Industry Dynamics
The global medical devices industry is fairly large, intensely competitive and highly innovative with 2009 worldwide sales in excess of $220 billion. The U.S. accounts for approximately 41% of this market. The industry is divided into different segments such as Cardiology, Oncology, Neuro, Orthopedic, Aesthetic Devices and Healthcare IT (“HCIT”).
The U.S. medical devices industry continues to grow at a brisk rate, thanks to an aging Baby Boomer population, high unmet medical needs and increased incidence of lifestyle diseases (including cardiovascular diseases, diabetes, hypertension and obesity). Neuro, Orthopedic and Aesthetic represent the fastest growing categories.
The aging population represents a major catalyst for demand of medical devices. The elderly population (persons 65 years and above) base in the U.S. registered 39.6 million in 2009, representing roughly 13% of the nation's population and accounting for one-third of health care consumption. Federal government estimates indicate that the elderly population will catapult to 72 million by 2030, ensuing a major boost to medical devices utilization.
The medical devices industry faces a host of issues, including pricing concerns, procedural volume pressure, impact of healthcare reform and increasing regulatory involvements, which have put investors in a dilemma in deciding whether to add these stocks to their kitty. While there exist several tailwinds for growth, these issues remain an overhang for MedTech companies.
With several growth constraints in the legacy markets, medical devices companies are aiming to expand into the lucrative incipient markets. Expansion in the emerging markets, especially those with double-digit annual growth rates, represents one of the best potential avenues for future growth. Our focus in this write-up, however, is primarily the U.S. market.
Regulatory Eco-system
Medical devices companies are susceptible to significant reimbursement risks as their products are reimbursed by the Center for Medicare and Medicaid (“CMS”) and commercial payers. Third-party reimbursement programs in the U.S. and abroad, both government-funded and commercially insured, continue to develop different means of controlling healthcare costs, including prospective reimbursement cuts with careful review of medical bills.
The Government-mandated healthcare reform in the U.S. in March 2010, dubbed as the “Patient Protection & Affordable Care Act,” has created a degree of uncertainty for medical devices companies. The reform has led to a less flexible pricing environment for these companies and may pressure pricing across the board. Moreover, the proposed tax on device companies may hit their bottom lines. Nevertheless, the Act places considerable emphasis on patient safety and aims to reduce the number of uninsured people.
“The 510 (k) Reform”
The U.S. Food and Drug Administration (FDA) declared a set of proposals on August 3, 2010, aimed at the overhaul of its 510 (k) device approval protocols. The proposed changes are subject to public feedback and independent study (expected to be completed in mid-2011).
The 200-page report, consisting of more than 70 proposed changes which will serve as a blueprint for the reform, represents FDA's vision to streamline the device review process and make it more predictable and transparent. As part of the listed proposals, the FDA intends to create a new “Center Science Council,” which will oversee medical device science-based decision-making. Moreover, the regulator aims to seek additional information regarding the safety and efficacy of devices in the 510 (k) submissions.
Our Thesis
We continue to recommend companies providing life-sustaining products, given their strong recurring stream of revenues as patients are unable to forego these products. Furthermore, investors should look at companies with strong-earnings quality profiles.
Moreover, large companies with a wide portfolio of products are also better poised for improved returns. These companies have greater capability of withstanding the soft economic conditions.
We advise investors to stay away from companies that have grown historically through extensive acquisitions only. These companies may find it difficult to fund acquisitions considering the lingering impact of the recession. More importantly, they face increasing challenges in delivering operational synergies from these acquisitions, which are considered to be the prime reason for failures of mergers and acquisitions.
OPPORTUNITIES
In our portfolio, we see growth potential in companies dealing with cardiovascular devices, Neuro and blood-related products. Names include Medtronic Inc. (MDT), Boston Scientific Corporation (BSX), St. Jude Medical Inc. (STJ), ZOLL Medical (ZOLL), Abiomed Inc. (ABMD), Cyberonics Inc. (CYBX), Haemonetics Corporation (HAE). Although these companies have Neutral ratings, they remain well placed in the current environment. We continue to closely monitor their performances for possible upgrades.
MedTech Giants Lead the Way
The above-listed companies produce life-sustaining products and are less affected by economic turbulence. As evident from their recent quarter results, some of these companies have been successful in weathering the storm (pricing, currency and procedure growth headwinds) in the cardiovascular space in the wake of recovery.
