Zimmer Biomet’s scale of operations
With Zimmer Holdings’ acquisition of Biomet in June 2015, the combinatioin of the two companies has provided a competitive edge for Zimmer Biomet. The economies of scale achieved through the acquisition give the company a broader geographic reach and market presence.
The acquisition has almost doubled the company’s market share in its Trauma, Spine, and Extremities segment. The company has become the top player in the knee and hip implants market. So the company’s scale can be leveraged to offset competition and price declines amid the single vendor relationship models. These models are being increasingly preferred by hospitals who want to cut costs due to the healthcare industry’s focus shifting to value-based care.
Cross sales opportunities
In 4Q15, Zimmer Biomet completed the commercial integration of the two medical device behemoths to capitalize the enhanced product portfolio. Intensive cross-product training, streamlining of management, and elimination of cross-sales dissynergies will help leverage the highly complementary product portfolio of the combined company and provide strong growth opportunities.
New product launches
Zimmer Biomet expects to launch a number of new and innovative products across the continuum of its orthopedics segment in 2016. Some of the recent launches that might gradually help improve Zimmer Biomet’s market share include the modular XtraFix External Fixation system, a device for the treatment of trauma patients that helps save time and cost.
Another 2015 product launch is G7 OsseoTi Porous Acetabular Shells, a device for the treatment of total hip arthroplasty that uses 3D printing technology. Various other innovative products are expected to boost the company’s growth in the years ahead.
Comprehensive product portfolio
After the acquisition of Biomet, Zimmer Biomet Holdings emerged as the second-largest player in the musculoskeletal device industry segment. The company offers products and solutions along the continuum of care. The diversified and broad product portfolio ranging from intervention technologies to joint preservation to partial and total knee replacement surgeries has helped position Zimmer Biomet as the single largest player providing the unparalleled musculoskeletal product portfolio. So it’s well positioned amid the changing business models and trends in the healthcare industry that focus on value-based healthcare.
Although the company faces stiff competition from peers such as Stryker (SYK), Johnson & Johnson (JNJ), and Wright Medical (WMGI), its strong market position and enhanced product portfolio with the on track integration of Biomet is expected to result in strong growth in the years ahead. Investors who want to participate in the growth potential of the company can invest in the First Trust Health Care AlphaDEX ETF (FXH), which has an exposure of ~1.8% in ZBH.