Medical Device Daily Executive Editor

SAN FRANCISCO — Investors with a gimpy knee from, let's say, an old football injury or a degenerative hip that is getting in the way of being competitive in that weekly tennis showdown, couldn't have picked a better day than Tuesday to attend the JPMorgan Healthcare Conference.

Those responsible for scheduling of company presentations at JPMorgan Chase's (New York) 24th annual rendition of the traditional annual investor conference lid-lifter put three of the top four orthopedic companies, along with a highly inventive challenger to the bigger players, on the same day's program.

Sector leader DePuy (Warsaw, Indiana), part of the Johnson & Johnson (New Brunswick, New Jersey) empire, was missing, as was its parent, but there was plenty of other news to absorb from the knees, hips, elbows and biologics crowd.

Making arguably the biggest impression on attendees — judging from post-presentation chatter in the Grand Ballroom at the Westin St. Francis Hotel — was Stephen MacMillan, president and CEO of Stryker (Kalamazoo, Michigan).

In his initial foray at the JPMorgan podium after taking over from longtime Stryker point man John Brown a year ago, MacMillan took a decidedly more aggressive approach to getting the company's story out than the traditional lower-key path traditionally trod by his highly respected predecessor.

One of his primary points of emphasis was that Stryker is much more than just an orthopedics powerhouse. "We're a $4.8 billion-plus diversified med-tech company with a leadership position in orthopedics," said MacMillan. He noted, for instance, that his firm has "more than $2 million in sales beyond reconstructive implants."

While Stryker is known for its public conservatism, it has long captured the attention of the investment community by its nearly unfailing ability to deliver on the oft-stated commitment to deliver 20% annual earnings growth.

"We tend to not do a great job of marketing ourselves," MacMillan said, "but we do a good job of delivering results."

He emphasized Stryker's broad mix of business lines, saying its diversified business model virtually assures overall growth even when some product or geographic sectors may lag.

A chart of the company's businesses showed that no single segment holds as much as a fifth of overall revenues. Hips at 19%, knees at 17% and MedSurg instruments at 15% are the biggest contributors, but numerous other businesses are significant parts of the Stryker story.

Only the largest segment, hip reconstructive products at 4%, registered less than double-digit global growth in the first nine months of the most recent fiscal year. Beyond business segment growth, Stryker registered "strong growth country by country," MacMillan said.

He cited in particular 89% growth in what the company calls its Biotech business, providing the opportunity to comment on the long-delayed OP-1 orthobiologic, for which a pivotal U.S. trial was recently completed and a new drug application is expected to be filed with the FDA in the current quarter. Using the word "finally" for emphasis, MacMillan said the company is looking toward a 2007 launch of the product.

Stryker also is enjoying "industry leading growth" in its MedSurg instruments business, he said, riding what he described as "a mini-boom in capital spending in worldwide markets."

Noting the emphasis companies in the sector are placing on minimally invasive surgery solutions, MacMillan said Stryker is "capitalizing on [that] push trough our MedSurg business."

In citing the strength of the company's product pipeline, he noted its "unprecedented boost in R&D spending," now approaching $300 million annually, almost double the figure of as recently as three years ago. In addition to products nearing commercialization, MacMillan said Stryker has added "an entire new layer of projects with longer-term results."

"We are a much bigger and stronger company than we were 18 months ago," he said. "We think we should be a core holding" for investors.

Among other orthopedics-centered firms that presented on Tuesday:

• Zimmer Holdings (Warsaw, Indiana) President, CEO and Chairman Ray Elliott ran through a lengthy list of new products either introduced by the company recently or on the way in the near term, but spent much of his allotted time touching on philosophic and strategic issues.

Citing the firm's slogan "Flawless Execution," he said Zimmer's goal in a global climate of trying to rein in healthcare costs is "to be the low-cost manufacturer, the low-cost distributor, and also the best innovator."

By way of example, Elliott cited the company's 1 million square feet of manufacturing space. "That's on a non-outsourcing basis," he said. "We would be Lou Dobbs' hero," he added in a reference to the outspoken CNN commentator who regularly lambastes U.S. industry for sending manufacturing and service jobs overseas.

Touching on a "Women are Different" bullet point, Elliott said, "women are taking over this industry," adding that "two of every three [reconstructive] knees that we do are done on women."

"For years, we have been putting men's implants into women," he said, noting the growing need to design such implants to meet the different dimensions, mass and other important characteristics of female patients. "That makes for an interesting market approach."

Elliott added his voice to those opposing "gainsharing," the latest buzzword in federal governmental circles. "This is cost shifting, not cost reduction," he said. "It's a risk to quality."

• Biomet (also Warsaw) President and CEO Dane Miller, whose firm holds down fourth place in the ortho sector behind DePuy, Stryker and Zimmer, emphasized the company's culture of innovation. He said that over the past six years, Biomet has introduced more than 500 new products.

Citing demographic statistics showing that the number of persons in the 55 to 75 age group in the U.S. will grow from 48.2 million in 2005 to 66.2 million in 2015, he said that population will support major growth for orthopedics in the U.S., as well as worldwide.

In addition to running through developments in Biomet's reconstructive implant lines, Miller cited the company's push in biomaterials. "I believe we have the broadest biomaterials platform in the industry," he said.

• Barry Bays, interim president and CEO of Wright Medical Group (Arlington, Tennessee), cited the growing emphasis on biologics at that company, which has a niche-focused product line that emphasizes its unique approaches in the hips, knees and extremities spaces.

"Extremities and biologics are very complementary," Bays said. "We're driving our biologics specialty products across all segments of our business."

Citing the company's "very strong pipeline," he said its orthobiologics program is paying dividends in a broad range of reconstructive products. Bays said, for instance, that Wright Medical's "strong intellectual property position in infection control" is allowing it to treat infection while also regenerating bone.

The company's Graft Jacket material can be sutured into soft-tissue tears, which gets the rehabilitation process going immediately while also beginning the regeneration process for cartilage and other tears.

Bays also noted that Wright "has led the charge" in the hip implant bone-conserving space, with products focused on resurfacing bone in the region of such implants in order to preserve bone quality for future revision procedures.