Diego Thomazini/iStock via Getty Images

Diego Thomazini/iStock via Getty Images

ZimVie Inc. (NASDAQ:ZIMV ) is a global leading medical technology company that designs, develops, manufactures, and delivers a wide range of products and solutions in the dental replacement & restoration and spine pathology markets. ZimVie was incorporated in March 2022 as an independent and publicly traded spin-off of the dental and spine business units of Zimmer Biomet ( ZBH). Zimmer Biomet, a global leader in the medical technology space, believes the separate company would achieve faster growth, delivering greater value to shareholders of both companies. Zimmer Biomet will focus on its integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. The spin-off Company's differentiated dental and spine products and solutions backed by strong R&D capabilities, manufacturing processes, and extensive clinical evidence will cover customers in more than 70 countries.

The new Company takes off with a broad portfolio of trusted brands and clinically proven products, built over the course of more than 30 years through the acquisition and integration of over a dozen leading spine and dental businesses and brands, including EBI Medical Systems (1988), 3I (1999), centerpulse (2003), LANX and Abbott Spine (2008), Zfx (2011), LDR (2016), implant concierge (2019), 3DIEMME (2020). As part of the strategy, ZimVie exited from unprofitable geographies, invested in digitization and automation of manufacturing, and learning from the pandemic, improved its operating model by establishing patient-centric systems. Future plans include systematic continuous improvement establishing a destination workplace, with integrated and automated systems platforms; and financial accountability and flexibility for mergers and acquisitions.

Dental products and solutions include:

implant systems, guided surgery solutions, site preparation surgical kits and implant removal kit, drill unit, surgical instrumentation, intraoral scanners;

digital solutions - abutments, analogs, bars, laboratory, implant concierge - virtual treatment plan coordinator, RealGUIDE for implant placement;

bone graft substitutes - allograft particulates, bone block, putties, xenograft particulate, synthetic particulate;

membranes - pericardium barriers, collagen barriers, non-resorbable, socket repair, soft tissue augmentation;

collagen tape, patch and plug;

restorative solutions - internal & external hex connection; eztetic connection; TSV connection.

Spinal offerings of the new Company include:

cervical - disc/plate replacement, fusion device, cage, interbody system;

anterior/lateral and posterior thoracolumbar solutions - fusion system, interbody system, cage, plating,

minimally invasive spinal fixation system;

best-in-class biologics - advanced allografts, synthetic bone void fillers, and allograft demineralized bone matrix;

non-invasive systems - spine fusion stimulator, bone growth stimulator, bone healing;

The Company will additionally offer educational resources for patients and caregivers for both dental and spinal offerings. ZimVie also has six institutes for medical education located in Florida, California and New Jersey in the US, and in Colombia, Switzerland and China, which offer on-demand and live, multi language virtual programs as well as residency and predoctoral programs. The Company has over 2700 team members, has contributed over 1250 peer-reviewed clinical publications, and owns more than 400 active patents globally. More than 4500 surgeons utilize the Company's systems and services in over 70 countries worldwide.

ZimVie was spun-off for strategic and dedicated focus on the ~$20B global dental and spine markets, with the Company well-positioned as the #5 and #6 player respectively.

ZimVie's target market (Corporate Presentation)

ZimVie's target market (Corporate Presentation)

ZimVie spin-off was achieved through the distribution of 80.3% of the shares of ZimVie to holders of Zimmer Biomet common stock on 3/1/2022, at one share of ZimVie common stock for every ten shares of Zimmer Biomet common stock held on the record date of 2/15/2022. The Company currently has a market capitalization of ~$712M as of close at $25.69 on 4/21/2022, with 26.08M common stock outstanding as of 3/25/2022, of which the public holds 59.07%, while public corporations, institutions, hedge funds and insiders hold 19.68%, 13.55%, 7.67% and 0.04% respectively. The Company currently expects fully diluted shares of approximately 26.6 million at fiscal year-end 2022.

Figures noted herein account as if the dental and spine units of the parent Company had operated as an independent, publicly traded company for the respective periods prior to spin-off. Revenues during 2018, 2019, 2020, 2021 were $1.1B, $1.06B, $912.4M, $1.01B respectively. Operating expenses for 2021 were $1.115B. Net loss was $95.3M. Revenue guidance for 2022 is $1B and adjusted EPS guidance is between $2.10 and $2.30. The Company does not pay a dividend currently.

As of 12/31/2021, the Company had cash and cash equivalents of $100.4M. Although net loss is reported, the Company has generated positive cash flow as the losses are due to significant non-cash expenses such as goodwill impairment, intangible asset amortization and depreciation.

The Company incurred substantial indebtedness upon separation from the parent company, amounting to approximately $561.0 million. There may also arise tax liabilities in future pursuant to the separation of the Company from its parent.

Tax liabilities may also arise in future if the Company's independent sales agents are construed as employees by the tax or other regulatory authorities.

As of 12/31/2021, the Company had $267.8 million in goodwill and $766.2 million of intangible assets. Any write-off of a material portion of these assets would negatively affect the Company's results of operations.

A substantial portion of the Company's revenue is from outside the US, which is subject to risks like currency exchange rate fluctuations and global economic conditions.

Potential decline in reimbursement levels and ongoing cost-containment measures in the target markets may put pricing pressures on the Company.

Certain new products of the Company will incorporate artificial intelligence and machine learning ('AI/ML) software, which is proposed in the FDA's new action plan to be addressed as a medical device. This may bring up unforeseen compliance risks.

The Company will have to retain key personnel including top management, but there is very little insider ownership at 0.04% only.

The COVID-19 pandemic adversely impacted the Company's operations and business, especially in 1H-2020. Though 2021 saw normal demand, there may be slight disruption in 1H-2022 too.

Disruptions to third-party supplies due to the pandemic and/or the Company's use and disclosure of "conflict minerals" could pose a risk to operations and profitability.

One Wall Street analyst with a strong buy, and one with a hold put the average rating at hold. The average price target is 33. The current price level at over 20% discount from the price target, offers a decent entry into this spin-off, a global leading company in the dental and spine markets.

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This article was written by

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.