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EDITED TRANSCRIPT**BMET - Q2 2012 BIOMET, INC.EARNINGS CONFERENCE CALL

EVENT DATE/TIME: JANUARY 10, 2012 / 9:30PM GMT

OVERVIEW:

Co. reported 2Q12 net sales of $725m, reported operating income of $104m andadjusted operating income of $220m.

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C O R P O R AT E P A R T I C I P A N T S

Jeff BinderBiomet Inc - President & CEO

Dan Florin Biomet Inc - SVP, CFO

C O N F E R E N C E C A L L P A R T I C I P A N T S

Matt Miksic Piper Jaffray - Analyst

Bob Hopkins BofA Merrill Lynch - Analyst

Bill CarlisleMorgan Stanley - Analyst

David Roman Goldman Sachs - Analyst

Michael Matson Mizuho Securities - Analyst

Dan SollofBarclays Capital - Analyst

Larry Biegelsen Wells Fargo Securities - Analyst

Kristen Stewart Deutsche Bank - Analyst

Matt Dodds Citigroup - Analyst

P R E S E N TA T I O N

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the fiscal year 2012 Q2 conference call. At this time, all participants are in a

listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) Also as

a reminder, today's teleconference is being recorded.

Some statements made during this call may be considered forward-looking statements.The Company's most recent press release, as well as the

10-K for fiscal year 2011, identify certain risk factors that could cause Biomet's actual results to differ materially from those projected in forward-lookingstatements made during this call. Both the press release and the 10-K are accessible on Biomet's website at www.Biomet.com, or by request. Biomet

undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. At

this time, we will turn the conference call over to your host, President and CEO, Mr. Jeff Binder. Please go ahead, sir.

Jeff Binder - Biomet Inc - President & CEO

Thank you,Tony. Good afternoon, and welcome to Biomet's second-quarter fiscal 2012 call for the three months ended November 30. As usual, I'l

start with our sales performance, and then our CFO, Dan Florin, will provide an overview of our full financial results. I'll conclude the prepared

portion of our call with a brief summary, and then we'll open the call for Q&A. The growth rates provided on this call will be quoted at constan

currency, which is a non-GAAP financial measure. Today's press release, which is posted on our website, contains our growth rates on a reported

basis, with a detailed reconciliation of reported to adjusted results.There have been no changes to the net sales results following the release o

the preliminary net sales results on December 19.

Let me start by talking about our sales results by geography. During our fiscal second quarter, net sales increased 3% worldwide to $725 million

US net sales increased 2% to $426 million. Europe net sales increased 1% to $195 million. And, net sales for our International region, which primarily

includes Canada, South America, Mexico, and the Asia-Pacific region, increased 8% during the quarter to approximately $104 million.

During our fiscal second quarter, we recorded the same number of billing days as compared to the second quarter of fiscal 2011. Based on ou

sales results during the quarter across multiple product categories, we believe the global orthopedic market at least stabilized, and perhaps

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improved, compared to the last several quarters.We won't know until our competitors report their results if the sequential year-over-year improvemen

we saw in our numbers was primarily a result of market growth acceleration, or market share gains. In addition, we believe it is probable that

changes in historic seasonality patterns in the United States -- that is, an increasing desire by patients to have elective procedures completed prio

to year-end -- may account for at least part of any apparent market improvement.

Let's look at our sales performance by product category. Our large joint reconstructive sales increased 3% worldwide to $442 million during our

second quarter of fiscal 2012, with US growth of 3% as well. In each case, the 3% worldwide and US growth represented our best year-on-year

growth since the first quarter of fiscal year 2011. In addition, worldwide hip sales growth of 6% and knee growth of 1%, both individually represented

our highest year-on-year growth rates in several quarters. As I mentioned before, we believe procedure volumes in the United States appear to

have stabilized, but we will not know the extent to which potential changes in seasonality affected the quarter, until we're several months into the

new calendar year.

In regard to Europe, we believe that the overall hip and knee market was stable to improving. From a Biomet perspective, we were very pleased

with what appeared to be above-market growth in knees and with our particularly strong performance versus the market in Germany, Italy, and

the Netherlands. In our International region, we recorded mid-single-digit growth for our large joint reconstructive sales. The teams in Japan and

Australia continue to perform very well, and we saw very strong growth in China. We believe we outpaced the market in each of these key

international countries.

Our fiscal second-quarter year-over-year pure price decline in our worldwide large joint reconstructive category was virtually the same as during

our fiscal first quarter, with our US pricing for hips and knees still negative in the low single-digit range.We continued to see positive mix in the

United States, principally from our new hip products, which partially offset the negative price. In Europe, pure price in our large joint reconstructive

category remained in line with what we saw during our fiscal first quarter.

Now, let's take a look at our specific product sales within our large joint reconstructive category, starting with knees. Knee sales increased 1%

worldwide and decreased 1% in the United States, during our fiscal second quarter. In the United States, the 1% decrease is a sequential year-over-yea

improvement, compared to our last three quarters of mid-single-digit declines. We believe this year-over-year improvement this quarter was

multi-factorial.

Our primary Vanguard knee sales showed signs of stabilization. Sales of our Oxford Partial Knee, while still declining, improved sequentially

year-over-year, and most notably, we received very strong market demand for our Revision Knee Systems, which included our new Vanguard SSK

360, which is in its clinical evaluation phase in the United States.We plan to complete these evaluations during our fiscal third quarter, highlighting

the SSK 360 at AAOS next month, and we expect to begin its full commercial launch in the United States during our fiscal fourth quarter.

