Hanger acquires Paris O&P Inc.

Hanger Orthopedic Group Inc., flexed its muscles last week, expanding its Southwestern operations with the purchase of Paris O&P Inc.

Bethesda-based Hanger has been providing orthotic and prosthetic services to patients with skeletal conditions or a loss of limbs for 146 years.

Orthotics is the design and fabrication of braces used to treat a vast range of musculoskeletal conditions such as multiple sclerosis.

Prosthetics involves the design and fabrication of artificial limbs.

The purchase of Paris O&P Inc., a provider of orthotic and prosthetic services in Texas and Oklahoma, marks the company’s second acquisition of 2007.

“This is the first [acquisition] of a number we will do this year,” said Ivan Sabel, who is chairman and chief executive officer of Hanger Orthopedic.

“We are a consolidator of small mom-and-pop operators,” said Mr. Sabel.

“We have $50 million that we can spend annually on acquisitions, its a core part of our program.”

The company already owns and operates 618 patient care centers in 45 states and the District of Columbia.

Hanger Orthopedic accounts for more than 22 percent of the $2.5 billion U.S. orthopedic and prosthetic services market.

Despite the company’s strong presence in the industry, shares of Hanger Orthopedic have fallen by nearly a dollar this month.

The stock closed at $10.47 yesterday, down 6 cents from Friday.

Hanger’s common stock profits for the first quarter ended March 31 were $1.37 million (6 cents per diluted share) compared to a net loss of $736,000 (3 cents) a year ago.

Revenue for the first quarter grew a modest 3 percent to $143 million versus $140 million the previous year.

Dawn Brock, an analyst from JP Morgan Chase and Co., a New York financial services firm, noted that the struggling orthotic and prosthetic industry might hold the company back.

“[Hanger] is still the 800-[pound] gorilla with the best service offering and management team in the industry,” Ms. Brock wrote in her quarterly research report.

“The problem is that the [orthotic and prosthetic] industry is not nearly back to health in our opinion, and being the healthiest in a struggling market is not necessarily cause for outperformance,” she said.

But Hanger Orthopedic said that the market for orthotic and prosthetic services is only getting stronger as the U.S. population ages.

According to the National Center for Health Statistics, there are currently more than 1.5 million people in the United States who have lost an extremity.

In its quarterly report Hanger said that the elderly are more susceptible to diabetes or vascular disease, the leading causes for amputations.

Therefore as the population ages the demand for prosthetic services will increase.

The company also said that more Americans are participating in athletics and physical fitness, which is leading to an increase in injuries that require more orthopedic services.

“The bottom line is that the industry is growing,” said Bradley Ruhl, president-elect of the American Orthotic and Prosthetic Association, a trade association in Alexandria.

“Although the rate of growth is in the single digits, it is a healthy industry,” said Mr. Ruhl.

“As the population ages … the need to treat aches and pains and medical conditions [with orthotics and prosthetics] will continue to rise,” he said.