Orthopedic Market Limped to Finish Line in 2020

The orthopedic market ended its miserable 2020 amid another downturn brought on by a late-year COVID surge. We estimate that the market declined in the low single digits for the fourth quarter and in the low double digits for the year. Most companies see sales remaining depressed through the first quarter of 2021, but rebounding in a strong second half.

Late Year Surge

November 2020 marked a significant worsening of the pandemic, particularly in the U.S. and Europe. According to the COVID Tracking Project, the daily average of new positive tests and COVID patients on a ventilator more than doubled in November compared to October. COVID hospitalizations increased by +91% for that same period.

However, hospital systems relied on experience gained early in 2020 and fared much better overall during the year-end surge. Johnson & Johnson CEO Alex Gorsky said, “There are certain regions and hospitals around the world, let alone in the United States, where you see a tremendous strain on the systems. But overall, we see hospital volumes decrease no more than about 10% or 15% in areas such as, for example, in the U.K. and a couple of other places in Europe.”

Robotics Sales Outperform Associated Segments

COVID-related restrictions battered joint replacement and spine surgery volumes, but robotic sales in those segments hit record levels in 2020. Stryker, Zimmer Biomet, Medtronic and Globus all reported all-time highs for robotic placements or revenue in the fourth quarter. Leadership at Medtronic believes that the strength of capital equipment indicates hospitals are preparing for a robust recovery in 2021.

Smith+Nephew didn’t find similar success in its first full quarter of selling its CORI system, but company CEO Roland Diggelmann saw encouraging signs of uptake from new and existing customers. He said, “With CORI, we’re excited. We think we can certainly capture market share. We come late to the market with CORI, but with a very differentiated solution that should allow us to capture share. It’s a handheld solution. It’s versatile, modular, doesn’t require a C.T. scan, and we think it will play very well in the ASCs.”

Despite the growing adoption and revenue-generating ability of robotics, not all players are sold on the clinical and economic benefits compared to the costs. Conformis’ CEO Mark Augusti made the case against robotics before acknowledging the company is exploring the space. He said, “We have questions about the ultimate value of robotics and are not aware of any significant clinical results that have been published which justify the incremental cost. I understand the hypotheticals, but they are not there yet. Our recent capital infusion will allow us to proactively evaluate how robotics might complement our personalized approach to arthroplasty.”

The Evolving Spine Market

Several interesting battles are taking shape in the spine segment as players across the revenue spectrum shift toward becoming integrated technology companies. Medtronic furthered its expansion in artificial intelligence and predictive analytics with the November 2020 purchase of Medicrea, while Surgalign purchased HoloSurgical for its ARAI technology.

Globus Medical is at the beginning stages of a transformation meant to align technology and implants more closely. Company CEO Dave Demski said, “Globus is in the early stages of a technology transformation that will combine the capabilities of our enabling technology solutions with our innovative implant portfolio. We have reorganized our product development efforts around procedural solutions, teaming up engineers from the implant side with those from Enabling Technologies. We expect that this collaboration from the ground up will result in more impactful seamlessly integrated solutions, accelerating the advancement of patient care.”

To wrap up a year in which it far outperformed the market, ATEC Spine hailed itself as “spine’s new revolutionary.” Company CEO Patrick Miles went on to say that ATEC is the new home of lateral spine surgery, and that competitive hiring candidates view ATEC as a “giant killer.” The company has reason to be bold, as it has notched nine straight quarters of double-digit growth and is poised to further differentiate its position with a renewed agreement to purchase EOS imaging.

Early 2021 Outlook

Given the substantial uncertainty remaining in the market, few companies provided quantitative revenue guidance for 2021. Headwinds from the pandemic continued into March 2021, though most players expect the market will stabilize by the second half of the year due to a decrease in the number of COVID cases and the rollout of vaccines. Based on 3Q20’s rapid recovery of backlogged procedures, we expect surgeons will quickly work through the pent-up demand for orthopedic care from patients. Therefore, we estimate 2021 to bring modest growth over 2019 levels, when the industry surpassed $53.1 billion.

Supplementary Data Tables

Please note that we’ve calendarized revenue for companies on offset fiscal years.