Outside the United States, our knee sales grew at a mid-single-digit rate, primarily due to strong knee sales growth in Europe. This growth was

driven by strong market interest in the unique features and benefits of the Vanguard Knee, providing a catalyst for new business opportunities

there.We also noted increased market demand in Europe for our OSS, or Orthopedic Salvage System, and for our RHK, our Rotating Hinge Knee

Revision Systems.

Let me make a few comments regarding Partial Knees. As the market leader, we're well-aware that competitors have targeted and successfully

chipped away at some of our share in the Partial Knee market, and we've been working to add new products to our Oxford product portfolio tha

we believe will stabilize our Partial Knee business, and get us back in a position to begin realizing growth and market share gains once again in

this business. In the United States, we initiated a limited launch of our Oxford Microplasty Instrumentation at the end of fiscal 2011, which continued

into our first quarter, in preparation for our general roll-out that began during our fiscal second quarter. In Europe, we began a limited launch of

the Microplasty instruments during our fiscal second quarter, and we expect to initiate a full launch of these instruments there during our fisca

fourth quarter.

During our fiscal second quarter, we also continued the US commercialization of our Oxford Twin Peg Femoral Component, that we initiated during

our fiscal first quarter.We began a limited launch of the Twin Peg in Europe during our fiscal second quarter, to be followed with a phased European

launch during our fiscal third quarter. And, perhaps most importantly, as I mentioned on our last call, we've received US regulatory approval for

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the Signature system application to create positioning guides for use with the Oxford Partial Knee.We introduced the Signature technology at ou

Oxford Masters Course in New York during our fiscal second quarter, and we continued the early evaluation of Signature for Oxford throughout

the quarter.

We will be prominently featuring Oxford with Signature at the AAOS meeting in February, in preparation for a full launch in Q3, and we've planned

an OR live webcast featuring these technologies to be held on February 22.We believe that Oxford, including our product additions, and combined

with Signature, will compete extremely well, both economically and clinically with competitive systems.We're really looking forward to marketing

the technologies aggressively in the coming quarters, and to talking about how we uniquely combine an implant with excellent clinical history

with a highly innovative and cost-effective, patient-specific guide system.

Let's move on to our hip sales. During our fiscal second quarter, our hip sales increased 6% worldwide, and at a rate of 7% in the United States

New products continue to drive our hip sales growth, including the Arcos Modular Femoral Revision System, our Taperloc Complete hip stem, and

our Active Articulation Dual Mobility System. Strong demand for the Arcos System continued in the US during our fiscal second quarter, and we

plan to roll out 100 additional Arcos instrument sets during our fiscal third quarter.The Arcos System also received strong surgeon acceptance in

Europe during the quarter.This comprehensive system provides surgeons with 117 proximal distal combinations, using one simple instrumentation

platform for complex revision procedures.

During the quarter, we continued to see high demand in the United States and Europe for our Taperloc Complete Stem, and we plan to release

additional sets to the field during our fiscal third quarter.We received US regulatory clearance during the fiscal second quarter for our short-term

Microplasty version of the Taperloc Complete, and we have scheduled clinical evaluations to run during our fiscal third and fourth quarters. In

Europe, the GTS, or Global Tissue Sparing hip stem, continued to receive excellent market acceptance.The GTS is a primary cement-less, short stem

designed for less invasive and bone-conserving procedure.

We completed the roll-out of our Active Articulation system in the United States during our fiscal first quarter, and this Dual Mobility System was

well received by surgeons during our fiscal second quarter. The large head design of this Acetabular system offers the benefits of low wear and

low risk of dislocation, making it an excellent alternative to a metal-on-metal system. In Europe, we market the Avantage Dual Mobility System

which has been contributing to hip sales there.

There continues to be a great deal of negative pressure on the metal-on-metal market, and while the clinical results for our M2a-Magnum System

have been generally very good, our metal-on-metal sales continue to be negatively affected during the quarter. Notably, sales of our E1 components

continued to increase, keeping our super premium-bearing category in the US at approximately 70% of our domestic Acetabular units.

Next, we'll review our SET, or Sports Extremities and Trauma category. SET sales increased 12% to $85 million worldwide, and increased 11% in the

United States during our fiscal second quarter. As I mentioned earlier in the call, we won't know until our competitors report how much of our

growth in any particular market may be from an improved market versus market share gains, but we're pleased to see these growth rates.Within

SET, during our fiscal second quarter, our Sports Medicine sales grew 19% worldwide and 13% in the United States, against strong comps in the

prior-year quarter of 17% growth both worldwide and in the US. We're committed to the expansion of our Sports Med portfolio, and several of the

procedure-specific devices that are driving growth are new to the market and have been well received by surgeons. Key products during our fisca

second quarter included the JuggerKnot Soft Anchor for rotator cuff repair, the ToggleLoc Femoral Fixation device with Zip Lube technology, the

ZipTight Fixation System for ankle syndesmosis, the JuggerKnot Short Soft Anchor used for foot and ankle repair, and the TunneLoc Tibial Fixation

device.

