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Stryker puts Corin out of joint again

Created:
18 July 2008
Written by:
Richard Hemming

• US distribution partner Stryker lowers expectations for Cormet sales

• Stryker chief executive casts doubt on technology

• Corin shares down 70 per cent in three months

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Small medical device companies rely on bigger ones to take their products to the mass market. So it's rarely good news when your marketing partner goes public with doubts about your technology.

Corin knows this to its cost. The shares halved back in May, when Stryker said it would suspend deliveries of Corin's Cormet hip replacement technolgy, and this latest development leaves investors in the UK company in limbo. Announcing second-quarter results, Stryker lowered expectations for sales of hip replacement device Cormet, and its chief executive Stephen Macmillan said that the group "wasn’t completely comfortable with the science" of its "metal-on-metal" technology.

Stryker's got problems of its own. The company was hit by the recall of its Trident hip socket in January, and it has received three warnings from the US Food and Drug Administration since March 2007 over manufacturing problems or erroneous documents at its operations.

Landsbanki analyst Elizabeth Klein says that while it is positive that Stryker sees the technology used in Corin's Cormet as the solution to its problems, it is a concern that it is still not 100 per cent behind the product.

"Our view remains cautious and will do so until Stryker becomes completely comfortable with the science," she says.

IC VIEW:

FairlyPriced

At 141p, Corin's shares are a shadow of their 500p level just three months ago, before the first Stryker bombshell. If it can mend fences with Stryker, then the shares will look cheap - but that seems some way off. Fairly priced.

Previous IC View: Fairly priced, 234p, 9 June 2008

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