July 22, 2010 / 6:16 PM / 10 years ago

WRAPUP 1-Zimmer, St. Jude beat Street; fight price pressure

* Zimmer, St. Jude beat 2nd-qtr earnings expectations

* Say positioned to manage pricing pressures

* Results come amid investor concern over the sector

* St. Jude shares up 3 pct, Zimmer down 0.5 pct

By Toni Clarke

BOSTON, July 22 (Reuters) - Medical device makers are under pressure from hospitals to cut prices as a weak economy threatens demand for surgical procedures, but some companies may be managing better than others.

On Thursday, orthopedic device maker Zimmer Holdings Inc ZMH.N and heart device maker St. Jude Medical Inc STJ.N reported better-than-expected earnings and said they were well positioned to ride out a rough economy.

Zimmer earned $1.09 a share, excluding one-time items, 4 cents above the average Wall Street estimate, according to Thomson Reuters I/B/E/S. [ID:nN2096660]

St. Jude reported adjusted earnings per share of 79 cents, outstripping the average analyst forecast of 73 cents. [nN21169950]

Earnings reports earlier this week from rivals Johnson & Johnson (JNJ.N) and Stryker Corp (SYK.N) had caused concern among investors that the orthopedic market may be slowing as hospitals try to wring out cost concessions.

Sales of Zimmer’s hip, knee and other reconstructive implants were up 3 percent on a constant currency basis, slightly less than some analysts had expected. But David Dvorak, Zimmer’s chief executive, said the company “didn’t see much change in the way of pricing pressure.”

“Regarding the overall market, while there did appear to be a modest stepdown in growth during the second quarter, we believe that the broader market dynamics are unchanged,” he said on a conference call with investors.

The “stepdown” pushed Zimmer’s shares down 0.5 percent in midday trading, but analysts said the results were solid.

“Given the results of Biomet, DePuy and Stryker, and increased investor concerns on the overall orthopedic market, we view Zimmer’s numbers as positive,” said David Roman, an analyst at Goldman Sachs, in a research report.

St. Jude, which makes pacemakers, implantable defibrillators and other cardiovascular devices, said its technology helps it resist excessive pricing pressure. The same is true of its focus on life-saving devices rather than on ones used in elective procedures that can more easily be deferred.

“It is the company whose devices are becoming commoditized that is going to be a loser in this kind of a crisis,” said Daniel Starks, St. Jude’s CEO, on a call with investors.

St. Jude, whose shares rose 3 percent, benefited in the quarter from the woes of Boston Scientific Corp (BSX.N), which had to suspend sales of its implantable heart defibrillators.

Boston Scientific told analysts on its earnings call on Wednesday that a slowdown in elective procedures had hurt some of its businesses in the latest quarter.

Zimmer rival Stryker Corp (SYK.N) reported earnings on Tuesday that showed strong demand for medical and surgical equipment but sluggish sales of hip and knee devices. On the same day, J&J posted weaker-than-expected results in its DePuy orthopedic division. [ID:nN2091149] (Reporting by Toni Clarke. Editing by Robert MacMillan)

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