December 10, 2020 | 10:32 PM by Jay Kunstman |

Zimmer Biomet (ZBH) – Intelligent Implants

On Zimmer Biomet’s (ZBH) Q3 earnings call, CEO Bryan Hanson would comment:

“Again, this is really lending itself to the needs of the ASC setting. So, again, pretty excited about this portfolio opportunity…Through this partnership, we actually see the opportunity to further differentiate our knee ecosystem, which is a major focus of ours right now. Our goal is to launch an intelligent Persona total knee implant that incorporates smart sensor technology. We feel the combination of active data capture from this smart implant that we already have from mymobility and we already have from ROSA is going to provide an unmatched dataset that ultimately could be leveraged through AI for a decision support related to how best to treat and care for the patient.

Fast forward to this week, on December 9th, when Needham analyst Mike Matson would publish a more detailed note on this topic.

Zimmer and Canary Medical are partnering to incorporate the Canary Health Implantable Reporting Processor (CHIRP) technology into ZBH’s Persona-IQ knee implant. Canary expects to receive an initial FDA approval in 1H21 and ZBH expects to launch Persona-IQ in 2021.

It goes without saying that Needham believes this could drive the next wave of innovation in the orthopedics market.

Smart implants can passively collect patient data that could help with decision-making during the postoperative recovery period, provide future diagnostics, and use predictive artificial intelligence for early intervention, which could lead to better outcomes over the longer term. The post-operative recovery is a particularly critical time and is increasingly important given the growth of 90-day bundled payment models. Specifically, the smart implants house a battery, sensors, and an antenna (See Image Below) that can measure and calculate physiological parameters such as activity, motion, pressure, and flow.

In addition, the smart implant is designed to provide more robust patient data than consumer wearables. For example, Needham comments that while wearables can track the number of steps, a smart implant can capture much more detailed information about a patient’s range of motion and gait, which can allow surgeons to intervene earlier if necessary. In addition, smart implants address compliance issues associated with wearable devices since it is implanted in the patient’s body. Surgeons are able to bill for monthly remote monitoring of patients with smart implants, which gives them a new source of revenue and a financial incentive to adopt the technology.

Needham estimates that every 10% of smart knee penetration in the U.S. can drive approximately $0.09 of incremental EPS for Zimmer. In their base case, they estimate that Persona-IQ makes up 20% of its domestic knee business in 2022. They estimate that Persona-IQ is sold at a 20% price premium, or $900, to standard knees. And they estimate that ZBH has a 60% incremental operating margin on the price premium. This results in an additional $72M of revenue and $0.17 of EPS which would add ~2% to ZBH’s 2022E EPS.

Password must meet the following requirements: