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Joint replacement procedures suffered the most lasting impact from the initial disruption of the pandemic and lingering hospital staffing shortages. However, the segment’s recovery accelerated in 2022. Procedure volumes stabilized and are likely to enjoy a modest but sustained tailwind from backlogged cases.
Improving procedure volumes aren’t the only thing influencing joint replacement sales. Below we’ll touch on three of the many factors driving revenue performance: technological innovation entering the space, accelerating adoption of cementless knee systems and volume-based procurement in China. These trends are particularly pertinent to the 10 largest joint replacement companies. First, let’s briefly review segment sales and players.
Return to Sales Growth
Global joint replacement sales exceeded $19.6 billion in 2022, growing $638 million or +3.4% compared to 2021, according to our preliminary 2022 estimates before earnings announcements. As we noted, joint replacement procedure volumes rebounded in 2022 after sustained sluggishness in the wake of the pandemic.
Exhibit 1 presents orthopedic joint replacement sales in 2021 and 2022. Exhibit 2 illustrates segment market share.
Exhibit 1: Orthopedic Joint Replacement Sales 2022 vs. 2021 ($Millions)
| FY22E | FY21 | $ Chg | % Chg | |
|---|---|---|---|---|
| Knee Replacement | $9,070.3 | $8,799.3 | $271.0 | 3.1% |
| Hip Replacement | $7,833.0 | $7,642.5 | $190.5 | 2.5% |
| Extremity Joint Replacement | $2,772.0 | $2,595.5 | $176.5 | 6.8% |
| Total | $19,675.3 | $19,037.3 | $638.0 | 3.4% |
Joint replacement is a top-heavy segment. The four largest companies — Zimmer Biomet, Stryker, DePuy Synthes and Smith+Nephew — account for 72% of sales. The top 10 joint replacement companies range from Zimmer Biomet’s $5.1 billion to MicroPort Orthopedics’ $207 million.
The strategic activity and growing success of these 10 companies directly correlate with the broad trends and market forces seen in the joint replacement segment. Additionally, companies have emphasized the knee replacement market, which experienced the most profound disturbance during COVID and has seen a slew of new technologies enter the space.
Innovation in Joint Replacement
While joint replacement is a vast and mature segment, innovative technologies that span the entire patient journey are driving growth. Companies are leaning on robotics, augmented reality navigation, connected implants and artificial intelligence to improve outcomes and drive efficiency.
Globus Medical is a newer joint replacement player, entering the market in 2019 through its acquisition of StelKast. Its efforts to acquire and integrate NuVasive won’t impact the timeline of its long-awaited joint replacement robot. The company said that the robot will launch with meaningful differentiation at a price that’s market appropriate, recognizing the number of competitive products available. Meanwhile, Stryker and Zimmer Biomet are developing robotics for shoulder surgery, with launches likely in 2024.
Enovis’ enabling technology focus is on delivering accuracy and efficiency at a smaller footprint and lower cost. The strategy is geared toward ASCs, where the company does 20% of its knee replacement business. In mid-2022, Enovis strengthened its ASC presence by acquiring Insight Medical Systems for the ARVIS (Augmented Reality Visualization and Information System) navigation platform.
The last three years have made clear the revenue-generating potential of these technologies.
“Technology can impact pricing dynamics. It leads to longer-term contracts and better stability in pricing,” said Zimmer Biomet CEO Bryan Hanson, “You also get more revenue for that same procedure. We see adoption continuing to grow for robotics, data and cementless knees. These factors could buoy the overall market growth rate. Pricing stability and bringing more revenue per procedure has a positive effect on the overall orthopedic space.”
Accelerating Cementless Knee Adoption
The synergy between robotics and cementless knee implants keyed Stryker’s incredible success in the segment over the last several years. By the end of 2021, nearly half of Stryker’s U.S. knee replacement surgeries used the Mako robot and a cementless implant. A year later, the company marked its one-millionth cementless knee procedure.
Stryker’s competitors have adopted the same strategy with varying degrees of success. Smith+Nephew estimated that cementless knees represent a $400+ million opportunity in the U.S. with double-digit growth, but has struggled to align its offerings in the space. Zimmer Biomet’s cementless penetration started in 2022 in the mid-teens but should accelerate rapidly with the company’s new cementless form factor and expanding ROSA robot placements.