These companies are all leading players in their respective fields and are potential winners in the long run. In particular, with a slew of new products, the big three players (MDT, BSX and STJ) in the roughly $6.5 billion implantable cardioverter defibrillator (“ICD”) market are well positioned to gain market share, despite the sluggish business environment. However, we do acknowledge the fact that a soft CRM market may prove to be a drag on these stocks.
Among the names above, Medtronic, the undisputed leader in MedTech space, has a diversified presence in Cardiovascular, Neuro, Spinal, Diabetes and ENT. The company boasts of an attractive pipeline including its new Protecta ICD and REVO pacemaker devices, which are currently awaiting final regulatory approval. Moreover, Medtronic is blessed with strong cash flows which it prudently uses for maximizing shareholder. The company is active on the acquisition front and is investing in emerging markets, which it reckons as an increasingly important growth driver.
Boston Scientific is the leader in the drug eluting stent (“DES”) market and is better placed with the recent resolution of all issues cited in its 2006 FDA corporate warning letter regarding serious regulatory problems and corrective actions at three of its facilities. The company's return to the ICD market (after one month absence due to product recall) represents another boost.
Moreover, Boston Scientic's restructuring initiatives are expected to contribute to the bottom line moving forward. Importantly, the company's pipeline DES product Promus Element is shaping up to be a major driver of its stent business. Moreover, we are also encouraged by Boston Scientic's acquisition of asthma-treatment company Asthmatx, which will enable it to target the pulmonary devices area.
St. Jude is poised to grow its market share in the CRM segment (especially in ICDs) driven by its new Fortify and Unify lines of devices. Moreover, we are optimistic about the emerging opportunity in intravascular imaging market, enabled by the company's LightLab acquisition in July 2010.
In a bid to boost its cardiovascular business St. Jude is acquiring Minnesota-based heart devices maker AGA Medical Holdings for $1.3 billion. The acquisition, which was completed recently, will eventually make the company a clear leader in the structural heart market.
The top-tier U.S. cardiovascular devices companies such as MDT, BSX and STJ are exploring new avenues of growth beyond the mature pacemaker and ICD markets. These companies are increasingly seeking opportunities to expand into fast-growing new therapy areas within or outside the cardiology space, including markets such as atrial fibrillation and neuromodulation.
Another interesting pick in our portfolio is resuscitation devices maker ZOLL Medical. ZOLL is a leading player in the global market for external defibrillators, which is worth more than $1 billion. The company is expanding its presence in the international markets, which should significantly push growth.
Notably, ZOLL's LifeVest wearable defibrillator business continues to grow at a healthy quarterly run rate, benefiting from increased awareness of the product and associated sales force enhancements. We are impressed with ZOLL's solid fundamentals, its broad product range, healthy revenue/margin mix and upbeat prospect for LifeVest.
We also believe that cardiac assist devices maker Abiomed represents another favorable opportunity for the investors. The company possesses a broad portfolio of products that are life-sustaining in nature and has been able to deliver sustainable growth in a challenging economy. Abiomed enjoys strong demand for its Impella cardiac pumps. Higher Impella sales continue to fuel double-digit revenue growth.
Improving Hospital Spending : A Potential Tailwind
A soft hospital capital spending backdrop has been challenging for the MedTech stocks in the first-half of 2010. The North American and European markets have been affected by shrinking budgets for equipment purchases at the height of the recession. However, recent quarterly results indicate signs of recovery in hospital spending across the U.S. and ex-U.S. markets. Spending levels are improving as hospitals appear to have started replacing their worn-out equipment. This may turn into a driver moving forward.
Federal “Stimulus”: A Boon for HCITs
Another area which is interestingly poised for growth these days is Healthcare IT. The landscape has changed since the Obama Administration took initiatives to encourage hospitals and physicians to modernize their health record-keeping as part of the “Stimulus Package.” The Stimulus is aimed at increasing the use of electronic health record (EHR) systems by medical practitioners.
Optimism about the growth prospects of HCIT service providers has improved since the Stimulus package. Moreover, the “meaningful use” rule that enables hospitals to qualify for federal incentive program will boost business opportunities for the incumbents in the long-run.
Beneficiaries of the Stimulus include Allscripts-Misys Healthcare Solutions (MDRX) and Quality Systems (QSII). Allscripts-Misys Healthcare Solutions presently holds a Neutral rating, but is a potential candidate for an upgrade based on its healthy third quarter results.
