Zimmer Biomet’s Competition in the Hip Implant Market

Zimmer Biomet (ZBH) is one of the leading providers of hip implants in the United States, with approximately 31% market share. That’s almost the same as Johnson & Johnson’s (JNJ) market share. The two behemoths are followed by Stryker (SYK) and Smith & Nephew (SNN), which command about 25% and 9%, respectively, of the hip implants market.

After Zimmer acquired Biomet in June 2015, Zimmer Biomet’s combined market share increased to 31% compared to ~22% before the acquisition. While Zimmer Biomet was focused on the commercial integration of the combined company in the second half of 2015, competitors were gaining market share through new and advanced devices. Stryker has witnessed strong growth due to the success of its MAKO robotic hip system. Johnson & Johnson’s Pinnacle, which provides a customized fit for patients with different needs, has been gaining ground in the hip implants market.

The aging population, changing lifestyles, and technological advancements have led to a higher demand for orthopedic implants. Total hip replacement surgery is an improved surgical technique that provides increased mobility and leg strength and involves advanced technologies. It has accelerated the rate of hip implant surgeries in the United States.

According to AHRQ (Agency for Healthcare Research and Quality), more than 300,000 people undergo total hip replacement surgery in the United States every year. The Zimmer M/L Taper Hip Prosthesis is one of Zimmer Biomet’s hip implants that offers a better fit for patients due to the modular neck and stem system that provides the surgeon flexibility for accurate hip joint reconstruction. Some of Zimmer Biomet’s competitors for the modular neck technology are Stryker’s (SYK) Rejuvenate and ABG II, Smith & Nephew’s (SNN) Short Modular Femoral System, and Wright Medical’s (WMGI) Profemur.

In fiscal 2015, Zimmer Biomet’s hip implants segment reported currency adjusted revenues of approximately $1.6 billion, representing ~15.9% YoY (year-over-year) revenue growth. But pro forma sales for the year declined by approximately 7.1% due to the negative impact of the strong US dollar and pricing pressures that amounted to about 7.2% and 2.1%, respectively. The adjusted pro forma revenues reflect the impact of previously announced divestitures and the Biomet revenue inclusion. Moreover, revenues reported in 4Q15 witnessed a ~0.6% decline in adjusted pro forma revenues YoY.

For diversified exposure to Zimmer Biomet Holdings, you can invest in the iShares Global Healthcare ETF (IXJ), which has approximately 0.49% of its total holdings in ZBH.