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LIFE AFTER ZIMMER BIOMET: WHY ZIMVIE HAS THE "IT" FACTOR
ARTICLE-LIFE AFTER ZIMMER BIOMET: WHY ZIMVIE HAS THE "IT" FACTOR
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Image courtesy of ZimVie
ZimVie's CEO, Vafa Jamali, returns to Let's Talk Medtech to give an update on
the company and how it's creating a lane of its own in spine and dental.
Omar Ford | Aug 17, 2023
In February of 2021, Zimmer Biomet revealed the next stage of its evolution –
by announcing it would spin off its spine and dental businesses. That
newly-created company would go on to be named ZimVie – Zim taken from Zimmer
Biomet and Vie coming from the French word for Life. It would launch in March of
2022.
Now a little more than a year later, the company has been on a rollercoaster of
a ride. There have been some setbacks but the firm is finding success in Europe
and has seen strong adoption of its spine and dental offerings. ZimVie's CEO
Vafa Jamali returns to Let's Talk Medtech (editor's note: remember he was on
Season One, Episode 34) to discuss the evolution of the company and how to
survive in this tough economic market.
A Transcript of the Season 2, Epidsode 13 of Let's Talk Medtech.
Omar: Well, Vafa, hello and welcome back to Let's Talk Medtech. Vafa was on
season one, episode 34 of the show, and I just have to ask you how's it been
since then.
Vafa: Thanks so much. It's an honor
to be back. Actually, the first time we spoke, I spoke to you from the Nasdaq
floor and we were celebrating ZimVie's first day as an independent, publicly
traded company. So that was a pretty incredible moment for us and I was glad to
talk to you then. Now here we are, a year and a half into it, and frankly, I'm
feeling more confident and excited about our future. So, it's been busy,
challenging, rewarding, everything you might expect, a few surprises that you
wouldn't expect, all that come with us. [It’s been] an experience, I guess, but
I'm really, really proud of the team and humbled by the opportunity to share a
bit about how far we've come and our outlook for the future.
Omar: Yeah, ZimVie was a company that was part of what I dubbed or what MD+DI
dubbed as the spin out revolution. Right. The forefront of that era. And I won't
mention some of the other companies, but there were quite a few that spun out
after the pandemic, obviously, or during the pandemic. But now that you are a
little more than a year out from the separation from Zimmer Biomet, what are
some of the lessons you've learned so far?
Vafa: Yeah, it was a really great learning experience and continues to be so.
But the biggest lesson is probably that spin outs are a very heavy lift and they
take time. The planning starts long before the spin is official. In our case, we
essentially had a little bit less than a year of prep to stand up a brand-new
company, which was pretty aggressive timeline, but we did it, and I'm in awe of
the dedication global team that got us there for March 1, 2022. As you look a
little bit further into why they're difficult, you have a lot of entanglements
in our case, we had a spine business that was very much entangled with
Orthopedics, and you have to undo those so that Zimmer Biomet can be a
successful orthopedic company and ZimVie can be a successful spine company.
Dental was a little bit more on its own, which helped there. And then you have a
lot of legacy processes that may better apply to a much larger organization. So
really, when you look at these carve outs, you almost want to run it like a
startup that already has some critical mass.
Omar: Yeah.
Vafa: But you really do inherit a lot of old ways of doing things that might not
be totally appropriate. So as time goes by and you get your feet under you a
little bit better, you have to build the right team and a structure that fits
the new needs of the organization. You've got to get away from some of the
technical dependencies of the parent. So, these are both just It infrastructure
and just other systems and processes. You got to build the brand, right. The
brand has to kind of find its home, and then you got to set yourself up
ultimately commercially for growth. As you know, growth is key in medtech, and
getting through all this work sometimes limits you a little bit, focusing as
much as you'd like to commercially. But it's been a good learning experience,
and I think we're in the next phase, which is going to really focus on growth.
Omar: Yeah, you brought up something interesting, the branding aspect of it. And
how do you establish yourself as a separate entity and have that recognized
brand? How do you separate, and you just become your own thing. And I think
that's what a lot of spin outs have kind of been dealing with, right. And what
any spin out would have to deal with when you come from such a strong structure.
