While Some Sectors Struggle, Early 4Q Results Show Stability for Ortho
BY LAUREN UZDIENSKI, JANUARY 14, 2009
Over the weekend, Slate.com posted a report on some of the reasons why the healthcare industry may be more vulnerable to a recession now than in the past. However, the article also helped to highlight the ways in which orthopedics may be a less risky sector, and early earnings reports may help to confirm that hypothesis.
Slate suggests that healthcare spending is currently made up of a greater portion of discretionary procedures - such as cosmetic procedures and LASIK - than during previous recessions. Additionally, health spending accounts (HSAs, where patients use pre-tax dollars to cover healthcare costs) have become more common, and deductibles have gone up since the 2001 recession. These costs would be sensitive to patients increasingly strapped for cash.
Despite concerns for discretionary health spending, there is some evidence that orthopedic procedures have held up so far. Though Stryker previously lowered its 4Q revenue expectations, those adjustments were attributed largely to declines in hospital capital spending and not reduced orthopedic procedure volumes. The company pre-announced 4Q:08 earnings last week, with sales of orthopedic implants up 9% in both the fourth quarter and the full year on a constant currency basis.
Additionally, Biomet reported their FQ2:09 yesterday, and worldwide recon sales grew 10% on a constant currency basis, with hip increasing 14% and knee up 10%. U.S. recon was up 11%. Spine sales increased by 9% constant currency. While their fiscal quarter only goes through November 30, their results set a positive tone for the industry as we await 4Q earnings reports.
