Indiana 100: New ownership, aging population keep Biomet booming

Biomet Inc.'s shift from a public company to private ownership has taken the orthopedics firm off an emotional roller coaster.

From a morale standpoint, employees no longer see the value of their company fluctuate from one quarterly report to the next,

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The 30-year-old business was acquired by a consortium of private equity firms Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG - in an $11.4 billion deal that closed in October 2007.

It reported revenue of $2.1 million for 2007, and in March, the company reported unaudited net sales of $603.1 million for the third quarter ended Feb. 29, up 14 percent.

The new ownership has given the company additional access to business minds, people who are looking at a range of opportunities, procedures and practices to help the company position itself for the future, said Kolter, who has been with Biomet since 1987.

Even without Wall Street breathing down Biomet's neck each quarter, the company still is focused on creating stakeholder value, but with less worry about volatility in the market, he said.

The private-equity deal came amidst a U.S. Department of Justice investigation of Biomet and four competitors. The government alleged the fees these manufacturers paid to physicians and other consultants may have violated federal kickback laws.

A settlement last fall netted the government $310 million in penalties from four of the five device manufacturers. And as a result of the deal, consumers now get direct access to information about the consultants and how much they are being paid for their work with the implant makers.

Biomet's share of the settlement was $26.9 million. DePuy Orthopedics, a Warsaw-based subsidiary of Johnson & Johnson, paid $84.7 million. Another Warsaw firm, Zimmer Holdings Inc., paid $169.5 million. Smith & Nephew of Andover, Mass., paid $28.9 million. The fifth company, Michigan-based Stryker Corp., did not pay a penalty.

All five firms will be monitored for 18 months to ensure they are complying with the settlement agreement, including posting the consultant data on their Web sites. Biomet has taken the push toward transparency a step further and posted not only names and salary ranges of its consultants but also what they are being paid to do.

Take Dr. Mike Berend, an orthopedic surgeon at the Center for Hip and Knee Surgery in Mooresville, who last year made between $75,000 and $99,000 as a consultant for Biomet - which makes about 95 percent of the implants he uses.

Berend was drawn to orthopedics because he wanted to use his interest in mechanical engineering to improve the quality of life for people. He grew up in Columbus, Ohio, and graduated from Hanover College in Indiana before heading to Duke University, where he spent a decade perfecting his orthopedic surgical skills. Berend has been at the Mooresville facility about 10 years, leading the joint-replacement fellowship program.

Besides training other surgeons in implanting Biomet devices, Berend works with the company's researchers on materials, processes and procedures for the devices and surgery.

He also works with students at the Orthopaedic Biomedical Engineering Laboratory at Rose-Hulman Institute of Technology in Terre Haute. This collaborative effort between the Joint Replacement Surgeons of Indiana Research Foundation and Rose-Hulman was created to allow students the opportunity to conduct orthopedics research, which relies on engineering and science disciplines along with medical skills.

Kolter said technology has increased the benefits of muscular-skeletal procedures, especially in the imaging of joints before surgery. Berend said the imaging technology helps surgeons figure out the exact path to take and the exact position the implant should have in the body to accommodate or correct walking problems, such as bowleggedness.

The men also said Biomet would maintain its pioneering reputation in the development and application of new materials for the devices. The plastic and metal materials play a critical role in the lifespan of the implants. Berend said recent studies place the life of replacement knees at about 20 years and slightly less for hips.

These procedures are on the high-demand track, too, as baby boomers age and with a population of overweight people, Kolter said. Total knee replacements are expected to increase 673 percent by 2030 and total hip replacements by 175 percent.

More people in the 45-to-64-year-old range are seeking help before problems become too severe. People want to remain as active as possible and do not want to be hampered by joint pain and limited motion, Kolter said.

Biomet Inc.

Location: 56 E. Bell Drive, Warsaw 46582

Phone: (574) 267-6639

Web site: biomet.com

Year founded in Indiana: 1977

Ownership: LVB Acquisitions LLC

Service/product: orthopedic devices

Employees: 4,254 total

Revenue (2007): $2.1 billion