This chart shows a cross-section of orthopedic-focused players from across the revenue spectrum, ranked by total orthopedic sales in 2021. The secondary axis shows a multi-year average for each company’s research and development spending as a percentage of total orthopedic sales. Both Zimmer Biomet and Smith+Nephew faced portfolio and innovation gaps in 2021, but the causes likely go beyond pure R&D investment.
While both companies are on the lower end of R&D spending as a percentage of revenue, they’re not significantly below Stryker. However, it is worth remembering that Zimmer Biomet and Smith+Nephew developed robotics and digital ecosystems during this period and even then, their R&D spend remained near the bottom (5.6% and 5.7%, respectively).
There are likely other operational challenges at play. In the run-up to Zimmer Biomet spinning off its spine and dental businesses, company leadership talked about the need to better prioritize capital allocation and investment focus. Zimmer Biomet seemingly struggled to forge a cohesive identity and strategy in the face of successive acquisitions and integrations.
Smith+Nephew made both organizational and leadership changes in 2021, a year in which it lost significant market share in knee replacement due in part to a late-arriving cementless option. The company combined its orthopedic and sports medicine businesses, and then parted ways with CEO Roland Diggelmann. Dr. Deepak Nath will be Smith+Nephew’s fourth CEO since 2018.
Average R&D Spend as Percentage of Total Revenue
- NuVasive plans to grow beyond its roots into a comprehensive spine player
- Globus Medical's next acquisition is likely to be a modest-sized deal outside of spine
- Orthofix expects to sustain mid-single-digit growth beyond 2022
- ConMed expects hospital ongoing staffing challenges for the market
- ATEC is supremely confident in its growth potential
- Conformis' royalty revenues accounted for 42% of its 2021 total revenue
- Treace's bunion pathology expertise has spurred innovation in related pathologies