Company Overview and History

Bioventus Inc. (BVS) is a global medical device company dedicated to helping patients recover and live life to the fullest by relieving pain and addressing musculoskeletal challenges. The company has a diversified portfolio of high-quality, innovative, and clinically-proven solutions that span across three key business segments: Pain Treatments, Surgical Solutions, and Restorative Therapies.

Bioventus Inc. was formed as a Delaware corporation in 2015 to facilitate an initial public offering and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries. Bioventus LLC was formed under the laws of Delaware in 2011 and commenced operations in 2012. In February 2021, Bioventus closed its initial public offering, which was conducted through an umbrella partnership C Corporation (UP-C) structure. This involved amending and restating the limited liability company agreement of Bioventus LLC to provide for a new single class of common membership interests and exchanging all of the existing membership interests for the new LLC Interests. Bioventus Inc. also amended its certificate of incorporation to authorize Class A common stock, Class B common stock and undesignated preferred stock.

Challenges and Milestones

The company has faced various challenges and milestones throughout its history. In 2018, Bioventus identified non-compliance with certain U.S. federal statutes and requirements governing the Medicare program related to improper completion of Certificate for Medical Necessity forms. In November 2018, Bioventus made a voluntary self-disclosure of this matter to the Office of Inspector General pursuant to the OIG's Provider Self-Disclosure Protocol. After settlement discussions, in February 2021 the company entered into a formal settlement agreement and paid $3.6 million to resolve this matter.

More recently, in 2023, Bioventus reached a settlement agreement with the former securityholders of CartiHeal, a company it had previously acquired, which resulted in the transfer of 100% of Bioventus' shares in CartiHeal to a trustee. This transaction was treated as a discontinued operation. Also in 2023, Bioventus divested certain assets within its Wound Business, including the TheraSkin and TheraGenesis products, for potential consideration of $84.67 million. The company incurred a $78.61 million non-cash impairment charge related to this divestiture.

Product Portfolio

Throughout its evolution, Bioventus has remained focused on developing and commercializing differentiated products that cater to the needs of healthcare providers and patients. The company's Pain Treatments segment features a range of hyaluronic acid (HA) viscosupplementation therapies for the treatment of knee osteoarthritis, including its flagship product DUROLANE. The Surgical Solutions segment encompasses the company's ultrasonic bone cutting and sculpting systems, as well as its portfolio of bone graft substitutes. Additionally, the Restorative Therapies segment is anchored by the EXOGEN bone healing system, which utilizes low-intensity pulsed ultrasound technology to accelerate the healing of fresh fractures and non-union fractures.

Business Segments and Product Areas

Bioventus operates through two reporting segments: U.S. and International. The company's portfolio is comprised of five patient-focused areas, grouped into three businesses based on clinical use:

1. Pain Treatments Segment This segment includes the Knee Osteoarthritis (KOA) and Peripheral Nerve Stimulation (PNS) product areas. The KOA area offers intra-articular, hyaluronic acid (HA) injections such as Durolane, GELSYN-3, and SUPARTZ FX. The PNS area focuses on peripheral nerve stimulation products, including the StimRouter Peripheral Nerve Stimulation system.

In fiscal year 2024, the Pain Treatments segment accounted for 46% of total net sales, with U.S. sales of $235 million and International sales of $26 million. This segment experienced strong growth, with net sales increasing 19% in the U.S. and 15% in International markets compared to the prior year.

2. Surgical Solutions Segment This segment consists of the Ultrasonics and Bone Graft Substitutes (BGS) product areas. The Ultrasonics business offers precision bone resection tools for spine conditions and spinal deformities, as well as ultrasonic neuro and general surgery capabilities. Key products include the neXus Ultrasonic Surgical System, BoneScalpel, and SonaStar. The BGS portfolio includes products that facilitate bone fusion following surgical procedures, such as OSTEOAMP, SIGNAFUSE, and PUREBONE.

In fiscal year 2024, the Surgical Solutions segment accounted for 33% of total net sales, with U.S. sales of $168 million and International sales of $22 million. This segment also saw robust growth, with net sales increasing 18% in the U.S. and 9% in International markets compared to the prior year.

3. Restorative Therapies Segment This segment focuses on the Fracture Care product area, which provides low-intensity pulse ultrasound to help patients with bone fractures that do not heal through traditional methods. The key product in this area is the EXOGEN Bone Stimulation System.

In fiscal year 2024, the Restorative Therapies segment accounted for 21% of total net sales, with U.S. sales of $104 million and International sales of $19 million. This segment experienced a 5% decrease in net sales in the U.S. market and a 7% decrease in the International market compared to the prior year, primarily due to the divestiture of the company's Wound Business and lower volumes from the Advanced Rehabilitation Business.

Financials

Bioventus' financial performance has demonstrated consistent growth in recent years, with the company reporting total revenue of $573.3 million in the fiscal year ended December 31, 2024, representing an 11.9% increase compared to the prior year. This top-line growth was fueled by strong demand across the company's diversified product portfolio, led by double-digit increases in both the Pain Treatments and Surgical Solutions segments.

