating losses in France (in 2007, the company closed a facility in the French city of Toulon).

The company reported strong sales performance of its Advance Medial-Pivot knee system, the Advance Stature knee implants and the Biofoam tibial base, which is a cement-less knee system.

During the year, a number of new hip-related products also were introduced, including the Dynasty Acetabular Cup System and the Gladiator Bipolar Hip System. Wright Medical also expanded its Profemur hip stem line with the addition of the Profemur-HA, Profemur-TL, Profemur-Z and Profemur-LX revision stems. In addition to internally developed product launches, in September 2008, the company licensed the rights to distribute the Link MP revision hip system in North America.

In late 2008, expanding its biologic product offering, the company introduced the Biotape XM xenograft soft tissue patch for tendon and ligament reinforcement.

Revenue and product growth also came in the form of acquisitions—particularly in its foot and ankle division.

In April last year, Wright completed the buyout of Inbone Technologies, Inc. for an initial cash payment of $24 million, guaranteed minimum future payments of $3.7 million and potential additional cash payments based on future operational and financial performance. The Inbone acquisition marked the seventh business development initiative targeted for the foot and ankle surgery market by Wright in the past year and a half. Key products for Wright Medical will be the Inbone Total Ankle System and the Inbone Intra-osseous Fusion Rod and Plate System.

In June last year, the company acquired certain assets of A.M. Surgical, Inc., a Smithtown, N.Y.-based firm that develops endoscopic soft-tissue release products for foot and ankle surgeons. Wright has marketed A.M. Surgical’s foot and ankle products since October 2007.

The purchase consisted of an initial cash payment of $2.1 million and potential additional cash payments, not to exceed $700,000, based on future financial performance of the acquired assets.

Wright’s big push in the foot and ankle business has paid off significantly. In 2008, this franchise grew 44 percent internationally, 82 percent domestically, and 74 percent globally, following an outstanding 2007 annual sales growth of 96 percent. In 2008, the company launched two new, internally developed products for foot and ankle, including the Charlotte Claw Plates and the Sidekick Coretrak Mini Fixator.

To keep up with the continued expansion of the company’s product offering, expansion of manufacturing facilities also was required. During fiscal 2008, Wright Medical completed the first phase of its facility expansion at its Arlington headquarters. The company now occupies a new 50,000-square-foot manufacturing building and the 17,500-square foot office tower and campus cafeteria.

The second phase of the project includes renovation of some existing facilities. An additional 29,000-square-foot manufacturing facility less than a half-mile from the company’s main campus was acquired in late 2008. Both of these are slated to be up and running this year.

Wright Medical’s product innovation hasn’t slowed down in 2009. In February, at the most recent annual meeting of the American Academy of Orthopaedic Surgeons, the company introduced its Prophecy preoperative navigation guide technology.

Alex Winber, Wright’s U.S. director for knee marketing, recently told Orthopedic Design & Technology that Prophecy has “incredible potential to “revolutionize the way total knee arthroplasty is done.” The Prophecy program uses basic CT or MRI scan technology to map precise implant placement and alignment. The imaging data is used to develop patient-specific guides that snap into place on the bone, following the unique curvature of the patient’s bone anatomy. The images are taken a few weeks prior to surgery, and the special guides are created using rapid-prototyping technology. Previously, orthopedic surgeons would use visually guided instruments such as an intramedullary rod to align the knee. With this process, there is no more drilling into bone canals.

“Computer navigation’s big claim was that it could increase accuracy and decrease the outliers—the number of patients a surgeon would do that would be out of alignment,” Winber said. “Computer navigation turned out to be very time consuming. Preoperative navigation fulfills the promise of inter-operative navigation, with greater accuracy, reproducible results and without all the time constraints. Every knee is as unique as a fingerprint. Prophecy also allows us to really fine tune the kind of implant that’s needed. It’s such a big advantage. All this results in better wear and long-term function.”

Winber said he expects the technology to expand beyond knee replacement and that physician adoption of the technology has been positive.

$387 Million
NO. OF EMPLOYEES: 1,000

Perhaps it’s not the company on ODT’s list with the largest bottom line, but Wright Medical Technology posted significant sales gains for fiscal 2007 and was aggressive about new product development and acquisitions.

