August 28, 2025 • 38 mins
“We are reinventing ourselves. We don’t want to be just a legacy orthopedic company and I think we’re driving with the same enthusiasm as Arnold Schwarzenegger,” Zimmer Biomet Chairman, President and CEO Ivan Tornos tells Bloomberg Intelligence. In this Vanguards of Health Care episode, Tornos sits down with BI analyst Matt Henriksson for an in-depth interview about Zimmer Biomet and the strategic initiatives made through internal developments and key acquisitions, including Paragon 28 and Monogram, to accelerate its weighted average market growth rate (WAMGR). He also discusses the current orthopedic landscape and the opportunities arising from the shift to the ambulatory surgical center (ASC) setting, as well as his relationship with Arnold Schwarzenegger as Chief Movement Officer.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:20):
Welcome to another episode of the Vanguards of Healthcare series.
My name is Matt Hendrickson, the medical technology analyst at
Bloomberg Intelligence, which is the in house equity research platform
of Bloomberg LP. We're pleased to have with us today
Avon Tornos, CEO of zimmer Biomet, a medical device company
that is a broad leader in the orthopedic market. You
can dive deeper into the company and its financials by
(00:43):
typing in ZBH Equity go on your Bloomberg terminal. Levon.
Thank you for joining us today.
Speaker 2 (00:49):
Great to be here, Matt.
Speaker 1 (00:50):
I will start with a quote that you said during
the second quarter call, and maybe I'm going to bore
the readers, but I'm going to read it in full.
The future does require diverse of We aspire to have
at least a five percent weighted average market growth rate
environment by the end of twenty twenty seven and be
in a position to be in a six to seven
(01:10):
percent environment by the end of twenty thirty. So with
that framework, our capital allocation is not changed, but it
certainly evolves. We want to engage in responsible m and
a that will get us into the five percent by
the end of twenty twenty seven and by twenty thirty
the six to seven percent. Now what caught my attention
(01:30):
was it certainly evolves. How has that capital allocation evolved
over your time at Zebra so far?
Speaker 2 (01:36):
So we want to be grading more than one area.
Already are a greater or topeditic company. Now we have
the ambition to be great in other areas. We got
the bandwidth, we got the capital to do that, so
we want to in a responsible way get into higher
growth areas. So has it evolved, I would say is
evolving an accelerating We know that revenue growth is the
(01:56):
number one value driver as you think about stocker Cree,
and we get the capital to move from a current
web guard a waited average market growth rate of four
percent to five percent twenty twenty seven, and again we
can do that in a responsible way with transactions that
make sense strategically and financially. And somewhere around sixty seven
(02:16):
percent by the end of twenty thirty. That's more of
an ambition that a goal. I would say that five
percent is a goal and the twenty thirty sixty seven
percent is an ambition. So it has evolved in the
sense that we're going to prioritize revenue in a more
meaningful way. We're going to continue to be responsible around
Arling's growth. We will continue to prioritize freak US flow growth,
(02:40):
but we're gonna prioritize revenue growth in a more meaningful
way because again, we deserve to be great strategically more
areas than orthopedics, and again financially, that is the one
key driver for value creation. So that's what I meant
in the QT Aarden's goal, and that's what we do
on And an example of that is the deals we
don't this year. The year is not even done with
(03:00):
on two very two very powerful deals, one being part
of on twenty eight you had Aliverer Hit in the
show as a transaction that closed in April. Is giving
US wen Guard accretion of around thirty to forty basis points. Obviously,
it's given US revenue accretion of around two hundred and
seventy basis points for twenty twenty five, and it's going
(03:21):
to be EPs neutral. In your two is diversifying us
into the rapid growth large foot and ankal market. It's
creating a platform for other acquisitions. And then after doing
that with the Monogram technologies, which that one actually is
EPs neutral from day one. So long wind the way
to say we're going to diversitify, We're gonna do it thoughtfully,
(03:42):
we're gonna do it strategically, and we're gonna be responsible.
Speaker 1 (03:44):
Yeah, and let's start with the Paragon twenty eight because
you know, I had Albert here and it was a
great episode with him, a great understanding of the products
and the markets and everything. Two things that caught my attention.
The first is with that deal completed, your se Hey franchise,
essentially the Extremities and Traumas and sports franchise is now
bigger than your hips and it's now the number two
(04:06):
largest division. I'll start with that one and saying how
important is that extremities and trauma market for you and
for the orthopedic market in general.
Speaker 2 (04:18):
Sure, mission critical to your point. Already set which by
the way, the acronym makes no sense whatsoever, used to
be sports extremities on trauma, and now you got in
there also shoulder, which is apid extremities. You get in
their CFT Craniom Maxiu Official Thoracic And to your point,
we got foot and Anklett as well. So again the acronym.
(04:40):
We got a revicid, you know.
Speaker 1 (04:41):
Yeah, but if you kind of do the every single letter, that's.
Speaker 2 (04:44):
Going to be a very very long averadat I'll be
tough for a Spaniard to pronounce. But how important it
is is a two point six two point seven billion
dollars business unit growing now double digit with Partagon twenty eight.
Even excluding Partagon twin eight, we've been growing upper single digit,
if not mid single digits, for nine out of eleven quarters.
(05:06):
It's a great opportunity or a great platform. Strategically again,
we can do all kinds of adjacencies. It gives us
a leadership platform in acs here in the US. Strategically
it diversifies the company into high growth areas. But financially again,
how many business do you know, Matt that can grow
double digit with a nice margin expansion opportunity at a
(05:29):
sizable size or a nice size You know of two
point six two billion dollars with less working capital requirements
than less, say quarter orthopedics. So again we don't get
enough credit for the business. We love that business for
all the right reasons. We're going to continue to invest
in the business. As we think about m and A
that is going to be a main recipient of capital.
(05:50):
So I don't think investors quite see the value this
business is the way that we do.
Speaker 1 (05:55):
Yeah, and it's very interesting that you cut my attention
to that it's EPs neutral by next year already. And
it sounds like you from the comments here and I'm
kind of implying it sounds like the inventory management allows
you to have some cost savings because it also sounds
like you're keeping most of the salesforce if I remember correctly,
and Albert is staying on as the head of that unit.
(06:16):
So is it inventory management? Is it gross margin expansion?
The biggest way to be able to take what Paragrind
twenty eight was doing on their own and make it
into a zimmer Biomet person twenty eight.
Speaker 2 (06:27):
Sure, it's a few things. Yes, inventory management is systems
and processes that we have a zimmer Biomet that we
can leverage in some of the DNA, the non commercial DNA.
So yes, we kept Albert. We also kept their chief
commercial officer, Matt. We kept the entire commercial or the
senior commercial team. Most exciting, every single distributor sales rep
(06:51):
facing customers is now part of zimmer Bioman so we're
keeping that a sustain alone operation against seniors coming from
other areas. Yes, we're going to be EPs neutral in
year two. The growth drives the drop through. I mean,
this company has been growing, you know, fifteen to twenty four,
ten years, and then they're not slowing down. So a
(07:11):
great opportunity, a great team, and more too commonly this one.
Speaker 1 (07:14):
Yeah, and then you know quickly into the Monogram one
because that is more in its infancy in the product development.
It's also in the buzz of robotics. But what caught
my attention with that with Monogram and its robotics is
the the semi autonomous and then potentially the full autonomous
features of the robot. Now, with traditional robots, there's always
(07:38):
surgeons in the room. I'm assuming that even if it's
fully autonomous, there's still gonna be a surgeon in the room.
Speaker 2 (07:43):
Correct, there will be, Okay, So what.
Speaker 1 (07:45):
What is the feature then that makes it fully autonomous
versus kind of the traditional robots in the market.
Speaker 2 (07:50):
I've been advised by my team to modulate my enthusiasm
and to uh slow down. The die got drinking, I'm
going to ignore both already already drank three or four diaghogus,
and I am not going to modelate my emphysiation. This
is a great platform, is a great deal. It will
change the standard ocre Monogram technology is sem autonomous early
(08:11):
twenty seven, fully autonomous late twenty seven, early twenty eight. Yes,
you will have a surgeon in the operating room for
both modalities, but here here's going to be doing something else.
The precision is going to be done by the robot.
The level of accuracy is automated by the robot. The
involvement from a thinking standpoint once the plant is done
is limited. The surgeons will be doing other stat that
(08:33):
is far more transformation in the surgery. So I think
it's a game changer. It is going to be fully
integrated with the CB superbiomed ecosystem or solutions. What happens
before surgeon after surgery is integrated into Monogram. So the
level of precision, of accuracy, reproducibility that you're going to
see with Monogram, I don't think we've seen anything like
that yet. No, we're not going to eliminate the surgeon. Yes,
(08:57):
we are going to make the surgeon more efficient and
we can enable that surging to think about bigger stuff
than some of the basic things are happening in a surgery,
the robot will do those.