Stryker CEO Kevin Lobo isn’t worried about a more crowded cementless market. He said, “We have one million procedures already done, and competitors are just starting to launch their systems. [Surgeons] will be very cautious before they move to another product on something like that. The synergy with cementless and Mako is significant.”
Volume-Based Procurement in China
The national volume-based procurement (VBP) tender in China for knee and hip implants caused a significant shakeup for some of the largest orthopedic players. The average retail price for companies participating in the tender fell by more than 80%. Approximately 538,000 pieces will be purchased in the first year of the tender based on procedure volumes submitted by hospitals.
Companies like DePuy Synthes and Smith+Nephew invested heavily in the Chinese market and still feel the sting of the price drops. Joe Wolk, Chief Financial Officer at Johnson & Johnson, still likes DePuy Synthes’ position in China.
“We won a number of tenders at the end of 2021 that were persistent throughout 2022, and we continue to win tenders. We think over time that the volume and the opportunity to help many more patients will come with that,” Mr. Wolk said.
Domestic Chinese players like AK Medical and MicroPort Orthopedics significantly increased market penetration with the implementation of VBP. AK Medical ranked first among all participating players with an allotment of 81,000 pieces, more than 15% of the tender’s total first-year volume. AK Medical’s hospital access grew to nearly 3,500, of which 953 are newly covered hospitals. MicroPort Orthopedics also expanded its joint replacement market access through the tender process, picking up 140 new hospital customers in China, a 10% increase.
We estimate that the joint replacement segment grew by the mid-single digits in 2022 and will do so again in 2023. After a few challenging years, the joint replacement market is well-positioned for solid growth. Improving procedure volumes and new technologies can buoy joint replacement sales while the dust settles on VBP and macroeconomic headwinds.
Joint replacement procedures suffered the most lasting impact from the initial disruption of the pandemic and lingering hospital staffing shortages. However, the segment’s recovery accelerated in 2022. Procedure volumes stabilized and are likely to enjoy a modest but sustained tailwind from backlogged cases.
Improving procedure volumes aren’t...
Joint replacement procedures suffered the most lasting impact from the initial disruption of the pandemic and lingering hospital staffing shortages. However, the segment’s recovery accelerated in 2022. Procedure volumes stabilized and are likely to enjoy a modest but sustained tailwind from backlogged cases.
Improving procedure volumes aren’t the only thing influencing joint replacement sales. Below we’ll touch on three of the many factors driving revenue performance: technological innovation entering the space, accelerating adoption of cementless knee systems and volume-based procurement in China. These trends are particularly pertinent to the 10 largest joint replacement companies. First, let’s briefly review segment sales and players.
Return to Sales Growth
Global joint replacement sales exceeded $19.6 billion in 2022, growing $638 million or +3.4% compared to 2021, according to our preliminary 2022 estimates before earnings announcements. As we noted, joint replacement procedure volumes rebounded in 2022 after sustained sluggishness in the wake of the pandemic.
Exhibit 1 presents orthopedic joint replacement sales in 2021 and 2022. Exhibit 2 illustrates segment market share.
Exhibit 1: Orthopedic Joint Replacement Sales 2022 vs. 2021 ($Millions)
| FY22E | FY21 | $ Chg | % Chg | |
|---|---|---|---|---|
| Knee Replacement | $9,070.3 | $8,799.3 | $271.0 | 3.1% |
| Hip Replacement | $7,833.0 | $7,642.5 | $190.5 | 2.5% |
| Extremity Joint Replacement | $2,772.0 | $2,595.5 | $176.5 | 6.8% |
| Total | $19,675.3 | $19,037.3 | $638.0 | 3.4% |
Joint replacement is a top-heavy segment. The four largest companies — Zimmer Biomet, Stryker, DePuy Synthes and Smith+Nephew — account for 72% of sales. The top 10 joint replacement companies range from Zimmer Biomet’s $5.1 billion to MicroPort Orthopedics’ $207 million.
