Pricing pressures continue to aggravate the pain being felt by orthopedic device makers. Take the situation at Stryker ( SYK), for example. One of the more flexible players in the group, Stryker suffered a big fall this week due to weakness in its joint reconstruction business. Challenges in the crucial U.S. market, where hospitals have stepped up demands for cheaper artificial joints, obviously hurt. During the latest quarter, analysts noted, Stryker saw domestic knee sales grow by just 11% -- and domestic hip sales actually dip -- for the first time in recent memory. The company still managed to hit its own profit target, if not Wall Street's, because of exceptionally strong results outside its orthopedic division. Even so, many investors have started to question whether Stryker can keep turning the cartwheels necessary to deliver the 20% earnings growth the market has come to expect. If anything, however, some investors have grown even more concerned about other big players -- such as Biomet ( BMET) and Zimmer ( ZMH) -- in the orthopedic space. "We believe the orthopedic reconstructive market (i.e., hips and knees) is set for a long slowdown due to pricing pressure from hospitals, which are being squeezed by insurers," JMP Securities analyst Robert Faulkner wrote this week after reviewing Stryker's results. "We rate Stryker a market-perform because it is less dependant on its orthopedic reconstructive franchise for growth than others in the group, which we rate market-underperform." Nevertheless, Stryker took the biggest hit on Wednesday. The company's stock tumbled 9.1% to $42.27 on news of its disappointing quarter. Meanwhile, shares of Zimmer -- which ranks as the largest orthopedic device maker in the world -- fell 6.9% to $63.25. And smaller Biomet slid 1.7% to $33.47. All three stocks, which have been stellar performers in recent years, are now trading near their 52-week lows.
To be sure, investors heard plenty to worry them this week. Even Johnson & Johnson ( JNJ), which posted strong results for medical devices in general, offered some clear words of caution about the orthopedic business.