Speaker 1 (09:07):
Yeah, and you know before we kind of move to
the rest of the robotic portfolio, which is kind of
what you're developing just with Monogram. Is there any timelines
for when the semi autonomous comes to the market or
if there's any clinical trials or clinical data that's coming
out that the other listeners want to be aware of.
Speaker 2 (09:26):
We're taking our time, Matt. This technology is FDA approof. Obviously,
with monogramm implants, we or they we have not closed
the transaction yet. They've done the first fully autonomous surgery
three four weeks ago, so we could go faster, but
we're going to take eighteen months to make sure that
we do all the clinical work. We understand exactly how
(09:49):
the products work with the robot. We see real world
evidence that this really does deliver on the valuable position.
So we think in early twenty seven four semi autonomous.
Earliest portfolio autonomous will be late twenty seven, potentially early
twenty eight. What I will tell you about the time
we launch, we're gonna have clinical evidence, We're gonna have
best in class medical education works are in place. We're
(10:12):
hiring a ton of cells, reps, a ton of employees
for these product launch and once it's in the market,
is it's gonna go fast?
Speaker 1 (10:21):
Yeah? You know what cut my attention to is that
you're saying that it was like a monogram implant. So
is there some time that takes to integrate the robot
with your persona and your Oxford in the last.
Speaker 2 (10:32):
And that's the eighteen months. If not, you know, within
bord part two to three months.
Speaker 1 (10:37):
Yeah, And I mean, actually we'll go through the rest
of portfolio, but I'm going to have a follow up
question there sure, because you know, you have the main
product in your portfolio is the ROSA robot, and you're
looking to expand the ROSA capabilities to include CT scan.
What's the importance of having CT scan versus just traditional
(10:59):
X ray capability.
Speaker 2 (11:01):
Let me go the long way to answer your question.
So give me two minutes. Maybe the next time is
it will bit shorter. So time time is two minutes
and go there we go mad and maybe two minutes exactly. Yeah.
The one thing that I think some folks don't get
is that there are a lot of different opinions or
a navigation and under data points hitting the US, eighty
(11:22):
percent of surgeons do not believe in robotics. Twenty percent do,
but they do believe in some sort of navigation. Outside
of the US, in Europe is ninety percent they don't
believe in robotics. Is it time constraint?
Speaker 1 (11:38):
I think they can do.
Speaker 2 (11:39):
I'm a better surgeon than the robot. I don't get
reimbursement for the robotic procedures, so it comes from my pocket.
It's complex to have it. It is a variety of reasons,
but eighty percent don't believe it in the US, and
by the way, the number obviously is getting reduced every
year with clinical evidence, and ninety percent outs of the US,
but they do believe in navigation. Those who believe in
robotics as don't want to have a city scan to
(12:01):
guide them in the surgery. Some, especially outside of the US,
do not want to have any kind of radiation. City
scans don't get covered outside the US. They believe it's
a waste of time. Then you get some that believe
in small robots. I don't want to have a large
foot print robot in my oprint room. You got, you know,
people that do want to have the larger food print
because they like Maco or as Rosa or whoever. Some
(12:26):
don't want to have any robotics, they want to do
mixed reality. So with all these rumblings the two minutes,
that app will be the only company that has a
solution for every single customer profile. You believe navigation on robotics,
we give you mixed reality and AI based orthogreed in hypothroplasty,
you believe in robotics, we have it for you. CITYSCN
(12:47):
city SCN less Rosa monogram and today Think Surgical. You
like to have a small foot print, we have an
exclusive particy with Think Sergica. You want to have the
larger foot print, we have it for you. So because
you don't have have two three customer profiles, you have several.
You cannot have one size fits all tap of technology.
So we're banking on category leadership, We're banking on flexibility
(13:10):
and optionality, and we believe or bet is going to
work out.
Speaker 1 (13:14):
So do you two five and then you know I
interrupted you there too, So there we go, so perfect
well done. So one of the things that's interesting too
is that is the thing Surgical, which is that handheld
robot and it's you know, I think Surgical is a
separate company. You have a partnership with them. How is
that partnership going so far.
Speaker 2 (13:34):
It's going great. We just extended I love what the
steward and the team over the things Surgical are doing.
The chairman of that company is the former CEO of
Zymberboment two years ago. So both David Deborac and and
still know the space very well. Obviously, Stuarts spend a
lot of time over a striker. They understand the operating room,
(13:58):
they understand the customer and have a very unique solution,
especially for ACS. It's a handheld, portable, very efficient, very
accurate robotic platform. It is CTS cam base. So again
for a large food a large segment of customers, that's
a great solution. And again we have an exclusive partnership
with them. We just extended it and we look forward
(14:19):
to a long term relationship.
Speaker 1 (14:21):
And you know with all these different products, you know,
we talked quickly about Monogram, about the traditional ROSA, about
ROSA CT about think how how do you when you
put on your capital allocation? Hat is it just simply
you're throwing in more capital into the robotics than you did.
Maybe you know, if there's two or three programs are
(14:41):
thrown in two or three times as much there or
is there different ways that you can allocate and be
able to streamline that allocation process.
Speaker 2 (14:49):
So when we think about capital location I mentioned earlier,
we prioritize revenue growth. And the way you get revenue
growth in medical technology and medical devices is by solving
meaningful problems. So we allocate dollars to problems. And today
we think in safety, you know, can we deliver the
safest procedure reducing infection? Can we deliver the most efficient procedure?
(15:12):
Here's where technology robotics came into play. And by the way,
can we deliver best in class outcomes with those three
problems in mind? Technology does play a very significant role.
Robotics does drive efficiency in the entire episode of treatment,
and we getting data in that regard. The shorter the surgery,
the lower the risk of infection. The more leveraging of technology,
(15:36):
the more the accuracy. Accuracy equals outcomes. So we do
prioritize robotics and that's InCred on these project that we're
trying to solve. Beyond that, you know, robotics is the
fastest growing space robotics class navigation technology. So going back
to eighty percent of you surgeons in the US than
you said, twenty nine thousand orthopedic surgeons in the US,
(15:58):
eighty percent of them are not using it. Every year
the number gets smaller and smaller. Technolog is growing, you know,
twenty five thirty percent. So we do prioritize capital to
our robotics.
Speaker 1 (16:08):
Yeah, yeah, and that could be an interesting segue just
into just the markets overall with those twenty nine thousand
US surgeons. For the last few years, it's been a
rather bit of a roller coaster. You kind of had
the depths from COVID related, you had the acceleration from
kind of the backlog of patients who are now feeling
comfortable to get back into the hospital. It feels like
(16:31):
twenty twenty five and going into twenty twenty six, it's
back to kind of a normalized market growth, not only
market growth but seasonality.
Speaker 2 (16:39):
Is that something that you're seeing a secret The backlog
is gone. So if anyone thinks that the current growth
rate of call it, you know, for foreign chains is
backlog indus here is wrong. We now have data, trangulated data.
We cems private payers. The backlog ended in the US
(17:00):
santime around Q three, third quarter of twenty twenty three,
so almost two years ago. So these four percent growth
rate is the new normal. Seasonality is almost the same
as it used to be, Pricing is better than it
used to be. And I think that's enabled by new
technology that all of us, you know, every company is
bringing to the market. So I think it's a new normal.
(17:21):
I think the trend of the AC and bullatorist orgical
centers is helping volume growth. If I can get my
need done in the morning or in the morning I
leave at night, I'll do it. If I need to
be in a hospital with sick people, you know, for
three days, I may think about it twice. So this
is the new normal. And if anything, given demographics, I
think the volumes are going to continue to grow.
Speaker 1 (17:43):
As I say, yeah, demographics, it seems like you always
hear aging demographics.
Speaker 2 (17:46):
So yeah, it is demographics. Twelve thousand people every day
in the US are turning sixty five or above. I
do think that COVID change or lifestyle. After COVID, all
of us want to be more mobile. We prioritize in
health as a trend that we've seen that is accelerating
volumes and then repeating myself, I do think that the
AC is underestimated.
Speaker 1 (18:07):
Yeah, I mean, let's dive deeper into the ASC setting
because you're right, it sounds like these procedures are being
done in a manner that these patients can go home
the same day so they don't need to stay in
the hospital. That's the main that's the main thesis for
the ASC setting and be able to get in there right.
