Orthopedic Device Market Gains Momentum: 3 Stocks In Focus

“At some point in every person's life, you will need an assisted medical device … as you age and you have a hip replacement or a knee replacement or a pacemaker.”

In the current context, nothing appears to be more apt than this remark made by Aimee Mullins (an American athlete). Considering the growing prominence of the orthopedics industry, it seems that the ''prosthetic generation is indeed all around us!''

Per a new market intelligence report by BIS Research published by CISION, the global orthopedics devices market was worth $40.20 billion in 2016. It is estimated to be worth $61.02 billion by the end of 2023, at a CAGR of 6.1% with joint reconstruction and replacement devices segment being the highest revenue generator.

In 2015, North America (51.4%) had the highest share in the orthopedics devices market and is expected to lead the same through 2024. Encouragingly, Asia Pacific is also estimated to catch up with a CAGR of 8.6% through 2024 in the niche space (per a Grand View Research report published by Becker's Healthcare).

Thus, for investors who are keen on placing a bet on the healthcare space for long-term gains, the orthopedics market undoubtedly holds immense potential.

Here, we take a look at five major factors that have been driving the global orthopedic industry in the last couple of years.

Major Market Movers

Ageing Populace

One of the major factors driving the orthopedic market is aging population. Per a WHO report published by Global Market Insights, the population above 60 is expected to be 2 billion globally by 2050.

Poor Life Style

Poor eating habits, smoking, drinking and lack of physical activity will also drive demand for orthopedics market. Rising healthcare expenditures, unhealthy lifestyle practices along with expanded treatment options have been driving demand. Per a report by Centers for Medicare and Medicaid Services published by Advisory Board, U.S. healthcare spending is projected to rise to around $5.5 trillion by 2025, representing 19.9% of GDP (based on the assumption that the Affordable Care Act will continue through 2025).

Rising Incidence of Diabetes

Diabetes and obesity will also fuel growth of this market. Globally, the diabetes market is expected to touch $66,053.1 million, at a CAGR of 6.7% between 2016 and 2025 (per a Transparency Market Research report).

Positive Tidings on the Regulatory Front

The orthopedic market is riding high on recent FDA nods and product launches. Zimmer Biomet Holdings, Inc. (NYSE:ZBH) reached a new milestone in the field of total shoulder arthroplasty with the recent FDA approval for its SidusStem-Free Shoulder system. Furthermore, the company launched the Vitality+ and Vital Spinal Fixation Systems in the United States, along with the global launch of Persona Partial Knee System.

NuVasive, Inc. (NASDAQ:NUVA) announced the receipt of FDA clearance for the company's PRECICE system from NuVasive Specialized Orthopedics (NSO). Further, Smith & Nephew (NYSE:SNN) announced the full commercial release of bi-cruciate retaining JOURNEY II XR total knee arthroplasty (“TKA”) in the United States and Japan recently.

Robotic Surgery Boosting Orthopedics

Medical technology companies are trying to expand through robots rather than complex surgeries. Per a report by Technavio, the global orthopedic surgical robots market is estimated to witness CAGR of around 47% by 2021. In view of the abovementioned factor, a number of bigwigs are spending a lump sum on R&D to continuously innovate and develop devices with improved efficacy and no side effects.

In this regard, one of the most noteworthy is Stryker Corporation (NYSE:SYK) . Mako is Stryker’s robotic-arm assisted surgery platform. Recently, Stryker launched the robotic-arm assisted total knee arthroplasty application for use with its Mako System.

Medical device major Johnson & Johnson (NYSE:JNJ) recently announced the acquisition of Orthotaxy. This is a privately-held developer of software-enabled surgery technologies, including a differentiated robotic-assisted surgery solution.

3D Printing in Action

Another technology which orthopedic device companies are trying to leverage is 3D printing. Per a report by Future Market Insights published by CISION, orthopedic implants in the application category of the global 3D printed medical devices market are expected to be worth $970 million in the 2017-2027 time frame at a CAGR of 19.2%. In this regard, Stryker’s Tritanium TL Curved Posterior Lumbar Cage is a 3D-printed interbody fusion cage intended for use as an aid in lumbar fixation. This device recently won FDA nod.

3 Stocks in Focus

We have selected three companies, which we believe are well poised given the encouraging prospects of the orthopedics market.

Stryker Corporation: This company has a long-term earnings growth rate of 9.8%. The current-quarter estimate revision trend for the stock has been encouraging with five estimates moving upward, compared to two downward movements in the past two months. Resultantly, the Zacks Consensus Estimate increased around 0.6% to $1.60 per share. The company’s five-year historical growth rate is also favorable at 10.1% compared with the industry’s 5.7% and the S&P 500’s 2.8%. Stryker's share price movement over the past year has been favorable. The company yielded a return of almost 26.3%, better than the industry's 17.1%.

Orthofix International N.V. (NASDAQ:OFIX) : This company has a long-term earnings growth rate of 10.1%. The company’s five-year earnings growth rate of 14.3% also compares favorably with the S&P 500’s 9.4%. Over the past three months, shares of Orthofix have outperformed the industry it belongs to. The stock has gained 51.9% compared with the industry’s 17.1% rise.

This company recently announced FDA approval and U.S. limited market launch of the FORZA XP Expandable Spacer System.

Johnson & Johnson: This company has a long-term earnings growth rate of 7.8%. Estimate revisions for the current year have been solid with 10 estimates moving upward, compared to one movement in the opposite direction over the past two months. Resultantly, the consensus estimate increased around 3.2% to $8.11 per share. The company’s five-year historical growth rate of 7% also compares favorably with the industry’s 3.1% and the S&P 500’s 2.8%.

Shares have increased 8.3% in the past month, comparing favorably with a 0.4% increase witnessed by its industry.

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