Integra's New PIP Fixation Device

Medical products company, Integra LifeSciences Holdings Corporation (IART - Snapshot Report) unveiled its latest device for fixing proximal interphalangeal (PIP) joint arthrodesis, namely IPP-ON PIP Fusion System. This product recently received 510(k) clearance from the US Food & Drug Administration (FDA). Currently, the device is being showcased at the American Orthopaedic Foot & Ankle Society 2012 Annual Meeting scheduled from June 20 to June 23, 2012 in California.

The IPP-ON PIP Fusion System is a stainless steel interphalangeal fusion device, an one-piece alternative to hammertoe fixation. Hammertoe is a malformation, which occurs due to the shortening of the tendon that controls toe movement. This new device is innovative as unlike other devices of similar category, it is not temperature sensitive and holds no handling and storage requirements. Currently, IPP-ON PIP Fusion System is available in two different sizes to support different patient anatomy.

Integra plans to distribute the product through its Extremity Reconstruction sales organization that mainly works on lower extremity and upper extremity fixations, tendon protection, peripheral nerve repair and wound repair. With the growing number of extremity procedures in recent times arising from increased patient population, the addition of Ascension and life expectancy, we believe that this new product development on Integra’s part will accelerate profitability going forward. During the first quarter of fiscal 2012, the US Extremities revenues of Integra grew 25% year over year to $26.6 million.

In late 2011, the company acquired Ascension Orthopedics, whose upper extremity and shoulder implants expanded Integra’s orthopedic portfolio. The acquisition also enabled Integra to utilize Ascension's proprietary PyroCarbon material, which is used in the new PyroTITAN implant.

Integra also expects to benefit from a product suite of over 20 new and differentiated products of Ascension, thus opening the largest component of the extremities market, estimated at $600 million.

However, over the past few quarters, the challenging macroeconomic environment in Europe and continued softness in the US has impacted Integra’s overall growth performance. The company is also facing stiff competition from large cap players like Medtronic (MDT - Analyst Report), Johnson & Johnson (JNJ - Analyst Report) and Stryker Corp. (SYK - Analyst Report) in the orthopedic market.

Although the company is taking several initiatives for international expansion and pursuing acquisitions to navigate through these difficulties, the challenging macroeconomic environment remains a headwind. Currently, Integra retains a Zacks #3 Rank (short-term Hold). Considering the company’s business model and fundamentals, we have a long-term Neutral recommendation on the stock.