Zimmer Biomet’s Knee Sales in 3Q17: What’s Ahead?



3Q17 results

In the quarter ended September 30, 2017, Zimmer Biomet Holdings (ZBH) registered a YoY (year-over-year) fall of 1.5% on a constant currency basis, excluding the impact of the LDR acquisition. The estimate includes the impact of one less selling day in the quarter.

As shown in the above chart, the majority of Zimmer Biomet’s business segments registered a decline in sales compared to 3Q16. In 3Q17, Zimmer Biomet reported knee sales of $624 million, contributing 34% to the company’s total sales. The segment registered a YoY sales decline of -1.7% on a constant currency basis. Pricing pressure was the major headwind in the quarter and had a negative impact of 2.5% on the segment’s sales. Volume and mix drove sales and had a positive impact of 0.8%.

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Factors impacting ZBH’s knee sales

According to Zimmer Biomet Holdings, the musculoskeletal market registered a lower-than-expected growth in 3Q17. The knee and hip procedure volumes in the United States witnessed a slowdown, as can be seen in the chart above. The company estimated the US insurance dynamics to be the major driver behind quarterly fluctuations in US procedure volumes. However, Zimmer Biomet is confident about the long-term prospects of the musculoskeletal market around the world. The other factors impacting segment sales include the impact of hurricanes, supply shortfalls, and Indian price cuts, as we saw in the previous parts of this series.

Peer companies Stryker (SYK), Medtronic (MDT), and Johnson & Johnson (JNJ) also faced challenges from the impact of the hurricanes, price cuts in India, and US market dynamics. Investors who want exposure to Zimmer Biomet Holdings while diversifying the company-specific risks can consider the Vanguard Value ETF (VTV), which holds ~0.19% of its total holdings in ZBH.

Recent product launches and key products in the pipeline

In September 2017, Zimmer Biomet Holdings launched the Persona partial knee system, the latest addition to the company’s Persona knee implant systems portfolio. For more details, read ZBH’s Persona Partial Knee Launch Expands Knee Implant Portfolio. The company has seen about 500,000 Persona knee procedures carried out to date. In the second half of 2018, ZBH expects to launch the Persona Tibia Cementless Knee. Also, the clinical evaluation of the company’s Persona Revision system and knee replacement application of the ROSA robotics platform is expected in that same period.

Next, let’s look at the company’s S.E.T. (Sports, Extremities, and Trauma) segment performance in 3Q17 and growth drivers going forward.


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