ZMH Expands with Global Spine Deal - Analyst Blog

In an effort to pave its way through the lateral access surgeries business, Zimmer Spine, a division of Zimmer Holdings, Inc. ( ZMH ), recently formed a distribution alliance with Michigan-based Frontier Medical Devices. Lateral access surgeries constitute a fast growing segment within the global spine market. As per this exclusive, long-term deal, Zimmer Spine will market the Lateral Locking Cage (LLC), a minimally invasive lateral interbody cage, globally.

The LLC by Frontier Medical Devices is the first-in-class minimally invasive lateral approach to treat degenerative disc disease and instability that includes grade 1 spondylolisthesis or retrolisthesis. It fixes the cage to the lumbar vertebra and offers various implant sizes to suit different patient anatomies and pathologies.

Notably, revenues from spinal products (accounting for approximately 5% of total revenues) were languishing over several quarters until growth was witnessed in the last reported quarter. After several quarters of drag in spine sales, Spine recorded an increase of 4% (at CER) to $54 million, with significant performance improvements from all geographic regions. We are further encouraged by Zimmer's attempt to expand its spinal portfolio to further cushion its sales.

According to the company, Spine has ultimately returned to growth with its focus on core fusion solutions such as the inViZia Track Anterior Cervical Plate Systems and the TM Ardis and TM-S Interbody Fusion devices. Moreover, early results from the recently introduced APEX Spine System are expected to expand the spine portfolio into a broad range of degenerative deformity and complex spine conditions. Zimmer is optimistic about its plan to build on this improved performance in the forecoming quarters.

Given the challenging macroeconomic conditions, the company's strategy of new product launches, growth through partnership, employment of new technologies and expansion into emerging markets, is likely to pay off well.

However, macroeconomic uncertainties and unfavorable currency adversely impacted sales during the reported quarter. The situation is likely to improve gradually as procedural deferrals reduce with time.

Moreover, the company is working on portfolio expansion and focusing on emerging markets to benefit from favorable long term trends. Meanwhile, in order to streamline its business, Zimmer plans to continue with its global restructuring program. Several new products are slated for launch that are expected to have a positive impact on the top line.

Zimmer presently has a Zacks Rank #3 (Hold). Some better-performing medical stocks are Boston Scientific Corp. ( BSX ), St. Jude Medical Inc. ( STJ ) and Mead Johnson Nutrition Co. ( MJN ). All these stocks carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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