WEAKNESSES
Dark Side of 510 (k) Reform
As part of the 510 (k) reform, the FDA aims to create a subset of moderately risky devices under the “Class IIb” moniker that would require submission of more clinical data and manufacturing information vis-à-vis the existing Class II devices. However, it remains to be seen which devices or group of devices should fall under this domain.
If implemented, this is expected to make the device approval process more complex, lengthy and burdensome. Moreover, with the expected rise in the regulatory bar for approvals, medical devices companies may require to shell out more for R&D. As such, critics and certain industry groups have started lobbying against such proposal.
Orthopedic Still a Concern
We continue to advise investors to shun companies in the orthopedic domain until we see a complete economic recovery. Companies in this space continue to struggle as patients defer their elective procedures given the lingering economic softness. Companies that fit this list include Stryker Corporation (SYK), Zimmer Holdings (ZMH), CONMED Corporation (CNMD), Wright Medical Group (WMGI) and Symmetry Medical (SMA).
Pricing Woes Linger
Recent operating results manifest weak performances across the hip and knee replacement businesses, which underscore the macro-level concerns related to product pricing pressure. Pricing concerns on hips, knees and spine products have impaired the performances of most of the orthopedic companies.
The pricing issue remains a key concern. The effect of government health care cost containment efforts and continuing pressure from local hospitals and health systems as potential Medicare reimbursement cuts create additional reasons for hospitals to push back on pricing. This is expected to hurt selling prices on a global basis.
The advent of group purchasing organizations (GPOs) has also put pressure on pricing. The GPOs act as agents that negotiate vendor contracts on behalf of their members. The prevailing economic climate has bolstered the bargaining power of GPOs.
A “Broken” Back
The U.S. spine market, which has grown at a double-digit rate in 2009, took a tumble recently. The spinal market has been worst hit by the pricing/volume headwinds as manifested by a decelerating quarterly growth trend. Leading companies in the orthopedic space such as Stryker and Zimmer continue to experience weak spine sales, which has somewhat shaken our confidence in these stocks.
Pricing pressure and reimbursement uncertainties coupled with austerity measures in Europe are expected continue to weigh on this market over the next few quarters. Private payors are delaying spine surgeries by requiring more documentation before approving such procedures, thereby contributing to the slowdown in this market.
Soft Replacement Hip and Knee Markets
The $12 billion replacement hips and knees markets still remain affected by the lingering economic softness, as reflected in sustained procedure volume pressure. Cash-strapped patients continue to defer surgeries given the weak economy. The knee market, especially, had a lackadaisical third-quarter 2010.
Procedural volumes in the U.S. have been negatively impacted as a result of a high unemployment rate, which has resulted in the expiry of health insurance as well as a decline in enrollment in private health plans.
Moreover, the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) subsidies expired effective June 1, 2010. This has led to a decline in the number of people covered under the COBRA, which allows employees who have lost their jobs to continue health insurance coverage and subsidized 65% of health care premiums for unemployed individuals for up to 15 months prior to its expiry.
As per the demographic analysis, these trends had a significant impact on the potential patient base for joint replacement procedures, those between 45 and 65 years of age and without any Medicare coverage. On the other hand, austerity measures are contributing to the reduction in procedure volumes in Europe .
A general sluggishness in the orthopedic industry is evident from the weak sales reported by most of the leading players in this market. The near-term outlook for procedure volume growth is bleak. Companies such as Stryker and Zimmer derive a chunk of their revenues from replacement hips and knees. As such, softness in these markets could potentially dent revenues and earnings of these companies at least through 2010 and early 2011.
As the economic indicators are pointing that the economy is still not out of the woods, we remain leery about the prospects of the companies listed above over the next few quarters and recommend investors to steer clear of these stocks at least for now until we see a material recovery.
ABIOMED INC (ABMD): Free Stock Analysis Report
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
CONMED CORP (CNMD): Free Stock Analysis Report
CYBERONICS INC (CYBX): Free Stock Analysis Report
HAEMONETICS CP (HAE): Free Stock Analysis Report
ALLSCRIPTS-MISY (MDRX): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
QUALITY SYS (QSII): Free Stock Analysis Report
SYMMETRY MEDICL (SMA): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
STRYKER CORP (SYK): Free Stock Analysis Report
WRIGHT MEDICAL (WMGI): Free Stock Analysis Report
ZIMMER HOLDINGS (ZMH): Free Stock Analysis Report
ZOLL MEDICAL CO (ZOLL): Free Stock Analysis Report
Zacks Investment Research
Market News and Data brought to you by Benzinga APIsThe global medical devices industry is fairly large, intensely competitive and highly innovative with 2009 worldwide sales in excess of $220 billion. The U.S. accounts for approximately 41% of this market. The industry is divided into different segments such as Cardiology, Oncology, Neuro, Orthopedic, Aesthetic Devices and Healthcare IT (“HCIT”).
