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Most orthopedic companies enjoyed a buoyant 2023 marked by a stable operating environment and elevated growth rates. That momentum carried into the first quarter of 2024, as the public companies we cover grew in the mid-single-digits. Below, we present quotes from the leaders of those companies as they reflect on the first quarter’s operating environment, the growing importance of technology and the high bar to clear for new M&A.
Orthopedic Demand Remains Robust but 2023 Likely Unique
While volume and demographic trends remain positive, last year brought a uniquely clean operating environment. Recently disrupted markets like spine and hyaluronic acid OA pain treatments remain attractive to companies with the right strategies.
Matt Trerotola, Enovis CEO
Last year brought a super clean market environment and very high utilization rates. This year will probably be a more normal market environment with storms, illnesses and other things, resulting in a little softer market growth. Quite a bit softer than last year.
Cheryl Blanchard, Anika Therapeutics CEO
The companies subject to the [hyaluronic acid] ASP changes have lapped that impact. That market had some dollar shrinkage because of that ASP dynamic, but it never stopped growing from a unit perspective. We continue to see low single-digit growth in that market in the United States. It is a healthy market. It is the frontline treatment for osteoarthritis before people move on to a total knee replacement. So, it does continue to have very healthy underlying market fundamentals.
Pat Miles, ATEC CEO
We face an unprecedented market opportunity, which began last fall with industry consolidation, capitulation and leadership change. As we look at the spine market, we see it as 35% disrupted. Other than us, the rest are apathetic. There’s a great proxy out there regarding Stryker and K2M, which transpired over multiple years. We expect this [opportunity] to continue over the coming years and cannot be more excited about it.
Technology Makes ASC and International Inroads
Enabling technology is driving consolidation and changing the competitive landscape of orthopedics. Orthopedic robots, once relegated to large hospitals primarily in the U.S., saw significant demand in ASCs and international markets during the first quarter.
Geoffrey Martha, Medtronic CEO
Accounts are making investments in a company now. The Medtronic ecosystem, AiBLE, versus some other ecosystem, and there’s not many out there, right? It’s also changing the industry structure because building these ecosystems requires a lot of expertise and capital. You don’t have this long tail of tiny spine companies preying on docs. Those are going away.
Ivan Tornos, Zimmer Biomet CEO
Here in the U.S., cases are moving to the ASC. Not a week goes by without a new ASC opening, and those ASCs want to acquire robotics. You can install or purchase it. We saw more purchases in the first quarter. We believe ASC dynamics drive this. Capital continues to be strong across key markets, so it is not a gating factor.
Timothy Schmid, Johnson & Johnson EVP MedTech
Within two years, we’re in 18 markets with 50,000 procedures. We see that as a constant tailwind as we now expand the provision of VELYS into EMEA and Asia Pac. We are proud of our ongoing progress, specifically in areas where we needed to compete better, like hips and knees. We saw high single-digit growth for knees in the first quarter, driven by the tremendous performance of our VELYS platform.
High Bar for Successful M&A in 2024
Orthopedic mergers and acquisitions slowed after 2020 and have been virtually nonexistent in 2024 thus far. It makes sense, as recent years featured a few industry-altering deals. However, the criteria for successful M&A have also tightened since then, with companies focused on a clear path to profitable growth.
Todd Garner, CONMED CFO
There is no change in our approach or filters. An acquisition needs to be accretive to the company’s revenue growth, which is getting harder. It needs to be accretive to our gross margin profile. If not on day one, we must have a clear line of sight for that to happen. And then, it’s got to have some protection. We don’t want to buy a big splash that becomes an anchor. We like to buy platforms more than just products, and we want to see some protection through IP or some other know-how that makes that accretion durable.
Kevin Lobo, Stryker CEO
We have an incredibly healthy pipeline of deals. Now, of course, the pipeline doesn’t always get realized. There’s always a washout rate as you go through these processes. But I’m feeling excited about the pipeline. They are mostly in the tuck-in variety. You’ll see most of those occur in the next couple of quarters.
Karen Parkhill, Medtronic CFO
Our robust balance sheet allows us to operate from a position of strength. As you know, we prioritize investing in our future growth and returning capital to our shareholders. We continue to evaluate tuck-in M&A opportunities against a high bar as we prioritize profitable growth.
Most orthopedic companies enjoyed a buoyant 2023 marked by a stable operating environment and elevated growth rates. That momentum carried into the first quarter of 2024, as the public companies we cover grew in the mid-single-digits. Below, we present quotes from the leaders of those companies as they reflect on the first quarter’s...