The device company has manufactured orthopedic implants and instrumentation for more than 50 years. Its product offerings include large-joint implants for the hip and knee; extremity implants for the shoulder, elbow, hand, wrist and foot; and biologic products including bone-graft substitutes.

Net sales for the fiscal year (ended Dec. 31) were $387 million, an increase of 14.1% compared with 2006. The company’s large-joint products made up the largest percentage of sales. Hips were 34.7% of sales, and revenues increased 10% for the year. Knee products were 26.5% of sales, while sales rose 8.8% compared with 2006. The most significant sales gains, however, came from extremity reconstruction products and biologics—areas in which Wright has devoted considerable attention and resources in recent years. Extremity sales increased 38.3% and represented 16.1% of sales. Biologics sales grew 16.2%, representing 19.7% of total 2007 sales.

Notably, international sales increased 18% to $151 million, helped in part by $6 million in favorable currency exchange, the company said.

Net income decreased to $1 million in 2007 from $14.4 million in 2006, primarily as a result of $18.9 million in restructuring charges related to the closure of the company’s operation in Toulon, France. Costs associated with acquisitions also impacted net income.

In hips and knees, the company cited strong sales of its Advance knee systems, the Profemur line of primary hip stems and the Conserve total hip implant, though sales partially were offset by slower sales of older product lines. For biologics, sales were boosted by the Graftjacket tissue repair product line and the Pro-Dense injectable regenerative graft. Extremity sales were helped by the Charlotte foot and ankle system and the Darco plating system, company officials noted.

For 2007, the company unveiled a number of new hip products, including the Supercap total hip arthroplasty, which does not require the hip to be dislocated during the procedure (minimizing recovery times). In addition, the company rolled out the Profemur Xm hip stem, the Profemur Z hip revision stem and the Profemur TL modular neck system. The new Dynasty acetabular cup system and the Gladiator bipolar system also were introduced.

In a significant step toward approval in the United States, Wright Medical received approval from Japan’s Ministry of Health, Labor and Welfare for its Conserve Plus hip resurfacing system, which currently is available in Europe, Canada and Australia, as well as other international markets. The company’s regulatory submission remains under review by the FDA, and the device only is available under an investigational device exemption domestically. Once approved, it would join Smith & Nephew’s Birmingham hip resurfacing system and the Cormet device (marketed by Stryker in the United States), which already received FDA approval.

Other notable product launches included the Evolve Proline system for radial head replacement in complex elbow fractures; the Pro-Dense injectable regenerative bone graft product; Advance Stature femoral implants for patients with a more narrow knee anatomy or smaller skeletal frame; and the Carolina system designed for treatment of Jones fractures of the fifth metatarsal of the foot, which is common in young, athletic patients and geriatric patients.

Product development and expansion in 2007—a particular boost to the company’s extremities business—were the result of strategic acquisitions. For example, in April last year, the company purchased Darco International, Inc.’s reconstructive foot surgery business for approximately $17 million in cash. The company also entered into an agreement with Regeneration Technologies, Inc. (RTI), a Florida-based developer of orthopedic and biologic implants, to develop advanced xenograft implants for use in foot and ankle surgeries. Under the agreement, Wright Medical will design and distribute the implants, while RTI will develop, manufacture and supply Wright’s designs. Wright will market the new foot and ankle implants under the Cancello-Pure brand.

Acquisitions continued in 2008. In June, the company acquired certain assets of A.M. Surgical, Inc., a Smithtown, NY-based firm that develops endoscopic soft-tissue release products for foot and ankle surgeons. Wright has marketed A.M. Surgical’s foot and ankle products since October 2007. The purchase consisted of an initial cash payment of $2.1 million and potential additional cash payments, not to exceed $700,000, based on future financial performance of the acquired assets.

In April, Wright completed the buyout of Inbone Technologies, Inc. for an initial cash payment of $24 million, guaranteed minimum future payments of $3.7 million and potential additional cash payments based on future operational and financial performance. The Inbone acquisition marked the seventh business development initiative targeted for the foot and ankle surgery market by Wright in the past year and a half. Key products for Wright Medical will be the Inbone Total Ankle system and the Inbone Intra-osseous Fusion Rod and Plate system.