Orthopedic devices major Stryker Corporation (SYK) has secured the 510(k) approval from the U.S. Food and Drug Administration (“FDA”) for its MDM X3 (“Modular Dual Mobility”) mobile bearing hip system. The product represents an important addition to the Michigan-based company’s portfolio of next-generation hip replacement systems.
The MDM X3 is Stryker’s third-generation dual mobility device designed to enable surgeons to offer the benefits of the company’s dual mobility technology to a greater patient population. The device’s launch has been based on the success of Stryker’s flagship mobile bearing product “ADM X3” hip system launched in early 2010.
The ADM X3 hip system is a premium priced product and has been positioned as an alternative to Metal-on-Metal (“MOM”) hip resurfacing systems that are, based on recent studies, associated with the risk of metal ion release. ADM X3 leverages Stryker’s proprietary X3 advanced bearing technology to provide greater joint stability without the risk of metal ion release.
Stryker’s achieved meaningful traction for ADM X3 in fourth-quarter fiscal 2010, contributing to a 6% growth in the company’s global hip sales despite sustained pricing pressure. Like ADM X3, the MDM X3 has been designed to enhance joint stability and jump distance, providing the potential for a greater range of motion in patients.
The approval of MDM X3 underscores Stryker’s sustained commitment to lead the mobile bearing hip market with products that address the shortcomings of competitive hip implants. The company expects its new hip systems and the much-anticipated launch of the OtisMed surgical cutting guides to favorably impact results in fiscal 2011.
We feel that new products coupled with acquisitions should help Stryker in expanding its top line moving forward. However, Stryker faces stiff challenges from Zimmer Holdings (ZMH), Smith & Nephew (SNN), CONMED Corp (CNMD), Biomet and Johnson and Johnson’s (JNJ) DePuy in a highly competitive orthopedic industry. Moreover, the company remains exposed to pricing and procedure volume headwinds on its hip, knee and spine products.
The joint replacement market remains sluggish as patients are deferring their elective procedures given the lingering economic softness and high unemployment rate. A still soft reconstructive implant market remains an overhang for the stock. Our long-term Neutral recommendation for Stryker is backed by a short-term Zacks #3 Rank (Hold).
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