The hip business isn't pretty these days. Just a few hours after we posted this initial report on May 16, news broke that Johnson & Johnson's ($JNJ) DePuy division was getting out of the metal hip business entirely. The company didn't blame its decision on the 10,000-plus lawsuits it faces over safety-related problems stemming from its now-recalled ASR hips. Rather, J&J/DePuy blamed declining demand and pending regulatory changes for forcing its hand.
But what's important to note here is that the company is still remaining in the hip replacement game, with plans to keep selling some nonmetal hip components.
And so it goes with hip replacement manufacturers in general. Hip implants have drawn a lot of negative attention in recent years, thanks to safety-related problems that have continued for all-metal models at J&J and other companies. But J&J's decision to at least stay in part of the hip replacement business is a sign that the sector as a whole remains a reliable bread-and-butter source of revenue for the major manufacturers.
Beyond metal-on-metal implants, device companies make metal-on-plastic, ceramic-on-ceramic, and partial hip replacements made of various materials. Companies report hip sale revenue without breaking down which kind of hips they sell. A look at 2012 revenue, as compiled by EvaluateMedTech, shows that the numbers are stagnant but stable for some of the major players, though at least one saw a big drop. Another enjoyed healthy revenue gains. What's more, EvaluateMedTech projects revenue growth through 2018 at all but one of the eight major hip implant manufacturers.
The problems with metal hips cannot be taken lightly. Beyond J&J's ASR metal hip saga, Stryker ($STK) says it may spend at least $390 million to settle lawsuits and cover surgeries relating to its now-recalled Rejuvenate and ABG II hip implants. Both companies and all of their rivals are facing intense regulatory scrutiny about the safety of the all-metal hips they produce.
Smith & Nephew ($SNN) has faced its own problems with another hip-related product--the R3 Constrained Acetabular Liner, regarding concerns about the product's performance and a high rate of required revision surgeries. But its hip problems carry into overall revenue, as the company faced slow hip (and knee) implant sales and predicts more of the same in the coming months. As well, Smith & Nephew is investing hundreds of millions of dollars into diversifying its business into other areas such as wound care, with a goal of not relying on hips so much. That's reflected in the company's hip revenue decline from 2011 to 2012, and so it is all the more remarkable that hip revenue growth is projected to rebound in the coming years.
But hip manufacturers have many other hip implant products that have generated few, if any, major complaints. And while pricing pressures and economic struggles will periodically reduce implant sales, they are a reliable revenue generator in an era when ever-increasing numbers of consumers seek medical treatment to help maintain mobility as they age.
Below is EvaluateMedTech's roundup of the top hip manufacturers. Keep in mind that the numbers include all types of hip replacements. And the J&J projections are based, in part, on assumptions made before the company's decision to leave metal hip implants behind. Let us know your thoughts. And once again, thanks for reading.
-- Mark Hollmer (email | Twitter)
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Editor's note: Updated list includes 6 confirmed top hip sellers; earlier version included 8 companies. Biomet reflects estimated 2012 figures. Intro also updated to reflect breaking news from Johnson & Johnson.
Wright Medical Group
2012 revenue - $151 million (- 12.7%)
2018 revenue (projected) - $149 million
2012 revenue - $640 million (+ 2.4%) (estimated)
2018 revenue (projected) - $740 million
Smith & Nephew
2012 revenue - $666 million (- 5.5%)
2018 revenue (projected) - $756 million
2012 revenue - $1.233 billion (+ 0.4%)
2018 revenue (projected) - $1.463 billion
Johnson & Johnson
2012 revenue - $1.316 billion (- 1.1%)
2018 revenue (projected) - $1.588 billion
2012 revenue - $1.342 billion (- 1%)
2018 revenue (projected) - $1.588 billion