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Recent analysis by Needham & Co. dashes hopes of a surge in sales for orthopedic medical devices this year from a pandemic-related backlog in procedures.
The investment bank’s report revealed that the backlog seems to have dissipated, with 2023 sales for most orthopedic products only marginally surpassing levels they would have reached without the pandemic.
Needham’s study involved calculating compound annual growth rates (CAGRs) in constant currency for four key categories of orthopedic devices from 2013 to 2019. These rates were then projected onto the pandemic years of 2020 to 2023 to assess performance.
The hip market emerged as the top performer last year. With a CAGR of 1.9% from 2013 to 2019, projections indicated 2023 sales would hit $6.22B if growth rates continued. Remarkably, actual sales in 2023 surpassed these estimates, reaching $6.32B, a 1.5% increase over the non-COVID prediction.
Following suit, the spine market showed resilience. Needham’s estimated CAGR for 2013 to 2019 stood at 1.6%, suggesting 2023 sales could have been $9.77B at that pace. However, actual sales figures for 2023 climbed to $9.88B, exceeding the non-COVID forecast by 1.1%.
Conversely, the knee market witnessed a slight slowdown. With a CAGR of 2.7% from 2013 to 2019, sales were anticipated to hit $8.55B in 2023 under similar growth. Yet, actual 2023 figures of $8.61B edged out Needham’s non-COVID projection by only 0.7%.
In contrast, the trauma and extremities market experienced sluggish growth. Despite a robust constant currency CAGR of 6.2% from 2013 to 2019, 2023 sales fell short of expectations. Projections indicated sales of $10.31B if growth rates maintained, but actual figures totaled only $9.54B, a 7.5% deficit from the non-COVID estimate.
While acknowledging improved pricing for implants post-pandemic, Needham suggested that orthopedic market expansion in 2024 may decelerate significantly compared to 2023.
Overall, Needham anticipates a 4.8% growth in the orthopedics market in 2024, a notable drop from the estimated 7.3% growth in 2023. The bank cautions that companies in this sector might face more restrained upside in 2024.
Enovis (NYSE:ENOV) and Alphatec (NASDAQ:ATEC) stand out as preferred choices in the orthopedics and spine segments by Needham, primarily due to their lower share prices and anticipated growth driven by market share gains rather than overall market growth.
Other notable orthopedic companies under Needham’s coverage include CONMED (CNMD), Globus Medical (GMED), OrthoPediatrics (KIDS), Paragon 28 (FNA), Medtronic (MDT), Stryker (SYK), and Zimmer Biomet (ZBH).