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Two Independents Emerge in Orthopedics

Executive Summary

The once consolidating orthopedic implant business is, if anything, going in the opposite direction, given the decisions this week by parents of two of the leading companies to create stand-alone companies of their orthopedic businesses. Bristol-Myers confirmed what had been rumored for months: that it will spin off its Zimmer orthopedics business into a public company rather than sell the company to some other player. Earlier, Sulzer announced that it plans to spin off its medical device business, Sulzer Medica, in response to pressure from a large investor who was concerned about the industrial giant's declining stock performance. But these individual deals also represent a surprising industry turnaround--the consolidation of two years ago has largely stabilized pricing, allowing independent companies to thrive once again.

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In Orthopedics, One Steps Up While One Steps Out

The two otherwise independent announcements this month by Sulzer Ltd. and Bristol-Myers Squibb Co. seemed almost to speak to each other. Sulzer announced that it would exit several businesses, including its textile, pumps, and some other industrial lines, to focus on health care and materials sciences. In the process, Sulzer will take back a medical device business it spun off three years ago and almost certainly will be expanding its base in orthopedics through both internal growth and acquisition. And BMS' announcement that it, too, would be divesting some businesses to concentrate on its core pharmaceutical business seemed appropriately timed, since one of the biggest pieces to be sold off is its Zimmer Inc. orthopedics line.

J&J Trades Up in Orthopedics

J&J's acquisition may or may not be the big deal that finally starts to consolidate the orthopedics implant industry. But it gives J&J a powerful franchise in orthopedics at a time when the company's future in the industry segment was uncertain.

Zimmer Redux

Six months after a significant management change, Zimmer officials claim the orthopedics leader is back on track. But in today's environment, can even a successful orthopedics company please its drug-company parent?

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