The U.S. medical devices industry continues to grow at a brisk rate, thanks to an aging Baby Boomer population, high unmet medical needs and increased incidence of lifestyle diseases (including cardiovascular diseases, diabetes, hypertension and obesity). Neuro, Orthopedic and Aesthetic represent the fastest growing categories.
The aging population represents a major catalyst for demand of medical devices. The elderly population (persons 65 years and above) base in the U.S. registered 39.6 million in 2009, representing roughly 13% of the nation's population and accounting for one-third of health care consumption. Federal government estimates indicate that the elderly population will catapult to 72 million by 2030, ensuing a major boost to medical devices utilization.
The medical devices industry faces a host of issues, including pricing concerns, procedural volume pressure, impact of healthcare reform and increasing regulatory involvements, which have put investors in a dilemma in deciding whether to add these stocks to their kitty. While there exist several tailwinds for growth, these issues remain an overhang for MedTech companies.
With several growth constraints in the legacy markets, medical devices companies are aiming to expand into the lucrative incipient markets. Expansion in the emerging markets, especially those with double-digit annual growth rates, represents one of the best potential avenues for future growth. Our focus in this write-up, however, is primarily the U.S. market.
Regulatory Eco-system
Medical devices companies are susceptible to significant reimbursement risks as their products are reimbursed by the Center for Medicare and Medicaid (“CMS”) and commercial payers. Third-party reimbursement programs in the U.S. and abroad, both government-funded and commercially insured, continue to develop different means of controlling healthcare costs, including prospective reimbursement cuts with careful review of medical bills.
The Government-mandated healthcare reform in the U.S. in March 2010, dubbed as the “Patient Protection & Affordable Care Act,” has created a degree of uncertainty for medical devices companies. The reform has led to a less flexible pricing environment for these companies and may pressure pricing across the board. Moreover, the proposed tax on device companies may hit their bottom lines. Nevertheless, the Act places considerable emphasis on patient safety and aims to reduce the number of uninsured people.
“The 510 (k) Reform”
The U.S. Food and Drug Administration (FDA) declared a set of proposals on August 3, 2010, aimed at the overhaul of its 510 (k) device approval protocols. The proposed changes are subject to public feedback and independent study (expected to be completed in mid-2011).
The 200-page report, consisting of more than 70 proposed changes which will serve as a blueprint for the reform, represents FDA's vision to streamline the device review process and make it more predictable and transparent. As part of the listed proposals, the FDA intends to create a new “Center Science Council,” which will oversee medical device science-based decision-making. Moreover, the regulator aims to seek additional information regarding the safety and efficacy of devices in the 510 (k) submissions.
Our Thesis
We continue to recommend companies providing life-sustaining products, given their strong recurring stream of revenues as patients are unable to forego these products. Furthermore, investors should look at companies with strong-earnings quality profiles.
Moreover, large companies with a wide portfolio of products are also better poised for improved returns. These companies have greater capability of withstanding the soft economic conditions.
We advise investors to stay away from companies that have grown historically through extensive acquisitions only. These companies may find it difficult to fund acquisitions considering the lingering impact of the recession. More importantly, they face increasing challenges in delivering operational synergies from these acquisitions, which are considered to be the prime reason for failures of mergers and acquisitions.
OPPORTUNITIES
In our portfolio, we see growth potential in companies dealing with cardiovascular devices, Neuro and blood-related products. Names include Medtronic Inc. (MDT), Boston Scientific Corporation (BSX), St. Jude Medical Inc. (STJ), ZOLL Medical (ZOLL), Abiomed Inc. (ABMD), Cyberonics Inc. (CYBX), Haemonetics Corporation (HAE). Although these companies have Neutral ratings, they remain well placed in the current environment. We continue to closely monitor their performances for possible upgrades.
MedTech Giants Lead the Way
The above-listed companies produce life-sustaining products and are less affected by economic turbulence. As evident from their recent quarter results, some of these companies have been successful in weathering the storm (pricing, currency and procedure growth headwinds) in the cardiovascular space in the wake of recovery.