Most orthopedic companies enjoyed a buoyant 2023 marked by a stable operating environment and elevated growth rates. That momentum carried into the first quarter of 2024, as the public companies we cover grew in the mid-single-digits. Below, we present quotes from the leaders of those companies as they reflect on the first quarter’s operating environment, the growing importance of technology and the high bar to clear for new M&A.
Orthopedic Demand Remains Robust but 2023 Likely Unique
While volume and demographic trends remain positive, last year brought a uniquely clean operating environment. Recently disrupted markets like spine and hyaluronic acid OA pain treatments remain attractive to companies with the right strategies.
Matt Trerotola, Enovis CEO
Last year brought a super clean market environment and very high utilization rates. This year will probably be a more normal market environment with storms, illnesses and other things, resulting in a little softer market growth. Quite a bit softer than last year.
Cheryl Blanchard, Anika Therapeutics CEO
The companies subject to the [hyaluronic acid] ASP changes have lapped that impact. That market had some dollar shrinkage because of that ASP dynamic, but it never stopped growing from a unit perspective. We continue to see low single-digit growth in that market in the United States. It is a healthy market. It is the frontline treatment for osteoarthritis before people move on to a total knee replacement. So, it does continue to have very healthy underlying market fundamentals.
Pat Miles, ATEC CEO
We face an unprecedented market opportunity, which began last fall with industry consolidation, capitulation and leadership change. As we look at the spine market, we see it as 35% disrupted. Other than us, the rest are apathetic. There’s a great proxy out there regarding Stryker and K2M, which transpired over multiple years. We expect this [opportunity] to continue over the coming years and cannot be more excited about it.
Technology Makes ASC and International Inroads
Enabling technology is driving consolidation and changing the competitive landscape of orthopedics. Orthopedic robots, once relegated to large hospitals primarily in the U.S., saw significant demand in ASCs and international markets during the first quarter.
Geoffrey Martha, Medtronic CEO
Accounts are making investments in a company now. The Medtronic ecosystem, AiBLE, versus some other ecosystem, and there’s not many out there, right? It’s also changing the industry structure because building these ecosystems requires a lot of expertise and capital. You don’t have this long tail of tiny spine companies preying on docs. Those are going away.
Ivan Tornos, Zimmer Biomet CEO
Here in the U.S., cases are moving to the ASC. Not a week goes by without a new ASC opening, and those ASCs want to acquire robotics. You can install or purchase it. We saw more purchases in the first quarter. We believe ASC dynamics drive this. Capital continues to be strong across key markets, so it is not a gating factor.
Timothy Schmid, Johnson & Johnson EVP MedTech
Within two years, we’re in 18 markets with 50,000 procedures. We see that as a constant tailwind as we now expand the provision of VELYS into EMEA and Asia Pac. We are proud of our ongoing progress, specifically in areas where we needed to compete better, like hips and knees. We saw high single-digit growth for knees in the first quarter, driven by the tremendous performance of our VELYS platform.
High Bar for Successful M&A in 2024
Orthopedic mergers and acquisitions slowed after 2020 and have been virtually nonexistent in 2024 thus far. It makes sense, as recent years featured a few industry-altering deals. However, the criteria for successful M&A have also tightened since then, with companies focused on a clear path to profitable growth.
Todd Garner, CONMED CFO
There is no change in our approach or filters. An acquisition needs to be accretive to the company’s revenue growth, which is getting harder. It needs to be accretive to our gross margin profile. If not on day one, we must have a clear line of sight for that to happen. And then, it’s got to have some protection. We don’t want to buy a big splash that becomes an anchor. We like to buy platforms more than just products, and we want to see some protection through IP or some other know-how that makes that accretion durable.
Kevin Lobo, Stryker CEO
We have an incredibly healthy pipeline of deals. Now, of course, the pipeline doesn’t always get realized. There’s always a washout rate as you go through these processes. But I’m feeling excited about the pipeline. They are mostly in the tuck-in variety. You’ll see most of those occur in the next couple of quarters.
Karen Parkhill, Medtronic CFO
Our robust balance sheet allows us to operate from a position of strength. As you know, we prioritize investing in our future growth and returning capital to our shareholders. We continue to evaluate tuck-in M&A opportunities against a high bar as we prioritize profitable growth.
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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.