Speaker 2 (18:22):
Absolutely. I'll give you a data point and then we
can elaborate back in twenty nineteen, pre COVID lost single
d yit revenue came for zimmer balmat of an AC.
Today that number is slightly above twenty percent already, and
over the next call it thirty or five years, we
believe that between forty to sixty percent of all cases
(18:44):
are going to be done an AC. So I throw
a lot of data points away, but I think you
get the points from low single DAR revenue in twenty
nineteen to already twenty percent of the revenue NAM shifting
over the two volumes, not just zimmer bam met Forty
to sixty percent of the surgeries will be done an
AC and we believe we're gonna gain a large percentage
of those cases. Why, well, look, this is the only
(19:05):
place where everybody agrees that you're going to get a
better surgery. If I'm a patient, I don't want to
be in a hospital three five days again with other
sick people. If I'm a surgeon, I love the efficiency
and the economics of being an in an AEC and
a lot of these physicians are actual owners of these asses.
(19:26):
And if I'm a payer, I love ass I'm reducing
operating costs, I'm reducing the time in the hospital. It's
a little better dynamic for payers as well. So payers, providers, physicians,
and patients prefer the AC. So I do believe the
trend is just starting.
Speaker 1 (19:44):
Yeah, and then I mean just from your perspective, though,
from the zimmer biomet perspective, is there any difference for you?
Is it maybe a revenue per patient for those cases
or is it just basically the volumes are just going
That opens up a more volume, more volume. It's like
a tie that lifts all kind of orthopedic boats.
Speaker 2 (20:07):
Great question. We love it, Trupital. Early on, we were
worried that reinbursement was going to be lower. Pricing dynamics
will be lower. We see the same price a SP
dynamics for the most part AC on AC reinmbursement is comparable,
but volumes are higher. And from a productivity standpoint, a
REP in an ASC may do six to eight cases
(20:29):
in a day, whereas a repping an impatient HOPD hospital
outpacing department may do two or three cases. So you're
doing far more cases. So from a leveraging of my
REP standpoint, the productivity is much higher in an SC.
We get more cases, more volumes. Yeah.
Speaker 1 (20:45):
And you also had just recently announced a partnership with
GETTING for your expansion or to help with their expansion
the ASC setting. How does that partnership going to work
out over the next few years? What's the what's the
goal for your partnership with them?
Speaker 2 (21:05):
You first of all have to be from Sweden to
know how to pronounce GETTING, so am mispronounced in that
real time? Uh, it's going to enable Zimmerbiamed to have
best in class anti effective products operating room infrastructure. Uh.
The last gaps that we had in our portfolio of
solutions are getting resolved through GETTING is very simple. One contract,
(21:27):
one company one solution for the AC. Ever since we
announced the transaction about a month month and a half ago,
we've increased the pipeline of customers that want to partner
with this in an AC. So it's just a great
solution and again another element of the portfolio. But we're
very bullies on the potential here.
Speaker 1 (21:46):
Yeah, and you know with that, with the market opportunities
in the A s C and with robotics and the
pull through with nees and everything.
Speaker 2 (21:57):
The question is Zimmer is.
Speaker 1 (21:59):
Already the largest or if not the close second largest,
And we are the largest in both Knees and Hepsie. Yeah,
largest largest, All right, well you heard it here first,
there's also the tendency that need to grow the fastest.
How how do you balance that out because you know,
with being the biggest yet to deal with the law
(22:20):
of large numbers. What's the strategy there is that you know,
as long as you maintain your largest market share in
those two large markets, is that okay for you or
do you still need to feel the need to grow
even faster than the competition.
Speaker 2 (22:37):
Yeah, so we are the largest, that's that's factual. Globally,
we are the number one knee company. And the number
one hip company. Yes, in the years, we had some
periods in where we struggle, true more than us called
it five to seven years, but we remain number one. No,
we don't want to be just number one and holder
position or lose less market share. We want to grow
(22:59):
faster than market How do you enable that innovation? We
got to continue to look four ways to disrupt the
standard occur, and I think some of the examples we
spoke about are real examples. You know, changing how you
do robotics through autonomous or sem autonomous, Changing how you
do need procedures through semandless partial semendless products, changing how
(23:21):
you interact with patients across entire episode of treatment with
technology like Persona i Q, the only smart implant in
the world. Those three examples change the standard occur. Those
three examples do drive revenue above markets. So now we
don't want to be just large. We want to gain
markets in those spaces. But I go back to question
number one. We do need to diversify out of fourthopedics
(23:45):
as well, because at some point, you know, you're not
going to get to a seventy eighty percent market ser.
Speaker 1 (23:50):
Yeah, and that's yeah, but you know going back to
the actual orthopedic markets. You know you've highlighted the Zimmer
version of the Magnificent seven, and you kind of briefly
talked about the cementless option as one of those seven.
I don't want to say which one is your favorite,
but out of those seven, which ones are kind of
(24:12):
the most exciting?
Speaker 2 (24:13):
Yeah, it's like picking which one is your favorite child?
Right right? Look all answer financially and then all answer
from an innovation standpoint, financially speaking, out of the seven
persona Ossio tie or cementdless platform is the most meaningful
product that we were launching. And this is year two
in the launch. And what I like about it financially
(24:36):
is that all I have to do is go to
my existing customer base, which again is very large, and
moved them from a cemented knee to a cementless knee.
And by doing that, I'm gaining fifteen percent ASP price
uplift per case. So this is not I have to
go and trade bullets with my competitors or have do
(24:56):
something her Coolian. So again, two years into the launch
is going in the right direction.
Speaker 1 (25:00):
And just when we pause for a quick section for
those listeners who are new to the orthopedic space.
Speaker 2 (25:05):
What is what benefit? Yeah?
Speaker 1 (25:07):
What is the big yeah? Because I'm I'm sure listeners
aren't expectingly a big cement truck to come in. But
what is you know, cementless versus cemented and you know
why is the what's the benefit of the cement list?
Speaker 2 (25:17):
So if you're a patient and then we'll talk about
the benefit to the physician and you're going to get
your need on at the end of the procedure, they're
going to put bon cement to fixate you know, the
actual device to your anatomy or they're not. And the
literature shows that semendless needs have comparable, if not better
fixation rates. So what have you know, a foreign substance
(25:39):
in your in your body? What make your case more complicated?
To the physician? You reduce surgical time, you know, up
to fifteen minutes, which is roughly twenty five percent. So
if you're a physician you want to go to the
Cemenda's route, you're saving you know, twenty five percent of
your time per surgery. If you're doing six surgeries a day,
that's an hour and a half that the uea safe
(26:00):
so cemented persona we've had it for a long time,
and now we have semendless Persona, which is called person
Elsa tie, and just bringing those patients from cemented over
to semendless gives zimabama And this is a fifteen percent
of lift that I just mentioned.
Speaker 1 (26:16):
Yeah, and it's just now time to get to all
the surgeons and get them up to speed on the
cement list. Or is there just some that are just
on the fence still and they're just kind of in
their way. It's almost the same way that you're talking
about eighty percent with the robots.
Speaker 2 (26:30):
It's probably a bit of both. I would say it's
more the former, right, It takes time to in Orthopedic
surgeons are creatures who have it, so it takes time
to convince you to move from something you've been doing
in the last ten twenty years to a new design,
a new device like a person Elza tie. But the
pipeline is really really large, and again two years into
the launch, we struggle at first with supply. We underestimated
(26:54):
themand we had some challenges there. I will tell you now,
for the first time, Matt, we had the right quantity
of products, the right segmentation and strategy or penetration rate
is now near thirty percent, if not above thirty percent.
As a proxy or number one competitor is doing sixty
five to seventy percent of end lists. Yeah, so I
(27:14):
like what we had.
Speaker 1 (27:14):
I mean gonna say, if you do sixty five percent
times that fifteen percent upside, I mean you're kind of
at that ten percent. You got your growth just from that.
Speaker 2 (27:23):
You got it. So that to close my answer, So
that's the most exciting product financially and then from a
pure innovation standpoint, hard to pick, but I will say
what we call navigation, the seventh product that has robotics,
mixed reality and a bunch of different products. Those products
are really changing the standard O car. Yeah, no hyperboling.
Once again, it's not the diagogue speaking. Those products will change,
(27:46):
are changing the standard O car. Yeah.
Speaker 1 (27:48):
You know what I noticed in the seven didn't include
any set products. Is that just because it's such a
broad toolbox of devices and implants that is tough to
single one of them? Or is there one that may be?
