Integra's New Extremity Offering - Analyst Blog
February 10 2012 - 12:08PM
Zacks
In an attempt to consolidate its position in the Extremity
Reconstruction business, which has witnessed disappointing sales
performance in the recent past, medical products company
Integra LifeSciences Holdings Corporation (IART)
recently launched its new Allograft Wedge System.
Developed from human cancellous bone, the Integra Allograft
Wedge is sterilized through the BioCleanse Tissue Sterilization
Process. This is also terminally sterilized using a validated
method to attain a Sterility Assurance Level (SAL) of
10-6. This system comprises simple pre-cut allograft
wedges for both Evans and Cotton osteotomies and a set of
instruments designed to provide a method of assessing osteotomy
space to aid in the selection of the appropriate Integra Allograft
Wedge implant.
Integra’s Extremity Reconstruction sales organization, which
works on lower extremity fixation, upper extremity fixation, tendon
protection, peripheral nerve repair/protection and wound repair,
distributes this Allograft Wedge System in four sizes (6, 8, 10 and
12mm). The company claims that this variation in size will help the
surgeons limit the uncertainty by accommodating a patient's unique
surgical needs.
For the past few quarters, Integra has been witnessing several
headwinds in the form of weakness in the extremities and spine
markets leading to softer procedural volume and
tough competitive environment. The company is facing stiff
competition from large-cap players like Medtronic
(MDT) and Stryker Corp. (SYK) in the extremities
fixation market. Additionally, the challenging macroeconomic
environment in Europe and continued softness in the US is leading
to lower sales in Spine and Orthobiologics.
Earlier this month, while reporting preliminary results for the
fourth quarter and full year 2011, the company estimated quarterly
revenues in the range of $202–$203 million (way below the
previously announced guidance of $208.5–223.5 million). The company
believes the poor performance is primarily due to the disappointing
sales of Extremity Reconstruction products in the domestic
market.
To worsen the situation, Integra recently received a warning
letter from the US Food and Drug Administration (FDA) pertaining to
quality systems and compliance issues at its collagen manufacturing
facility in Plainsboro, New Jersey. Earlier in August, the company
received a Form 483 observation from the FDA regarding
manufacturing concerns at this collagen manufacturing facility.
Collagen products currently represent roughly 23% of total sales
and are manufactured at two facilities (the second in Puerto Rico).
We remain apprehensive regarding the FDA warning letter as it may
weigh down the stock further.
Although the company is taking several steps like planned
product launches and acquisition strategy to navigate through these
difficulties, the challenging macroeconomic environment remains a
headwind for the turnaround. Currently, Integra retains a Zacks #4
Rank (Short-term Sell). Considering the company’s business model
and fundamentals, we have a long-term Neutral recommendation on the
stock.
INTEGRA LIFESCI (IART): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
STRYKER CORP (SYK): Free Stock Analysis Report
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