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We estimate the orthopedic market grew in the mid-single digits in the first quarter of 2022 as COVID recovery outweighed pressures like inflation and labor shortages. The return of elective procedures, especially for joint replacement, helped market segments move closer to their historical norms. However, capital sales slowed significantly in the quarter. Still, companies are bullish about their prospects in 2022.
Elective Procedure Recovery a Boon for Joint Replacement
As disruption from the omicron variant surge abated later in the first quarter, orthopedic companies saw a quick rebound in procedures. Most companies report significant pressure in January, followed by improvement in February and a strong March rebound that continued into April. Procedure volumes surpassed 2019 by the end of the quarter.
Joint replacement procedures, in particular, regained some ground lost over the last two years. We estimate the knee replacement segment grew in the high-single digits for the first quarter compared to the year prior, while hip replacement grew in the mid-single digits.
Stryker anticipates improved hip replacement sales following the launch of its Insignia hip stem at AAOS, while Zimmer Biomet pushed its cementless knee penetration into the teens. Smith+Nephew has a new commercial structure, CEO and cementless partial knee. However, it remains well below its previous knee replacement sales levels.
We expect orthopedic sales, in general, to build momentum throughout the year and end 2022 close to historical levels.
Orthopedic Sales Tumble for Capital Equipment in First Quarter
Sales of robotic units and other capital equipment were a critical revenue lifeline for some companies during the worst of the pandemic. Robotic sales repeatedly broke company records starting in late 2020. However, the first quarter of 2022 marked the end of the torrid pace.
Globus Medical’s enabling technology sales fell by -12% in the quarter after propelling the company to stellar sales growth in 2021. The shortfall contributed to a rare weak quarter for Globus, which grew just +1.4% overall after a long string of stellar quarters. Stryker’s orthopedic capital sales fell around -20%, as did Smith+Nephew’s.
The drawback doesn’t seem to be from lack of demand. Stryker CEO Kevin Lobo said he’s not concerned about the light quarter. He pointed to supply constraints and hospital staffing shortages as major disruptions for capital sales but said Stryker’s order book grew in double digits for the quarter.
Despite the momentary slowdown, Zimmer Biomet CEO Bryan Hanson sees ample opportunities for technology to infuse new revenue into the market. He said, “Most people think about knee replacement as a slow-growth market. But there’s more innovation entering the knee space than we’ve ever seen before. Us and our competitors are all focused on data, robotics, and other forms of technology that we just haven’t seen in the past.”
Orthopedic Companies Confident They Can Manage Market Challenges
Hospital staffing shortages remain a significant constraint in the U.S. The shortages have impacted elective procedures and hospitals’ ability to receive and install capital purchases like robotics. The staffing deficit will also blunt any tailwinds from backlogged procedure recapture.
Bioventus CEO Ken Reali said, “Even amid improving market conditions, we continue to see some impact from the ongoing hospital staffing challenges. Reports estimate there are nearly 400,000 fewer health care workers than before the pandemic. We expect these disruptions to continue over the next few months.”
Device companies aren’t immune to staffing woes. Conformis’ manufacturing plant generated higher levels of scrap and longer lead times during the quarter due to staffing churn and shift rotations. The company ended the first quarter at about 90% of its staffing goals.
Companies cited rising costs for labor, freight and commodities. However, most companies expect the challenges to moderate throughout the year.
About half of the public companies we cover raised their 2022 revenue guidance during the first quarter, while the rest reaffirmed previous guidance. Only ZimVie lowered its guidance as it exits unprofitable geographies and products.
The second half of the year was supposed to bring a return to near normalcy in both 2020 and 2021. We believe 2022 could finally be the year that we see consistent improvement. We expect orthopedic sales to approach historical growth rates by the close of 2022.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
We estimate the orthopedic market grew in the mid-single digits in the first quarter of 2022 as COVID recovery outweighed pressures like inflation and labor shortages. The return of elective procedures, especially for joint replacement, helped market segments move closer to their historical norms. However, capital sales slowed significantly in...