Whatever the Magnificent eight.
Speaker 2 (28:05):
Is, I love it. There's a ton of said products,
set products that we launching across CMFT, across Solder Identity,
we launch identity and comprehensive solutions in Solder. Last year
we grow in every single D double digits. The Magnificent
seven are the most compelling seven products that we launching
(28:27):
from a financial standpoint. So that's why you have mostly
recom products there except number seven, which again is navigation,
which has ROSA sold and whatnot. The Magnificent Seven are
not the seven most important or most innovative products, just
seven products that financially make a ton of sense for
the company. And candidly, some of those products are catch ups.
(28:49):
You know, there is a company that's gone through a lot,
you know, zimmer and BioMed. We merging twenty fifteen. Something
didn't work out well with a load of innovation, and
the Max seven are here to tell customers and in
the stores we are done with the gaps that we had.
Speaker 1 (29:02):
Yeah, and acc interesting because you know when you started
the CEO role it was three or four years.
Speaker 2 (29:08):
Years, two years, two years, two years. I mean, yeah,
I'm a rookie man.
Speaker 1 (29:11):
It's aok flies by fast. When you went in what
what were these the first things that you were thinking
I need to fix or was there other things that
you wanted wanted to go in and say hey, let's
get this set up first and then we can get
these magnificence seven out of the door.
Speaker 2 (29:28):
Sure well, I was CEO before being CEO, and we
did a lot of clean up. You know, again, the
company had four of the awarding letters, We had a
monitorship with the Department of Justice. We had a lot
of complex problems given an integration in the work out
the way that we expected it. Becoming CEO two years ago,
I had three careers of focus strategy, operations, and culture,
(29:51):
which led to the three priorities that we got going
on right now. People and culture, operational excellence, innovation, diversification.
On a strategy, I knew day one had to diversify,
and now we're going to diversify at a faster pace
because we get to we get the money, and we
had the products that we had before. On operations, I
knew back then and I know now that we had
to do things differently around supply, manufacturing, product launching, et cetera,
(30:15):
et cetera. And then on culture, you know, put the
best team in place, em better thing. All of that
is the innovation story. You know, what are products that
are going to change the standard occur now that we
don't catching out with competitors, what are meaningful products that
we can launch? And over the last two years, I
think you've seen some examples, you know, whether it's next
generation persona IQ, first to market with ROSA solder, whether
(30:40):
it is first to market in the US with partials
and endlessness, whether it is at some point once we
close the transaction, first to market with autonomous robots. There
is a lot of first to market sentences that I'm
going through here.
Speaker 1 (30:53):
Yeah, yeah, And you know, one of the other things
too with the M and A front is, you know,
with Paragon and with my you're starting to build a
cadence or even a team and experience of how to
integrate these companies. How are you going to utilize that
as a tool for kind of future M and A
And then you know, I'll just throw in the kind
of follow up question there now is you know, when
(31:16):
you're thinking about these target M and A targets in
the future, how close of an adjacency are they going
to be to your further products. Is it kind of
going to be a slow expansion outside of traditional large
joint orthopedic markets, or are there opportunities that you could
see that Zimmer could come in and be able to
(31:36):
fit in well in a new maybe non adjacent market.
Speaker 2 (31:39):
Sure, so let me go one by one. So we
put in place a best in class integration team. We
had a capabilities on M and A. We hired a
four or five new leaders in the last six months.
We have a new Chief Innovation Officer with extensive experience
in mn A. We're keeping things separate. Got an integration
(32:00):
playbook again early in the journey here, but two sizeable
deals in twenty twenty five they're working as well, or
at least the one that is already part of Zimmervironment
and by the way, a lot of other deals that
we don't talk about in CMFT and another spaces. So
I do think we have the people, the processes, the
governance to have a real integration platform here at Zimmerbament.
(32:23):
In your second question, you know how we're thinking about
targets three vectors, if you will have three segments Number
one higher growth segments within recon technology, AI navigation that
is fast growing. We love it. That's what we're doing, monogram,
That's what we're done. Orthogreed. At the end of twenty
(32:45):
twenty four, you know surgical AI in hipothroplastic, so that's
segment number one. Segment number two is anything within growth
drivers of st so the occurring that doesn't make sense.
You know, anything in shoulders we love, the market is
growing up a single digit. We want to be growing
double d in the market. Anything in cranium, maximo facial thoracic,
(33:07):
elements of external closure, rib trauma, potentially areas of neuro
that makes a lot of sense, high growd segments, great margins.
Anything in fort an ankle obviously part of on twenty
eight is an example of that. There may be other
opportunities there and after we don't with the right targets
within set, then is the third vector or the third segment,
(33:29):
which is pure adjacencies. You know, once we dont number
one number two, we believe that with credibility we can
look into other areas. Do we want to be in
areas like endoscopy? Do you want to be in other
areas within the AC Do you want to be in
some elements of cardiac Yeah.
Speaker 1 (33:44):
I was just thinking about that with the you know
the ASC. If you're footing the door of the ASC
for orthopedics, there's a lot of the endoscopy or the
cardio vascular procedures that are done in.
Speaker 2 (33:53):
That you can leverage the set of care opportunity there.
But we're going to be thoughtful and responsible. You know.
One of the questions that I get from stories like,
are you guys gonna do a hell Mary, you guys
are gonna buy a large company? You're gonna get out
of orthopedics tomorrow and become an ideology company. The answer
is no, there is a lot of room to grow
within orthopedics. Love the cast flow generation of orthopedics. I
(34:15):
like the cast flow that were getting out of orthopedics
to continue to diversify and to say I love the
sat up here opportunity within a city ac and what
enabled strategically and financially to do other deals in that space.
So we have the playbook, we have the people, and
we're gonna go at it.
Speaker 1 (34:32):
And that kind of gets you know, it sounds like
that's the path to your ambition for twenty thirty.
Speaker 2 (34:37):
That is it? Yeah? That is it. Well, when I.
Speaker 1 (34:40):
Close out with one of your biggest hires in your
two years, your chief movement officer.
Speaker 2 (34:46):
There, you go, how's he doing? The one and only
he is the man. I love our not been working
with Arnold for about a year now. He truly is
one of the most, if not the most authentic individual
that I know. And he actually is the brand of Zimmerbaman.
And I mean, I mean you think about Arnold, this
is someone with a ball vision. This is someone who
(35:08):
has reinvented himself over the years. A bodybuilder from Austria
that became a businessman before he became an actor or
mister Olympia, and then became an actor, and then he
became a politician and now he's a major philanthropist. So
he's someone with a vision and a mindset of execution
that knows how to reinvent himself and he's relentless. And
(35:31):
that's Zimmerbaman. We have a ball vision. We're going to
be the boldest metal companiers. Beyond the vision, that is
a plan to execute on it. We are reinventing ourselves.
We don't want to be just a legacy orthopedic company.
And I think we drive with the same enthusiasm as
Arnold Scharshenegger. So he's doing great. Spend a lot of
time time together. He's definitely engaged. You would not imagine
(35:55):
the amount of world that he's doing. God knows that
he doesn't need the money. You know, his net worth
is the GDP of my country. And there is not
a week that goes by that he's not throwing an idea,
trying to move us at a faster pace. He's doing amazing.
And now with everything else said.
Speaker 1 (36:11):
He's gonna asked for a race, but he's Yeah, I
mean about saying it seems like he's doing his job
more than that, because it sounds like he's actually interacting.
It's not just not just that marketing guy.
Speaker 2 (36:20):
Is unbelievable, he's unbelievale. He truly cares about this. I mean,
there's somebody who for fifty sixty years has been obsessed
with movement and physical activity and he's done that at really,
really deep levels. So he's doing great. And again I
love the fact that we got one year behind and
many to come.
Speaker 1 (36:39):
Yeah, and that's say, compared to what we were talking
about with the early days of the zimmer BioMed integration
to today, it sounds like there's a lot of paths
to reinvent the company.
Speaker 2 (36:50):
Just like, oh no, we are already reinventing the company.
And again we had to solve some problems. I'm not
going to say that every problem is done, but I
would say virtually, if not most of the MRB and
now my time, my thinking time, and the thinking time
of the team is about how do we become that
company that we have in mind coming twenty thirty. How
do we move from being who we are today, who
(37:11):
do we deserve to be and what does that mean
financially and how do we reward investors. So it's a
very exciting time for answing Urvironment. Well.
Speaker 1 (37:20):
I look forward to having you back on in future
episodes see how the path to twenty thirty is playing out.
