Competition Limps Toward Knee Implant Market
09/27/05 - 07:08 AM EDT
Melissa Davis
Thirty years ago, inventor Doug Noiles had what he calls a "flash of insight" that would pave the way for a popular artificial knee.
Noiles, a machine designer by trade, had spent the day in San Francisco at the American Association of Orthopedic Surgeons' annual conference. He had hoped to pique doctors' interest with a model of an artificial knee he was designing. But after some surgeons rejected his plan, he retreated to his room at the Chinatown Holiday Inn. Later, though, he awoke with what turned out to be a revolutionary idea. "Why not let it rotate?" he thought. The result was the mobile-bearing knee, a device that promises more natural movement than the so-called fixed-bearing devices that make up the rest of the market. Right now, just one company -- Johnson & Johnson (JNJ Quote - Cramer on JNJ - Stock Picks) -- has permission to sell mobile-bearing knees in the U.S. The company's orthopedics division, DePuy, underlines that dominance in advertisements to consumers. Analysts believe the device accounts for a nice chunk of J&J's massive orthopedic sales every year. But the New Jersey company could soon see its long monopoly come to an end, as rivals seek approval for similar devices in a highly competitive industry in which new offerings and their big price tags mean so much. Right now, in fact, the big orthopedic device makers -- ranging from Stryker (SYK Quote - Cramer on SYK - Stock Picks) and Zimmer Holdings (ZMH Quote - Cramer on ZMH - Stock Picks) and Smith & Nephew (SNN Quote - Cramer on SNN - Stock Picks) -- need blockbusters more than ever. In the past, they could always hike prices to help boost profitability. But they have recently found themselves trying to sell those expensive devices to hospitals that no longer make any money on the bulk of their joint-replacement surgeries. As a result, the manufacturers must constantly roll out new products -- and promise superior results -- in order to justify the premium prices that have made them so profitable in the past.
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