Zimmer Leads Orthopedic Makers Higher on Rising Joint Demand

Zimmer Holdings Inc. led makers of artificial joints and hospitals higher in New York trading on optimism that demand for the profitable replacement operations is on the rise.

Zimmer surged 6.3 percent, the most in almost 11 months, after closely held rival Biomet Inc. said sales of artificial hips climbed 7 percent in the quarter ended Nov. 30, while demand for knees gained 2 percent. The increase was greater than the previous three months, suggesting a market decline seen since the recession began may be improving, said Derrick Sung, an analyst with Sanford C. Bernstein & Co. in New York.

“We would view the Biomet large joint reconstruction results with cautious optimism for the broader hip and knee markets,” Sung wrote in a note to investors today. “Investors are generally pricing in no expectation for an orthopedic market recovery in 2012, so we would view any signs of such as incrementally positive for Stryker and Zimmer, the pure-play orthopedic companies.”

Zimmer, based in Warsaw, Indiana, has fallen 5.6 percent this year.

Symmetry Medical Inc., also based in Warsaw, climbed 4.2 percent to $8.12. Stryker Corp., based in Kalamazoo, Michigan, rose 4.3 percent to $47.76, while Minneapolis-based Medtronic increased 3.1 percent to $36.17.

Biomet, also based in Warsaw, was acquired for $11.4 billion in 2007 by a group of private-equity firms including Blackstone Group LP and Kohlberg Kravis Roberts & Co.

Hospitals would also benefit from a rebound in surgery rates. Community Health Systems Inc., based in Franklin, Tennessee, rose 2.3 percent to $16.44 and Health Management Associates Inc., based in Naples, Florida, climbed 3.7 percent to $7.05. Universal Health Services Inc., based in King of Prussia, Pennsylvania, gained 3.2 percent to $37.30 and Tenet Healthcare Corp., based in Dallas, increased 5.7 percent to $4.67.

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