Speaker 2 (37:25):
Another word, you do. Thank you for having me here.
Speaker 1 (37:27):
Yeah, Avon, thank you for joining us, and thank you
to our listeners for tuning in today. We hope you
join us for future episodes, and if you want to
stay up to date, please click the subscribe button on
Spotify or your favorite streaming platform. Take care.
Speaker 2 (38:02):
Usual US and AMAS
Welcome to another episode of the Vanguards of Healthcare series.
My name is Matt Hendrickson, the medical technology analyst at
Bloomberg Intelligence, which is the in house equity research platform
of Bloomberg LP. We're pleased to have with us today
Avon Tornos, CEO of zimmer Biomet, a medical device company
that is a broad leader in the orthopedic market. You
can dive deeper into the company and its financials by
(00:43):
typing in ZBH Equity go on your Bloomberg terminal. Levon.
Thank you for joining us today.
Speaker 2 (00:49):
Great to be here, Matt.
Speaker 1 (00:50):
I will start with a quote that you said during
the second quarter call, and maybe I'm going to bore
the readers, but I'm going to read it in full.
The future does require diverse of We aspire to have
at least a five percent weighted average market growth rate
environment by the end of twenty twenty seven and be
in a position to be in a six to seven
(01:10):
percent environment by the end of twenty thirty. So with
that framework, our capital allocation is not changed, but it
certainly evolves. We want to engage in responsible m and
a that will get us into the five percent by
the end of twenty twenty seven and by twenty thirty
the six to seven percent. Now what caught my attention
(01:30):
was it certainly evolves. How has that capital allocation evolved
over your time at Zebra so far?
Speaker 2 (01:36):
So we want to be grading more than one area.
Already are a greater or topeditic company. Now we have
the ambition to be great in other areas. We got
the bandwidth, we got the capital to do that, so
we want to in a responsible way get into higher
growth areas. So has it evolved, I would say is
evolving an accelerating We know that revenue growth is the
(01:56):
number one value driver as you think about stocker Cree,
and we get the capital to move from a current
web guard a waited average market growth rate of four
percent to five percent twenty twenty seven, and again we
can do that in a responsible way with transactions that
make sense strategically and financially. And somewhere around sixty seven
(02:16):
percent by the end of twenty thirty. That's more of
an ambition that a goal. I would say that five
percent is a goal and the twenty thirty sixty seven
percent is an ambition. So it has evolved in the
sense that we're going to prioritize revenue in a more
meaningful way. We're going to continue to be responsible around
Arling's growth. We will continue to prioritize freak US flow growth,
(02:40):
but we're gonna prioritize revenue growth in a more meaningful
way because again, we deserve to be great strategically more
areas than orthopedics, and again financially, that is the one
key driver for value creation. So that's what I meant
in the QT Aarden's goal, and that's what we do
on And an example of that is the deals we
don't this year. The year is not even done with
(03:00):
on two very two very powerful deals, one being part
of on twenty eight you had Aliverer Hit in the
show as a transaction that closed in April. Is giving
US wen Guard accretion of around thirty to forty basis points. Obviously,
it's given US revenue accretion of around two hundred and
seventy basis points for twenty twenty five, and it's going
(03:21):
to be EPs neutral. In your two is diversifying us
into the rapid growth large foot and ankal market. It's
creating a platform for other acquisitions. And then after doing
that with the Monogram technologies, which that one actually is
EPs neutral from day one. So long wind the way
to say we're going to diversitify, We're gonna do it thoughtfully,
(03:42):
we're gonna do it strategically, and we're gonna be responsible.
Speaker 1 (03:44):
Yeah, and let's start with the Paragon twenty eight because
you know, I had Albert here and it was a
great episode with him, a great understanding of the products
and the markets and everything. Two things that caught my attention.
The first is with that deal completed, your se Hey franchise,
essentially the Extremities and Traumas and sports franchise is now
bigger than your hips and it's now the number two
(04:06):
largest division. I'll start with that one and saying how
important is that extremities and trauma market for you and
for the orthopedic market in general.
Speaker 2 (04:18):
Sure, mission critical to your point. Already set which by
the way, the acronym makes no sense whatsoever, used to
be sports extremities on trauma, and now you got in
there also shoulder, which is apid extremities. You get in
their CFT Craniom Maxiu Official Thoracic And to your point,
we got foot and Anklett as well. So again the acronym.
(04:40):
We got a revicid, you know.
Speaker 1 (04:41):
Yeah, but if you kind of do the every single letter, that's.
Speaker 2 (04:44):
Going to be a very very long averadat I'll be
tough for a Spaniard to pronounce. But how important it
is is a two point six two point seven billion
dollars business unit growing now double digit with Partagon twenty eight.
Even excluding Partagon twin eight, we've been growing upper single digit,
if not mid single digits, for nine out of eleven quarters.
(05:06):
It's a great opportunity or a great platform. Strategically again,
we can do all kinds of adjacencies. It gives us
a leadership platform in acs here in the US. Strategically
it diversifies the company into high growth areas. But financially again,
how many business do you know, Matt that can grow
double digit with a nice margin expansion opportunity at a
(05:29):
sizable size or a nice size You know of two
point six two billion dollars with less working capital requirements
than less, say quarter orthopedics. So again we don't get
enough credit for the business. We love that business for
all the right reasons. We're going to continue to invest
in the business. As we think about m and A
that is going to be a main recipient of capital.
(05:50):
So I don't think investors quite see the value this
business is the way that we do.
Speaker 1 (05:55):
Yeah, and it's very interesting that you cut my attention
to that it's EPs neutral by next year already. And
it sounds like you from the comments here and I'm
kind of implying it sounds like the inventory management allows
you to have some cost savings because it also sounds
like you're keeping most of the salesforce if I remember correctly,
and Albert is staying on as the head of that unit.
(06:16):
So is it inventory management? Is it gross margin expansion?
The biggest way to be able to take what Paragrind
twenty eight was doing on their own and make it
into a zimmer Biomet person twenty eight.
Speaker 2 (06:27):
Sure, it's a few things. Yes, inventory management is systems
and processes that we have a zimmer Biomet that we
can leverage in some of the DNA, the non commercial DNA.
So yes, we kept Albert. We also kept their chief
commercial officer, Matt. We kept the entire commercial or the
senior commercial team. Most exciting, every single distributor sales rep
(06:51):
facing customers is now part of zimmer Bioman so we're
keeping that a sustain alone operation against seniors coming from
other areas. Yes, we're going to be EPs neutral in
year two. The growth drives the drop through. I mean,
this company has been growing, you know, fifteen to twenty four,
ten years, and then they're not slowing down. So a
(07:11):
great opportunity, a great team, and more too commonly this one.
Speaker 1 (07:14):
Yeah, and then you know quickly into the Monogram one
because that is more in its infancy in the product development.
It's also in the buzz of robotics. But what caught
my attention with that with Monogram and its robotics is
the the semi autonomous and then potentially the full autonomous
features of the robot. Now, with traditional robots, there's always
(07:38):
surgeons in the room. I'm assuming that even if it's
fully autonomous, there's still gonna be a surgeon in the room.
Speaker 2 (07:43):
Correct, there will be, Okay, So what.
Speaker 1 (07:45):
What is the feature then that makes it fully autonomous
versus kind of the traditional robots in the market.
Speaker 2 (07:50):
I've been advised by my team to modulate my enthusiasm
and to uh slow down. The die got drinking, I'm
going to ignore both already already drank three or four diaghogus,
and I am not going to modelate my emphysiation. This
is a great platform, is a great deal. It will
change the standard ocre Monogram technology is sem autonomous early
(08:11):
twenty seven, fully autonomous late twenty seven, early twenty eight. Yes,
you will have a surgeon in the operating room for
both modalities, but here here's going to be doing something else.
The precision is going to be done by the robot.
The level of accuracy is automated by the robot. The
involvement from a thinking standpoint once the plant is done
is limited. The surgeons will be doing other stat that
(08:33):
is far more transformation in the surgery. So I think
it's a game changer. It is going to be fully
integrated with the CB superbiomed ecosystem or solutions. What happens
before surgeon after surgery is integrated into Monogram. So the
level of precision, of accuracy, reproducibility that you're going to
see with Monogram, I don't think we've seen anything like
that yet. No, we're not going to eliminate the surgeon. Yes,
(08:57):
we are going to make the surgeon more efficient and
we can enable that surging to think about bigger stuff
than some of the basic things are happening in a surgery,
the robot will do those.
