Smith & Nephew yesterday became the first medical equipment maker to win US regulatory approval to sell a new artificial hip promising to be less invasive than traditional implants.
Shares rallied on hopes that US approval of its Birmingham Hip Resurfacing System would help revive growth following a fall in first-quarter earnings.
S&N, which cut its full-year growth forecasts last month amid government cutbacks on healthcare spending, had expected approval of the new implant by the end of June.
"This news bodes well for a second half recovery," Morgan Stanley analysts wrote in a research note.
S&N's Birmingham implant replaces the ball of the thighbone (femur) and the hip socket with a metal ball and cup. Surgeons cut away only a tiny amount of the top of the femur, which makes it less invasive than traditional total hip replacement.
The implant was originally developed by Midland Medical Technologies, a firm which started life at the University of Birmingham.
It was acquired by S&N for around £100 million some two years ago and later integrated into Smith & Nephew's global Orthopaedics Reconstruction business based in Memphis, Tennessee.
S&N, which has a European orthopaedic centre in Warwick, believes the implant will be suitable for patients at risk of requiring more than one hip replacement in their lifetime, which could include people younger than age 55 and those who are physically active.
Nomura Code analyst Michael King forecasts that hip resurfacing products will grow to capture more than ten per cent of the hip implant market by 2010, or about $300 million.
He expects the S&N's Birmingham implant to account for about $80 million of that total.
"This (the US approval) is reassuring and it's always good to be first to market," he said, retaining a "buy" investment rating on S&N shares.
Other companies hoping to win US approval for hip resurfacing products over the next few months are Wright Medical Group, with its Conserve Plus device and Britain's Corin Group, which is working with US partner Stryker on its its Cormet product.
The Birmingham implant has already been approved for sale in a number of other countries.
"The procedure has already gained significant market share in countries including the UK and Australia, and we believe it has great potential in the US in patients who are considered too young for conventional replacement surgery," S&N chief executive Chris O'Donnell said.
"We are pleased to be first to market with a hip resurfacing product in the US, and the Birmingham hip resurfacing system continues the momentum of our innovative new product launches in orthopaedics."
Last month Smith & Nephew slashed its growth forecasts after warning that constraints on NHS spending were hitting its business.
Among factors behind the disappointment, it blamed UK "healthcare budget constraints", just a day after Health Secretary Patricia Hewitt was jeered by nurses over job cuts in the NHS.
A move to split its orthopaedics division into separate reconstruction and trauma businesses had also held back revenue growth, it added.