The 3Q:04 Earnings Season is Half-way Completed for Large Joint Manufacturers: Any Trends?
BY JOHN CHOPACK, OCTOBER 25, 2004
Three of the seven leading large joint orthopedic manufacturers have reported their 3Q:04 financials. So far, market growth rates on a constant currency basis remain in-line with the growth rates reported by industry leaders DePuy, Biomet and Stryker in the first half of 2004. Hip market growth rate for the three manufacturers that have reported to date was 10%, which is the same as the 2Q:04 rate for the broader hip replacement market. The 16% constant currency growth rate is also exactly the same as the broader market rates reported in 2Q:04.
Table 1 - Large Joint Constant Currency Growth Rates for 3Q:04
Table 2 - Large Joint Constant Currency Growth Rates for 2Q:04
With Zimmer, Smith & Nephew, Wright, Exactech and Encore to report shortly, we expect the 3Q:04 hip and knee growth rates to resemble the rate of growth seen during the 2Q:04. Things to look and listen for:
- Ceramic-on-ceramic hip penetration - Stryker has already reported that ceramic acetabular liners represented 32% of all of their acetabular liners sold in the quarter. This is exactly the percentage reported during the 2Q:04. Is ceramic penetration for Stryker, Wright and Encore topping out? Maybe this could explain the slow down in the rate of growth of the hip market.
- Mobile bearing knee approval - Although the FDA panel recommended a down classification of the mobile bearing knee, it has yet to happen. We believe a down classification represents an excellent way for manufacturers to increase knee revenues by taking advantage of a shift in product mix to a premium priced mobile bearing prosthesis.
- Next to market with ceramic-on-ceramic hips - Stryker, Wright and Encore launched their ceramic hips during 2003. Next to market should be Smith & Nephew, Biomet and Exactech. We anticipate that the growth rate of the hip market will increase as more manufacturers launch a premium priced ceramic hip system.
- Pricing - Stryker reported that pricing pressure is occurring within some of their territories. We expect pricing to remain in the 2-3% down from the 3-5% range the market experienced during 2003.
Here is a schedule of when the rest of the major players will be reporting their 3Q:04 financials and holding conference calls to discuss their financials.
Table 3 - Remaining Earnings Schedule for Large Joint Manufacturers for the 3Q:04