Vafa: So I think you want to embrace what's good about the past. So, you want to
say, hey, let's celebrate Zimmer. Let's celebrate Biomet and all the companies
that created that. So that's a good thing. It's not something to just walk away
from, so that's positive. But at the same time, you want to build a new life
sciences company for the future. And the way we really looked at it is keep a
few things that sort of get us attached to the past, like the Z on the logo, and
then embrace the future. And the way we can do that is ZimVie obviously is its
own brand, but the brands right underneath that, like the sub brands, are really
what a lot of our clinicians recognize us at. Right? So, the Tether MOBC TSX
real guide. Those are the things that clinicians really recognize. So, we've
been able to benefit from having those names not change and then doing the work
in the back in terms of some of the really excellent work that our comms team's
done on social media, et cetera, to kind of get ZimVie out there. Not expecting
it to be the number one brand of the company, but nevertheless finding its
place. And that'll just take some time.
Omar: Now we're at a point where we're returning to normal, knock on wood when
it comes to elective procedures, and there was a lot of disruption because of
the pandemic. How has that impacted ZimVie, especially when it comes to some of
your offerings like dental and spine? Are we beginning to see things rebound or
are we still kind of in this weird gray area where we're still kind of bouncing
back or trying to find our footing?
Vafa: I think we're definitely getting a lot more, quote unquote, normal. And
you're seeing that evidence through cases being not being postponed or not being
put back and relegated to the back of the queue for some urgent case that comes
up that's largely respiratory related. So, I think that that's coming back.
There are other things that are still not creating enormous amounts of certainty
in the market. Like staffing sometimes can be an issue, what gets a priority,
what doesn't, because you arguably might have a backlog of cases out there and
what gets to be a priority, what doesn't is still a little bit of a gray area.
But you see that the areas that I thought we responded well was, for example,
with dental, because we were dealing with a customer who basically their
practice was their business, and they very quickly adopted PPE and all that
protective equipment that they needed to really manage the cases and to see
their patients at some level of normalcy. So, we saw dental kind of recover
quicker after going to absolutely zero. They recovered quicker by addressing
that the hospital is a little more unique because you're really negotiating for
time in an or that you may want to have higher acuity products in there. So, if
you're dealing with oncology or respiratory illness because of the virus, et
cetera, et cetera, that's always going to get the staff priority. And we saw
some of the spine orthopedic businesses kind of get relegated to the back of the
line. And I do see that coming back now. And I think a lot of people have been
hoping for some sort of a bolus. I just think it'll be a return to kind of
normal and we'll manage through those cases. So, feeling like it's getting much
better into the second half of the year.
Omar: It seems as if, again, knock on wood, things are kind of normalizing right
now compared to where they were maybe a year to two years ago. Yeah. What are
some of the standout products in the portfolio right now? What are you
especially proud of? I know I'm asking you to pick which child you love the most
right now. Talk about that a little bit.
Vafa: Well, actually, for a company that's our size competing with giants, it's
really important to decide who your favorite kids are and to really focus on
them. So, if I look at Spine, we're looking at the Mobi cervical disc, which
really we're experiencing a renaissance now where we sort of forgot about it for
a bit and now we're investing much more in it and bringing that back to front
and center. But that's a share leader in cervical disc replacement space. The
Tether is a really interesting product. It's for Tethering kids with scoliosis
that meet the indication that the Tether lets them grow and grow out of their
curve. It's a really novel, very early adoption type of product. And then we've
got a whole list of products that come with our core portfolio that are only
going to be helped with a recent partnership that we did with a company called
Brain Lab that has a really best in class suite of enabling technology like
robots, navigation, all that kind of work. So, this is a really great portfolio
that kind of is emerging out of Spine. And we're really focusing on these areas
as the critical parts to develop that. And within dental, we've had a number of
launches, so we've had a number of dental implant launches, which are very much
leading in terms of the industry. Again, we're scrapping it out with giants, but
we have really great adoption rates here. We use a dental implant that's really
best in class in terms of design and how it works. And we combine that with a
digital offering which allows the clinician to have a really streamlined
workflow. So, it's a really nice combination. So, we're really focused on dental
implants. And then how does that digital dentistry platform help support its
growth? Again, remember, everything I've mentioned pretty much is free full
adoption. So, everyone, whether it's Spine or dental are in markets that are not
yet fully adopted. So again, it's a great way to grow and it's a great way to
teach, engage clinicians and to get best in care adoption for patients.