These companies are all leading players in their respective fields and are potential winners in the long run. In particular, with a slew of new products, the big three players (MDT, BSX and STJ) in the roughly $6.5 billion implantable cardioverter defibrillator (“ICD”) market are well positioned to gain market share, despite the sluggish business environment. However, we do acknowledge the fact that a soft CRM market may prove to be a drag on these stocks.
Among the names above, Medtronic, the undisputed leader in MedTech space, has a diversified presence in Cardiovascular, Neuro, Spinal, Diabetes and ENT. The company boasts of an attractive pipeline including its new Protecta ICD and REVO pacemaker devices, which are currently awaiting final regulatory approval. Moreover, Medtronic is blessed with strong cash flows which it prudently uses for maximizing shareholder. The company is active on the acquisition front and is investing in emerging markets, which it reckons as an increasingly important growth driver.
Boston Scientific is the leader in the drug eluting stent (“DES”) market and is better placed with the recent resolution of all issues cited in its 2006 FDA corporate warning letter regarding serious regulatory problems and corrective actions at three of its facilities. The company's return to the ICD market (after one month absence due to product recall) represents another boost.
Moreover, Boston Scientic's restructuring initiatives are expected to contribute to the bottom line moving forward. Importantly, the company's pipeline DES product Promus Element is shaping up to be a major driver of its stent business. Moreover, we are also encouraged by Boston Scientic's acquisition of asthma-treatment company Asthmatx, which will enable it to target the pulmonary devices area.
St. Jude is poised to grow its market share in the CRM segment (especially in ICDs) driven by its new Fortify and Unify lines of devices. Moreover, we are optimistic about the emerging opportunity in intravascular imaging market, enabled by the company's LightLab acquisition in July 2010.
In a bid to boost its cardiovascular business St. Jude is acquiring Minnesota-based heart devices maker AGA Medical Holdings for $1.3 billion. The acquisition, which was completed recently, will eventually make the company a clear leader in the structural heart market.
The top-tier U.S. cardiovascular devices companies such as MDT, BSX and STJ are exploring new avenues of growth beyond the mature pacemaker and ICD markets. These companies are increasingly seeking opportunities to expand into fast-growing new therapy areas within or outside the cardiology space, including markets such as atrial fibrillation and neuromodulation.
Another interesting pick in our portfolio is resuscitation devices maker ZOLL Medical. ZOLL is a leading player in the global market for external defibrillators, which is worth more than $1 billion. The company is expanding its presence in the international markets, which should significantly push growth.
Notably, ZOLL's LifeVest wearable defibrillator business continues to grow at a healthy quarterly run rate, benefiting from increased awareness of the product and associated sales force enhancements. We are impressed with ZOLL's solid fundamentals, its broad product range, healthy revenue/margin mix and upbeat prospect for LifeVest.
We also believe that cardiac assist devices maker Abiomed represents another favorable opportunity for the investors. The company possesses a broad portfolio of products that are life-sustaining in nature and has been able to deliver sustainable growth in a challenging economy. Abiomed enjoys strong demand for its Impella cardiac pumps. Higher Impella sales continue to fuel double-digit revenue growth.
Improving Hospital Spending : A Potential Tailwind
A soft hospital capital spending backdrop has been challenging for the MedTech stocks in the first-half of 2010. The North American and European markets have been affected by shrinking budgets for equipment purchases at the height of the recession. However, recent quarterly results indicate signs of recovery in hospital spending across the U.S. and ex-U.S. markets. Spending levels are improving as hospitals appear to have started replacing their worn-out equipment. This may turn into a driver moving forward.
Federal “Stimulus”: A Boon for HCITs
Another area which is interestingly poised for growth these days is Healthcare IT. The landscape has changed since the Obama Administration took initiatives to encourage hospitals and physicians to modernize their health record-keeping as part of the “Stimulus Package.” The Stimulus is aimed at increasing the use of electronic health record (EHR) systems by medical practitioners.
Optimism about the growth prospects of HCIT service providers has improved since the Stimulus package. Moreover, the “meaningful use” rule that enables hospitals to qualify for federal incentive program will boost business opportunities for the incumbents in the long-run.
Beneficiaries of the Stimulus include Allscripts-Misys Healthcare Solutions (MDRX) and Quality Systems (QSII). Allscripts-Misys Healthcare Solutions presently holds a Neutral rating, but is a potential candidate for an upgrade based on its healthy third quarter results.
