Leading medical device maker Zimmer Holdings (ZMH) recently received pediatric clearance for its proprietary Universal Clamp Spinal Fixation System. This additional clearance, path breaking in the US, would be effective in treating children with idiopathic and neuromuscular scoliosis. The Universal Clamp Spinal Fixation System will be utilized in spinal fusion surgeries.
With 3 to 5 out of every 1,000 children in the US developing scoliosis or spine curvature and back pain, this additional clearance for Universal Clamp Spinal Fixation System is expected to open up new opportunities in the pediatric market for Zimmer.
The Spine segment has encountered several challenges over the past few quarters and continues to do so with pricing pressure and reimbursement issues plaguing the market in the US. Spine was the only product category during the second quarter of 2011 to record a decline in revenues (down 3% year over year to $56 million). Despite the headwinds in the US market, the company seems confident of the potential of this business over the long haul.
Zimmer believes that products launched in the recent past should contribute to improved performance in the second half of 2011. The latest products unveiled include the PathFinder NXT System (that has been built upon the clinical success of the original PathFinder Minimally Invasive Pedicle Screw System) and TM-S Trabecular Metal Cervical Interbody Fusion Device. The former provides an intuitive and flexible system for a range of minimally invasive spinal procedures. Zimmer’s broad product portfolio across its Spine segment is expected to benefit the top line gradually.
Although the musculoskeletal market is witnessing several challenges in the form of reduced procedure volume and pricing pressure, we believe that the company is on its growth trajectory through new product launches, employment of new technologies and expansion into emerging markets. Additionally, in order to streamline its business, Zimmer plans to continue with its global restructuring program. However, our views are moderated by intense competition from larger players like Stryker (SYK), Smith & Nephew (SNN), and Medtronic (MDT).
Currently we hold a long-term ‘Neutral’ recommendation on Zimmer, which is supported by a short-term Zacks #3 Rank (Hold).
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