Extremity sales increased 14% both worldwide and in the US during the quarter, against very tough comps of 23% worldwide and 36% US growth

during the second quarter of fiscal 2011. Some of you on the phone downplayed these results and pointed out after our preliminary report tha

those tough comps were actually easier than last quarter's. We kind of think that's quibbling, but we do appreciate the bulletin board materia

which only serves to fire up a team that's already pretty hard-working. In any case, our record streak for extremity sales held up again this quarter,

for a total of 16 consecutive quarters of double-digit sales growth worldwide and 14 consecutive quarters of double-digit sales growth in the United

States. Our comprehensive primary and reverse shoulder system continued to be in high demand in the US during our fiscal second quarter. In

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Europe, the TESS shoulder continued to receive strong surgeon support, while sales of the Comprehensive Shoulder System in Europe recorded a

strong growth rate off a relatively low revenue base.

Finally within SET, during our fiscal second quarter, our Trauma hardware sales decreased 1% worldwide and increased 1% in the US. While ouperformance might seem modest, it represented a significant improvement relative to recent quarters, and we're beginning to see some of the

benefits of our internal restructuring of the Trauma business to be managed within SET. Within Trauma, growth in worldwide sales of interna

fixation device was offset by continued sales declines in external fixation. Key internal fixation products that contributed to Trauma sales during

the quarter included several intramedullary nails -- the PTN nail, or Peritrochanteric nail, the Phoenix Intramedullary Nail, and the Phoenix Ankle

Arthrodesis Nail -- as well as the OptiLock VL Distal Radius Plating System, which offers plating options to stabilize a variety of risk factors.

Now, we'll transition to our Spine & Bone Healing category. Our Spine & Bone Healing sales decreased 5% to $77 million worldwide and decreased

5% in the US during our fiscal second quarter. During the second quarter, we continued to see some of the same issues that we've seen in previous

quarters, including soft volumes, mid-single-digit price declines, high reimbursement hurdles for certain procedures, and aggressive competition

from both traditional competitors and physician-owned distributorships.

Within Spine & Bone Healing, our Spine sales decreased 6% both worldwide and in the US during the quarter. I've said many times that product

differentiation is the key to success in Spine, and we're very excited about the number of new product roll-outs that we've scheduled in Spine ovethe next two quarters. We plan to introduce the Zyston Straight Spacer during our fiscal third quarter.This launch complements the continued

roll-out of our Zyston Curve, the TLIF Arc Spacer, which we introduced near the end of our fiscal first quarter.

During our fiscal fourth quarter, we also plan to introduce the Solitaire C-Spacer, which allows for insertion and locking of screws through the

spacer into the vertebral bodies above and below the fusion.The device is made of PEEK-Optima and has a titanium face plate that will accept and

provide for a mechanical locking of the titanium screws to the spacer.This will be Biomet's first offering in the anterior cervical stand-alone space

market.

We also expect to begin offering allogeneic stem cell services during our fiscal fourth quarter.The allogeneic stem cell offering will supply the three

essential components needed for robust bone formation -- osteogenic, osteoinductive, and osteoconductive properties. We will be one of only a

few companies that offer this service. And finally, during our fiscal fourth quarter, we're scheduled to introduce the [Lineum] Posterior

Occipito-Cervico-Thoracic System.This exciting system will feature our Helical-Flange locking mechanism and a unique translating thoracic pedicle

screw, a proprietary and cutting edge technology which represents the first top-loading thoracic, multi-axial screw with the addition of medial and

lateral translation.

Next, a brief review of Bone Healing sales, which include electrical stimulation devices for trauma, as well as bracing products. Our Bone Healing

sales decreased 4% worldwide, with a 3% decrease in the US.While we're not pleased with the decline, we believe we're seeing signs of stabilization

as this is the second quarter that we've seen sequential year-over-year improvement in our rates. During our fiscal third quarter, we expect to begin

a Beta launch of our new Biomet EBI Bone Healing System. Designed to be worn externally over the fracture site, this device provides cost-effective

treatment as a non-invasive alternative or adjunct to surgery.

Now, let's turn to our Dental sales. Dental sales increased 1% during our fiscal second quarter to approximately $74 million worldwide, and increased

11% in the United States, marking our fourth consecutive quarter of Dental sales growth in the US. Dental sales outside the US continued to decline

during the quarter, with continued weakness in our European Dental sales, which were partially offset by growth in our International sales.We

believe the soft sales performance in Europe was primarily the result of a weak market, with our southern business particularly affected by lumpy

sales to our distributors.

In regard to new products within Dental, we're currently in the middle of the limited launch of our BellaTek surgeon model, which combines the

use of our patented BellaTek Encode Impression System with intraoral scanning.This solution is designed to help surgeons build their practice by

improving the patient experience and outcomes while reducing treatment time and complexity. During our fiscal third quarter, we plan to

commercially introduce and expand an Abutment Restorative offering and components that provide more options to restore integrated

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platform-switching Tapered PREVAIL Implants. Our Tapered PREVAIL Implant has shown documented clinical success in reducing crestal bone loss

resulting in improved aesthetic outcomes.

During our fiscal third quarter, we plan to introduce our SMILE TODAY program, as a part of our DM2 solution, a treatment solution for partiallyand fully edentulous patients. The SMILE TODAY program provides clinicians access to a combination of electronic and conventional marketing

tools.This program further demonstrates our commitment to partner with our customers by providing them with enhanced product offerings.

In addition, we continue to augment our regenerative line in dental.We're completing the global commercialization of our new Endabon packaging

with improved handling features as well as OsseoGuard Flex, which is a resorbable collagen membrane engineered to provide flexibility while

retaining a suitable resorption profile. We also plan to introduce RegenerOss Allograft Putty Plus Mineralized Tissue, a mixture of DBM fo

osteoinductivity and mineralized allograft tissue for osteoconduction.

