Biomet Inc. on Thursday reported sluggish fiscal second-quarter sales that indicated a struggling orthopedics market hurt by the economic downturn isn't yet in recovery mode, and may have slowed further in recent months.

Shares of some publicly traded rivals were lower in the wake of Biomet's report, with Zimmer Holdings Inc. (ZMH) closing down 3.1% at $52.60 and Wright Medical Group Inc. (WMGI) down 3.1% to $15.70. Biomet is smaller that the industry heavyweights and its fiscal quarters end a month earlier than usual, but its results are closely watched for early clues about the market's condition.

In this case, Biomet reported flat hip sales and a 3% increase in knee sales for the quarter ended Nov. 30, excluding the impact of currency rates, down from growth rates seen in the prior three-month period. U.S. hip-and-knee sales slowed to 2% growth from 5% growth in the quarter ending Aug. 31.

The market may rebound at some point, as the companies expect. "But we're going to have to wait a little bit longer," Jefferies & Co. analyst Raj Denhoy said.

J.P. Morgan analyst Michael Weinstein said the results reinforce his firms' recent survey work indicating that market conditions continued to weaken during autumn. Among other replacement joint makers, Smith & Nephew PLC (SNN) closed down 1.3% at $51.40 while Stryker Corp. (SYK) slipped 2 cents to $54.64.

The orthopedics market has shown some economic vulnerability. Replacement hips and knees address painful, arthritic problems with original parts, but the procedures can be deferred by patients worried about out-of-pocket costs or long stretches off work for recovery.

"We believe that market growth rates for orthopedic reconstructive products continued to be depressed in the quarter," Jeffrey Binder, Biomet's president and chief executive, said in a release. "However, an improving economy, favorable demographics and product innovation should stimulate long-term market growth, and we continue to make significant research and development investments to address unmet clinical needs across our business.

In a conference call later, he added that doctors continuing to move away from so-called metal-on-metal hips--which use metal surfaces of both the ball and socket components--may have played a role in the company's slowed hip sales. The all-metal joints have drawn scrutiny amid concerns about wear kicking up debris that damages surrounding tissue. Biomet sells all-metal joints to some customers that use other manufacturers for other types of hips, which means lost business if those customers shift away from all-metal joints, customers Binder said.

"It's not clear whether hip market continued to decelerate or if we lost share," he said on the call. "It could be both."

He also said the company saw more of a decline in average selling prices in the fiscal second quarter than the first quarter. Sliding product prices are a long-running concern for medical-device investors, but it wasn't clear whether Biomet's experience signaled worsening market conditions. Binder noted that Biomet had been doing better than competitors on pricing, and the declines it's recently seen bring it into range with what competitors have reported.

For the quarter ended Nov. 30, the company's loss widened to $7.6 million from $7.2 million a year earlier. Excluding items such as costs related to the buyout, it reported a profit of $66 million, down from $74.8 million. Net sales slipped 0.4% to $698.3 million, but were up 2% excluding currency effects.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

(Matt Jarzemsky contributed to this article.)
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