We estimate the orthopedic market grew in the mid-single digits in the first quarter of 2022 as COVID recovery outweighed pressures like inflation and labor shortages. The return of elective procedures, especially for joint replacement, helped market segments move closer to their historical norms. However, capital sales slowed significantly in the quarter. Still, companies are bullish about their prospects in 2022.
Elective Procedure Recovery a Boon for Joint Replacement
As disruption from the omicron variant surge abated later in the first quarter, orthopedic companies saw a quick rebound in procedures. Most companies report significant pressure in January, followed by improvement in February and a strong March rebound that continued into April. Procedure volumes surpassed 2019 by the end of the quarter.
Joint replacement procedures, in particular, regained some ground lost over the last two years. We estimate the knee replacement segment grew in the high-single digits for the first quarter compared to the year prior, while hip replacement grew in the mid-single digits.
Stryker anticipates improved hip replacement sales following the launch of its Insignia hip stem at AAOS, while Zimmer Biomet pushed its cementless knee penetration into the teens. Smith+Nephew has a new commercial structure, CEO and cementless partial knee. However, it remains well below its previous knee replacement sales levels.
We expect orthopedic sales, in general, to build momentum throughout the year and end 2022 close to historical levels.
Orthopedic Sales Tumble for Capital Equipment in First Quarter
Sales of robotic units and other capital equipment were a critical revenue lifeline for some companies during the worst of the pandemic. Robotic sales repeatedly broke company records starting in late 2020. However, the first quarter of 2022 marked the end of the torrid pace.
Globus Medical’s enabling technology sales fell by -12% in the quarter after propelling the company to stellar sales growth in 2021. The shortfall contributed to a rare weak quarter for Globus, which grew just +1.4% overall after a long string of stellar quarters. Stryker’s orthopedic capital sales fell around -20%, as did Smith+Nephew’s.
The drawback doesn’t seem to be from lack of demand. Stryker CEO Kevin Lobo said he’s not concerned about the light quarter. He pointed to supply constraints and hospital staffing shortages as major disruptions for capital sales but said Stryker’s order book grew in double digits for the quarter.
Despite the momentary slowdown, Zimmer Biomet CEO Bryan Hanson sees ample opportunities for technology to infuse new revenue into the market. He said, “Most people think about knee replacement as a slow-growth market. But there’s more innovation entering the knee space than we’ve ever seen before. Us and our competitors are all focused on data, robotics, and other forms of technology that we just haven’t seen in the past.”
Orthopedic Companies Confident They Can Manage Market Challenges
Hospital staffing shortages remain a significant constraint in the U.S. The shortages have impacted elective procedures and hospitals’ ability to receive and install capital purchases like robotics. The staffing deficit will also blunt any tailwinds from backlogged procedure recapture.
Bioventus CEO Ken Reali said, “Even amid improving market conditions, we continue to see some impact from the ongoing hospital staffing challenges. Reports estimate there are nearly 400,000 fewer health care workers than before the pandemic. We expect these disruptions to continue over the next few months.”
Device companies aren’t immune to staffing woes. Conformis’ manufacturing plant generated higher levels of scrap and longer lead times during the quarter due to staffing churn and shift rotations. The company ended the first quarter at about 90% of its staffing goals.
Companies cited rising costs for labor, freight and commodities. However, most companies expect the challenges to moderate throughout the year.
About half of the public companies we cover raised their 2022 revenue guidance during the first quarter, while the rest reaffirmed previous guidance. Only ZimVie lowered its guidance as it exits unprofitable geographies and products.
The second half of the year was supposed to bring a return to near normalcy in both 2020 and 2021. We believe 2022 could finally be the year that we see consistent improvement. We expect orthopedic sales to approach historical growth rates by the close of 2022.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
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ME
Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
