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More than a year after announcing its intention to acquire Wright Medical for $5.4 billion, Stryker today completed the purchase. Stryker Chair and CEO Kevin Lobo said, “This acquisition enhances our global market position in trauma and extremities, providing significant opportunities to advance innovation and reach more patients. We welcome the Wright Medical team to Stryker and look forward to growing the combined business by delivering solutions that improve patient outcomes.”
A Long Road
The orthopedic industry greeted news of Stryker’s intent to purchase Wright Medical with surprise and a modicum of skepticism. The massive price tag, coupled with some cultural and revenue red flags at Wright Medical, seemed a significant risk for Stryker. Observers immediately questioned some of the portfolio overlaps between the two companies.
Not long after Stryker’s announcement, a Wright Medical shareholder filed suit to halt the acquisition. The lawsuit claimed that the Solicitation Statement submitted to shareholders regarding the proposed acquisition was false and misleading.
Stryker next faced regulatory hurdles related to its STAR total ankle replacement line. The U.K.’s Competition and Markets Authority (CMA) announced at the end of June 2020 that Stryker’s acquisition of Wright Medical would result in a substantial lessening of competition (SLC) in U.K. total ankle replacement markets. Stryker ultimately entered an agreement with Colfax Corporate/DJO to divest its STAR product line along with select finger joint replacement products.
Integration Challenges Ahead
Stryker faces a massive integration project at a time when the COVID pandemic is setting daily records in the U.S. for infections and hospitalizations. Further, the company struggled with its November 2018 acquisition of K2M, a far smaller company than Wright. After initially targeting a 1Q19 completion for its integration buildout with K2M, Stryker found itself mired in organizational and inventory challenges. During his 3Q20 earnings remarks, Lobo said, “We’re pleased with the performance of spine. I think that K2M was a tough integration. We knew it would be tough. It was tough. That is largely behind us. We actually got a little reprieve in the second quarter, honestly, to get our inventory and position more stabilized.”
Wright Medical itself is no stranger to bumpy integrations. It faced a mid-2019 mutiny from Cartiva legacy distributors, talent-retention troubles and intense competition from smaller foot-and-ankle companies. At the time, Wright Medical CEO Bob Palmisano said, “It was clear that as a group, the distributors collectively believed that they would not have access to Cartiva long term. They stopped devoting time and resources to this product and actively tried to move as many customers as they could away from Cartiva.”
The New Orthopedic Landscape
Despite these challenges, Stryker’s acquisition of Wright Medical could reshape significant portions of the orthopedic landscape. It vaults Stryker into the market leader position for extremity joint replacement, solidifies its trauma position and improves its orthobiologics ranking. Stryker gains access to a specialized salesforce, particularly for international upper extremities, where it has no presence. Stryker leadership also expressed excitement over Wright Medical’s Blueprint upper extremity planning technology, as well as the Augment injectable biologic. Blueprint pre-operative planning software could ultimately be integrated into Stryker’s planned extremity and spine expansions for Mako.
Stryker’s acquisition of Wright likely figured into Smith+Nephew’s decision to purchase the orthopedic assets of Integra LifeSciences. Likewise, Zimmer Biomet expects to benefit from salesforce disruption caused by the integration of Stryker and Wright. Bryan Hanson, Zimmer Biomet President and CEO, said, “Most of the time, in our industry, bringing two organizations together creates dis-synergy. I would expect at some point, just given the historical views of acquisitions in our space, you’re going to see some level of dis-synergy. We’re hoping to have an opportunity to take advantage of that.”
