RTI Surgical™ Blames Poor Q3 Revenues on Multiple Factors

Surgical implant company RTI Surgical Inc. has announced preliminary revenue results for the third quarter that are way off prior guidance. In the same release it confirms a new agreement with Medtronic Sofamor Danek USA, Inc. to process allograft implants for use in spinal surgeries.

Background

First the numbers. In the quarter ended Sept. 30, 2013 RTI says it expects to report total revenues of approximately $54.7 million, as compared to the company’s prior guidance of $59 million to $61 million. The commentary provided below by President and CEO Brian Hutchison, rather tells the tale.

The initial term of the new agreement runs until Dec. 31, 2017 with two five year extensions available through 2027. The terms of the agreement are substantially equivalent to the previous agreement between the two companies, which was set to expire June 2014, and include transfer fee structures and intellectual property rights for spinal allograft distribution.

Company comments

“Our revenues came in lower than projected due to several factors including uncertainties surrounding when the Food and Drug Administration (FDA) would provide a close-out to the warning letter that we received in October 2012, a slower than expected ramp in our new direct surgical specialties business, lower than expected volumes in our spine business and lower than projected revenues in our international business due to shortages in tissue supply,” said Brian K. Hutchison, president and chief executive officer of RTI. “We are working diligently to rebuild business that was lost in the first half of the year and gain new customers. We have made progress on integrating the Pioneer business and are in the early stages of realizing cross distribution opportunities. We are confident we are headed in the right direction for long term success.”

On the new agreement with MSD, Hutchison said “We have had a long relationship with Medtronic from the earliest days of our company, and we look forward to working together to deliver safe, high quality allograft implants for use in spinal surgeries for many years to come.”

Source: RTI Surgical, Inc., Business Wire