J&J, Stryker execs predict elective surgeries to rebound

Johnson & Johnson ($JNJ) and Stryker ($SYK) executives are predicting a rebound in elective surgeries as patients decide to undergo procedures they've been putting off due to the economy. However, it is difficult to determine when this will occur. The predictions came during the companies' respective earnings calls Tuesday.

As was noted in Stryker's earnings call, the orthopedic market has been running below expectations for roughly 7 quarters. It's hard to predict when patients will come back, but unemployment rates do need to come down, explained Katherine Owen, Stryker's VP of strategy and investor relations. While elective procedure trends might not improve this year, the company thinks it can make gains in knees and hips. Furthermore, once the economy rebounds and as older adults seek procedures to help their osteoarthritis, Stryker should be poised to help those patients seeking elective surgeries.

Stryker had an excellent Q4, with net earnings increasing almost 36% to $401 million over the prior year period. Stryker CEO Stephen MacMillan cited the company's diverse offerings for the company's strong Q4 and 2011 results. He added during the call he was "encouraged on multiple fronts" despite the current economic climate. The company saw balanced growth in the U.S. and internationally, but is still seeing challenges in Europe. However, emerging markets continue to contribute to the company's overall strength.

Meanwhile, J&J saw its Q4 2011 sales rise 3.9% to $16.3 billion versus the same period in 2010. However, it also experienced an 89% drop in Q4 profit due to legal settlements and product-liability costs. And, as Dow Jones notes, its 2012 earnings outlook fell short of Wall Street's expectations.

Worldwide medical devices and diagnostics sales were $25.8 billion for year, a 4.8% increase versus the prior year. Growth was driven by Ethicon's surgical care products, Ethicon Endo-Surgery's advanced sterilization products and international sales of minimally invasive products, blood glucose monitoring and insulin delivery products, Biosense Webster's electrophysiology business and Vistakon's disposable contact lenses, according to a company statement.

Like Stryker, J&J also sees elective surgery as rebounding, with patients being able to hold off procedures for so long, and we're close to the bottom of the trough in terms of the numbers of these procedures. In addition, there will continue to be opportunities in emerging markets.

When asked about further acquisitions, Weldon said J&J will "continue to be aggressive if we see a great opportunity."

Some analysts see the trend in J&J's results as "a hopeful indication for [its] surgical and device business as well as the broader medical device group," said Matthew Miksic, a Piper Jaffray analyst, as quoted by Bloomberg. And other companies competing in orthopedics, including Stryker, Zimmer and Smith & Nephew ($SNN) could also benefit.

While J&J had some positive news on the device front, it disclosed it took quarterly charges of more than $3 billion, largely related to the recall of its DePuy Orthopaedic unit's metal-on-metal hip. And the overall effect of these recalls still have analysts concerned. "The hip recalls worry me because their eventual costs are unknown," said Jeff Jonas, an analyst at Gabelli & Co., as quoted by The New York Times

- see Stryker's release
- read J&J's release
- check out more from the NYT
- read the Dow Jones story
- see Bloomberg's take

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