Smith & Nephew boosted by US approval for new artificial hip

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Smith & Nephew received a fillip yesterday when it won US regulatory approval to sell a new artificial hip that is less invasive than traditional implants. The shares, which have suffered recently on a slowing growth outlook, rallied 4.6 per cent to close at 460p as analysts at Lehman Brothers and Numis upgraded their recommendations on the stock.

S&N slashed its annual growth forecast last month after first-quarter earnings were hit by a restructuring of the business and cutbacks in government healthcare spending. But its chief executive Chris O'Donnell was confident trading would improve in the second half as he placed high hopes in the roll-out of a number of new products, including the so-called "Birmingham hip resurfacing system", which is the first such product to be approved in the US.

The implant is suitable for younger patients, including people under the age of 55, and those who are physically active, as an alternative to total hip replacement. It is already on the market in the UK and Australia. The implant replaces the ball of the thighbone and the hip socket with a metal ball and cup, but surgeons cut away only a tiny amount, leaving the top of the thigh bone largely intact.

Mr O'Donnell said: "The procedure has already gained significant market share in the UK and Australia, and we believe it has great potential in the US."

Some analysts predict hip resurfacing products will capture more than 10 per cent of the hip implant market by 2010, or about $300m (£160m). S&N's Birmingham implant could grab some $80m of that total.

Analysts at Morgan Stanley said: "There is a high level of interest in this new product in the US, especially as it can be used in younger patients. The Birmingham hip, along with two knee products, should have an impact on the top line in the second half."