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Year in Review

2018 Year in Review: Revenue Projections and Technology Trends

By Mike Evers

In November, we published our downloadable report, 2018 Revenue Projections: Companies Over $200 Million, for the 25 largest orthopaedic companies, shown here in Exhibit 1. Sales for these 25 companies account for approximately 80% of the worldwide orthopaedic market. We project that these companies will combine for $41 billion in 2018 revenue, +3% vs. 2017.

Exhibit 1: 2018 Revenue Projections for Companies Over $200MM

Company 2018P 2017 $ Change % Change
Acumed $280.6 $265.2 $15.4 5.8%
Aesculap $782.8 $756.5 $26.3 3.5%
Arthrex $2,534.8 $2,267.3 $267.5 11.8%
Bioventus $309.0 $300.0 $9.0 3.0%
ConMed $446.4 $429.0 $17.4 4.1%
DePuy Synthes $8,829.5 $9,017.7 -$188.2 -2.1%
DJO * $1,206.5 $1,186.1 $20.4 1.7%
Exactech $288.3 $264.5 $23.8 9.0%
Globus Medical $705.0 $636.0 $69.1 10.9%
K2M ** $287.8 $258.1 $29.8 11.5%
LimaCorporate $260.2 $246.9 $13.3 5.4%
Medacta $320.3 $278.1 $42.2 15.2%
Medtronic $3,017.0 $2,966.0 $51.0 1.7%
MicroPort Orthopedics $235.0 $216.8 $18.2 8.4%
MTF Biologics $379.8 $370.5 $9.3 2.5%
NuVasive $1,105.8 $1,027.7 $78.1 7.6%
Orthofix $452.5 $433.8 $18.7 4.3%
RTI Surgical $225.0 $223.6 $1.4 0.6%
Sanofi $379.1 $476.8 -$97.7 -20.5%
Seikagaku $264.1 $289.9 -$25.9 -8.9%
Smith & Nephew $3,449.8 $3,353.4 $96.4 2.9%
Spinal Elements $215.8 $198.0 $17.8 9.0%
Stryker $7,119.2 $6,667.6 $451.6 6.8%
Wright Medical $833.0 $745.0 $88.1 11.8%
Zimmer Biomet $7,088.2 $6,964.4 $123.8 1.8%
Total $41,015.5 $39,839.0 $1,176.6 3.0%

*Acquired by Colfax with expected close in 1Q19
**Acquired by Stryker in 4Q18


2018 Revenue Projections for Orthopaedic Companies - ORTHOWORLD








The performance of these 25 companies lends valuable insight to the overall state and health of the industry, and their strategic moves often guide industry trends. In early 2018, we conducted a survey with ORTHOWORLD Members (60% of respondents) and non-Member industry executives and managers (40% of respondents), dozens of whom represent these top 25 companies, to inform our market projections and thoughts on future technology activities. In reflecting on company performance in 2018 and re-examining responses to the survey, two items stood out that we wanted to share: the continual development of pre- and intra-operative technology and growth of Asian markets.

As mentioned, our projections show that the top 25 orthopaedic companies by revenue combined are expected to grow 3% in 2018 vs. 2017. In 2018, the companies with market growth above 6% had a few things in common: investment in robotic-assisted, navigation and surgical planning technologies; robust product portfolios; execution in emerging markets and the ability to capitalize on favorable economic conditions.

In our survey, 20% of respondents indicated that robotic, navigation and surgical planning technology represents a key opportunity in 2018 and beyond. The fastest-growing companies found success in this space with a variety of approaches, from robotics like Stryker’s Mako and Globus’ ExcelsiusGPS to Wright Medical’s BLUEPRINT 3D planning software. NuVasive’s Pulse surgical automation platform remains on track for 2Q19 launch, and the company gathered significant robotics expertise in 2018 by naming J. Christopher Barry CEO and Scott Huennekens of Verb Surgical to the board.

Companies with differentiated robotic- and computer-assisted surgery technology have increased sales growth due in part to product pull through. As health systems consolidate and reduce their number of vendors, companies are looking to offer complete systems of closely integrated technology and hardware, exemplified by NuVasive’s strategy of “turning operating rooms into NuVasive rooms.” Executing on this strategy requires a robust portfolio realized either through an aggressive new product cadence or targeted acquisitions, such as Stryker’s purchase of K2M to expand their spine offerings.

In our survey, 45% of respondents expect mid-single-digit growth for the orthopaedic industry between 2018 and 2022. This is shown in Exhibit 2. Low to no growth and double-digit growth each received 21% of responses. A few commonalities become apparent when the responses were broken out by geographic region, per Exhibit 3. Respondents see significant opportunities in Asia, with 48% of responses indicating double-digit growth. Regarding Europe and the U.S., the largest portion of respondents indicated that they expect mid-single-digit growth through 2022.

Emerging markets, particularly those in Asia, are a potential source of untapped revenue as many respondents pointed out. Stryker, for instance, saw double-digit 3Q18 revenue growth in emerging markets, and 11 of their 37 Mako placements for the quarter went to international accounts. Japan and China figured prominently in the international 3Q success for many of the top companies. For example, Medtronic’s Restorative Therapies Group segment grew 17% in China for 3Q18, driven primarily by spine sales (spine accounts for just over 30% of Medtronic’s RTG segment).

 

Exhibit 2: State and Future of the Orthopaedic Industry Survey, Market Growth Expectation 2018-2022

Growth Rate % Responses
Mid-Single-Digit 45%
Low to No Growth 21%
Double-Digits 21%
Unsure 13%

 


Exhibit 3: State and Future of the Orthopaedic Industry Survey, Market Growth Expectation 2018-2022 by Geographic Region

Growth by Region % Responses
U.S. 100%
Mid-Single-Digit 64%
Low to No Growth 24%
Double-Digits 8%
Unsure 4%
Europe 100%
Mid-Single-Digit 45%
Low to No Growth 36%
Unsure 15%
Double-Digits 4%
Asia 100%
Double-Digits 49%
Mid-Single-Digit 28%
Unsure 19%
Low to No Growth 5%

 

Continuing to reflect on this year, a strong economy has led to increased insurance coverage and more widespread willingness to pay for elective procedures, according to leadership from multiple companies. Some companies were positioned to leverage these favorable conditions, while others were constrained because of lingering operational issues or restructuring. DePuy Synthes, DJO, Smith & Nephew and Zimmer Biomet are all engaged in multi-year transformation or recovery programs. A significant number of survey respondents indicated that cost reductions were an area of focus, and while most companies are undertaking programs to drive efficiencies, those that stayed aggressive with strategic spending during belt-tightening may realize additional long-term benefits.

In 2018, we saw market segments like joint reconstruction and spine somewhat rebound from decelerated growth, due in part to a strong economy and more widespread insurance coverage. We will report about this more in-depth in the new year. To combat device commoditization and vendor consolidation, companies invested in robotic- and computer-assisted surgery technology to drive differentiation and create closely integrated surgical ecosystems—which we expect to continue over the next decade. Additionally, many focused on growth in their emerging markets, particularly in Asia, where revenue can be generated without the capital intensity required in the U.S. market.

Mike Evers is ORTHOWORLD’s Market Analyst. Reach him via email.