Zimmer Biomet Achieving Synergies Ahead of Schedule

Marie Thibault

The early report from Zimmer Biomet Holdings is a positive one. Management of the new combined company is seeing savings from synergies earlier than anticipated and good sales progress due to integration.

According to a Seeking Alpha transcript of the company’s October 29 earnings call, David Dvorak, Zimmer Biomet president and CEO, said, “The company made great strides across all geographies by accomplishing significant commercial integration milestones. We largely completed the appointment of our global sales leaders during the quarter, and we expect to substantially complete all commercial integration efforts by the end of this year. As evidenced by our sequential sales improvement in the Asia-Pacific and Europe, Middle East, and Africa regions (EMEA), as well as in several product categories, we have already begun to see the benefits of the progress we have made on our sales channel integration.”

The combined company’s knee sales grew 9% year-over-year in the Asia-Pacific region and 6% y/y in the EMEA region.

While there has been consolidation of sales leadership positions, which Dvorak described as “select[ing] the best-of-the-best to take the organization forward,” company executives have kept their promise to retain the sales reps from both Zimmer and Biomet. Dvork said, “We said from the beginning that we were continuing to preserve the sales representative positions, and that holds true through our integration plans. The comprehensive product portfolio puts us in a position where we need all of those sales positions to fully realize the opportunities that we have out in the marketplace.”

Dvorak went on to give more detail on the integration, explaining that sales reps from both legacy companies are pulled together into one team and trained on the products that are new to them. “So the execution has gone very smoothly, and the pipeline build for the cross sell opportunities is creating nice visibility, and we believe it will be expressed on the scoreboard as we move into 2016.”

Highlighting the cost savings so far, Dan Florin, chief financial officer, noted that this quarter’s savings included early termination of a duplicate office lease by a couple months. The company increased its cost savings target for the first year following the merger completion from $135 million previously to $155 million now. However, Florin pointed out that the accelerated cost savings doesn’t change the original goal of a $350 million savings run rate year three post-merger. 

Given the benefit of a broader product portfolio, Zimmer Biomet’s executives believe the company may have an edge when it comes to evolving business models, such as the Comprehensive Care for Joint Replacement (CCJR) model from CMS. “We think that proposals like CCJR are just expressions of that reality. So we feel like, if anything on a combined basis, we’re uniquely positioned to address those demands in that evolving healthcare environment,” Dvorak said.

Marie Thibault is the associate editor at MD+DI. Reach her at [email protected] and on Twitter @medtechmarie. 

[Image courtesy of BLUEBAY/FREEDIGITALPHOTOS.NET]