Speaker 1 (09:07):
Yeah, and you know before we kind of move to
the rest of the robotic portfolio, which is kind of
what you're developing just with Monogram. Is there any timelines
for when the semi autonomous comes to the market or
if there's any clinical trials or clinical data that's coming
out that the other listeners want to be aware of.
Speaker 2 (09:26):
We're taking our time, Matt. This technology is FDA approof. Obviously,
with monogramm implants, we or they we have not closed
the transaction yet. They've done the first fully autonomous surgery
three four weeks ago, so we could go faster, but
we're going to take eighteen months to make sure that
we do all the clinical work. We understand exactly how
(09:49):
the products work with the robot. We see real world
evidence that this really does deliver on the valuable position.
So we think in early twenty seven four semi autonomous.
Earliest portfolio autonomous will be late twenty seven, potentially early
twenty eight. What I will tell you about the time
we launch, we're gonna have clinical evidence, We're gonna have
best in class medical education works are in place. We're
(10:12):
hiring a ton of cells, reps, a ton of employees
for these product launch and once it's in the market,
is it's gonna go fast?
Speaker 1 (10:21):
Yeah? You know what cut my attention to is that
you're saying that it was like a monogram implant. So
is there some time that takes to integrate the robot
with your persona and your Oxford in the last.
Speaker 2 (10:32):
And that's the eighteen months. If not, you know, within
bord part two to three months.
Speaker 1 (10:37):
Yeah, And I mean, actually we'll go through the rest
of portfolio, but I'm going to have a follow up
question there sure, because you know, you have the main
product in your portfolio is the ROSA robot, and you're
looking to expand the ROSA capabilities to include CT scan.
What's the importance of having CT scan versus just traditional
(10:59):
X ray capability.
Speaker 2 (11:01):
Let me go the long way to answer your question.
So give me two minutes. Maybe the next time is
it will bit shorter. So time time is two minutes
and go there we go mad and maybe two minutes exactly. Yeah.
The one thing that I think some folks don't get
is that there are a lot of different opinions or
a navigation and under data points hitting the US, eighty
(11:22):
percent of surgeons do not believe in robotics. Twenty percent do,
but they do believe in some sort of navigation. Outside
of the US, in Europe is ninety percent they don't
believe in robotics. Is it time constraint?
Speaker 1 (11:38):
I think they can do.
Speaker 2 (11:39):
I'm a better surgeon than the robot. I don't get
reimbursement for the robotic procedures, so it comes from my pocket.
It's complex to have it. It is a variety of reasons,
but eighty percent don't believe it in the US, and
by the way, the number obviously is getting reduced every
year with clinical evidence, and ninety percent outs of the US,
but they do believe in navigation. Those who believe in
robotics as don't want to have a city scan to
(12:01):
guide them in the surgery. Some, especially outside of the US,
do not want to have any kind of radiation. City
scans don't get covered outside the US. They believe it's
a waste of time. Then you get some that believe
in small robots. I don't want to have a large
foot print robot in my oprint room. You got, you know,
people that do want to have the larger food print
because they like Maco or as Rosa or whoever. Some
(12:26):
don't want to have any robotics, they want to do
mixed reality. So with all these rumblings the two minutes,
that app will be the only company that has a
solution for every single customer profile. You believe navigation on robotics,
we give you mixed reality and AI based orthogreed in hypothroplasty,
you believe in robotics, we have it for you. CITYSCN
(12:47):
city SCN less Rosa monogram and today Think Surgical. You
like to have a small foot print, we have an
exclusive particy with Think Sergica. You want to have the
larger foot print, we have it for you. So because
you don't have have two three customer profiles, you have several.
You cannot have one size fits all tap of technology.
So we're banking on category leadership, We're banking on flexibility
(13:10):
and optionality, and we believe or bet is going to
work out.
Speaker 1 (13:14):
So do you two five and then you know I
interrupted you there too, So there we go, so perfect
well done. So one of the things that's interesting too
is that is the thing Surgical, which is that handheld
robot and it's you know, I think Surgical is a
separate company. You have a partnership with them. How is
that partnership going so far.
Speaker 2 (13:34):
It's going great. We just extended I love what the
steward and the team over the things Surgical are doing.
The chairman of that company is the former CEO of
Zymberboment two years ago. So both David Deborac and and
still know the space very well. Obviously, Stuarts spend a
lot of time over a striker. They understand the operating room,
(13:58):
they understand the customer and have a very unique solution,
especially for ACS. It's a handheld, portable, very efficient, very
accurate robotic platform. It is CTS cam base. So again
for a large food a large segment of customers, that's
a great solution. And again we have an exclusive partnership
with them. We just extended it and we look forward
(14:19):
to a long term relationship.
Speaker 1 (14:21):
And you know with all these different products, you know,
we talked quickly about Monogram, about the traditional ROSA, about
ROSA CT about think how how do you when you
put on your capital allocation? Hat is it just simply
you're throwing in more capital into the robotics than you did.
Maybe you know, if there's two or three programs are
(14:41):
thrown in two or three times as much there or
is there different ways that you can allocate and be
able to streamline that allocation process.
Speaker 2 (14:49):
So when we think about capital location I mentioned earlier,
we prioritize revenue growth. And the way you get revenue
growth in medical technology and medical devices is by solving
meaningful problems. So we allocate dollars to problems. And today
we think in safety, you know, can we deliver the
safest procedure reducing infection? Can we deliver the most efficient procedure?
(15:12):
Here's where technology robotics came into play. And by the way,
can we deliver best in class outcomes with those three
problems in mind? Technology does play a very significant role.
Robotics does drive efficiency in the entire episode of treatment,
and we getting data in that regard. The shorter the surgery,
the lower the risk of infection. The more leveraging of technology,
(15:36):
the more the accuracy. Accuracy equals outcomes. So we do
prioritize robotics and that's InCred on these project that we're
trying to solve. Beyond that, you know, robotics is the
fastest growing space robotics class navigation technology. So going back
to eighty percent of you surgeons in the US than
you said, twenty nine thousand orthopedic surgeons in the US,
(15:58):
eighty percent of them are not using it. Every year
the number gets smaller and smaller. Technolog is growing, you know,
twenty five thirty percent. So we do prioritize capital to
our robotics.
Speaker 1 (16:08):
Yeah, yeah, and that could be an interesting segue just
into just the markets overall with those twenty nine thousand
US surgeons. For the last few years, it's been a
rather bit of a roller coaster. You kind of had
the depths from COVID related, you had the acceleration from
kind of the backlog of patients who are now feeling
comfortable to get back into the hospital. It feels like
(16:31):
twenty twenty five and going into twenty twenty six, it's
back to kind of a normalized market growth, not only
market growth but seasonality.
Speaker 2 (16:39):
Is that something that you're seeing a secret The backlog
is gone. So if anyone thinks that the current growth
rate of call it, you know, for foreign chains is
backlog indus here is wrong. We now have data, trangulated data.
We cems private payers. The backlog ended in the US
(17:00):
santime around Q three, third quarter of twenty twenty three,
so almost two years ago. So these four percent growth
rate is the new normal. Seasonality is almost the same
as it used to be, Pricing is better than it
used to be. And I think that's enabled by new
technology that all of us, you know, every company is
bringing to the market. So I think it's a new normal.
(17:21):
I think the trend of the AC and bullatorist orgical
centers is helping volume growth. If I can get my
need done in the morning or in the morning I
leave at night, I'll do it. If I need to
be in a hospital with sick people, you know, for
three days, I may think about it twice. So this
is the new normal. And if anything, given demographics, I
think the volumes are going to continue to grow.
Speaker 1 (17:43):
As I say, yeah, demographics, it seems like you always
hear aging demographics.
Speaker 2 (17:46):
So yeah, it is demographics. Twelve thousand people every day
in the US are turning sixty five or above. I
do think that COVID change or lifestyle. After COVID, all
of us want to be more mobile. We prioritize in
health as a trend that we've seen that is accelerating
volumes and then repeating myself, I do think that the
AC is underestimated.
Speaker 1 (18:07):
Yeah, I mean, let's dive deeper into the ASC setting
because you're right, it sounds like these procedures are being
done in a manner that these patients can go home
the same day so they don't need to stay in
the hospital. That's the main that's the main thesis for
the ASC setting and be able to get in there right.
Speaker 2 (18:22):
Absolutely. I'll give you a data point and then we
can elaborate back in twenty nineteen, pre COVID lost single
d yit revenue came for zimmer balmat of an AC.
