While the Pinnacle line of products covers a range of products, the metal-on-metal implants in that family will be under the gun in the near future. Even without a massive blow from recalls and litigation — J&J has been tougher in fighting claims for the Pinnacle as compared to its settlements with many ASR suits — expect doctors to continue to back away from metal-on-metal products. As of mid-2012, more than 150,000 patients had received a Pinnacle metal-on-metal implant, according to a report from Reuters.
All of this is a boon to J&J’s competition in the hip implant industry. Granted, some rival companies have had recall problems, too: Smith & Nephew plc (ADR) (NYSE:SNN) launched a voluntary recall of an all-metal hip implant product, a component of its R3 Acetabular System, last year. Still, competitors don’t face nearly the scale of lawsuits and publicity damage that J&J is squaring off with.
What to watch for
Expect orthopedics players such as Zimmer Holdings, Inc. (NYSE:ZMH) — which pulled its own metal-on-metal hip component, the Durom Acetabular, from Australia last year, although its troubles aren’t even in the same universe as J&J’s — and Stryker Corporation (NYSE:SYK) to look to take advantage of J&J’s PR struggles. I wouldn’t be surprised to see the competition claw back market share in the orthopedics industry as J&J gets a handle on the scope of its problem-particularly if more problems crop up. Even an upstart company such as MAKO Surgical Corp. (NASDAQ:MAKO), which could use some good news with its stock in the dumps, could turn J&J’s misfortune into an opportunity to sell its MAKOplasty hip replacement as an alternative to the declining metal-on-metal implant trend.
Is Johnson & Johnson’s orthopedics division doomed? Of course not: This is still the biggest player in the health care industry, and regardless of these troubling concerns, J&J won’t be toppled that easily. The company will face its hurdles, and less-than-expected growth in orthopedics despite the synergies of the Synthes addition wouldn’t surprise me. For long-term investors, however, J&J is still a company worth your investment. You should keep an eye on how the hip recall saga plays out, but at the end of the day, Johnson & Johnson will come back swinging.
Is bigger really better?
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The article The Not-So-Hip Trend at Johnson & Johnson originally appeared on Fool.com and is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and MAKO Surgical. The Motley Fool owns shares of Johnson & Johnson and Zimmer Holdings.
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