UPDATE 2-Synthes sees low growth in 2010 after weak Q4

ZURICH, Feb 17 (Reuters) – Swiss medical device maker Synthes Inc (SYST.VX) said revenue growth is likely to remain in single digits this year as hospitals cut costs, after the lowest growth for years in the fourth quarter.

Synthes’ shares were down 5 percent at 128.51 Swiss francs by 0929 GMT on Wednesday, making it the largest loser in the Dow Jones European health care sector index .SXDP as at least two brokers cut their ratings for the stock.

The maker of nails, screws and plates to fix broken bones missed its own 2009 forecast for low double-digit revenue growth for the first time in years as it reported a 9 percent rise in sales, when stripping out currency effects.

Synthes, which also makes artificial spine discs, said revenue growth slowed to 4.7 percent in the fourth quarter, largely in line with competitors such as Biomet or Johnson & Johnson’s medical devices unit.

“Since we have been covering Synthes (1998), we have seen no quarter with such a low growth pattern,” Helvea analyst Daniel Jelovcan said in a note. “This is astonishing and will act as a drag on the share price.”

Synthes had pleased investors with double-digit revenue growth for years.

Brokerage Kepler cut its rating on Synthes stock to reduce from buy and ZKB lowered the stock to market weight from overweight.

“The expectations on have been very high and it is now going to be very hard to meet them,” ZKB analyst Sibylle Bischofberger said.


Revenue growth should pick up from the fourth quarter but was likely to remain in single digits, Synthes’ spokesman Gilgian Eisner said, despite a harsh winter giving the company a good start to the year.

“The economic crisis has shown effects,” and conditions are still tough Eisner said. Hospitals are cutting costs, activity in industries with high accident risk such as construction has reduced and people have cut back on driving or sports that could lead to accidents requiring treatment with Synthes products.

“The harsh winter has had a positive effect (on Synthes business) in Europe at the beginning of 2010,” he added.

Analysts have said companies such as Synthes should have had a good start to 2010 as the prolonged cold snap across Europe and North America led to a surge in fractures caused by falls and road accidents, boosting demand for orthopaedic trauma products used to fix broken bones.[ID:nLDE60A12Z]

Synthes’ spine business, which is still trailing competitors, was also hit by the recall of its Synex-II product in North America.

“We are not satisfied with the fourth quarter top line growth; however, we are encouraged by the higher growth rate in early 2010,” Synthes Chief Executive Michel Orsinger said in a statement.

The world’s market leader in trauma business reported full-year net profit of $824 million for 2009, beating analysts’ average forecast of $791 million.

Synthes, which is majority owned by its chairman Hansjoerg Wyss, increased its dividend by 23 percent to 1.35 Swiss francs per share. (Reporting by Sven Egenter and Oliver Hirt; Editing by Erica Billingham)


Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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