The strategic activity and growing success of these 10 companies directly correlate with the broad trends and market forces seen in the joint replacement segment. Additionally, companies have emphasized the knee replacement market, which experienced the most profound disturbance during COVID and has seen a slew of new technologies enter the space.
Innovation in Joint Replacement
While joint replacement is a vast and mature segment, innovative technologies that span the entire patient journey are driving growth. Companies are leaning on robotics, augmented reality navigation, connected implants and artificial intelligence to improve outcomes and drive efficiency.
Globus Medical is a newer joint replacement player, entering the market in 2019 through its acquisition of StelKast. Its efforts to acquire and integrate NuVasive won’t impact the timeline of its long-awaited joint replacement robot. The company said that the robot will launch with meaningful differentiation at a price that’s market appropriate, recognizing the number of competitive products available. Meanwhile, Stryker and Zimmer Biomet are developing robotics for shoulder surgery, with launches likely in 2024.
Enovis’ enabling technology focus is on delivering accuracy and efficiency at a smaller footprint and lower cost. The strategy is geared toward ASCs, where the company does 20% of its knee replacement business. In mid-2022, Enovis strengthened its ASC presence by acquiring Insight Medical Systems for the ARVIS (Augmented Reality Visualization and Information System) navigation platform.
The last three years have made clear the revenue-generating potential of these technologies.
“Technology can impact pricing dynamics. It leads to longer-term contracts and better stability in pricing,” said Zimmer Biomet CEO Bryan Hanson, “You also get more revenue for that same procedure. We see adoption continuing to grow for robotics, data and cementless knees. These factors could buoy the overall market growth rate. Pricing stability and bringing more revenue per procedure has a positive effect on the overall orthopedic space.”
Accelerating Cementless Knee Adoption
The synergy between robotics and cementless knee implants keyed Stryker’s incredible success in the segment over the last several years. By the end of 2021, nearly half of Stryker’s U.S. knee replacement surgeries used the Mako robot and a cementless implant. A year later, the company marked its one-millionth cementless knee procedure.
Stryker’s competitors have adopted the same strategy with varying degrees of success. Smith+Nephew estimated that cementless knees represent a $400+ million opportunity in the U.S. with double-digit growth, but has struggled to align its offerings in the space. Zimmer Biomet’s cementless penetration started in 2022 in the mid-teens but should accelerate rapidly with the company’s new cementless form factor and expanding ROSA robot placements.
Stryker CEO Kevin Lobo isn’t worried about a more crowded cementless market. He said, “We have one million procedures already done, and competitors are just starting to launch their systems. [Surgeons] will be very cautious before they move to another product on something like that. The synergy with cementless and Mako is significant.”
Volume-Based Procurement in China
The national volume-based procurement (VBP) tender in China for knee and hip implants caused a significant shakeup for some of the largest orthopedic players. The average retail price for companies participating in the tender fell by more than 80%. Approximately 538,000 pieces will be purchased in the first year of the tender based on procedure volumes submitted by hospitals.
Companies like DePuy Synthes and Smith+Nephew invested heavily in the Chinese market and still feel the sting of the price drops. Joe Wolk, Chief Financial Officer at Johnson & Johnson, still likes DePuy Synthes’ position in China.
“We won a number of tenders at the end of 2021 that were persistent throughout 2022, and we continue to win tenders. We think over time that the volume and the opportunity to help many more patients will come with that,” Mr. Wolk said.
Domestic Chinese players like AK Medical and MicroPort Orthopedics significantly increased market penetration with the implementation of VBP. AK Medical ranked first among all participating players with an allotment of 81,000 pieces, more than 15% of the tender’s total first-year volume. AK Medical’s hospital access grew to nearly 3,500, of which 953 are newly covered hospitals. MicroPort Orthopedics also expanded its joint replacement market access through the tender process, picking up 140 new hospital customers in China, a 10% increase.
We estimate that the joint replacement segment grew by the mid-single digits in 2022 and will do so again in 2023. After a few challenging years, the joint replacement market is well-positioned for solid growth. Improving procedure volumes and new technologies can buoy joint replacement sales while the dust settles on VBP and macroeconomic headwinds.
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Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