Omar: You’ve been having Some success in Europe right now and the region seems
to be a huge area of growth for ZimVie. Can you talk a little bit about what
drove growth in Europe and the kind of market opportunity it presents.
Vafa: I think Europe sort of came out of a slow period pretty aggressively, and
it has been a great, great market for us, particularly strong. It was really
growing with dental. We had a number of launches there, both from the digital
platform that I mentioned and also with our new implants. And the team's been
able to sell these implants at an ASP or a price lift due to the features and
the benefits of it, and really get fast adoption. So that's gone exceptionally
well. Again, that's all supported by the digital solutions and we're all-around
Europe, I would say we're doing really well with dental, with spine. We had a
recent announcement that gave us a very strong push in UK and France. In France,
we became the only cervical disc that was reimbursed, and those sales have
really skyrocketed, and they're at an all-time high right now. That's a new kind
of event that we're benefiting from. But the team is really embracing it and
getting some confidence and some swagger that's much needed in this market, and
we're getting those countries and those clinicians to adopt new standards of
care, and they're open to it, open arms. Additionally, the tether is growing the
fastest in Europe. That's our pediatric scoliosis device. It's performing really
well in Europe. That's a big, big growth driver for us. So, both of these
businesses have really returned in full force to growth in Europe, and we're
pretty excited about that.
Omar: Yeah. And Europe is an interesting place right now too, from a regulatory
standpoint. You have a lot of companies that used to go there first to get
approval, but now, because there's just so much change there, because the
landscape has been drastically altered, we're not seeing that. We're seeing us
as being the first point of entry for any type of regulatory approval. So, it's
amazing that even with that being said, that you're seeing Europe as a strong
place for growth and development for medtech firms right now, even with the
state of regulations being what they are.
Vafa: Yeah, I think what's happened there is the clinical bar has gone up. So if
you have clinical evidence and we have it in spades for our entire portfolio,
then you can be compliant with that, with what they're trying to do with the
governing body there, and also possibly create a little bit of a mode around
yourself, which is to our benefit. The other thing we've been able to do with
Europe, again, with our actually, this is kind of a nod to the FDA in a very
good way, is we're able to use some of the real-world evidence. So, there was an
idea that could we use real world evidence to get approvals with FDA, and we've
been able to do that with one of our really critical product lines and bring the
work that we did in Europe and the experience we had in Europe over to the US.
So, I think done right, and if you participate with your regulated bodies, we've
all chosen this field and we always knew who was going to be regulated. And the
real reason we do it is to get the best care and the best safety for patients.
If you do it and you participate and you do it properly, you might actually find
yourself at an advantage to many of your competitors who are busy worrying about
the new reg. So we've embraced it and we've done well with it.
Omar: So, in other words, well, you're saying that just be at the top of your
game. Europe is a breeze. Just kidding.
Vafa: Nothing's a breeze. So, the EU MDR requirements are heavy and they're
expensive, but you've got to choose what you want to do there, how you want to
do it, and whether or not you have the evidence to do it. And I think if you
choose that and it sits with your strategy, then you're in great shape. If it
isn't, you're busy wishing what it would be like if they didn't have erects.
Omar: Let's switch to the current economic conditions right now. I know that
it's tough for a lot of medtech companies out there. What is your thought
process during this time as a CEO? What is your strategy? When we see the
headwinds of inflation and these tougher economic conditions happening across
the board, across different industries, what is your first instinct as a CEO? I
mean, these are tough times, and these are different times. How do you deal with
that?
Vafa: So, I think there's a number of items here that stick out. If you think
about on the day that you and I spoke, the interest rates were close to zero and
they're significantly higher right now. Right. So that was a company going
public with debt and the focus really, for us changed to making sure we paid
down our debt as fast as we could as a critical reality of doing business as a
public company. So that's a bit of a shift. Right. So those expenses were not
anticipated, and you have to deal with it. But again, you have to deal with your
circumstances and flex and adjust. In terms of the market, what really has
helped us is segmenting and deciding where we're going to be, where we're not.
