FDA Approved Novation Ceramic Articulation Hip System

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Novation Ceramic Articulation Hip System

Exactech has received premarket approval from FDA for the Novation Ceramic Articulation Hip System thereby granting Exactech permission to market the system.

The new system adds a high demand, hard bearing option to Exactech offerings for total joint replacement. Featuring alumina ceramic, the system is designed to improve implant longevity and has demonstrated up to 2,000 times less wear debris generation than traditional metal and polyethylene bearings. Exactech's sizing scheme allows the use of larger femoral heads in the majority of patients which provides a competitive advantage compared to other ceramic systems. The system also features femoral stems designed to increase range of motion for patients(1,2).

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Exactech also said it is increasing its full-year sales targets from the $112 to $118 million range to an updated estimate of $115 to $120 million.

Chief Financial Officer Joel Phillips said, "The company has performed exceptionally well during the first half of 2007 by delivering new products on or ahead of schedule and by realizing positive sales results from products released during the past year. We expect to meet our revenue plan for the second quarter and have confidence in our ability to sustain this momentum through the remainder of the year and beyond."

As a part of Exactech's comprehensive hard bearing program, the company entered a license and distribution agreement with Dimicron Corporation in 2003 to market and distribute polycrystalline diamond compact hip bearings. While Dimicron has made progress in developing the technology, Dimicron recently informed Exactech of new challenges that will adversely impact Dimicron's ability to produce the diamond hip bearings it has been developing. Based on previous and anticipated delays, uncertainty regarding production of a product, and disagreement with Dimicron about how best to proceed, Exactech believes it is prudent to take an impairment charge of $1.5 million in the second quarter which represents the current full carrying value of the asset.

"We are evaluating our options for continuing development and bringing this technology to market because we believe our investment to date has created potential value. To this end, Exactech and Dimicron have agreed to submit evaluation of our agreement to an arbitration panel," stated Exactech CEO Bill Petty. "We still believe that the diamond bearing concept has the potential for substantially improving patient outcomes."

The impairment charge is estimated to have an $.08 after tax impact on second quarter diluted EPS as a non-cash charge. Excluding the impact of this one time charge, the company reconfirms its previous diluted EPS target of $.19 - $.20 for the second quarter of 2007 and $.72 - $.76 for the full year. Including the one time charge, the company is targeting diluted EPS of $.11 - $.12 for the second quarter and $.64 - $.68 for the full year 2007.

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