Today that number is slightly above twenty percent already, and
over the next call it thirty or five years, we
believe that between forty to sixty percent of all cases
(18:44):
are going to be done an AC. So I throw
a lot of data points away, but I think you
get the points from low single DAR revenue in twenty
nineteen to already twenty percent of the revenue NAM shifting
over the two volumes, not just zimmer bam met Forty
to sixty percent of the surgeries will be done an
AC and we believe we're gonna gain a large percentage
of those cases. Why, well, look, this is the only
(19:05):
place where everybody agrees that you're going to get a
better surgery. If I'm a patient, I don't want to
be in a hospital three five days again with other
sick people. If I'm a surgeon, I love the efficiency
and the economics of being an in an AEC and
a lot of these physicians are actual owners of these asses.
(19:26):
And if I'm a payer, I love ass I'm reducing
operating costs, I'm reducing the time in the hospital. It's
a little better dynamic for payers as well. So payers, providers, physicians,
and patients prefer the AC. So I do believe the
trend is just starting.
Speaker 1 (19:44):
Yeah, and then I mean just from your perspective, though,
from the zimmer biomet perspective, is there any difference for you?
Is it maybe a revenue per patient for those cases
or is it just basically the volumes are just going
That opens up a more volume, more volume. It's like
a tie that lifts all kind of orthopedic boats.
Speaker 2 (20:07):
Great question. We love it, Trupital. Early on, we were
worried that reinbursement was going to be lower. Pricing dynamics
will be lower. We see the same price a SP
dynamics for the most part AC on AC reinmbursement is comparable,
but volumes are higher. And from a productivity standpoint, a
REP in an ASC may do six to eight cases
(20:29):
in a day, whereas a repping an impatient HOPD hospital
outpacing department may do two or three cases. So you're
doing far more cases. So from a leveraging of my
REP standpoint, the productivity is much higher in an SC.
We get more cases, more volumes. Yeah.
Speaker 1 (20:45):
And you also had just recently announced a partnership with
GETTING for your expansion or to help with their expansion
the ASC setting. How does that partnership going to work
out over the next few years? What's the what's the
goal for your partnership with them?
Speaker 2 (21:05):
You first of all have to be from Sweden to
know how to pronounce GETTING, so am mispronounced in that
real time? Uh, it's going to enable Zimmerbiamed to have
best in class anti effective products operating room infrastructure. Uh.
The last gaps that we had in our portfolio of
solutions are getting resolved through GETTING is very simple. One contract,
(21:27):
one company one solution for the AC. Ever since we
announced the transaction about a month month and a half ago,
we've increased the pipeline of customers that want to partner
with this in an AC. So it's just a great
solution and again another element of the portfolio. But we're
very bullies on the potential here.
Speaker 1 (21:46):
Yeah, and you know with that, with the market opportunities
in the A s C and with robotics and the
pull through with nees and everything.
Speaker 2 (21:57):
The question is Zimmer is.
Speaker 1 (21:59):
Already the largest or if not the close second largest,
And we are the largest in both Knees and Hepsie. Yeah,
largest largest, All right, well you heard it here first,
there's also the tendency that need to grow the fastest.
How how do you balance that out because you know,
with being the biggest yet to deal with the law
(22:20):
of large numbers. What's the strategy there is that you know,
as long as you maintain your largest market share in
those two large markets, is that okay for you or
do you still need to feel the need to grow
even faster than the competition.
Speaker 2 (22:37):
Yeah, so we are the largest, that's that's factual. Globally,
we are the number one knee company. And the number
one hip company. Yes, in the years, we had some
periods in where we struggle, true more than us called
it five to seven years, but we remain number one. No,
we don't want to be just number one and holder
position or lose less market share. We want to grow
(22:59):
faster than market How do you enable that innovation? We
got to continue to look four ways to disrupt the
standard occur, and I think some of the examples we
spoke about are real examples. You know, changing how you
do robotics through autonomous or sem autonomous, Changing how you
do need procedures through semandless partial semendless products, changing how
(23:21):
you interact with patients across entire episode of treatment with
technology like Persona i Q, the only smart implant in
the world. Those three examples change the standard occur. Those
three examples do drive revenue above markets. So now we
don't want to be just large. We want to gain
markets in those spaces. But I go back to question
number one. We do need to diversify out of fourthopedics
(23:45):
as well, because at some point, you know, you're not
going to get to a seventy eighty percent market ser.
Speaker 1 (23:50):
Yeah, and that's yeah, but you know going back to
the actual orthopedic markets. You know you've highlighted the Zimmer
version of the Magnificent seven, and you kind of briefly
talked about the cementless option as one of those seven.
I don't want to say which one is your favorite,
but out of those seven, which ones are kind of
(24:12):
the most exciting?
Speaker 2 (24:13):
Yeah, it's like picking which one is your favorite child?
Right right? Look all answer financially and then all answer
from an innovation standpoint, financially speaking, out of the seven
persona Ossio tie or cementdless platform is the most meaningful
product that we were launching. And this is year two
in the launch. And what I like about it financially
(24:36):
is that all I have to do is go to
my existing customer base, which again is very large, and
moved them from a cemented knee to a cementless knee.
And by doing that, I'm gaining fifteen percent ASP price
uplift per case. So this is not I have to
go and trade bullets with my competitors or have do
(24:56):
something her Coolian. So again, two years into the launch
is going in the right direction.
Speaker 1 (25:00):
And just when we pause for a quick section for
those listeners who are new to the orthopedic space.
Speaker 2 (25:05):
What is what benefit? Yeah?
Speaker 1 (25:07):
What is the big yeah? Because I'm I'm sure listeners
aren't expectingly a big cement truck to come in. But
what is you know, cementless versus cemented and you know
why is the what's the benefit of the cement list?
Speaker 2 (25:17):
So if you're a patient and then we'll talk about
the benefit to the physician and you're going to get
your need on at the end of the procedure, they're
going to put bon cement to fixate you know, the
actual device to your anatomy or they're not. And the
literature shows that semendless needs have comparable, if not better
fixation rates. So what have you know, a foreign substance
(25:39):
in your in your body? What make your case more complicated?
To the physician? You reduce surgical time, you know, up
to fifteen minutes, which is roughly twenty five percent. So
if you're a physician you want to go to the
Cemenda's route, you're saving you know, twenty five percent of
your time per surgery. If you're doing six surgeries a day,
that's an hour and a half that the uea safe
(26:00):
so cemented persona we've had it for a long time,
and now we have semendless Persona, which is called person
Elsa tie, and just bringing those patients from cemented over
to semendless gives zimabama And this is a fifteen percent
of lift that I just mentioned.
Speaker 1 (26:16):
Yeah, and it's just now time to get to all
the surgeons and get them up to speed on the
cement list. Or is there just some that are just
on the fence still and they're just kind of in
their way. It's almost the same way that you're talking
about eighty percent with the robots.
Speaker 2 (26:30):
It's probably a bit of both. I would say it's
more the former, right, It takes time to in Orthopedic
surgeons are creatures who have it, so it takes time
to convince you to move from something you've been doing
in the last ten twenty years to a new design,
a new device like a person Elza tie. But the
pipeline is really really large, and again two years into
the launch, we struggle at first with supply. We underestimated
(26:54):
themand we had some challenges there. I will tell you now,
for the first time, Matt, we had the right quantity
of products, the right segmentation and strategy or penetration rate
is now near thirty percent, if not above thirty percent.
As a proxy or number one competitor is doing sixty
five to seventy percent of end lists. Yeah, so I
(27:14):
like what we had.
Speaker 1 (27:14):
I mean gonna say, if you do sixty five percent
times that fifteen percent upside, I mean you're kind of
at that ten percent. You got your growth just from that.
Speaker 2 (27:23):
You got it. So that to close my answer, So
that's the most exciting product financially and then from a
pure innovation standpoint, hard to pick, but I will say
what we call navigation, the seventh product that has robotics,
mixed reality and a bunch of different products. Those products
are really changing the standard O car. Yeah, no hyperboling.
Once again, it's not the diagogue speaking. Those products will change,
(27:46):
are changing the standard O car. Yeah.
Speaker 1 (27:48):
You know what I noticed in the seven didn't include
any set products. Is that just because it's such a
broad toolbox of devices and implants that is tough to
single one of them? Or is there one that may be?
Whatever the Magnificent eight.
Speaker 2 (28:05):
Is, I love it. There's a ton of said products,
set products that we launching across CMFT, across Solder Identity,
we launch identity and comprehensive solutions in Solder. Last year
we grow in every single D double digits. The Magnificent
seven are the most compelling seven products that we launching
(28:27):
from a financial standpoint. So that's why you have mostly
recom products there except number seven, which again is navigation,
which has ROSA sold and whatnot. The Magnificent Seven are
not the seven most important or most innovative products, just
seven products that financially make a ton of sense for
the company. And candidly, some of those products are catch ups.
