A better way
While total knee replacement, or TKR, is the standard of treating osteoarthritis of the knee, there is another operation called partial knee resurfacing, or PKR, where only the arthritic region of the knee is resurfaced. Think of it as treating a cavity rather than removing the entire tooth. It is a good alternative for people suffering from early and mid-stage osteoarthritis, or OA.
Partial knee resurfacing is made possible with the use of MAKO Surgical Corp. (NASDAQ:MAKO) RIO surgical robots. Last year, 10,204 MAKOplasty procedures were conducted with the RIO system, netting the company $51 million in procedural revenue. The company is usually considered to be a younger sibling to Intuitive Surgical, Inc. (NASDAQ:ISRG), the company which put robotic surgery on the medical map a decade earlier with its da Vinci surgical robots.
While MAKO will benefit from the aging baby boomers, there is another trend that may help increase demand for PKR procedures. More and more patients are opting to get knee surgery at a younger age. These patients are likely to have higher expectations of mobility after surgery. Not to mention only a small fraction of people with osteoarthritis choose to under-go TKR. If a more benign procedure is available, it might encourage more sufferers of osteoarthritis to seek surgery.
Catalysts on the horizon
MAKO isn’t just about partial knee resurfacing; the company added a total hip arthoplasty application to the RIO in September 2011 and today 63% of its RIO systems are equipped to enable THA procedures. The company last November also announced that it is also working on a total knee solution. There is also speculation that the company may be planning to offer shoulder replacement solutions for the RIO.
If all these procedures come on-line it will help increase utilization and convince more hospitals and clinics to invest in system installations. It will also help MAKO to capture more of the booming joint replacement market.
This has so far been a largely American-centric article, but the U.S.A is actually the youngest of the industrialized nations. There should be great market opportunities for orthopedic companies in Western Europe, Japan, and even China going forward. Most of MAKO’s RIOs have been installed Stateside, however there are 6 RIOs that have been installed outside the US. If the company can prove itself in the US, the rest of the world should follow.
MAKO has also been successful in defending its Intellectual Property as can be seen with its infringement dispute against British company Stanmore Implants Worldwide. Stanmore decided to drop out of robotic surgery and MAKO was able to purchase Stanmore on the cheap for under $1 million thus removing a competitor permanently. MAKO’s traditional competitors have also had their hands full lately with law suits and product recalls.
Conclusion
The aging of the baby boomer generation offers a great opportunity for companies in the orthopedic space. The cutting-edge technology offered by MAKO combined with its small market cap can offer early investors in this company huge returns going forward if things turn out favorably for the company.
Mohammed Shaaban has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson (NYSE:JNJ) and MAKO Surgical Corp. (NASDAQ:MAKO) . The Motley Fool owns shares of Johnson & Johnson (NYSE:JNJ) and Zimmer Holdings, Inc. (NYSE:ZMH).
The article The Market For This Company is Set to Explode originally appeared on Fool.com.
Mohammed is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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