Zimmer Holdings
(
ZMH
) has strengthened its spinal portfolio in the US with the
introduction of TM Ardis interbody system. This product, which
extends the application of the proprietary trabecular metal
technology, has been developed as a first application of a porous
metal implant with an interbody indication for the lumbar spine.
The company had released this product across Europe last month.
Sales from spinal products, contributing a mere 5% to the top
line, have been languishing over the past few quarters. This
segment witnessed high single-digit sales declines over the past
two years, primarily in the Americas, while Europe and Asia Pacific
recorded sales growth. Operational challenges related to the sales
force, a difficult reimbursement landscape and lower sales of
DynesysDynamic stabilization system affected sales numbers in the
Americas.
Zimmer, however, managed to partially mitigate these challenges
by robust sales of the PathFinder and Sequoia Pedicle Screw
Systems, Universal Clamp System and Trabecular Metal Technology
products. We are encouraged by the company's attempt in expanding
its spinal portfolio that should provide some cushion to its
struggling sales.
We also expect Zimmer to benefit from favorable long-term trends
that point toward sustained growth driven by an aging global
population, obesity, wear and tear of joints from more active
lifestyles, growth in emerging markets, new material technologies,
advances in surgical techniques and proven clinical benefits of
joint replacement procedures.
Moreover, the shift in demand to premium products, such as those
using trabecular metal technologies, hip stems with Kinectiv
Technology, high-flex knees, porous hip stems and the introduction
of patient specific devices, is expected to propel sales
growth.
Although the musculoskeletal market is suffering from reduced
procedure volume and pricing pressure, Zimmer believes that
clinically relevant and innovative products can still fetch premium
pricing and reimbursement. The company's recent product launches
are based on two principles - the development of customizable
implant and instrumentation systems enabling surgeons to deliver
personalized care to every patient (including options for lifestyle
demands, and providing relevant products that deliver long-term
value to patients, hospitals and healthcare systems).
Consequently, Zimmer is exploring opportunities to expand its
reach into early intervention products. However, the competitive
landscape is tough with the presence of players such as
Stryker Corporation
(
SYK
) and
Medtronic
(
MDT
), among others.
We have a Neutral recommendation on Zimmer. The stock retains a
Zacks #3 Rank (Hold) in the short term.
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