A Running Start

Orthopedic companies, like most other businesses, hope for growth with the flip of the calendar. Fiscal years may not always align with calendar years, but January 1 usually brings with it talk of new products, evaluation of market trends compared to the prior year, and predictions about the hot-button issues expected to shape the industry over the coming 365 days.

So far, the ortho sector seems to be off to a running start.

Deal-making in the first month and half of the year has been relatively robust. Since ringing in 2014, the orthopedic industry has seen Wright Medical Technology Inc. make two strategic acquisitions to boost its focus on the extremities market. The company announced that it would buy two relative start-ups—OrthoPro LLC and Solana Surgical LLC—in the same week (see News Front on page 12).

The blockbuster buyout thus far is Smith & Nephew’s proposed purchase of ArthroCare for more than a billion dollars, though critics have said that the deal is undervalued and shareholders would be doing themselves a favor by shopping around for another potential suitor (also in News Front). Either way, ArthroCare is in play and it will be interesting to watch how the story changes during the coming weeks and which companies might jump into the mix of potential buyers.

In the large-joint (hips and knees) market, the first half of the year looks promising. According to market analyst Richard Newitter with Leerink, the numbers in the fourth quarter of 2013 should mean good things into the beginning of this year.

“Overall, healthier large-joint end-market growth keeps us positive on ortho stocks,” he wrote recently, noting that rising surgery wait times and physicians’ higher knee growth forecasts for the next 12 months bode particularly well for the near term.

For the upcoming annual meeting of the American Academy of Orthopaedic Surgeons in New Orleans, La., (March 11-15), Newitter said his physician contacts predicted the main topics at this year’s meeting would be robotics/navigation; technologies that focus on earlier, less-invasive interventions (e.g., cartilage repair); new reverse shoulder systems; customization/instrumentation (such as patient-specific instruments, tissue balancing sensors); and technologies that can help reduce the cost of care delivery.

For the overall orthopedic sector, Albany, N.Y.-based research firm Transparency Market Research predicts that the global orthopedic device market will grow 4.9 percent per year to reach an estimated value of $41.2 billion by 2019. In 2012, the market was valued at 29.2 billion, according to a recent report that covers hip, knee, spine, shoulder, elbow, foot, ankle, craniomaxillofacial and other extremity devices. Analysts attributed the projected growth to the ever-looming aging population combined with the rise in risk for osteoporosis, osteoarthritis, injuries and obesity. These issues will contribute to growth in emerging markets, including the Middle East and Asian countries such as China and India.
Orthopedic innovations such as bio-absorbable implants, coupled with an increase in the success rate of such implants and fixators in emerging markets, will serve as an opportunity for investors, report authors suggested.

In 2012, knee implants accounted for the largest share by revenue of the total orthopedic device market. However, product recalls resulting from implant loosening, corrosion, wear and manufacturing errors are expected to have a major impact on the overall market revenue. As a result, the U.S. and European knee markets are anticipated to see a decline in growth during the forecast period of 2013-2019. The market for hip orthopedic products accounted for the second-largest share. Analysts estimated that the global market for hip devices would grow at an annual rate of 5.9 percent.
Geographically, North America dominates the global market for orthopedic devices in terms of revenue generation and is expected to maintain its position throughout the forecast period.

Though all of this doesn’t necessarily mean this year will be a breeze, clear skies seem to be ahead (and what better weather for running?). Even running slightly uphill is preferable to rolling down the hill backward, no?

Christopher Delporte
Editorial Director, Medical Devices
[email protected]