Biomet has been in the trade news in a very big way over the last few months. Since the company has yet to issue any explanation of its failure to file a form 8-K with the SEC, I will tell what I know here.
Biomet's 11-hour effort staves off potential raw materials shortage
Health Industry Today, Vol. 60, Issue 4, p.10.
A unique agreement signed recently by orthopedic device manufacturer Biomet Inc., Warsaw, Ind., ensures a supply of a preferred raw material used in a variety of implantable devices. In the deal, which demonstrates the potential seriousness of the situation, Biomet put its corporate assets on the line in support of Montell Polyolefins, Wilmington, Del., allowing that supplier to re-enter a market it abandoned in 1994 due to liability concerns.
At that time, Montell said it would no longer supply the resin, known as ultra high molecular weight polyethylene or UHMWPE, leaving device manufacturers with only one domestic supplier, Hoechst Celanese, Somerville, NJ. UHMWPE is a component used in the production of compression molded polyethylene products. Manufacturers such as Dow Chemical Co., Midland, MI, and DuPont, Wilmington, Del., exited the UHMWPE market earlier for the same reasons as Montell. Other orthopedic implant producers rely on resins made by Hoechst Celanese and foreign suppliers. Biomet has used Montell's resins for more than 18 years.
Details of the Biomet-Montell agreement were published in the February 1997 issue of orthopedics trade magazine, "Orthopedics Today." The agreement to restore Montell's market position was reached just as Biomet had hit the last few days supply of its UHMWPE reserves. To prop up Montell, Biomet pledged to assume liability for the raw materials up to the "book value" of its corporate assets.
I asked Mr. Greg Sasso about this agreement and he claimed to know nothing of it. I don't have the "Orthopedics Today" article in hand yet, but judging from the article that I have posted, the supply agreement between the company and Montell should have been filed with the SEC on form 8-K.
I really hope he was joshing me about having no knowledge of this agreement. His actual unawareness would manifest a significant internal communication problem at the company. He should not be informed on a need to know basis, he's supposedly the bridge between shareholders and the company, and the shareholders are still the owners. In an age such as this a company's management cannot afford to try and pull one over on its shareholders. Over the internet shareholders communicate.
In any case, if he really didn't know about this agreement and this agreement is legitimate, what's in it for the company beyond the supply of raw materials? I know the benefits of the polyethylene that Montell supplies, both the costs and its superior resistance to oxidative processes, but do we have an ownership stake in the company (Montell)? Will the per share growth rates of profits exceed that experienced historically in light of the increased risk to which shareholders are subject, or is this just an issue of continuing operations as is?
These are the sort of questions that I'd like the company to address.
Later on today I'll post last year's article concerning Montell's resolve to abandon the supply of this product because of the substantial risks. |
