What Impacted Zimmer Biomet’s Reconstructive Segment?

Reconstructive segment’s 3Q16 performance

In 3Q16, Zimmer Biomet Holdings (ZBH) reported total sales of $1.83 billion. It represented YoY (year-over-year) constant currency growth of 3.5%. The company’s reconstructive segment consists of its market leading knee and hip implants portfolio. Stryker (SYK), Johnson & Johnson (JNJ), and Smith & Nephew (SNN) are the other major players in this segment.

What Impacted Zimmer Biomet’s Reconstructive Segment?

The market share of the knee implants market is shown in the above chart. In 3Q16, Zimmer Biomet’s knee sales were reported to be flat. One of the factors contributing to weak sales was the negative impact of pricing pressures. Knee segment sales increased in the Asia-Pacific region, but witnessed a decrease of ~0.9% in the Americas. In the EMEA (Europe, the Middle East and Africa) region, segment sales marginally improved 0.3% on a YoY basis. Segment sales were weighed down by supply issues due to the company’s supply chain infrastructure transitioning efforts. Although the company witnessed attractive growth for its Persona knee system, limited sales execution due to supply chain issues partially impacted its growth.

What Impacted Zimmer Biomet’s Reconstructive Segment?

Hip segment sales witnessed YoY sales growth of 0.6%. In the Asia-Pacific region, Zimmer Biomet’s hip segment sales rose 7.8% YoY. However, sales in the Americas remained flat and fell 1.4% in the EMEA region. Hip segment sales were also weighed down by pricing pressures. The company continued to witness momentum in the Taperloc Complete System and Arcos Modular Femoral Revision System.

How is the reconstructive segment expected to perform going forward?

Zimmer Biomet Holdings announced the commercial launch of the Vanguard Individualized Design total knee replacement. It’s the first of its kind in total knee replacement. It’s expected to drive significant sales in the coming quarters. For more information on this product, read ZBH’s Launch of Latest Vanguard System Strengthens Knee Portfolio. Zimmer Biomet Holdings also launched the G7 Dual Mobility Construct, which is expected to generate significant sales for the company.

To participate in Zimmer Biomet’s growth potential, investors can invest in the iShares Core S&P 500 ETF (IVV). IVV has ~0.11% of its holdings in Zimmer Biomet Holdings.