Zimmer Holdings, Inc., according to Bank of America analyst Bob Hopkins, just reported the company’s best revenue growth in years.
The reported second quarter 4% increase in sales to $1.17 billion by the largest hip and knee maker in the industry continued the theme of stability in orthopedics. Net currency impact for the quarter decreased company revenue by 1.6% or $18 million.
Zimmer President and CEO David Dvorak told Wall Street analysts on July 25, 2013, the company expects to “sustain this accelerated top line performance in the second half of the year.” Full-year revenues for 2013 are now expected to increase between 4.0% and 5.0% on a constant currency basis from 2012. Previously, the company had estimated full-year revenues would increase between 2.5% and 4.5% constant currency.
Dvorak continued that in the second quarter, musculoskeletal markets demonstrated stability with modest improvements over the first quarter. This was in line with trends from the previous several quarters, as well as company management expectations for the full year.
Knee sales rose 4% to drive overall reconstructive sales up 2%. Hip sales remained relatively flat. Trauma was flat and spine sales climbed 3%. The big winner was extremities, which rose 14%. Knee growth, said Dvorak, benefited from promising sales of Gel-One, Zimmer’s single-injection hyaluronic acid treatment. It was too early to see any impact from the introduction of the company’s Persona knee.
Spine’s growth rate represents a “noteworthy turnaround” from recent quarters with significant performance improvements from all geographic regions, added Dvorak. Zimmer Spine’s return to growth has been led by a focus on the company’s core fusion products, such as the inViZia Anterior Cervical Plate Systems, as well as the TM Ardis and TM-S Interbody Fusion devices.
During the quarter, the company announced the acquisition of Knee Creations, LLC, with its joint preservation procedure called Subchondroplasty and NORMED Medizin-Technik GmbH, with trauma and extremities products. The company also set aside $47 million for worldwide claims related to the Durom Acetabular Component.
Joanne Wuensch of BMO Capital Markets said it is hard to argue with revenue increasing 5.5% on a constant currency basis. She said while it looks like the company lost some share in hips during the quarter, it looks like knees increased at greater than two times the market rate constant currency.
Matt Miksic, senior analyst with Piper Jaffray, said he viewed the most important near-term metric for Zimmer and the ortho group as a return to top-line growth and end-market demand in the U.S. “On that front the company delivered significant upside, raising outlook for the remainder of the year. The results in the quarter put our ‘turning the corner call’ for orthopedics on track and confirm our recent survey work which points to stable and improving trends in the U.S. orthopedics market.
