Zimmer Expands in Extremities

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Recently, leading orthopedic medical device giant – Zimmer Holdings (ZMH) has won Food and Drug Administration’s (:FDA) 510(k) clearance for its latest Patient Specific Instruments (PSI) Shoulder system. Since May 2013, Europe has been enjoying limited availability of this shoulder system and with the 510 (k) clearance, this device will now be easily available to orthopedic surgeons across the U.S.

According to the company, this PSI Shoulder device complements the Trabecular Metal Reverse Shoulder system for reverse shoulder arthroplasty (:RSA) procedures.  This advanced shoulder device with its 3D visualization software allows patient-specific surgical plans and customized instrument guides to facilitate placement of the implant.

Zimmer's Trabecular Metal Reverse base plate implant system has been leading the RSA market for the last two years and each year, more than thousands of patients benefit from the Reverse Shoulder Arthroplasty. Thus, the success of this PSI device, which complements the Trabecular Metal Reverse base plate implant system, is unquestionable and its contribution will prove indispensable to the future expansion of the company’s growing Extremities business.

At present, Zimmer is strengthening its product portfolio to drive its top line. Moreover, the ongoing shift in demand to premium products, such as Prolong and Vivacit-E Highly Crosslinked Polyethylene, Trabecular MetalTM Technology products, high-flex knees, porous hip stems, and the introduction of patient specific devices, is expected to continue to advance sales growth. Along with the focus to drive Reconstructive and emerging businesses, Zimmer is exploring opportunities to expand its reach into early intervention products.

We are also encouraged with the favorable long-term trend that points toward sustained growth for Zimmer, driven by obesity, wear and tear of joints from more active lifestyles, growth in emerging markets, new material technologies, advances in surgical techniques, and proven clinical benefits of joint replacement procedures.

More importantly, the percentage of population over the age of 65 in the U.S., Europe, Japan, and other developed regions is expected to nearly double by 2030. In the U.S., the oldest baby boomers are now pushing retirement age. We believe that Zimmer is benefiting from this aging demography since knee and hip joints tend to wear out with age and therefore require replacement.

Meanwhile, in order to streamline its business, Zimmer plans to continue with its global restructuring program. Several new products are slated for launch that will have a positive impact on the top line. However, macroeconomic uncertainties and unfavorable currency continued to adversely impact sales during the last reported quarter.

Zimmer has a Zacks Rank #3 (Hold). Other medical stocks such as Alere (ALR), with a Zacks Rank #1 (Strong Buy) and Align Technologies (ALGN) and MWI Veterinary Supply Inc. (MWIV), both carrying a Zacks Rank #2 (Buy), are worth considering.

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