Zimmer Biomet Holdings Inc.

Overview Key strengths Key risks Leading global market positions in key product categories (hip and knee implants). Substantial product concentration in the hip and knee segments (68% of 2023 revenue combined). Substantial intellectual property (IP) and high barriers to entry. Competition-driven pricing pressure and technological obsolescence risk. One of the strongest profitability profiles among rated medical device companies, with EBITDA margins of over 30%. Slow growth in core markets increases merger and acquisition (M&A) appetite to support faster revenue expansion. Zimmer increased its revenue by 7.5% on a constant-currency basis (6.5% reported) in 2023, which outperformed our expectations, due to strong orthopedic procedure volumes supported by improved supply chain conditions, better staffing across the health care industry, an increase in

...We believe the company's pipeline of new product launches will support a mid-single digit percent increase in its revenue over 2024-2025 despite a somewhat less-favorable pricing environment. Zimmer increased its revenue by 7.5% on a constant-currency basis (6.5% reported) in 2023, which outperformed our expectations, due to strong orthopedic procedure volumes supported by improved supply chain conditions, better staffing across the health care industry, an increase in robot-assisted surgeries, and the contributions from its recent product launches (i.e. the cementless knee form factor in its Persona implant portfolio). We also believe the elevated inflationary environment contributed to more-favorable pricing dynamics that enabled the company to limit the price erosion to approximately 60 basis points (bps) in 2023, which compared with its historical price erosion of 200 bps-300 bps in previous years. We assume Zimmer will continue to benefit from the solid demand for orthopedic surgeries,...

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