Revenue Exhibits
Exhibit 1: Stryker Segment Ranks Based on 2019 Combined SYK and WMGI Revenue ($ million)
| Segment | Revenue | Share | New Rank | Prev Rank |
|---|---|---|---|---|
| Joint Replacement Extremities | $635.1 | 26.1% | 1 | 4 |
| Trauma | $1,813.6 | 24.3% | 2 | 2 |
| Biologics | $359.8 | 6.8% | 5 | 7 |
Exhibit 2: Stryker Projected 2020 Revenue ($ million)
| FY20P | FY19 | $ Chg | % Chg | |
|---|---|---|---|---|
| Joint Replacement | $3,662.7 | $4,010.6 | ($347.9) | (8.7%) |
| Knees | $1,988.5 | $2,180.7 | ($192.2) | (8.8%) |
| Hips | $1,510.3 | $1,657.2 | ($146.9) | (8.9%) |
| Extremities | $163.8 | $172.7 | ($8.8) | (5.1%) |
| Spine | $1,001.0 | $1,082.3 | ($81.4) | (7.5%) |
| Trauma | $1,460.4 | $1,487.3 | ($26.8) | (1.8%) |
| Sports Medicine | $569.1 | $607.0 | ($37.8) | (6.2%) |
| Orthobiologics | $237.0 | $246.3 | ($9.3) | (3.8%) |
| Other (CMF) | $284.0 | $295.6 | ($11.6) | (3.9%) |
| Total | $7,214.2 | $7,729.0 | ($514.8) | (6.7%) |
Exhibit 3: Wright Medical Projected 2020 Revenue ($ million)
| FY20P | FY19 | $ Chg | % Chg | |
|---|---|---|---|---|
| Joint Replacement Extremities | $412.2 | $462.4 | ($50.2) | (10.9%) |
| Trauma | $310.1 | $326.3 | ($16.2) | (5%) |
| Sports Medicine | $15.1 | $18.8 | ($3.7) | (19.5%) |
| Orthobiologics | $98.6 | $113.5 | ($14.9) | (13.1%) |
| Total | $836.0 | $920.9 | ($84.9) | (9.2%) |
More than a year after announcing its intention to acquire Wright Medical for $5.4 billion, Stryker today completed the purchase. Stryker Chair and CEO Kevin Lobo said, “This acquisition enhances our global market position in trauma and extremities, providing significant opportunities to advance innovation and reach more patients. We welcome...
More than a year after announcing its intention to acquire Wright Medical for $5.4 billion, Stryker today completed the purchase. Stryker Chair and CEO Kevin Lobo said, “This acquisition enhances our global market position in trauma and extremities, providing significant opportunities to advance innovation and reach more patients. We welcome the Wright Medical team to Stryker and look forward to growing the combined business by delivering solutions that improve patient outcomes.”
A Long Road
The orthopedic industry greeted news of Stryker’s intent to purchase Wright Medical with surprise and a modicum of skepticism. The massive price tag, coupled with some cultural and revenue red flags at Wright Medical, seemed a significant risk for Stryker. Observers immediately questioned some of the portfolio overlaps between the two companies.
Not long after Stryker’s announcement, a Wright Medical shareholder filed suit to halt the acquisition. The lawsuit claimed that the Solicitation Statement submitted to shareholders regarding the proposed acquisition was false and misleading.
Stryker next faced regulatory hurdles related to its STAR total ankle replacement line. The U.K.’s Competition and Markets Authority (CMA) announced at the end of June 2020 that Stryker’s acquisition of Wright Medical would result in a substantial lessening of competition (SLC) in U.K. total ankle replacement markets. Stryker ultimately entered an agreement with Colfax Corporate/DJO to divest its STAR product line along with select finger joint replacement products.
Integration Challenges Ahead
Stryker faces a massive integration project at a time when the COVID pandemic is setting daily records in the U.S. for infections and hospitalizations. Further, the company struggled with its November 2018 acquisition of K2M, a far smaller company than Wright. After initially targeting a 1Q19 completion for its integration buildout with K2M, Stryker found itself mired in organizational and inventory challenges. During his 3Q20 earnings remarks, Lobo said, “We’re pleased with the performance of spine. I think that K2M was a tough integration. We knew it would be tough. It was tough. That is largely behind us. We actually got a little reprieve in the second quarter, honestly, to get our inventory and position more stabilized.”
