Orthopaedic Medical Devices & Bad Backs

It’s all in the joints. Shares in medical technology companies, having lagged behind broader indices last year, are now enjoying a respite and have outperformed by nearly 5 per cent this year. As well they should. Medical technology companies are truly defensive stocks. Like the pharmaceuticals companies with which they are often compared, most of medtech churns out products that are non-discretionary and paid for by governments or insurers. But medical device makers generally face shorter approval processes and less generic competition, giving them better growth prospects than their drugmaking cousins.

The orthopaedic sector looks particularly promising. The huge baby boom generation is developing creaky joints and new products aimed at early intervention could expand the customer base. With $32bn in global sales in 2007, the segment is expected to expand 10 per cent annually until 2011, according to Espicom, a consultancy. They expect the fastest growth in spinal products and the still-small area of tissue repair agents. Joint replacement sales are expected to increase almost as quickly and market share is up for grabs after a change in marketing practices forced by a US government probe.

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