We'll now wrap up our sales review with our, quote, Other product category. Sales of Other products decreased 1% to approximately $47 million

worldwide during the quarter, and decreased 9% in the US. But our Microfixation sales increased during the quarter to double-digit rate both

worldwide and in the US, and were offset by decreased sales of Biologics and other products. During our fiscal second quarter, our Microfixation

sales continued to benefit from the introduction of the IQ Intelligent Delivery System.The IQ System was officially launched during our fiscal second

quarter, after being introduced to the market on a limited basis. This unique screw delivery system is designed to increase the speed of titaniumscrew insertion, and is primarily being used for neurosurgical procedures.We plan to expand the indications for use and provide for global availability

to drive continued sales growth during the second half of fiscal 2012. I'll now turn it over to Dan Florin, and Dan will provide the financial review.

Dan Florin - Biomet Inc - SVP, CFO

Thank you, Jeff, and good afternoon. I'll begin the fiscal second quarter financial overview for the period ended November 30, 2011, with our income

statement, followed by a brief review of our balance sheet, cash flow, and liquidity. My comments will include certain non-GAAP financial measures,

to offer a perspective that better matches how management views our performance. A detailed reconciliation of reported to adjusted results and

certain other non-GAAP financial measures were included in today's press release, which is posted on our website. Also, reconciliations of the

remaining non-GAAP financial measures discussed today have also been posted on our website.

As Jeff stated earlier, our net sales increased 4% during our second quarter of fiscal 2012 to $725 million. Excluding the effect of foreign currencynet sales increased 3%, compared to the same period for fiscal year 2011. During the second quarter, we recorded pretax special items of $116

million, which included $85 million of non-cash amortization and depreciation expense related to the merger. Non-merger-related special items

totaled $31 million during the quarter, with the most significant portion associated with our ongoing operational improvement program. In

November, we announced plans to consolidate our two manufacturing facilities in the UK, and close our Swindon facility, as we continued to

implement programs which optimize our plant network capacity.

Reported gross profit for the quarter was $490 million. Adjusted gross profit was $507 million for the quarter, for a margin of approximately 70%,

compared to adjusted gross profit of $501 million for the prior-year quarter. Our gross margin rate was impacted primarily by a decline in average

selling prices, as well as the impact of unfavorable manufacturing variances due to lower than planned production volumes, along with highe

instrument depreciation expense related to new product launches.

Reported SG&A expense during the second quarter was $271 million. During the fiscal second quarter, adjusted SG&A expense was $253 million

or 34.9% of net sales, which was an 80 basis point improvement compared to the prior-year quarter reflecting the benefit of our ongoing operationaimprovement program as well as good control over discretionary spending in all areas. Reported R&D expense totaled $31 million during our fisca

second quarter. On an adjusted basis, R&D expense increased approximately 7% to $31 million, or 4.2% of net sales, compared to $29 million, or

4.1% of net sales during the prior-year quarter.The R&D investment during the quarter continued to be dedicated to new product development

as well as regulatory and clinical affairs.

Reported operated income during the fiscal second quarter was $104 million, compared to operating income of $106 million in last year's second

quarter. Adjusted operating income was $220 million for the quarter, which was slightly lower than the second quarter of the prior year. Adjusted

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EBITDA was impacted by the lower gross margin rate, and totaled $266 million, or 36.7% of net sales for the quarter. Interest expense came in at

$121 million during our second quarter, compared to $123 million for the same period in the prior year, primarily due to lower average interest

rates on our term loan facilities.

Now, turning to the balance sheet and cash flow. At November 30, accounts receivable totaled $496 million, which compares to $480 million at

May 31, 2011, reflecting a worldwide DSO of about 62 days for the quarter, which is an increase of one day compared to the May 31 quarter as a

result of a more challenging collection environment. Net inventory decreased to $562 million at November 30 from $583 million at May 31, 2011

On a reported basis, net inventory turns at November 30 improved slightly to 1.57 turns, compared to 1.54 turns at May 31, and were relatively flat

on an adjusted basis at 1.46 turns.

Reported cash flow from operations totaled $11 million for the second quarter of fiscal 2012. CapEx came in at $42 million, or 5.8% of net sales,

which included approximately $30 million of instruments, at 4.1% of net sales, principally due to new product introductions in our Large Joint

Reconstructive business. Free cash flow during the second quarter was a use of cash of approximately $31 million, and our unlevered free cash

flow, defined as cash flow before debt service, was approximately $154 million. Cash paid for interest during the quarter totaled $192 million, which

included our semi-annual interest payment on our bonds.

Now, looking at our debt position. Our reported gross debt was $5.921 billion as of November 30, 2011, which was a decrease of approximately$99 million compared to May 31. The decrease in reported gross debt reflects $80 million of favorable foreign currency translation on ou

euro-denominated debt along with $19 million of debt payments. As of November 30, our cash and cash equivalents as defined by our credit

agreement increased $23 million to $384 million from $361 million at May 31. As a result, our net debt balance decreased approximately $122

million since May 31, 2011 to $5.537 billion at November 30, 2011.

Since May 31, 2008, which was the first fiscal year after the merger, we have reduced our net debt balance by $636 million, due to a $380 million

reduction in gross debt, combined with increase in cash and cash equivalents of $256 million. The $380 million decrease in gross debt includes

$188 million of favorable foreign currency translation on our euro-denominated debt and approximately $192 million in debt paydown. Our liquidity

position totaled approximately $1.1 billion at November 30, which included available revolving borrowings under all debt facilities of approximately

$714 million, the cash and cash equivalents of $384 million, plus $40 million accessible through the pick option on the toggle notes.

