Orthofix Medical (NASDAQ:OFIX) executives said the company’s updated outlook reflects the restoration of bone growth stimulation reimbursement, improving trends in biologics and limb reconstruction, and an expected European inventory order, partly offset by a steeper-than-anticipated decline among smaller U.S. spine distributors.
Speaking at the Canaccord Genuity Growth Conference, Chief Financial Officer Julie Andrews said the revised guidance incorporates several moving parts. Positive factors include the reimbursement restoration, an expected European Medical Device Regulation-related inventory purchase in the second half, and strengthening performance in the biologics and limb reconstruction businesses. Those items are being partially offset by weaker results from smaller U.S. spine distributors.
CMS Reimbursement Restoration and Therapeutic Solutions
Orthofix said a temporary reimbursement pricing change affecting its bone growth stimulation business had an approximately $1 million impact over a six-week period in the second quarter. Andrews said the company expects to recoup that revenue in the third quarter following the restoration, along with billing proceeds.
Chief Executive Officer Massimo Calafiore said the company worked with the Centers for Medicare & Medicaid Services and other industry participants to advocate for the reversal. He described the effort as a coordinated response led by Orthofix as a market leader in the category.
Despite the reimbursement uncertainty, Andrews said the company’s therapeutic solutions business showed resilience and that procedural volumes were broadly consistent. Calafiore added that Orthofix’s top 40 distributors, representing about 80% of distributor revenue, continued to grow above market.
While the FDA’s down-classification of certain products remains in place, Calafiore said Orthofix had been preparing for that development. He said the change may make it more difficult for new entrants to obtain equivalent indications, while giving Orthofix greater flexibility to consider product innovation and expansion into additional markets.
Spine Distribution Strategy Remains a Focus
Orthofix is continuing to concentrate its spine business among larger, higher-quality distributor partners. Calafiore said the company plans to identify which distributors within the remaining 20% of its network it wants to retain and shift resources toward the larger distributor group.
He acknowledged that the transformation could continue to create some volatility, but said he remains optimistic that the concentrated approach will support profitable growth. Andrews said the decline in the smaller distributor channel has been steeper than initially expected and was a key factor in the company’s revised outlook.
Calafiore, who is more directly overseeing the spine business following changes in leadership earlier this year, said he does not anticipate bringing in an outside leader. Instead, he said he is working with an internal executive who has the potential to assume greater responsibility for the business over time.
The company also highlighted progress around its 7D technology platform and VIRATA pedicle screw system. Andrews said Orthofix does not disclose installed-base figures, but is seeing encouraging early use of VIRATA. Calafiore said VIRATA is ready for commercial launch in open procedures, while the minimally invasive system is in alpha-stage development. He said Orthofix recently completed its first minimally invasive case using the new 7D software update.
Biologics, Europe and Cash Flow
Calafiore said recent distribution-related disruption in biologics has declined significantly or has been eliminated. He said the past two quarters were the business’s best in some time, supported by a new commercial team, leadership investment and efforts to build clinical evidence across products including OsteoCove, VIRTÙOS and Strand Plus.
Orthofix has also moved biologics under limb reconstruction leadership. Calafiore said that structure creates an opportunity to expand the biologics channel while enabling the company to offer distributors a broader combined limb reconstruction and biologics portfolio.
In Europe, Andrews said a legacy distributor is expected to place a $15 million stocking order, with most of the order anticipated in the fourth quarter. The company expects a $22 million headwind next year, including about $7 million of base business, as the stocking order is intended to bridge the distributor until regulatory approvals are expected to be restored.
Andrews said the inventory purchase will create a near-term cash-flow headwind because Orthofix must pay for the inventory before most cash receipts arrive next year. She characterized the effect as timing-related and said the sale is expected to be profitable and ultimately generate cash.
The company has removed its free-cash-flow guidance, but Andrews said Orthofix does not see a change in the underlying cash-generation potential of the business. She noted the company improved from a $108 million use of cash in 2023 to near breakeven in 2025. Orthofix’s priorities remain strengthening the balance sheet and investing in organic research and development, while M&A is not the current focus.
Management has not set a timeline to reinstate long-range guidance. Andrews said Orthofix wants greater stability in its U.S. spine business before reintroducing longer-term targets. She also said company growth has been driven by organic volume and product acceptance rather than pricing, with annual price pressure generally running about 1% to 2%.
About Orthofix Medical (NASDAQ:OFIX)
Orthofix Medical Inc (NASDAQ: OFIX) is a global medical device company focused on the design and development of innovative orthopedic and spinal solutions. The company’s core business is divided into two segments: spine and orthopedics. In the spine segment, Orthofix offers a range of titanium implants, biologics and portable bone growth stimulation devices designed to support spinal fusion, deformity correction and minimally invasive procedures. Its orthopedic segment encompasses products for fracture fixation, external fixation systems, trauma care and sports medicine, providing surgeons with implantable devices and instruments for complex bone reconstruction and healing.
Orthofix’s product portfolio includes strut systems, bone growth stimulators, interbody fusion devices and fixation hardware that address various indications such as degenerative disc disease, spinal deformities, non-unions and long-bone fractures.