WEAKNESSES
Dark Side of 510 (k) Reform
As part of the 510 (k) reform, the FDA aims to create a subset of moderately risky devices under the “Class IIb” moniker that would require submission of more clinical data and manufacturing information vis-à-vis the existing Class II devices. However, it remains to be seen which devices or group of devices should fall under this domain.
If implemented, this is expected to make the device approval process more complex, lengthy and burdensome. Moreover, with the expected rise in the regulatory bar for approvals, medical devices companies may require to shell out more for R&D. As such, critics and certain industry groups have started lobbying against such proposal.
Orthopedic Still a Concern
We continue to advise investors to shun companies in the orthopedic domain until we see a complete economic recovery. Companies in this space continue to struggle as patients defer their elective procedures given the lingering economic softness. Companies that fit this list include Stryker Corporation (SYK), Zimmer Holdings (ZMH), CONMED Corporation (CNMD), Wright Medical Group (WMGI) and Symmetry Medical (SMA).
Pricing Woes Linger
Recent operating results manifest weak performances across the hip and knee replacement businesses, which underscore the macro-level concerns related to product pricing pressure. Pricing concerns on hips, knees and spine products have impaired the performances of most of the orthopedic companies.
The pricing issue remains a key concern. The effect of government health care cost containment efforts and continuing pressure from local hospitals and health systems as potential Medicare reimbursement cuts create additional reasons for hospitals to push back on pricing. This is expected to hurt selling prices on a global basis.
The advent of group purchasing organizations (GPOs) has also put pressure on pricing. The GPOs act as agents that negotiate vendor contracts on behalf of their members. The prevailing economic climate has bolstered the bargaining power of GPOs.
A “Broken” Back
The U.S. spine market, which has grown at a double-digit rate in 2009, took a tumble recently. The spinal market has been worst hit by the pricing/volume headwinds as manifested by a decelerating quarterly growth trend. Leading companies in the orthopedic space such as Stryker and Zimmer continue to experience weak spine sales, which has somewhat shaken our confidence in these stocks.
Pricing pressure and reimbursement uncertainties coupled with austerity measures in Europe are expected continue to weigh on this market over the next few quarters. Private payors are delaying spine surgeries by requiring more documentation before approving such procedures, thereby contributing to the slowdown in this market.
Soft Replacement Hip and Knee Markets
The $12 billion replacement hips and knees markets still remain affected by the lingering economic softness, as reflected in sustained procedure volume pressure. Cash-strapped patients continue to defer surgeries given the weak economy. The knee market, especially, had a lackadaisical third-quarter 2010.
Procedural volumes in the U.S. have been negatively impacted as a result of a high unemployment rate, which has resulted in the expiry of health insurance as well as a decline in enrollment in private health plans.
Moreover, the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) subsidies expired effective June 1, 2010. This has led to a decline in the number of people covered under the COBRA, which allows employees who have lost their jobs to continue health insurance coverage and subsidized 65% of health care premiums for unemployed individuals for up to 15 months prior to its expiry.
As per the demographic analysis, these trends had a significant impact on the potential patient base for joint replacement procedures, those between 45 and 65 years of age and without any Medicare coverage. On the other hand, austerity measures are contributing to the reduction in procedure volumes in Europe .
A general sluggishness in the orthopedic industry is evident from the weak sales reported by most of the leading players in this market. The near-term outlook for procedure volume growth is bleak. Companies such as Stryker and Zimmer derive a chunk of their revenues from replacement hips and knees. As such, softness in these markets could potentially dent revenues and earnings of these companies at least through 2010 and early 2011.
As the economic indicators are pointing that the economy is still not out of the woods, we remain leery about the prospects of the companies listed above over the next few quarters and recommend investors to steer clear of these stocks at least for now until we see a material recovery.
ABIOMED INC (ABMD): Free Stock Analysis Report
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
CONMED CORP (CNMD): Free Stock Analysis Report
CYBERONICS INC (CYBX): Free Stock Analysis Report
HAEMONETICS CP (HAE): Free Stock Analysis Report
ALLSCRIPTS-MISY (MDRX): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
QUALITY SYS (QSII): Free Stock Analysis Report
SYMMETRY MEDICL (SMA): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
STRYKER CORP (SYK): Free Stock Analysis Report
WRIGHT MEDICAL (WMGI): Free Stock Analysis Report
ZIMMER HOLDINGS (ZMH): Free Stock Analysis Report
ZOLL MEDICAL CO (ZOLL): Free Stock Analysis Report
Zacks Investment Research
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