Before turning the call back over to Jeff, just a couple comments on our leverage ratios. As of November 30, our LTM-adjusted EBITDAm as defined

by our credit agreement, totaled $1.012 billion. And at the end of our fiscal second quarter, our senior secured leverage ratio was 3.33 times

compared to 4.16 times at May 31, 2008. We finished the quarter with a total leverage ratio on a net debt basis at 5.47 times compared to 6.97 a

May 31, 2008.That wraps up the financial review, and I'll turn the call back over to Jeff.


Thanks, Dan. I'll share some closing remarks, and then we can open up the call to Q&A. Overall, I'm very pleased with our fiscal second-quarter sale

performance. It feels like the market may have improved somewhat based on our sales results across multiple product categories.We think tha

we might be seeing some change in seasonality, with an increase in the proportion of patients presenting for surgery in the fourth quarter of the

calendar year. But I also note that our team has been working diligently in many areas of our business trying to build some momentum. I think that

we may have seen some market share stabilization, if not some market share gains in some categories. All of this is speculation, of course, and we

won't know for sure until everyone reports.

Our large joint reconstructive business had been pretty much in line with the market over the past four quarters, which is not where we wanted

to be, of course. But this quarter, we'll just have to wait and see how the market shapes up.We have some great new products on the market, which

we'll be showcasing at AAOS next month, and we're excited about our pipeline. As I've said before, our hip performance indicates the continued

importance and power of successful product launches, and we expect to see similar upticks as we execute important launches on the knee side

starting with our reinvigoration of our partial line.

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Again, this quarter, I'm very pleased with the sales growth coming from our SET product category. It's great to see double-digit growth for this

category, after our previous quarter was in the single-digit range. Our Dental sales continued to improve, with double-digit growth in the US and

positive growth worldwide, following a couple of quarters of decline. Microfixation sales continued to be very strong this quarter, and the team

there has continued to execute very well.

And, then from a geographic perspective, both our European and International teams appear to have performed very well versus the market in

Reconstructive.While we still have some major work to do in a few of our product categories, we'll continue to focus on those as we move forward

into the new calendar year, and at this time, we'll open the call for questions.

Q U E S T I O N S A N D A N S W E R S

Operator

Thank you. (Operator Instructions) We'll take our first question in queue from Matt Miksic with Piper Jaffray. Please go ahead.

Matt Miksic - Piper Jaffray - Analyst

So one question on some of the drivers of growth here in the quarter, and then just one quick follow-up.The first, just on the composition of the

hip growth, you've got a couple of new products, some that you've been talking about for multiple quarters, and some that you have launched

more recently. Looking at the sequential improvement in growth, can you give us some color as to how much of that is sort of an improvement in

your base business, and how much of that improvement is really substantial contributions from these new products, kind of moving the needle?

As I say, I have one follow-up.


I would say without discussing specific numbers, it would be fair to say that much of the growth that we're seeing is from the new products.


Okay. And that would be Arcos and the mobile bearing product or --?


It would be all three, it's Arcos, it's Taperloc complete and it's the Active Articulation.


Got it. Okay.That's helpful. And then the second is just on the European performance as you just mentioned, outperforming what we expect to

see from the rest of the folks. I guess is that -- how do you characterize that? I think if there's one thing that we're worried about as we look aheadin the coming quarters, it's potentially slowing performance in Europe for obvious reasons. Help us understand maybe what drove the out

performance, and then also maybe how we should think about the next -- how you're thinking about the next several quarters, given the risks to

those geographies?

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Yes. I think it was a combination, Matt, of both the market being a little bit stronger than we might have expected, and our own performance versus

the market being pretty strong, especially as I said, on the knee side. On hips, I think we're -- feels like we're kind of tracking with the market, but

on knees I think we've done a little bit better. And then the market overall seems to have -- it's not going gangbusters but where it was goingbefore, it seems to have accelerated a little bit from there. It's not great, but it's a little bit better than it was.

So I think you put those two factors together. And then geographically, we've been doing real well in a couple of particular markets, Germany is

an example of that. We've also done well in the Netherlands. We've done well in Italy, and a couple other places in the quarter. So I think it's al

those things.The market ticking up just a touch, our own performance versus the market ticking up a touch, based on some good execution ove

there.


And the looking forward part?


I do look forward, yes. It's so hard to say, especially in Europe. I think that most analysts, and to some extent ourselves, we're not real bullish on

growth for Europe for this year, but this quarter was a little better than we thought it would be, and I'm hard-pressed to predict where it goes from

here. Having said all that, Matt, I have to say, we're talking about a market that's performed in a fairly narrow range.This is not a huge improvement

in the market, but it does appear to have ticked up a bit.


Thanks so much.

Operator

Thank you. Our next question in queue, that will come from the line of Bob Hopkins with Bank of America. Please go ahead.

Bob Hopkins - BofA Merrill Lynch - Analyst

I just want to follow up on Europe a little bit because -- I realize these year-over-year growth rates aren't changing that materially, but Q1 you were

quite cautious and had one of the weakest growth quarters you've had in Europe in a long time, and then in Q2, more optimism and one of the

better quarters you've had in Europe in a long time. So just wondering if there's any way to hash that out a little bit more, and maybe there isn't.

