Stryker is one of the world’s leading medtech companies. From medical and surgical to neurotechnology and orthopedics, Stryker’s innovative products include digital and enabling technologies to support customers and drive the growth of the company. Stryker is “a category leader across all of its businesses in one category or another. It has a diversified customer base with massive potential upsides, including advanced imaging, stroke care, safety, and medical robotics,” according to market analysis firm Seeking Alpha. “While there are always leaders in specific fields, very few fields have as clear a leader as Stryker seems to be in these segments.”1
The company’s “quality first” strategy encompasses customer focus, innovation, globalization, and financial performance (see Table 1). The company is focusing on financial strategies that balance innovation with price, cost, and managing the supply chain. “Stryker’s innovative spirit is alive and well as we continue to launch new products and pursue acquisitions to fuel growth across our 22 business units,” the company says.
Setting the Stage for Success
On the orthopedic side, Stryker is seeing “good improvement in procedure volumes,” said Glenn Boehnlein, Stryker vice president and chief financial officer, at the 2022 Wells Fargo Securities Healthcare Conference. “Hospitals are getting better at managing new staffing realities and being more efficient about how they’re running their ORs, sterile processing, and everything that supports that,” he said. “On the med-surg side, we haven’t seen a slowdown in terms of capital uptake both on small and large capital.” Boehnlein noted that capital is about 25 percent of Stryker’s revenue, with large capital making up 10 percent of that revenue.
Stryker hasn’t experienced any cycle elongation. Rather, Boehnlein said, the company is still seeing good order uptake. “If you want to flip to the cost side of things, things are less worse — so we’re not having to go to the spot market as much to buy chips. We are starting to have regular interactions with our normal vendors and our normal contracted prices — which is good.”
He noted, however, that the medtech giant is feeling some of the effects of the underlying inflation of labor, transportation, distribution, and commodities such as plastics, resins, and metals. “Overall, things are on track for us to close out the year where we said they would, but there are lots of twists and turns between now and December.”
Stryker is getting “smart on price,” he said. “It’s a little bit of a tale of two buckets within our P&L. On the first side, there’s our med-surg products. Med-surg is used to going after price — and has gone after a price in the past. In fact, if you look at Q2, U.S. med-surg had a positive price of 0.4 percent. Endo, instruments, and medical are putting in the incentive plans, and working with their customers to help rationalize the price increases that they need. It doesn’t happen overnight. So, I do think that on that side of the business, we’ll see a good price impact as we get rolled into next year,” he said. “The med-surg/neuro segment is providing some extremely innovative solutions in instruments, surgical tech, and acute care — including things like extremely advanced resuscitation technologies.”
The ortho side of the business is managed much more centrally, said Boehnlein. “Those are large contracts, and those contracts come up for renewal every three years or so. Typically, on the ortho side of the business, we see anywhere from –5 percent for spine to –2 percent for hips and knees.” This, he said, provides Stryker with an opportunity to engage its customers and start to work on price.
“A win could even look like holding price flat on the ortho side, but it is a conversation that we are having with customers now. I expect that we’ll see the positive benefit of this at some point rolling through next year. At any given time in ortho, we only have the opportunity to address about one-third of the contracts in a given year.”
The pandemic led to disrupted global supply chains, along with other challenges including inventory shortages, cost pressures, and lead times. Despite this, Stryker stayed steady and weathered the storm.
“If you look at our growth numbers, endo and instruments are being impacted but they’re managing through it — given the robust growth we had in Q2 . Medical — having negative growth in Q2 even aside from the large comparable [companies] — they are the one division that’s being impacted the most from supply constraints. Defibrillator and bed products are where we are feeling most of that.”
But, added Boehnlein, “we have good visibility to supply through the rest of this year, so we’ll see sequential improvement out of medical through the rest of this year, which gets us to our overall 8–9 percent growth number.”
Stryker is feeling underlying inflation in labor as well as operating “hand to mouth” on some raw material supplies. “We don’t have our normal steady manufacturing environment. That’s driving some inefficiencies within labor and overheads.”
Boehnlein pointed out that Stryker has learned a lot over the last few years about how to be prudent in its operating expenses, noting that a big portion of those expenses are tied to how the company controls head count. “We are being appropriately how we expand our headcount, and we’re doing a lot more virtual meetings than we used to.”
“One of the things that gives us confidence is that we are seeing sequential improvement in procedural volumes across our orthopedic businesses. The other piece of that is having visibility to supply and critical supply for chips and components that allow us to feel comfortable about what kind of volumes we were forecasting from med-surg in the past half of the year.”
Innovation in Robotics and 3D Printing
“A huge part of the future in medtech is bound to be robotics — and the company is a robotics leader, with its Mako platform driving growth in implants and expansion both in U.S. and in non-U.S. geographies,” notes Seeking Alpha. 1 Stryker’s Mako SmartRobotics program includes a Hospital/ASC Reported Outcomes (HRO) dashboard and RecoveryCOACH, which is a patient engagement and patient reported outcomes collection portal and app. Insights from the platforms are designed to enhance patient engagement to help improve satisfaction scores, benchmark data to compare outcomes to look for areas of opportunity for improvement and provide a comprehensive view of key performance indicators of the orthopedics.
