Orthofix International NV

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Orthofix International NV

7 Abraham de Veerstraat
Curaçao
Netherlands Antilles
Telephone: ( + 599) 94658525
Fax: ( + 599) 94616978
Web site: http://www.orthofix.com

Public Company
Incorporated: 1979
Employees: 988
Sales: $286.63 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: OFIX
NAIC: 339112 Surgical and Medical Instrument Manufacturing

Orthofix International NV is a leading manufacturer of orthopedic and other medical products focused on three primary areas: Spine, which accounts for 28 percent of group sales; Reconstruction (42 percent); and Trauma (22 percent). The company major products feature external and internal fixation devices, which can be used to treat fractures, promote bone growth and reconstruction, and lengthen limbs. The company also develops stimulant devices, such its non-invasive Physio-Stim and Spinal-Stim devices, used for enhancing bone and other post-injury and post-surgical repair. Other products developed by Orthofix include its Oasis system for aiding osteoarthritis suffering from knee pain; the Xcaliber line of fracture fixators; VacoSplint and Storm, both used for tendon and other soft tissue injuries; AV Impulse, a vascular therapy device used to promote circulation in post-operative patients; limb lengthening and limb reconstruction devices, including the Sheffield Ring Fixator, and an internal bone lengthening system, ISKD; and pneumatic bracing devices, such as its Orthotrac Pneumatic Vest, used for relieve pain and promoting recovery from spinal injuries. Orthofix's product line also includes a limited range of non-orthopedic devices, including women's care and respiratory assistance products. Non-medical sales accounted for just 8 percent of group sales of $287 million in 2004. Founded in Verona, Italy, but registered in Curaçao, in the Dutch Antilles, Orthofix operates primary manufacturing facilities in the United States, Mexico, and Italy, as well as sales and marketing subsidiaries in France, Germany, Switzerland, the United Kingdom, Belgium, and elsewhere. At the end of 2004, Orthofix strengthened its U.S. presence as well as its position in the American market with the acquisition of California-based BREG Inc. Orthofix is listed on the NASDAQ and is led by president and CEO Charles W. Federico.

Italian Origins in the 1980s

Orthofix International stemmed from the work of orthopedic researcher Giovanni de Bastiani of the University of Verona in Italy. Toward the end of the 1970s, Bastiania proposed the concept of "dynamization," based on the natural ability of bone to repair itself. Bastiani developed an external axial frame device that could be fitted to a fracture in order to stimulate and assist the reconstruction of the bone. In 1979, Bastiani presented the device at an orthopedic conference. The following year, he founded Orthofix Srl in order to continue the development of the device and launch it as a commercially available product. The company grew slowly, reaching sales of about $7 million by the mid-1980s.

Orthofix's fortunes changed with the arrival of investment and management team Robert Gaines-Cooper and Edgar Wallner. Backed by pension fund investors, Gaines-Cooper and Wallner acquired Orthofix and reoriented it toward an international market. The company was reincorporated in Curaçao, in the Netherlands Antilles, becoming Orthofix International. Nonetheless, Orthofix remained closely connected to the university at Verona and maintained a research and development and manufacturing base in that city. Soon after the takeover, Orthofix completed its Modulsystem, an external fixation system, which became the group's first major success on the international orthopedic market.

Orthofix continued to focus on developing minimally invasive orthopedic devices, growing steadily into the early 1990s, as sales topped $20 million in 1991 and then $30 million by the end of 1993. By then, Orthofix had developed relationships with a network of distributors, bringing its products to more than 70 countries. The United States represented the company's single largest market. A new milestone for the company came in 1992, when Orthofix listed its stock on the NASDAQ. The public offering enabled Orthofix to begin plotting its next expansion phase.

Acquisition played a prominent role in Orthofix's growth throughout the 1990s and into the 2000s. The company's first purchase came soon after its public offering, when Orthofix acquired a 20 percent stake in the United Kingdom's Novamedix Ltd. By the end of 1992, the company had boosted its stake in Novamedics to 40 percent, while also acquiring a 60 percent stake in NMX Distribution Ltd., which handled distribution for Novamedix in the Americas and elsewhere. The eventual purchase of the whole of Novamedix by Orthofix allowed the latter company to extend its product offering into a new category, adding its subsidiary's A-V Impulse System Foot Pump. This non-invasive device attached to a bedridden patient's foot in order to stimulate the return of blood from the legs, enhancing circulation in order to maintain muscular and circulatory function. The product exemplified Orthofix's focus on innovative yet minimally invasive orthopedic devices.

Orthofix continued to target the United Kingdom for its next acquisitions. In 1993, the company acquired two more British companies, Orthosonics and Colgate Medical. Orthosonics brought Orthofix an important extension to its product categories, adding the development and manufacture of orthopedic devices utilizing ultrasound technology. Colgate Medical had been established in the mid-1970s as a distributor of breast pumps and breast shields before adding medical products such as respiratory devices. Colgate Medical also became the U.K. distributor for the A-V Impulse. Its acquisition by Orthofix came as a joint venture with Intavent Ltd., and initially the distribution group took on the name of Intavent Orthofix Ltd. Orthofix acquired 100 percent control of Intavent Orthofix in the early 2000s.

Building a U.S. Presence in the 1990s and 2000s

Although the United States represented Orthofix's most important market, the company had not yet established a presence there. That move came in 1995, when Orthofix acquired American Medical Electronics Inc. (AME). The acquisition brought Orthofix a new specialty, that of bone growth stimulators and bone substitutes. AME also gave Orthofix an extensive sales and distribution network in the United States, as well as a manufacturing complex in Richardson, Texas. Following its acquisition, the subsidiary was renamed Orthofix Inc.

