Zimmer to Present at a Conference - Analyst Blog


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Leading orthopedic medical devices company, Zimmer Holdings ( ZMH ) has decided to present at the upcoming J.P. Morgan Health Care Conference in San Francisco, California, on January 10, 2012.

Although the musculoskeletal market is witnessing several challenges in the form of reduced procedure volume and pricing pressure, Zimmer, based in Warsaw, Indiana 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 that also includes options for lifestyle demands, and providing relevant products that deliver long-term value to patients, hospitals and healthcare systems. Along with the focus to drive Reconstructive and Emerging businesses, Zimmer is also exploring opportunities to expand its reach into early intervention products. We expect the company to share its views on the uptake of the newly launched products and future plans.

Further, in an effort to streamline its business, Zimmer has resorted to the restructuring route, which is expected to generate annualized pre-tax savings of more than $100 million. The various initiatives include management de-layering, consolidation of sourcing activities and optimization across global manufacturing network. To meet this objective the company plans to source manufactured components to ensure highest quality, lowest cost and optimal after-tax returns.

With economic uncertainty taking its toll on procedure volume in both the US and Europe, companies are increasing their focus on emerging markets and Zimmer is no exception. The company's investments in these regions over the past several quarters to improve operational and sales performance are yielding results. Besides, with stabilization in the global economy, the growth in procedure rate in the developing or emerging markets is on the higher side because of lower penetration rates compared to the developed markets (from low single digits to more mid-single digits).

However, decline in procedure volume will continue to be a major overhang for the company. This scenario has impacted the orthopedic companies across the board including Zimmer's peers such as Stryker Corporation ( SYK ) and Smith & Nephew ( SNN ). Besides, pricing pressure remains a concern for the company. With several European countries continuing to adopt austerity measures, we expect Zimmer to provide an updated outlook at the conference.

We are currently Neutral on Zimmer, in line with the short-term Zacks #3 Rank ("Hold").

SMITH & NEPHEW ( SNN ): Free Stock Analysis Report
STRYKER CORP ( SYK ): Free Stock Analysis Report
ZIMMER HOLDINGS ( ZMH ): Free Stock Analysis Report
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