“On the Mako front, the key thing for us is installation, and we continue to command price for Mako purchases,” said Boehnlein. “Customers are considering a variety of financing alternatives. Those include rentals, but they also include leases or leases tied to joint purchases. For certain customers — especially customers that are buying their second, third, or fourth Mako — we’re starting to see more outright cash purchases, which we definitely like. We’ve seen the utilization of Mako for hips growing. It’s certainly not where knees are, but it’s growing in a pretty significant way,” he said.
In October, Stryker also launched the Monterey AL Interbody System, a stand-alone interbody fusion device designed for anterior lumbar interbody fusion (ALIF). Monterey AL is made up of both solid and porous structures within a single implant, leveraging Stryker’s proprietary Tritanium In-Growth Technology, a material designed to mimic cancellous bone and provide an environment favorable to bone regeneration and fusion. New data demonstrates that undifferentiated stem cells grown on Tritanium exhibited osteogenic alkaline phosphatase without requiring growth factor supplements. Tritanium is a 3D printed, novel, highly porous titanium material designed for bone in-growth and biological fixation, built using AMagine, Stryker’s proprietary approach to implant creation using additive manufacturing.
“No one understands 3D printing like Stryker. The fact that they’ve been able to dial in the right mix of small, medium, and large pores in a reproducibly randomized matrix is incredible. Their growing body of preclinical data, specifically the cellular findings published most recently, makes my decision to go with these products very straightforward. Our goal with any implant is spinal fusion, and Stryker has taken a very intentional approach to designing the Tritanium cages with this goal in mind,” said Bala Giri, MD, president and founder, Texas Neuro Spine Institute.
Preparing for 2023
Stryker’s System 9 will launch next year. The system introduces a Europeancentric designed aseptic system for addressing a variety of orthopedic procedures. A new transfer shield has been engineered to accommodate novel aseptic system designs, including a redesigned battery handle and the system’s redesigned aseptic door aids in cleaning and use. It also provides tactical and visual feedback when latched. The handpiece retention mechanism has been updated with a new, intuitive locking mechanism that helps establish a secure battery connection. A novel twist-lock design provides tactile and visual feedback to ensure that it is locked.
“Our next-gen power tools have some exciting new feature sets that are going to do well in the market. Those products bring along a suite of products with them,” said Boehnlein.
“In the launch year, there’s training and sales details to work through with customers, so the impact is noticeable but not big. It’s the next year when we hit the large stride and full impact of that product. That would hold true for endoscopy as well. Customers are expecting those launches so there are those early adopter customers that provide a nice little spike for us,” he said. “We haven’t impacted our innovation span. We firmly believe that we must keep investing in that innovation line as that drives our product pipeline and drives our top line number.”
Mergers and Acquisitions
In 2021, Stryker acquired both Wright Medical and Gauss Surgical. Wright Medical brought a complementary product portfolio and customer base to Stryker’s trauma, foot, and ankle, and upper extremities businesses. Gauss Surgical developed Triton, an artificial intelligence-enabled platform for real-time monitoring of blood loss in sponges and canisters during surgery, enabling early detection of postpartum hemorrhage. Stryker believes the Triton technology will help improve the industry standards for quantifying blood loss in the labor and delivery department, furthering Stryker’s commitment to improve safety and outcomes for our caregivers and their patients.
In February 2022, Stryker completed its acquisition of Vocera Communications, a leader in digital care coordination and communication. Vocera brings a highly complementary and innovative portfolio to Stryker’s medical division that will enhance the company’s advanced digital healthcare offerings and further advance Stryker’s focus on preventing adverse events throughout the continuum of care. Stryker has integrated the Vocera product into Stryker’s acute care sales force.
“We are ahead on our revenue targets, and we’re going to feel the benefit of that as it gains momentum,” said Boehnlein. “On the integration front, we’re probably halfway through working through that process. We’ll be in a position where Vocera will be accretive to [earnings pershare] next year, and it’s certainly very accretive to our growth numbers.”
Vocera is now part of Stryker’s medical division, which Boehnlein noted is one of the best integrators at Stryker. Stryker is now working toward making sure that Vocera’s products are plugged into Stryker’s innovation timeline and that what Vocera was planning to do dovetails in with what Stryker wants, he said.
The future is bright for more M&A activity at Stryker. “We’ll get back to our knitting, our sweet spots, and our product tuck-ins — $100 million to $300 million deals. We have a good pipeline of what kinds of deals we want to look at that relate to that,” said Boehnlein.
“We will also prioritize debt reduction. We will pay off [our] term loan next year, but we’ll still look at these deals. These deals can be funded out of operating capital, and so you’ll see some singles and doubles as we’re moving forward. Then we’ll reload for the next round of maybe a multibillion-dollar deal.”
Growth at the high end of medtech is still on the table, said Boehnlein. “We haven’t backed away from that, and we will demonstrate that this year. We have a pathway in terms of looking at our current businesses and looking at our product pipeline. We have a lot of exciting new products that are coming out next year that will help drive the top line. There will be some stabilization in the orthopedics world, which will also help,” he said.
- “Stryker – A Leading MedTech Company Worth a Second Look,” Seeking Alpha, October 8, 2022.
This article was written by Sherrie Trigg, Editor and Director of Medical Content. Contact: