Ninety-four-year-old Great Grandma Frieda fell and needed surgery several weeks ago after she broke her hip. That's not so surprising, given her age. But did you know that many younger people who suffer from severe hip arthritis may benefit from hip replacement, too?
That's one demographic that British orthopedic provider Smith & Nephew (NYSE:SNN) hopes will aid its results, especially after reporting disappointing first-quarter earnings last month.
On Wednesday, the company announced that the Food and Drug Administration has approved its Birmingham Hip Resurfacing System. Although the name sounds like the sort of process an auto-body shop might employ on your used jalopy, the device is targeted primarily at getting people younger than 55 back on their feet again.
Replacing the worn surfaces of the hip joint with high-carbide cobalt chrome caps (there we go with the auto repair again), the Birmingham system is a two-part surgical procedure in which only the surface of the femoral ball is removed to implant the resurfacing component. First, a metal cap is fitted over the top of the resurfaced ball, and then a corresponding metal cup is placed into the pelvic socket.
Conserving more of the bone allows younger patients, often considered too young to undergo total hip replacement, to gain the benefits of the procedure without forgoing future surgical options. According to the FDA, the system relieves pain and improves hip function in patients suffering damage from degenerative joint diseases such as osteoarthritis and rheumatoid arthritis. The company also believes that its metal device will prove more durable than the plastic joint implants used in traditional hip-replacement surgery.
So if the technology can help one's hurting joints, can it also aid Smith & Nephew's faltering bottom line? Some think so. It's a positive development for sure, particularly considering that the company did not expect approval until the end of next month. American depositary receipts rallied by 3.15% yesterday, and the stock was upgraded to "overweight" by Lehman Brothers, with its analyst projecting sales totaling $18 million the second half of this year. Smith & Nephew will begin training approximately 50 surgeons to perform the procedure, with the first surgeries expected to take place this summer.
Competition, however, lurks in various forms. Biomet (NASDAQ:BMET) offers porous hip replacement products, while Wright Medical Group (NASDAQ:WMGI) and a collaborative effort between the British Corin Group and Stryker (NYSE:SYK) both anticipate regulatory approval of hip-resurfacing products later this year.
Smith & Nephew shares have lagged the European health care sector by approximately 21% since the beginning of the year. The company will get a jolt from U.S. sales of its new system to an aging baby boomer population, but it also needs strong joints across its business operations to keep it healthy.
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Fool contributor S.J. Caplan does not own shares of the companies mentioned. The Motley Fool has a disclosure policy.