Wright Medical itself is no stranger to bumpy integrations. It faced a mid-2019 mutiny from Cartiva legacy distributors, talent-retention troubles and intense competition from smaller foot-and-ankle companies. At the time, Wright Medical CEO Bob Palmisano said, “It was clear that as a group, the distributors collectively believed that they would not have access to Cartiva long term. They stopped devoting time and resources to this product and actively tried to move as many customers as they could away from Cartiva.”
The New Orthopedic Landscape
Despite these challenges, Stryker’s acquisition of Wright Medical could reshape significant portions of the orthopedic landscape. It vaults Stryker into the market leader position for extremity joint replacement, solidifies its trauma position and improves its orthobiologics ranking. Stryker gains access to a specialized salesforce, particularly for international upper extremities, where it has no presence. Stryker leadership also expressed excitement over Wright Medical’s Blueprint upper extremity planning technology, as well as the Augment injectable biologic. Blueprint pre-operative planning software could ultimately be integrated into Stryker’s planned extremity and spine expansions for Mako.
Stryker’s acquisition of Wright likely figured into Smith+Nephew’s decision to purchase the orthopedic assets of Integra LifeSciences. Likewise, Zimmer Biomet expects to benefit from salesforce disruption caused by the integration of Stryker and Wright. Bryan Hanson, Zimmer Biomet President and CEO, said, “Most of the time, in our industry, bringing two organizations together creates dis-synergy. I would expect at some point, just given the historical views of acquisitions in our space, you’re going to see some level of dis-synergy. We’re hoping to have an opportunity to take advantage of that.”
Revenue Exhibits
Exhibit 1: Stryker Segment Ranks Based on 2019 Combined SYK and WMGI Revenue ($ million)
| Segment | Revenue | Share | New Rank | Prev Rank |
|---|---|---|---|---|
| Joint Replacement Extremities | $635.1 | 26.1% | 1 | 4 |
| Trauma | $1,813.6 | 24.3% | 2 | 2 |
| Biologics | $359.8 | 6.8% | 5 | 7 |
Exhibit 2: Stryker Projected 2020 Revenue ($ million)
| FY20P | FY19 | $ Chg | % Chg | |
|---|---|---|---|---|
| Joint Replacement | $3,662.7 | $4,010.6 | ($347.9) | (8.7%) |
| Knees | $1,988.5 | $2,180.7 | ($192.2) | (8.8%) |
| Hips | $1,510.3 | $1,657.2 | ($146.9) | (8.9%) |
| Extremities | $163.8 | $172.7 | ($8.8) | (5.1%) |
| Spine | $1,001.0 | $1,082.3 | ($81.4) | (7.5%) |
| Trauma | $1,460.4 | $1,487.3 | ($26.8) | (1.8%) |
| Sports Medicine | $569.1 | $607.0 | ($37.8) | (6.2%) |
| Orthobiologics | $237.0 | $246.3 | ($9.3) | (3.8%) |
| Other (CMF) | $284.0 | $295.6 | ($11.6) | (3.9%) |
| Total | $7,214.2 | $7,729.0 | ($514.8) | (6.7%) |
Exhibit 3: Wright Medical Projected 2020 Revenue ($ million)
| FY20P | FY19 | $ Chg | % Chg | |
|---|---|---|---|---|
| Joint Replacement Extremities | $412.2 | $462.4 | ($50.2) | (10.9%) |
| Trauma | $310.1 | $326.3 | ($16.2) | (5%) |
| Sports Medicine | $15.1 | $18.8 | ($3.7) | (19.5%) |
| Orthobiologics | $98.6 | $113.5 | ($14.9) | (13.1%) |
| Total | $836.0 | $920.9 | ($84.9) | (9.2%) |
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ME
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.
