DePuy Synthes Finds Stability in First Quarter

DePuy Synthes Companies orthopedic sales of $2.41 billion improved, on a reported basis, by 1.5% during the first quarter of 2014. On a constant currency basis, sales rose 2.7%.

On a reported basis, trauma was the big performer, rising 6%. Knees were up 3%. Hips rose 1% and spine dropped 1%.

Bumping Knees With Zimmer

Company management told analysts during an April 15, 2014 conference call that knee sales were driven by the Attune Fixed Bearing Knee. The device is now in full commercialization in North America, with launches in 13 European and Asia-Pacific countries under way. The Attune is up against Zimmer Holdings Inc.’s Persona knee, one of the most successful new knees in some time.

Management said hip sales were negatively affected by seasonal volumes, as well as pricing. In the U.S., price for hips was negative 4.1%, offset by modest mix, for a total of negative 3.7%.

Trauma sales included a 10% increase in the U.S. BMO Capital Market analyst, Joanne Wuensch, reported that while it seems that there was some strong market growth, most of the trauma positive recovery was a result of last year’s nail recall.

Spine Stabilizing

While spine sales declined, Wuensch noted that the loss was an improvement from a larger decline in the fourth quarter of 2013, “indicating some stability.” The company has been clear that Synthes and DePuy integration challenges have contributed to a loss in market share. Perhaps those challenges are fading.

Ortho Market as Expected

Wuensch wrote that there have been several worries regarding the overall health of the device market. “Yes, the 1Q14 did witness softer utilization trends driven by the more difficult winter, and ortho did soften sequentially as expected given seasonality (as well as some influence of the implementation of ObamaCare).” She said management noted that they saw a similar type of year-over-year decline in the rate of utilization, particularly hospital admissions as well as lab procedures, as these have been trending for the least year or so at minor downticks.

Only DePuy Synthes and Biomet, Inc. have reported orthopedic sales for the quarter. “But so far the sequential step down does not seem meaningfully better or worse than expectations (with the exception of hip pricing), ” concluded Wuensch.