(28:49):
You know, there is a company that's gone through a lot,
you know, zimmer and BioMed. We merging twenty fifteen. Something
didn't work out well with a load of innovation, and
the Max seven are here to tell customers and in
the stores we are done with the gaps that we had.
Speaker 1 (29:02):
Yeah, and acc interesting because you know when you started
the CEO role it was three or four years.
Speaker 2 (29:08):
Years, two years, two years, two years. I mean, yeah,
I'm a rookie man.
Speaker 1 (29:11):
It's aok flies by fast. When you went in what
what were these the first things that you were thinking
I need to fix or was there other things that
you wanted wanted to go in and say hey, let's
get this set up first and then we can get
these magnificence seven out of the door.
Speaker 2 (29:28):
Sure well, I was CEO before being CEO, and we
did a lot of clean up. You know, again, the
company had four of the awarding letters, We had a
monitorship with the Department of Justice. We had a lot
of complex problems given an integration in the work out
the way that we expected it. Becoming CEO two years ago,
I had three careers of focus strategy, operations, and culture,
(29:51):
which led to the three priorities that we got going
on right now. People and culture, operational excellence, innovation, diversification.
On a strategy, I knew day one had to diversify,
and now we're going to diversify at a faster pace
because we get to we get the money, and we
had the products that we had before. On operations, I
knew back then and I know now that we had
to do things differently around supply, manufacturing, product launching, et cetera,
(30:15):
et cetera. And then on culture, you know, put the
best team in place, em better thing. All of that
is the innovation story. You know, what are products that
are going to change the standard occur now that we
don't catching out with competitors, what are meaningful products that
we can launch? And over the last two years, I
think you've seen some examples, you know, whether it's next
generation persona IQ, first to market with ROSA solder, whether
(30:40):
it is first to market in the US with partials
and endlessness, whether it is at some point once we
close the transaction, first to market with autonomous robots. There
is a lot of first to market sentences that I'm
going through here.
Speaker 1 (30:53):
Yeah, yeah, And you know, one of the other things
too with the M and A front is, you know,
with Paragon and with my you're starting to build a
cadence or even a team and experience of how to
integrate these companies. How are you going to utilize that
as a tool for kind of future M and A
And then you know, I'll just throw in the kind
of follow up question there now is you know, when
(31:16):
you're thinking about these target M and A targets in
the future, how close of an adjacency are they going
to be to your further products. Is it kind of
going to be a slow expansion outside of traditional large
joint orthopedic markets, or are there opportunities that you could
see that Zimmer could come in and be able to
(31:36):
fit in well in a new maybe non adjacent market.
Speaker 2 (31:39):
Sure, so let me go one by one. So we
put in place a best in class integration team. We
had a capabilities on M and A. We hired a
four or five new leaders in the last six months.
We have a new Chief Innovation Officer with extensive experience
in mn A. We're keeping things separate. Got an integration
(32:00):
playbook again early in the journey here, but two sizeable
deals in twenty twenty five they're working as well, or
at least the one that is already part of Zimmervironment
and by the way, a lot of other deals that
we don't talk about in CMFT and another spaces. So
I do think we have the people, the processes, the
governance to have a real integration platform here at Zimmerbament.
(32:23):
In your second question, you know how we're thinking about
targets three vectors, if you will have three segments Number
one higher growth segments within recon technology, AI navigation that
is fast growing. We love it. That's what we're doing, monogram,
That's what we're done. Orthogreed. At the end of twenty
(32:45):
twenty four, you know surgical AI in hipothroplastic, so that's
segment number one. Segment number two is anything within growth
drivers of st so the occurring that doesn't make sense.
You know, anything in shoulders we love, the market is
growing up a single digit. We want to be growing
double d in the market. Anything in cranium, maximo facial thoracic,
(33:07):
elements of external closure, rib trauma, potentially areas of neuro
that makes a lot of sense, high growd segments, great margins.
Anything in fort an ankle obviously part of on twenty
eight is an example of that. There may be other
opportunities there and after we don't with the right targets
within set, then is the third vector or the third segment,
(33:29):
which is pure adjacencies. You know, once we dont number
one number two, we believe that with credibility we can
look into other areas. Do we want to be in
areas like endoscopy? Do you want to be in other
areas within the AC Do you want to be in
some elements of cardiac Yeah.
Speaker 1 (33:44):
I was just thinking about that with the you know
the ASC. If you're footing the door of the ASC
for orthopedics, there's a lot of the endoscopy or the
cardio vascular procedures that are done in.
Speaker 2 (33:53):
That you can leverage the set of care opportunity there.
But we're going to be thoughtful and responsible. You know.
One of the questions that I get from stories like,
are you guys gonna do a hell Mary, you guys
are gonna buy a large company? You're gonna get out
of orthopedics tomorrow and become an ideology company. The answer
is no, there is a lot of room to grow
within orthopedics. Love the cast flow generation of orthopedics. I
(34:15):
like the cast flow that were getting out of orthopedics
to continue to diversify and to say I love the
sat up here opportunity within a city ac and what
enabled strategically and financially to do other deals in that space.
So we have the playbook, we have the people, and
we're gonna go at it.
Speaker 1 (34:32):
And that kind of gets you know, it sounds like
that's the path to your ambition for twenty thirty.
Speaker 2 (34:37):
That is it? Yeah? That is it. Well, when I.
Speaker 1 (34:40):
Close out with one of your biggest hires in your
two years, your chief movement officer.
Speaker 2 (34:46):
There, you go, how's he doing? The one and only
he is the man. I love our not been working
with Arnold for about a year now. He truly is
one of the most, if not the most authentic individual
that I know. And he actually is the brand of Zimmerbaman.
And I mean, I mean you think about Arnold, this
is someone with a ball vision. This is someone who
(35:08):
has reinvented himself over the years. A bodybuilder from Austria
that became a businessman before he became an actor or
mister Olympia, and then became an actor, and then he
became a politician and now he's a major philanthropist. So
he's someone with a vision and a mindset of execution
that knows how to reinvent himself and he's relentless. And
(35:31):
that's Zimmerbaman. We have a ball vision. We're going to
be the boldest metal companiers. Beyond the vision, that is
a plan to execute on it. We are reinventing ourselves.
We don't want to be just a legacy orthopedic company.
And I think we drive with the same enthusiasm as
Arnold Scharshenegger. So he's doing great. Spend a lot of
time time together. He's definitely engaged. You would not imagine
(35:55):
the amount of world that he's doing. God knows that
he doesn't need the money. You know, his net worth
is the GDP of my country. And there is not
a week that goes by that he's not throwing an idea,
trying to move us at a faster pace. He's doing amazing.
And now with everything else said.
Speaker 1 (36:11):
He's gonna asked for a race, but he's Yeah, I
mean about saying it seems like he's doing his job
more than that, because it sounds like he's actually interacting.
It's not just not just that marketing guy.
Speaker 2 (36:20):
Is unbelievable, he's unbelievale. He truly cares about this. I mean,
there's somebody who for fifty sixty years has been obsessed
with movement and physical activity and he's done that at really,
really deep levels. So he's doing great. And again I
love the fact that we got one year behind and
many to come.
Speaker 1 (36:39):
Yeah, and that's say, compared to what we were talking
about with the early days of the zimmer BioMed integration
to today, it sounds like there's a lot of paths
to reinvent the company.
Speaker 2 (36:50):
Just like, oh no, we are already reinventing the company.
And again we had to solve some problems. I'm not
going to say that every problem is done, but I
would say virtually, if not most of the MRB and
now my time, my thinking time, and the thinking time
of the team is about how do we become that
company that we have in mind coming twenty thirty. How
do we move from being who we are today, who
(37:11):
do we deserve to be and what does that mean
financially and how do we reward investors. So it's a
very exciting time for answing Urvironment. Well.
Speaker 1 (37:20):
I look forward to having you back on in future
episodes see how the path to twenty thirty is playing out.
Speaker 2 (37:25):
Another word, you do. Thank you for having me here.
Speaker 1 (37:27):
Yeah, Avon, thank you for joining us, and thank you
to our listeners for tuning in today. We hope you
join us for future episodes, and if you want to
stay up to date, please click the subscribe button on
Spotify or your favorite streaming platform. Take care.
Speaker 2 (38:02):
Usual US and AMAS
Host
Jonathan Palmer
Popular Podcasts
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com