David C. Dvorak, President & CEO
Cheryl R. Blanchard, Ph.D., Sr. VP & Chief Scientific Officer
James T. Crines, Exec. VP of Finance & Chief Financial Officer
Jeffery A. McCaulley, President, Zimmer Reconstructive
Jeffrey B. Paulsen, Group President, Global Businesses
Bruno A. Melzi, Chairman of Europe, Middle East and Africa
Stephen H.L. Ooi, President of Asia Pacific
NO. OF EMPLOYEES: 8,700
GLOBAL HEADQUARTERS: Warsaw, Ind.
When Zimmer Holdings Inc. issued its first annual report 10 years ago, executives used the theme“New Products New Markets New Geographies”to convey their future
vision for the newly independent company.
“New products are the lifeblood of any medical device company and our goal is to be a new products‘machine,’“ former President and CEO J. Raymond Elliott told shareholders in a letter
within the firm’s debut report. (Elliott eventually left Zimmer in
2007 and was hired two years later by Boston Scientific Corp. to
revive the fortunes of that device firm after its ill-fated takeover of
Guidant Corp. He retired from Boston Scientific on Dec. 31, 2011).
“A key to our future will be our ability to leverage our brand
strength, our sales forces, and our heritage of trust for success in
new markets,” Elliott’s letter continued.“We intend to enter rap-
idly growing, adjacent markets such as spine, pain management
and blood management. We believe orthobiologics may transform
orthopaedic treatments…Finally, we are a global company. With
approximately one-third of our revenues from outside the Ameri-
cas, we have only just begun to focus on new geographies. From
the historic strength of our base in Asia and particularly in Japan,
Korea and Taiwan, we believe we can continue to take advantage
of the increasing sophistication of economies and healthcare sys-
tems in this most populous region of the world.”
Elliott’s successor could have used the same theme last year to
provide investors with a progress report on those early goals. Since
breaking free of global biopharmaceutical giant Bristol-Myers
Squibb in August 2001, Zimmer has indeed become a new prod-
uct “machine”—the Warsaw, Ind.-based firm regularly debuts
dozens of new products every year, many of them timed to coin-
cide with industry trade shows like the American Academy of Or-
thopaedic Surgeons and the North American Spine Society
The company also has entered some of those rapidly growing
markets Elliott mentioned in his letter, namely spine and orthobiologics. Zimmer’s spinal portfolio includes thoracolumbar and
cervicothoracic products, while its orthobiologics lineup includes
the Fortitude Osso Interbody Spacer, the CopiOs bone void filler,
the AlloFuse Demineralized bone matrix and the Chondrofix Osteochondral Allograft, a product designed to address osteochondral lesions in a single-stage procedure. The Chondrofix implant
is an osteochondral plug comprised of articular cartilage and subchondral bone, according to Zimmer.
The company is collaborating with St. Louis, Mo.-based ISTO
Technologies Inc. to develop other chondral grafts for cartilage repair. One of the pair’s creations—the DeNovo NT Natural Tissue
Graft—has been used in more than 1,600 cartilage repair procedures in 2011 (the product uses particulated juvenile cartilage tissue
to repair articular cartilage defects in the knee, ankle, shoulder, hip,
elbow and toe joints). The companies also are working together on
a Phase III clinical study to evaluate the DeNovo ET Engineered
Tissue Graft, an implant designed to repair knee cartilage damage.
In its relatively brief existence as a publicly-listed firm, Zimmer has become a significant player in the global orthopedics
market. The firm has operations in more than 25 countries and
sells products in more than 100. The emerging markets of Brazil,
Russia, India and China (the“BRIC”brethren) have become so essential to long-term growth that executives announced plans last
year to build a new research and development center in China to
focus on the unique needs of Asian patients and clinicians.
Sales in the Asia Pacific region (which include Australia, China,
Hong Kong, India, Korea, Malaysia, New Zealand Singapore, Taiwan and Thailand) posted the best growth in 2011, according to
Zimmer’s latest annual report. Revenue spiked 16 percent to $796.5
million, or 18 percent of total net sales. Japan was the largest market in this region, accounting for roughly 52 percent of sales.
North and South American sales remained flat last year at $2.4
billion, though the region captured more than half ( 55 percent) of
the company’s total revenue. The United States accounted for 93
percent of all sales in this area.
Europe contributed $1.2 billion in revenue to Zimmer’s bottom line in 2011 (year ended Dec. 31), a 10 percent hike compared
with the $1.09 billion this region reported in 2010. France, Germany, Italy, Spain, Switzerland and the United Kingdom accounted for 72 percent of the area’s net sales.
Such robust gains in the Asia Pacific and European markets
helped push sales 5. 5 percent to $4.5 billion last year and diluted
earnings per share to $4.03. Net earnings skyrocketed 27. 4 percent to $760 million, a welcome change from the 17 percent
plunge the company’s earnings encountered in 2010. Gross profit
totaled $3.3 billion and operating profit came in at $1 billion, an
11. 7 percent increase compared with the $916.7 million in operating profit the company reported in 2010.
Reconstructive product sales garnered the most revenue for Zimmer last year, comprising roughly three-quarters of the company’s
total net sales. Hip, knee and extremities devices generated $3.3 billion in sales, a 4 percent increase compared with the $3.2 billion
54 • ODT