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March 26, 2021, 4:16 p.m. EDT

10-K: BIOVENTUS INC.

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(EDGAR Online via COMTEX) -- Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1A, Risk Factors and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K (Annual Report). In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part 1, Item 1A. Risk Factors and elsewhere in this Annual Report. A discussion of the year ended December 31, 2019 compared to the year ended December 31, 2018 has been reported previously in our final prospectus filed with the SEC on February 12, 2021, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." Executive summary We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body's natural healing process. We operate our business through two reportable segments, U.S. and International, and our portfolio of products is grouped into the following three verticals: OA joint pain treatment and joint preservation products, which are HA viscosupplementation therapies approved by the FDA through a PMA; BGSs, which are human tissue allograft and synthetic products used primarily in spine surgery which have either (i) received 510(k) clearance, which is a premarket submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent, to a legally marketed device, or (ii) are regulated solely as Section 361 HCT/Ps, which means they are human cells, tissues and cellular and tissue-based products that do not require a PMA in the United States; and minimally invasive fracture treatment, which is a FDA-approved Exogen system prescribed for long bone stimulation for fracture healing. Our U.S. segment offers our full existing portfolio of products. This includes our OA joint pain treatment and joint preservation products, which address the entire market for HA viscosupplementation with offerings for single, three and five injection therapies: (i) Durolane, a single injection therapy, which we launched in the United States in the first half of 2018 and also market outside the United States in more than 30 countries; (ii) GELSYN-3, a three injection therapy, which we have marketed in the United States since the second half of 2016; and (iii) SUPARTZ FX, a five injection therapy, which we have marketed in the United States since May 2012. Our U.S. segment also offers our BGS products, which are targeted at improving bone fusion rates following spinal fusion and other orthopedic surgeries. These products include allograft-derived bone graft with growth factors (OsteoAMP), a DBM (Exponent), cancellous bone in different preparations (PureBone), bioactive synthetics (Signafuse and Interface), a collagen ceramic matrix (OsteoMatrix) and two bone marrow isolation systems (CellXtract and Extractor). Further, our U.S. segment offers our Exogen system, which we believe offers significant advantages over electrical based long bone stimulation systems, including documented mechanism of action, shorter treatment times and superior nonunion heal rates. Our International segment offers Durolane, or single injection therapy, OsteoAMP, our allograft-derived bone graft with growth factors, and our Exogen system. The following table sets forth total net sales, net income from continuing operations, Adjusted EBITDA and pro forma net income (loss) per unit attributable to common unit holders - basic and diluted: Years Ended December 31, 2020 2019 Net sales $ 321,161 $ 340,141 Net income from continuing operations $ 14,722 $ 8,113 Adjusted EBITDA(1) $ 72,443 $ 79,188 Net income (loss) per unit attributable to common unit holders - basic and diluted(2) $ 0.89 $ (0.13)

(1)See below under Components of our results of operations-Adjusted EBITDA for a definition of Adjusted EBITDA and Results from continuing operations for a reconciliation of net income from continuing operations to Adjusted EBITDA.

On February 16, 2021, our limited liability company agreement was amended and restated to, among other things, (i) provide for a new single class of common membership interests in the Company (LLC Interests) and (ii) exchange all of the existing membership interests for LLC Interests. For purposes of calculating pro forma earnings per unit, we have adjusted the number of outstanding membership units retroactively to give effect to the amendment and resulting recapitalization.







                                                                                    2020                  2019
        Net income from continuing operations attributable to
        common unit holders                                                    $     16,411          $      8,666
        Loss from discontinued operations, net of tax                                     -                 1,815
        Net income attributable to common unit holders                         $     16,411          $      6,851
        Pro forma net income per unit attributable to common unit holders
        -basic and diluted
        Pro forma net income from continuing operations                        $       0.29          $       0.15
        Pro forma loss from discontinued operations, net of tax                           -                  0.03
        Pro forma net income attributable to common unit holders               $       0.29          $       0.12
        Pro forma weighted average units used in computing basic and diluted
        net income per common unit                                               56,825,325            56,825,325
        


Strategic transactions

million equity investment from us, if needed, for IDE study completion. We previously made an initial $2.5 million investment in CartiHeal in January 2018 and a subsequent investment of $0.2 million in January 2020.

The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Due to the evolving nature of the COVID-19 crisis, we continue to monitor the situation closely and assess the impact on our business. In response to various governmental orders and public health advisories, we have implemented a number of measures to protect the health and safety of our workforce, conserve liquidity and position us to emerge from the current crisis in a healthy financial position. These measures include closing our offices and instituting work-from-home policies with the exception of essential personnel in March 2020. In addition, we temporarily imposed employee salary reductions for our U.S. employees for the month of June 2020 and suspended, until December 31, 2020, a portion of the employer contribution we make under our 401(k) plan. All temporary salary reductions have now been reversed and all salaries have been reinstated to pre-COVID-19 levels. To the extent permitted and in accordance with guidance from public health officials and government agencies, we have begun to reopen our locations and resume normal operations where appropriate. It is possible our operations will continue to be impacted in 2021, however, the magnitude and duration of the impact is impossible to predict due to:

We sell our OA joint pain treatment and joint preservation products and minimally invasive fracture treatment through our direct sales team, who manage and maintain the sales relationship with healthcare providers, distribution centers or specialty pharmacies. In certain international markets, we also sell to independent distributors on prearranged business terms, who manage or maintain the sales relationship with their physician customers. Refer to Note 2. Summary of significant accounting policies to our Notes to consolidated financial statements for further information We recognize revenue at the point in time when control is transferred to the customer, typically, in the case of our OA joint pain treatment and joint preservation products, when these products are shipped to the customer and, in the case of our Exogen system, when the patient has accepted the product.

Research and development expense

Mar 26, 2021

COMTEX_383441505/2041/2021-03-26T16:15:38

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