Orthopedics Growing 2.5x Faster than U.S. GDP
BY EDITOR, NOVEMBER 3, 2003
For the third quarter, with three more companies yet to report, public orthopedic companies have reported that their sales grew 17.5% on a year-over-year basis. To put that into perspective, U.S. GDP grew at a 7.2% annual rate in the third quarter for the fastest rate in 24 years. This “mature” industry of hip, knee and spine repair, this medical device industry of sawbones and carpenters grew at a rate that was 2.5 times faster than the economy. Its core patient population is over 65 years of age with the acceleration in demographic growth still a few years away. When will Wall Street wake up? This is the single most interesting and exciting industry in America, tackling the chronic diseases of arthritis, osteoporosis, back pain and trauma for over 75 million people (U.S.). It is also posting revenue growth that is 2.5x that of the overall economy. By the way, the industry is delivering even higher rates of cash flow growth.
Nineteen of the twenty-two companies we track in the HealthpointCapital Orthopedic index have reported their results for the September (or August) quarter. For the first six months of 2003, revenue growth reached 18% (year-over-year), which was well above expectations and well above 2002's 14% rate, or, for that matter, 2001's 11% rate. The third quarter revenue growth number, so far, is 17.5%. And that will likely, we think, rise in the normally strong 4th quarter.
Companies that reported an increase in their third quarter revenue growth rate from the 1st half of the year were;
- Biomet (16.6% in the calendar 3rd quarter vs. 15.98% for the previous six months)
- Interpore Cross (25.7% vs. 20.2%)
- DJ Orthopedics (6.6% vs. 4.8%)
- Orthofix (15.1% vs. 14.4%)
- Osteotech (17.5% vs. 4.8%)
- Wright Medical (28.6% vs. 17.9%)
Every other company in the HealthpointCapital index showed a slight decline in growth rate for the third quarter as compared to the first half growth, which is common in the seasonally slow summer quarter. Zimmer, for example, reported an 18% rate of YOY revenue growth for the third quarter, which was down from the 1st half's torrid 20% pace.