Importantly, Bioventus has also made significant strides in improving its profitability and cash flow generation. In 2024, the company reported adjusted EBITDA of $108.9 million, a 23% year-over-year increase, and expanded its adjusted EBITDA margin by 160 basis points to 19.0%. Furthermore, Bioventus generated $38.8 million in operating cash flow during the year, more than doubling the prior year's figure. This robust cash flow enabled the company to reduce its net debt position, with the net leverage ratio improving from over 4.0x at the start of 2024 to just above 3.0x by the end of the year.

For the most recent quarter (Q4 2024), Bioventus reported revenue of $153.6 million, up 13.5% year-over-year. The company's net loss narrowed significantly to $156,000 for the quarter. Operating cash flow for Q4 2024 was $19.3 million, representing an 86.3% increase compared to the same period in the previous year.

The U.S. segment accounted for 88% of total net sales in 2024, while the International segment contributed the remaining 12%. Bioventus' gross profit margin improved to 67.7% in fiscal year 2024, up from 64.1% in the previous year, driven by favorable product mix and volume growth in the Pain Treatments and Surgical Solutions segments.

Growth Strategy

Looking ahead, Bioventus remains well-positioned to sustain its growth trajectory. The company has outlined a strategic plan focused on driving above-market revenue growth, continuing to expand profitability, and accelerating free cash flow generation. Key growth drivers include further penetration of the Surgical Solutions business, ongoing momentum in the Pain Treatments segment, and a resurgence in the Restorative Therapies unit.

In the Surgical Solutions segment, Bioventus is particularly excited about the long-term potential of its ultrasonic bone cutting and sculpting systems, which the company believes can become the standard of care in spine, neurosurgery, and general surgery procedures. The company is investing in strategic marketing, commercial effectiveness, and medical education initiatives to drive broader adoption of this innovative technology.

Within the Pain Treatments segment, Bioventus remains the market leader in HA viscosupplementation for knee osteoarthritis, led by the clinical differentiation and strong brand recognition of its DUROLANE product. The company is committed to expanding its geographic footprint and driving continued share gains in this sizable and growing market.

In the Restorative Therapies segment, Bioventus is focused on revitalizing the performance of its EXOGEN bone healing system. After years of decline, the company reinvigorated this business in 2024 through renewed commercial focus and targeted investments, resulting in a return to growth. Bioventus believes it can sustain low-to-mid single digit annual growth for EXOGEN going forward.

Liquidity and Financial Flexibility

Bioventus' growth strategy is further bolstered by a strong balance sheet and ample liquidity, providing the financial flexibility to selectively pursue accretive acquisition opportunities that can augment the company's organic initiatives. The successful divestiture of the Advanced Rehabilitation business in late 2024 has also streamlined Bioventus' portfolio, allowing the management team to sharpen its focus on the company's core growth platforms.

As of December 31, 2024, Bioventus had $41.6 million in cash and cash equivalents and $37.8 million available under its $40 million revolving credit facility. The company's debt-to-equity ratio stood at 0.18, while its current ratio and quick ratio were 1.31 and 0.87, respectively. These metrics indicate a solid financial position and adequate liquidity to support ongoing operations and strategic initiatives.

Competitive Landscape and Risks

While Bioventus operates in a competitive medical device landscape, the company's innovative product portfolio, differentiated clinical evidence, and talented commercial organization position it well to capitalize on favorable demographic and market trends in the active healing space. However, the business is not without risks, including regulatory uncertainties, potential reimbursement challenges, and the inherent risks associated with new product development and commercialization.

The medical device industry is highly competitive and subject to rapid change and technological advancements. The overall market for Bioventus' products is expected to grow at a low to mid-single digit CAGR in the coming years, presenting both opportunities and challenges for the company.

2025 Guidance and Future Outlook

Building on its strong performance in 2024, Bioventus has provided guidance for fiscal year 2025. The company expects net sales to be in the range of $560 million to $570 million, reflecting above-market organic growth of approximately 6% to 8%. Adjusted EBITDA is projected to be between $112 million and $116 million, representing growth of 8% to 12% when adjusting for the impact of the divested advanced rehabilitation business.

Bioventus anticipates adjusted earnings per share of $0.64 to $0.68 for 2025, an increase of 31% to 39% compared to the previous year. The company expects revenue and adjusted EBITDA to be the lowest in the first quarter of 2025 and the highest in the fourth quarter, reflecting typical seasonality in the business.

Furthermore, Bioventus is committed to improving its balance sheet and reducing leverage. The company projects its net leverage ratio to be below 2.5x by the end of 2025, demonstrating its focus on financial discipline and long-term sustainability.

Conclusion

Overall, Bioventus has demonstrated its ability to navigate a dynamic industry environment and deliver consistent financial performance. With a clear strategic roadmap in place, a diversified product portfolio, and a focus on innovation and operational excellence, the company appears poised to build upon its solid foundation and continue driving value for shareholders in the years ahead. As Bioventus executes its growth strategy and capitalizes on emerging opportunities in the active healing space, it remains well-positioned to maintain its leadership position in the global medical device market.