US ortho device rebound tied to jobs, confidence-CEOs

* Zimmer CEO says hip, knee rebound depends on job growth

* Smith & Nephew CEO says consumer confidence is low

* Zimmer CEO sees procedure growth in second half of 2011

* Zimmer expects mid-single-digit sector growth eventually

* Both see more consolidation in medical device industry (Adds comments from CEOs)

By Susan Kelly

CHICAGO, Jan 10 (Reuters) – Demand for orthopedic implants such as hips and knees will remain under pressure until the economy and consumer confidence in it improves, the top executives of two medical device makers said on Monday.

Sales of replacement hips and knees, once a high-growth business, has been one of the hardest hit areas of the medical device sector in the economic downturn as patients who lost their jobs and health insurance get fewer procedures.

Zimmer Holdings Inc (ZMH.N) Chief Executive David Dvorak, speaking at the J.P. Morgan Healthcare Conference in San Francisco, said demand for hip and knee replacement procedures will recover when consumers have jobs and insurance again.

“There will continue to be an impact until unemployment rates are reduced and (insurance) enrollment rates go back up,” Dvorak told investors in a presentation was webcast.

Dvorak forecast better procedure volumes for hips and knees in the second half of 2011 and said overall sector growth will ultimately “settle in the mid single digits” once the economy improves.

“We’re going in the right direction, but it’s a slow recovery,” he said.

The shares of rival orthopedic device maker Smith & Nephew Plc (SN.L) hit a record high on Monday on an unconfirmed report the company received a takeover bid last month from Johnson & Johnson (JNJ.N), whose DePuy unit also makes orthopedic devices.

Both J&J and Smith & Nephew declined to comment on the report.

Speculation the sluggish orthopedic sector is ripe for consolidation has risen as hospitals, which are also feeling the pressure from lower patient volumes, step up demands for price concessions from vendors such as device makers.

Smith & Nephew Chief Executive Dave Illingworth, who also spoke at the J.P. Morgan conference on Monday, said pressure on pricing remains intense, but jobs growth is key to reviving orthopedic procedure volumes.

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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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