Financial

SeaSpine Reports Record Revenue, Driven by 16% U.S. Spinal Implants Growth

CARLSBAD, Calif., Oct. 29, 2019 (GLOBE NEWSWIRE) — SeaSpine Holdings Corporation (NASDAQ: SPNE), a global medical technology company focused on surgical solutions for the treatment of spinal disorders, today announced financial results for the third quarter ended September 30, 2019.

Summary of Third Quarter 2019 Financial Results and Recent Accomplishments

  • Revenue of $39.9 million, an increase of 11% year-over-year
  • U.S. revenue of $35.5 million, an increase of 12% year-over-year
    • U.S. Spinal Implants revenue of $17.4 million, an increase of 16% year-over-year
    • U.S. Orthobiologics revenue of $18.2 million, an increase of 9% year-over-year
  • Announced exclusive (field-based) collaboration with restor3d, Inc. to develop differentiated 3D-printed interbody devices, one of the fastest growing segments in spine
  • Limited commercial launch of three additions to the product portfolio:
    • Mariner MIS Posterior Fixation System, a minimally invasive system built upon the Mariner platform to simplify the treatment of a wide range of spinal pathologies
    • Mariner Outrigger Revision System, an adjunct to the Mariner Posterior Fixation system designed to effectively revise and extend previous fusions
    • Shoreline RT Cervical Interbody Implant System, featuring Reef Topography, which describes machined macrostructures and undercut features designed to act as an integrated fusion scaffolding that enhances NanoMetalene surface technology
  • Presented data at the North American Spine Society (NASS) Annual Meeting demonstrating that the cell component of cellular bone matrices provides no benefit in bone healing

Keith C. Valentine, President and Chief Executive Officer, said, “The Mariner revision and MIS systems are key new products in our spinal implants portfolio that allow us to attract the high-quality distribution that we believe, coupled with our other initiatives, will generate consistent U.S. spinal implants revenue growth in the mid-teens through 2020, with further acceleration anticipated in 2021.  Notably, we achieved 16% growth in this portfolio based primarily on our core Mariner and NanoMetalene platforms.  As we expand and enhance these foundational technologies with the Mariner revision and MIS systems, transition Mariner midline to full commercialization before the end of 2019, and execute on our 3D strategy, we will have access to new market segments where we were previously unable to compete.” 

Mr. Valentine continued, “Adding to confidence in our future growth is the proprietary Reef Topography that we licensed in 2017 and introduced this past quarter with Shoreline, which further differentiates our interbody offerings.  Critically, we are investing in the scientific work to evidence the value of Reef Topography.  We have preliminary data from an animal study, which we expect to finalize this year and present at a future scientific conference, that we believe demonstrates the in vivo benefits of Reef.  We expect to launch an additional five interbody products that incorporate Reef Topography by the end of 2020.” 

“At the recent NASS meeting, we presented data from a study conducted in collaboration with Jeff Wang, MD, the current president of NASS, and his research team at USC, along with Scott Boden, MD at Emory University, demonstrating that there was no benefit to the viable cell component of cellular bone matrices in the well-accepted athymic rat posterolateral fusion model,” said Frank Vizesi, Vice President, Orthobiologics Research and Development and Clinical Affairs.  “The study also indicated superior fusion with our demineralized bone matrix product, OsteoStrand™ Plus, which does not contain any cell component, relative to two market leading cell-based products.  As the body of evidence grows confirming that cells do not confer any benefit in bone healing, we believe we are exceptionally well-positioned to transition hospitals from high-priced, cell-based therapies to our best-in-class DBM products.” 

Mr. Valentine concluded, “We look forward to the collaboration with restor3d, which provides us an opportunity to partner with Professor Ken Gall, one of the leaders in additive processing techniques, and his team from Duke University.  We will now have the opportunity to deliver best-in-class solutions for those surgeons who prefer titanium-based, 3D-printed interbodies, in addition to those who prefer traditional PEEK or advanced composite materials, such as our NanoMetalene surface technology.  In the next six to nine months, we expect the limited commercial launch of five 3D-printed interbody products designed specifically for different approaches or techniques in the cervical and lumbar regions and to move these products to full commercial launch by the end of 2021.”

John Bostjancic, Chief Financial Officer, said, “Our product development plans are ambitious, but we have the team and processes in place that, combined with our strong balance sheet, we believe will enable us to execute successfully across a broad range of initiatives.  Additionally, we are well positioned to invest in the additional sets needed to attract the strongest distribution partners and to support the number of surgical procedures that, ultimately, we believe will deliver long-term growth and stockholder value.  Confidence in our existing liquidity position is demonstrated by our decision to terminate our $50 million at-the-market facility.” 

Third Quarter 2019 Financial Results
Revenue for the third quarter of 2019 was $39.9 million, an 11% increase compared to the same period of the prior year.  Spinal Implants revenue was $19.8 million, a 15% increase compared to the same period of the prior year.  The $2.5 million increase was driven by growth in recently launched products. Orthobiologics revenue was $20.1 million, an 8% increase compared to the same period of the prior year.  The $1.5 million increase was driven by growth in recently launched products.

Gross margin for the third quarter of 2019 was 63.9%, compared to 60.2% for the same period of the prior year. The increase in gross margin was due to a favorable shift in geographic and product mix, with higher margin U.S. revenue growing faster than international revenue and higher gross margin spinal implant product revenue growing faster than orthobiologics product revenue.  Additionally, manufacturing scrap rates, inventory losses and excess and obsolete provisions were lower in the current period compared to the prior year period.

Operating expense for the third quarter of 2019 was $34.8 million, a $3.8 million increase compared to the same period of the prior year.  This increase was driven by a $3.1 million increase in selling, general and administrative expenses and a $0.7 million increase in research and development expenses compared to the prior year period.

Net loss for the third quarter of 2019 was $9.7 million, a $0.1 million increase compared to same period of the prior year. 

At September 30, 2019, cash, cash equivalents and investments were $27.3 million, and the company had no outstanding debt under its credit facility. 

Updated 2019 Financial Outlook
SeaSpine expects full-year 2019 total revenue to be in the range of $157 million to $158 million, reflecting growth of 9% to 10% compared to the prior year. 

Webcast and Conference Call Information
SeaSpine’s management team will host a conference call beginning today at 1:30 p.m. Pacific time / 4:30 p.m. Eastern time to discuss the financial results announced today. Individuals interested in listening to the conference call may do so by dialing (877) 418-4766 for callers in the U.S. or (614) 385-1253 for callers outside the U.S., using Conference ID: 1369654.  To listen to the webcast and view the accompanying slides, please visit the Investors section of the SeaSpine website at: www.seaspine.com.

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Mike Adams

Mike Adams is a medical device sales leader with extensive clinical experience in spine and biologics and a nationwide distribution network built over the last 10+ years in the industry. He has held various leadership positions in healthcare and device including Distributor Partner, Hospital COO and Spine VP of Sales. He currently leads the commercialization strategy for OrthoSpine Partners and is a Distributor Principal at Novel Medical. Because of his unique career path, Mike has the ability to see the healthcare business from multiple perspectives making him passionate about building strategic partnerships that help reduce overall costs, drive innovation, and cultivate growth for new markets.

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