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Integra Expands in Europe

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Medical products company Integra LifeSciences (IART - Free Report) recently revealed its intention of expanding its international operations. The company came up with the first implantation of its new shoulder arthoplasty device PyroTITAN Humeral Resurfacing Implant in Italy and Sweden.

Integra claims that this new device will be a safer and traditional substitute with smaller incision and less bone removal to the total shoulder replacement surgery. Moreover, the PyroTITAN implant has chances of less damage compared to metal resurfacing replacement. This device, in particular, replaces damaged humeral head bearing surface, especially on patients with glenohumeral joint disease arising from non-inflammatory, inflammatory and post traumatic arthritis.  The PyroTITAN Humeral Resurfacing System is currently available in 12 sizes.

With the growing number of shoulder arthroplasty procedures in recent times owing to increased patient population, activity levels and life expectancy, we believe that this initiative on Integra’s part will accelerate profitability going forward. However, the company is yet to launch the device in the US.

During the fourth quarter of fiscal 2011, Integra’s Orthopedics segment sales increased 21% year over year to $89.5 million. The company is also pursuing strategic acquisitions to turnaround the company’s fortunes. 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 - Free Report) , Johnson & Johnson (JNJ - Free Report) and Stryker Corp. (SYK - Free 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.

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