And if there isn't, when we think about the future in Europe, is there anything that you can point us to, to give us confidence that Europe can stay

in this low-single-digit kind of growth dynamic or do you not have that good visibility at this point?


I'd say honestly it's the latter. I don't have great visibility and I don't think anybody really does have great visibility. I certainly hope that this is

something that the market can build from. I certainly hope that it's something that Biomet can build from. But as I said before, it's just so hard.

It's hard enough in the United States, Bob, and then in Europe, you just, as you well know, you have this phenomenon or dynamic of -- we talk

about Europe, but of course it's a number of individual countries, all of which have fairly complicated dynamics going on in their markets, relative

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to macroeconomics, relative to government spending and budgets, relative to healthcare regimes, and you could spend a long time just talking

about each individual country, much less the continent.

And so it's hard to predict. I know it's trite but we try to really focus a lot more on whatever that market growth is going to be in Europe, we wantto out-execute our competitors and we want to try to grow a little bit faster than that and if we can do that, we feel pretty good about it.


I appreciate the answer. Two other real quick follow-ups. At AAOS, is Oxford with Signature probably the most prominent thing for you guys a

AAOS? For Dan, on gross margins, you called out price a little bit, and yet pricing really hasn't changed. Was that normal part of the script, or was

there something else going on there on gross margins worth pointing out?


Okay.Well, on the first part, we love all of our product categories equally. So we're excited about what we'll be talking about in all of them.We are

particularly excited about Oxford with Signature.We'll be talking about that a lot at Academy. And I'd say it's among our most featured introductionsOxford with Signature.


And Bob, on my comments on gross margin rate were a year-over-year comparative. So as opposed to the sequential. Definitely, we're -- while it's

consistent, fiscal Q1 and Q2, we saw the same amount of pressure when compared to year-on-year and the favorable mix helps the revenue side

for sure but it -- from a gross margin rate perspective, slightly worse than the predecessor product so that's putting a little bit of pressure on the

rate side of things. And from a planned production volume you saw a nice decline in our inventory levels, so we're producing even below the sales

level to drive inventory down, so that's flowing through the P&L as well.


Great.Thanks, guys.

Operator

Our next question in queue, that will come from David Lewis with Morgan Stanley. Please go ahead.

Bill Carlisle - Morgan Stanley - Analyst

This is Bill Carlisle on for David Lewis.


You're a touch tough to hear.


Okay. Can you hear a little bit better now?

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11/18


Yes, I can. I'm picturing you all skulked in corners on your cell phones at JPMorgan now.


Unfortunately I think it's just a bad headset.Thinking about some of the headwinds to price that we've seen for a couple of quarters now, particularly

as they relate to hospital consolidation and greater physician employment by hospitals, how much more room do you think these trends have to

run before reaching a sort of steady state? Maybe asked a little bit differently, how do you factor these specific trends into your medium or longer-term

planning as it relates to price?


I would say what I find remarkable about pricing trends at this point is while they're negative, they're stably negative which I mean to say they're

not accelerating. If you look at both Europe and if you look at the United States, our pure price numbers for the past several quarters have been in

a really, really narrow range. So that's not to paint it as a positive story, because they're stable at a negative growth, but they are stable. The

persistence of that is hard for me to predict. Certainly, as we model the next couple of years, we assume continued low single digit price pressure

I think it's a reasonable assumption. And that's what we see. But there's no certainty to that.


Okay. And then on a different topic, in Partial Knees, of course Signature with Oxford is going to be a big product for you guys coming up and

hopefully will stem some of the share loss, particularly as it relates to competitors with robotics. And so I guess given the way that you are positioning

some of your products, particularly in Partial Knees, how much of a, I guess, competitive threat do robotics look to be in the future? Do you see

more competitors entering that market or is it more just to combat kind of the steady state that we're seeing right now?


I've certainly read what some of you have reported about potential competitive launches in the robotics space in addition to what we currently

see out there. We do strongly believe that our technology, and just to talk about Oxford with Signature in the Partial Knee space stacks up

extraordinarily well against robotic offerings, both from a clinical perspective, in that we're selling an implant with extraordinary clinical results

that we don't believe our competitors can match, from the perspective of the innovation of the guides.

And then I think from an overall economic proposition to the hospital, I think we're going to be able to show that our solution, Oxford with Signature

is a less expensive proposition in terms of overall economics to the hospital, while providing as much innovation as you get from robotics, as much

predictability, and on top of that, an implant that's absolutely survived the test of time. So I think you put all of that together, and we have an

extremely good selling and marketing proposition, relative to robotics, and we'll have to prove that on the street. But we feel very, very comfortable

making that argument.


All right. Great.Thanks for the time, guys.

Operator

Thank you. Our next question in queue will come from David Roman with Goldman Sachs. Please go ahead.

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12/18

David Roman - Goldman Sachs - Analyst

Good afternoon, everyone.Thank you for taking the questions. I wanted to come back to your hip business for a second. One of the things that

you've talked about, Jeff, in the past is that some of the accounts where you had metal-on-metal presence, you weren't penetrated that deep intothose accounts, such that when metal-on-metal started to go south you actually ended up losing either the entire account or most of it. If you

could maybe update us on where that trend stands, and how you might have been able to reverse that with the E1 roll-out?


I think we're just doing a better job with E1. I think we're doing a really good job with the launch of the Active Articulation, which gives us yet

another option in that space. So I think you put all that together, and I think we're executing a little bit better.