The addition of Orthofix Inc. helped boost the company's total sales past $77 million by the end of 1996. Nonetheless, the company's extension into the United States was not immediately successful, and losses were posted in the U.S. subsidiary's first years with the company. In 1996, however, Orthofix brought in Charles Federico to take over as CEO of the U.S. subsidiary and turn it around. Federico's success later led him to take over as president and CEO of Orthofix International.

In the meantime, Orthofix continued to extend its range of offerings, adding products including Radiolucent Wrist Fixator, the Spinal Stim and Physio-Stim Lite Bone Growth Stimulator, and the OSCAR ultrasonic bone cement removal system for the hip. In 1997, the company introduced another new product, a synthetic bone replacement material called Intramedullary Nail and Osteogenics BoneSource. Also in 1997, the company shifted its U.S. headquarters to North Carolina, where it launched a joint research initiative with Wake Forest University.

Orthofix continued to expand in the United States at the end of the 1990s. The company acquired a 30 percent stake in Neomedics Inc., based in New Jersey, which specialized in the development of implantable tissue growth stimulation devices. Orthofix acquired full control of Neomedics in 1999. The addition of Neomedics expanded Orthofix's product offering, particularly in the area of spinal care, to include both non-invasive and invasive devices.

Company Perspectives:

The company's mission is to offer highly valued minimally invasive medical devices for the orthopedic and trauma markets and to achieve market leadership in each of our chosen segments by focusing on continuous innovation in the products and services we offer. We will ask ourselves every day what we have done to delight our customers.

Key Dates:

1979:: Giovanni de Bastiani of the University of Verona in Italy introduces an axial frame device for the stimulation of bone growth.
1980:: Orthofix Srl is created to market the axial frame device.
1987:: Orthofix is acquired in a buyout led by Robert Gaines-Cooper and Edgar Wallner.
1992:: Orthofix goes public on the NASDAQ and acquires Novamedix in England.
1993:: Orthofix acquires Orthosonics in England and distributor Colgate Medical (renamed as Intavent Orthofix) in a joint venture with Intavent.
1995:: American Medical Electronics is acquired and renamed Orthofix Inc.
1999:: New Jersey-based Neomedics Inc. is acquired.
2000:: Minnesota-based Kinesis Medical Products is acquired.
2002:: OrthoRX is formed in a joint venture with Health-South Corporation.
2003:: Full control of Intavent Orthofix is acquired.
2004:: California-based BREG Inc. is acquired.
2005:: The company becomes the distributor for Berkeley Advanced Biomaterials' OsteoMax synthetic bone-graft products.

The following year, Orthofix boosted its range of spinal care products again when it acquired Kinesis Medical Inc., based in Bloomington, Minnesota. That company specialized in support devices providing ambulatory unloading in order to diminish pain from spinal and back injuries. Kinesis' core product was its patented pneumatic vest system, Orthotrac, proven to reduce lower back pain in patients with herniated discs and related injuries. Sales at the end of 2000 topped $131 million.

In 2002, Orthofix stepped up its distribution reach with the formation of a 50–50 joint venture, OrthoRX Inc., with Health-South Corporation. The joint venture provided orthopedic inventory, insurance authorization, and billing services for HealthSouth's more than 1,900 health centers. The following year, the company strengthened its U.K. distribution arm as well, buying up full control of Intavent Orthofix Ltd. By 2004, the company's distribution network had extended its product reach into more than 85 countries worldwide, with direct sales operations in the United States, the United Kingdom, Italy, France, Germany, Mexico, Switzerland, and Brazil, as well as its stake in OrthoRX.

Orthofix's expansion in the United States took a major step forward in 2004. In that year, the company completed its acquisition of privately-held BREG Inc. for a purchase price of $150 million. The California-based company complemented Orthofix's own focus on the spine, bone reconstruction, and trauma sectors, and added nearly $60 million in annual revenues. By the end of 2004, Orthofix's sales had jumped to nearly $287 million.

Orthofix continued to seek out new expansion opportunities in 2004 and into 2005. In April 2005, for example, the company announced its agreement to handle marketing and distribution for Berkeley Advanced BioMaterials Inc.'s bone-repair products. Orthofix itself unveiled extensions of its own product line, notably with the launch of updated versions of the Physio-Stim and Spinal-Stim bone-growth generation systems. Orthofix had established itself a leader and major innovator in the field of non-invasive osteopedic devices.

Principal Subsidiaries

Breg, Inc. (United States); Colgate Medical Ltd. (United Kingdom); Implantes Y Sistemas Medicos, Inc. (Puerto Rico); Intavent Orthofix Ltd. (United Kingdom); Inter Medical Supplies Limited (Cyprus); Inter Medical Supplies Ltd. (Seychelles); Novamedix Distribution Limited (Cyprus); Novamedix Services Ltd. (United Kingdom); Orthofix AG (Switzerland); Orthofix do Brasil (Brazil; 89.5%); Orthofix GmbH (Germany); Orthofix Holdings Inc. (United States); Orthofix II B.V. (Holland); Orthofix Inc. (United States); Orthofix International B.V. (Holland); Orthofix Ltd. (United Kingdom); Orthofix S.A. (France); Orthofix S.r.l. (Italy); Orthofix UK Ltd. (United Kingdom); Orthofix US LLC (United States); Orthosonics Ltd. (United Kingdom); Promeca S.A. de C.V. (Mexico; 61.25%)

Principal Competitors

Merial Ltd.; McKesson Medical-Surgical; Medline Industries Inc; Siemens AB; Cadwell Laboratories Inc; Agilent Technologies Deutschland GmbH; Instrumentarium Corporation; NOF Corporation; 3M United Kingdom plc; Centerpulse Orthopedics AG.