So, if you look at consumer sentiment, it probably impacts dental a bit more
than spine. Right? So, the idea was, I remember hearing this one sometimes, if
the price of a carton eggs goes up, who's going to get an implant? And it's an
interesting comment, but the point is, are you at risk? And I think we've
segmented properly. So, in dental, I believe that we're outperforming the market
for premium implants. So, we continue to fill all of our training programs. We
have this new state of the art center in Palm Beach Gardens where we train and
we're planning to train about 1000 clinicians there this year alone in this new
facility. So, this is all new users and new adoption. So, if you've got markets
that quite aren't adopted yet, then you do have a chance for growth, even though
your existing users sort of soften a little bit. Right. So, I think that's what
we're experiencing, a little bit of softness, not share shifting. It's not a
binary zero one, it's more of just a softness that's happening. And I am
convinced that it's a temporary situation that we'll get through. But again,
segmenting know exactly where your customer is. If you're in the premium
implant, people are not trading down your product. There might be a slight
delay, but nevertheless, you're going to get it back. It's a matter of staying
the course for it. So that's kind of how we've dealt with it. But there's been a
lot of change over the last year and a half, I guess.
Omar: Yeah. And it's quickly becoming a different world. We're seeing the use of
more automation, artificial intelligence. I don't want to go down that whole
rabbit hole during this conversation, how AI is taking over or how it's changing
many of the applications. But I think what we're seeing ultimately is a new
landscape forming and we're going through some birth pains right now. I think
the inflation is a result of it. And we're at a much different place than where
we were when Zimvi first became public. And even when there was the
announcement, I know you all were very gracious to reach out to me, and I
reached out to you all as well when you were named CEO. But we're in so much of
a different place than we were back then that it's incredible. And it's only
been like a year and a half. It feels like it's been like three or four years,
like almost five years, really. Just the number of things that have happened.
Vafa: Yeah. Well, yes, of course. I think if you look at it from a longer
perspective, which hopefully over time we generate some wisdom, we know that you
have to be consistent with who you are, your values, your core, and you will get
through these periods. And if they were just unique to us, I would say it'd be
an operating error. But because it's systematic, you just have to make sure that
you're staying true to your course and you're doing the right things for the
people that work there, your customers, your patients, and you'll get through
it. And I think that's how we've looked at this. But there's been no shortage of
change since we went public.
Omar: Let's talk a little bit about the future for ZimVie. What does the future
hold? What are your plans going forward?
Vafa: You mentioned AI, so Chat GPT is going to be doing all of my earnings
calls and all of these interviews from now on. And it's terrific. I can't wait.
It's going to be great. I'm really pleased with our progress in 2023 when you
come out of these things and for a period we were really being left for dead,
that was a difficult period. But again, you got to stick true to it. You execute
and you get out. We've done a lot of really great things. We've gotten out of
all of our ERPs, we've gone out of all of our transition service agreements. I
mean these are things that sometimes it takes these carveouts a long time to get
out of. We've gotten out of all of. So I'm really really excited about that. I'm
really pleased with the team that we have that got us through there and now
we're looking know how do you get your business to durable growth. We still have
some wood to chop there but again, if I look at the future for Zimbabwe, you've
got again dental implant market which is your core initiative in dentistry and
that's only 25% penetrated. So only 25% of the people that need one get one,
otherwise they get something temporary. MOBC is only 33% penetrated relative to
fusion. With all the evidence in the world that says a cervical disc has better
outcomes, the Tether is only about 10% penetrate relative to fusion. Again,
these are all really good markets and we can actually lead with innovation, not
with me too, but with innovation and that's super exciting and super rewarding.
You just need time, you need focus, you need determination and you need some
level of stick-to-itiveness to kind of get there. So overall I'm pretty happy
about the future. I'm excited about the back end of this year. Again, as we kind
of return back to normal, it's going to be a lot more predictable. It was a
difficult time to predict anything, but ultimately executing commercially is
going to be the critical piece for ZimVie.
Omar: Sounds great. Sounds great and it'll be interesting to know that journey
that ZimVie is going to go through. VAFA. Thanks for coming on to Let's Talk
Medtech. It's always a pleasure to have you on the show.
Vafa: Thanks, Omar. Much appreciated.
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