And then on the knee side of the business, you talked a little bit about Partial Knees being down in the US. Is that a result of new competition, or

is that tied to more macro factors given that Partial Knees tends to be a more non-Medicare procedure?


I think it's a little bit of both. I think that the Partial Knee market overall has been soft, and I think that does tie to macroeconomic factors and obviou

-- not obviously, but Partial Knees are going to be more of a private pay market than total knees are going to be. So I think there's that factor. But

I think sometimes you also do have to give credit to your competition, and I think there's no question that we've had competitors both on the

nontraditional robotic side, and then on the more traditional side who have come after us very hard, given the success of Oxford, and they've done

well.

And it's up for us -- it's up to us to respond to that, and similar but different to what I said before about Europe, no matter what market growth is,

our job is to do better than that and gain market share.We set that challenge for our teams in every single one of our product areas and every one

of our geographies, and so in this case, I think it's a bit of both, but I also think that we can do a heck of a better job executing.


And then lastly for Dan, on the gross margin line you talked about I think two factors influencing gross margins being under pressure on a

year-over-year basis. The first was negative average selling price. The second was I think manufacturing variances. On the pricing side, is there

anything you can do, should the pricing environment remain sustainably weak, to either streamline certain manufacturing processes to offset tha

impact, or is the gross margin really just that sensitive to negative price? Then manufacturing variances, is that just a result of overall weakness in

the end markets, or is that another factor at play there?


Well, certainly as pricing comes down, that puts lots of pressure on the GP rate. How we respond to that is just as I said in my prepared remarkswe've had an ongoing improvement program for four-plus years. We've closed a number of manufacturing plants, including as I said this past

November, one of our UK facilities, the announcement of that. That's not an easy decision to make. But part of how we offset or try to offset the

pricing environment.

From a production volume perspective, we have a lot of inventory. I think that's inherent to the industry. But as we launch new products and look

to move inventory levels down on existing products, we see opportunity to just take inventory out of the system. And so that negative production

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13/18

variance is just going to flow, as we sell that inventory. So I think we have, in our case, a few more quarters of negative variances to flow through

the P&L and then we'll start to see another range of benefit flowing through from some of the actions we've taken over the past 12 months or so


Okay. Great.Thanks so much.

Operator

Thank you. Our next question in queue will come from Michael Matson with Mizuho Securities. Please go ahead.

Michael Matson - Mizuho Securities - Analyst

I guess first of all, just in the hip business, you mentioned that metal-on-metal continues to decline and obviously you're being able to offset that

with some of your other products. Do you think that we're going to see that just looking at the entire industry sort of let up here? Seems like tha

kind of peaked about a year ago, kind of late 2010, I guess it was. So do you think that's sort of run its course, and it's going of to stabilize in 2012,

or do you expect it to continue to decline at a similar pace?


Actually, it peaked earlier than that, probably back in 2009. And it's been declining for a while so that it's never, quote, anniversaried out, because

it's just been declining proportionately as part of our sales. I think at some point, probably about a year from now or so, the effect will be -- it wil

plateau and there won't be much of an ongoing effect but I think for the time being for the past couple of years and probably for another year o

so, you're going to see some impact from that. As we've talked about many times, we're doing everything we can to mitigate that impact, and

think we're doing a better and better job of that. I think what you're seeing in the hip numbers is not so much a lessening of the phenomenon o

the decline of metal-on-metal as a proportion of sales, but more just improved execution on our part in addressing that.


Okay. And then I just had an additional question on the stem cell allograft product that you mentioned. Just wondering if you could give us a little

more detail on that product and I know that IP has been an issue in that area, and just wondering if you're concerned at all about any patent

litigation from some of the companies out there that already have those products.


Well, we would never launch a product where we thought we were infringing other people's patents, so that's clearly not a concern for us.We've

done a lot of work on both the regulatory and intellectual property sides of this, and we feel really good about what we're launching.


Okay. All right.Thanks a lot.

Operator

Thank you. Our next question will come from Adam Feinstein with Barclays Capital. Please go ahead.

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Dan Sollof- Barclays Capital - Analyst

So first of all. Like-for-like pricing, you guys are talking about down low-single-digit kind of been stable for a while. You guys mentioned you're

getting some benefit from mix. So was curious, would you characterize mix as tougher to get now versus several quarters ago with some of thechallenges out there, and do you think mix can get -- do you think mix can get tougher going forward, or is there some level of confidence on your

part that customers will continue to pay for it?


Ironically, if anything, mix has improved for us the last couple of quarters. I think it has to do with releasing products that make a difference, in

combination with the fact that we've had, I'd say a disproportionate share of our growth, first in hips and now on knees from revision systems, and

revision systems do come at a higher price point than primary systems. But I think products like Active Articulation, E1, certainly some of the

products that we hope to release, there still are opportunities out there to be able to drive some mix. It's not as easy as it once was.

I think you have to come to the market with an extraordinarily good value proposition, but I think those opportunities exist. I think it's harder.

think the magnitude is going to be less than it was in previous years, but if anything, I think we've done pretty darn well from a mix perspective onthe revenue side in the last couple of quarters.


Just a real quick follow-up on customizable solutions, you guys and your competitors have really talked about the opportunity there, and we've

seen it on the knee side. Looking over to the hip side, that's not something we've heard that much about. Do you guys view that as an opportunity,

and if so, how far down the road we looking?


My personal opinion is that the shorter term opportunities, in terms of patient-specific implants are on the knee side. I would say on the hip side

though, there is still a lot of room for improving the alignment and orientation of implants and we do -- we're doing a lot of work on that.


