ZimVie plots 5% workforce cut to help boost its spine business

ZimVie, the spine and dental spinout launched from Zimmer Biomet just over one year ago, announced it plans to cut 5% of its workforce following continued losses and declines in sales.

Alongside its earnings report for the first quarter of this year, the company said it aims to start saving between $17 million and $20 million annually by paring back its global operations “across all regions, functions and levels,” as well as by reducing its discretionary spending.

In its release, ZimVie noted that these cutbacks had been factored into its previous 2023 financial projections, issued back in March—which had pegged net sales between $825 million and $850 million, and adjusted earnings-per-share between 30 and 50 cents. 

However, the company has now slightly bumped up those ranges, to $835 million and $860 million, and 40 to 60 cents, respectively, while maintaining the same margins. But that’s still below the $909.5 million in revenues it gathered during 2022. Nevertheless, the news boosted ZimVie’s stock price by about 30%, before coming down to rest at around $9.50. 

The company had previously placed the hills it has to climb in stark relief. When quantifying its earnings results from the full year of 2022, ZimVie attributed an annual drop in spine sales to a litany of causes, namely: its exit from unprofitable markets the year before, the dropping of a number of products and brands, the loss of sales left behind with its Zimmer Biomet mothership, distributor orders that were not renewed, Omicron’s surge in COVID-19 cases, volume-based procurement slowdowns in China, operational hiccups in setting up the company’s new IT and management systems, and continued competition in the spine market.

On an earnings call with investors this week, CEO Vafa Jamali said the announced workforce reductions “are aimed, in particular, to increase efficiency and profitability of our spine portfolio in all markets.” Jamali also pointed to “incremental successes” within the segment, with increasing insurance coverage for its tether-based scoliosis implant, as well as its growth outside the U.S. 

In terms of first-quarter revenue for this year, the company saw sales of its spine implants and surgical tools drop by 8.1%, down to $104.9 million versus the $114.1 million it logged during the same period in 2022. 

In dentistry, meanwhile, ZimVie saw sales largely remain flat at about $120.1 million, with a 0.3% decrease driven mainly by changes in international currency exchange rates. That’s important because the first quarter of 2022 saw a large boost in dental implant sales, according to Jamali, as part of a “post-COVID splurge” seen across the industry.

In total, ZimVie’s net loss for the first quarter of 2023 was $30 million, a bit more than the $25.7 million loss it posted the year before.