All right.Thanks, guys.Very helpful.

Operator

Thank you. Our next question will come from Larry Biegelsen with Wells Fargo.Your line is open.

Larry Biegelsen - Wells Fargo Securities - Analyst

Just two questions. First, on the Japan price, biannual price cut.What are you guys assuming for this round? And then I have one follow-up.


We're not yet talking about any specific assumptions until we see it play out. I think on the last round, it looked like about a 5%, mid-single-digit

type hit. And we think this time it will be around a mid-single-digit hit. Could be a touch worse but we'll have to see how it all plays out.

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You're talking about for Biomet specific?


Yes.


Okay.You weren't talking about the industry overall, you were talking about for Biomet.


No, I focus on the good guys.


Okay. And secondly, we've seen some procedure volume that suggests that the US knee market deteriorated in the second half of 2011. It sounds

like, based on your commentary that you wouldn't agree with that data. In other words, you didn't see a deterioration in knee procedure volume

in the US in the second half? Thanks.


Well, I would say this, that if you were just to look at our results for not the second half of the year but for our first two fiscal quarters, which is kind

of close, we saw in the United States, I think it was a 4% decline last quarter, and a 1% decline this quarter. So let's say that's a -- for the first half

somewhere between a 2% and 3% decline and let's say price decreases are, as we've said, low-single-digit.That nets to in the ballpark of either flator a slight decline in knee volumes.That's just the Biomet experience, right? If I do the math on that, depending upon what competitors repor

and what market share looks like, knee volumes in the United States,Yes, flattish. We'll see how others report, but despite my optimism about the

fourth quarter and the possible seasonality changes, no matter what we're talking about here, we're not talking about significant volume increases

if any.


Thank you.


Thought I would do some type of the mind math today for everybody just to keep everybody interested.

Operator

The next question comes from Kristin Stewart, Deutsche Bank. Please go ahead.

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Kristen Stewart - Deutsche Bank - Analyst

Jeff, I guess just in terms of the seasonality, I'm just curious, if I guess for you guys just seeing any differences within monthly trends and is some

of your commentary based on what you've been seeing so far in December, and is that kind of leading you to believe the seasonality effect?


My comments really have very little to do with December.They have to do with essentially extrapolating a little bit off what we saw last year in

combination with more anecdotal information. I think if one looks at pure sequential trends that we experienced last year, as we went from the

calendar fourth quarter of 2010 to the calendar first quarter of 2011, we saw an anomalous sequential drop-off, at least it seemed anomalous to

us.You combine that with some anecdotal reports that patients are trying to push surgeries into the fourth quarter.

Patients have always -- we've always seen some waiting until the calendar fourth quarter because patients have always wanted to get surgeries

done at the end of the year, but the theory is that, that might be changing a little bit and becoming a little bit more exaggerated.You have people

going onto lower deductible plans, higher copay plans as the calendar flips, you would think that those people who have maybe chosen because

of their employers' incentives to pay less for lower deductible and higher copay plans, that those people might be that much more inclined than

they would have been historically to get some of those procedures into the preceding calendar year, before their plan changes.

And so this is theory. But I think it's reasonable to project that theory might lead to a higher percentage of procedures going into the fourth quarter

and as we talked to some surgeons, not all, but some surgeons tell us that yes, they did see a lot of patients this year who wanted the procedure

in the fourth quarter.They are elective procedures, many of them, and we'll have to see how that plays out.


Great. So I guess it sounds like we won't really -- I guess some of the stabilization that might be apparent is just more seasonality and it sounds like

the first calendar quarter results are probably not going to -- to the extent it is seasonality, that might be soft, so it may not be for a couple more

quarters until we can really convincingly say we've got a stable market. Is that fair?


Yes, that's fair.


And then -- go ahead.


You go ahead.


You go first.

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I was just going to say that the next question was going to be the last question but that's kind of irrelevant because you're in the middle of this

question.


Actually, I'm good. Don't worry.Thanks.

Operator

The last question comes from the line of Matthew Dodds of Citigroup.

Matt Dodds - Citigroup - Analyst

Good afternoon. First, Dan, you gave some mix comments before about the US being positive. Can you say anything about the US -- the Europeanand international markets, what the mix is like there?


Yes, my comments were in the context of the gross profit rates, and the fact that some the newer products and the revision products or some of

the newer products we're launching have a lower GP rate than the predecessor products.


I apologize, Jeff, you're the one that commented on the mix up front in the US.


Yes.


How's Europe and international compared to the US comment?


I would just answer it by saying that in general terms, we see mix as somewhat less of a phenomenon outside the United States as we do within

the United States. In fact, we don't even track it as closely. I'd say the story outside the United States that we track more closely is just pure price.


And then just one quick follow-up. On the revision comments, can you at least say if the revision products in hips and knees grew faster than you

overall rate in hips and knees?

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Yes, I can say that, and they did.


A lot faster? I was wondering in knees in particular.


They grew somewhat significantly faster, but obviously it's a much lower base. So I wouldn't -- just because it's such a small percentage of the

market and less than 10% of our sales, so I wouldn't extrapolate from that, that means that our primary offering grew significantly at a slower rate

than our overall growth. But yes, our revision growth rates were very nice.


Thanks, Jeff.Thanks, Dan.


Sure. All right, thank you everybody.We appreciate your time.

Operator

This concludes our conference for today.Thank you for using AT&T Executive Teleconference Service.You may now disconnect.

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