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Stryker posted 4Q18 orthopedic revenue of $1,932.3MM, +6.5% vs. 4Q17, with full year revenue of $7,092MM, +6.4% vs. 2017. Expecting to carry 2018’s momentum forward, the company provided 2019 guidance of organic growth in the range of 6.5% to 7.5%. This is the highest initial revenue guide Stryker has provided in a decade.
Performance was strong within all segments. Knees continue to grow above market, in part because of strong Mako 4Q sales, while hips are starting to gain momentum. Despite some supply challenges in 3Q18, Stryker hit the milestone of $1 billion U.S. annual sales in their Trauma and Extremity segment for the first time in 2018 (note that we break those out into separate segments). Per leadership, those supply chain issues are largely resolved now. The spine segment was impacted by moderate price pressure, offset by growth in Tritanium implant products. Finally, the company saw less erosion in bone cement products than expected, leading to stronger overall orthopedic revenue performance.
Since closing the K2M acquisition in November 2018, Stryker has focused on integrating the management team and salesforce. A global senior leadership team has been formed from the combined organizations, and the rest of the organizational buildout should be complete by the end of the first quarter. In 2019, core spinal revenue is expected to grow in the mid-single digits.
Mako had a particularly strong 4Q with 54 robots installed globally, 40% of which were in competitive accounts. Competitive accounts are a key area of focus, as Stryker sees significantly faster growth across its entire portfolio in accounts with a Mako, according to leadership. Of the 54 robots placed in 4Q, 36 were installed within U.S. accounts, an increase of 33% vs. prior year. The global total of installed units is 642 (523 in the U.S.), with the majority of these now upgraded to the Total Knee Application.
Leadership provided some additional Mako metrics:
- Within the quarter, about 250 surgeons were certified on Total Knee, bringing the total number of surgeons trained since launch to approximately 1,600.
- Total Mako procedures for the year topped 76,900 with Total Knee procedures increasing 35% sequentially to 15,500.
- Knees represented 60% of all U.S. Mako procedures in 2018.
- Utilization rates improved. The fourth quarter saw an increase of 25% sequentially and 30% year-over-year.
- The ability to perform a cementless Total Knee on the robot, approved by FDA in 4Q17, is helping drive cementless knee adoption. As of the end of 2018, 30% of all Stryker knees are cementless.
Stryker expects double-digit Mako installation growth again in 2019 with significant room for growth in China and Japan, where only a few robots have been placed. The company built a training center in Hong Kong to educate surgeons in the Asia Pacific region. Regulatory approvals for the knee application are still in progress, but leadership expects significant uptake of Mako in China and Japan starting in 2020.
These metrics, in addition to growing peer reviewed evidence of Mako’s clinical outcomes, provide a strong position for the company in the face of competitive products launching soon (Zimmer Biomet’s ROSA Knee). Stryker CEO Kevin Lobo said, “I think that the entry of other products in the market will actually grow robotics. The whole dialogue about robotics is everywhere. They are here to stay. And I think more interest in robotics will frankly provide a tailwind in the market and a tailwind for our Mako business.”
Leadership also called out extremities as contributing to strong orthopedic performance for the quarter. Stryker had been growing their foot and ankle business in the 30% range for the first few years of building out that business, but as that growth regressed to the mean they were able to find more success in shoulders. The company expects to have a short stem shoulder in 2019 that will further increase their relatively low extremity market share.
Stryker is bullish about the prospect of another year of above market growth. They exited 2018 with a “very healthy” pipeline of capital orders as well as new products, such as the 3D-printed Trident II hip cup and next-generation 1688 endoscopy camera, that will accelerate growth in the second half of 2019.
ORTHOWORLD estimates segment sales and growth on an as-reported basis, as follows:
| 4Q18 | 4Q17 | $ Change | % Change | |
| Joint Replacement | $1,027.8 | $975.8 | $52.1 | 5.3% |
| Knees | $565.5 | $531.5 | $34.0 | 6.4% |
| Hips | $429.7 | $413.9 | $15.8 | 3.8% |
| Extremities | $32.7 | $30.4 | $2.3 | 7.4% |
| Spine | $232.1 | $187.0 | $45.1 | 24.1% |
| Trauma | $398.7 | $380.3 | $18.5 | 4.9% |
| Sports Medicine | $136.6 | $130.7 | $5.8 | 4.4% |
| Orthobiologics | $64.3 | $59.9 | $4.4 | 7.4% |
| Other | $73.0 | $69.8 | $3.2 | 4.6% |
| Total | $1,932.6 | $1,803.5 | $129.1 | 7.2% |
| FY18 | FY17 | $ Change | % Change | |
| Joint Replacement | $3,717.9 | $3,523.1 | $194.8 | 5.5% |
| Knees | $2,022.5 | $1,887.8 | $134.7 | 7.1% |
| Hips | $1,571.0 | $1,520.2 | $50.8 | 3.3% |
| Extremities | $124.4 | $115.1 | $9.3 | 8.1% |
| Spine | $781.3 | $707.1 | $74.2 | 10.5% |
| Trauma | $1,473.3 | $1,378.1 | $95.2 | 6.9% |
| Sports Medicine | $521.8 | $494.0 | $27.8 | 5.6% |
| Orthobiologics | $233.4 | $219.4 | $14.0 | 6.4% |
| Other | $301.5 | $287.0 | $14.5 | 5.1% |
| Total | $7,029.2 | $6,608.7 | $420.5 | 6.4% |
ORTHOWORLD estimates geographic sales and growth as follow:
| Geographic Region | 4Q18 | 4Q17 | $ Change | % Change |
| US | $1,408.9 | $1,303.9 | $104.9 | 8.0% |
| Ex-US | $523.7 | $499.57 | $24.2 | 4.8% |
| EMEA | $244.8 | $232.3 | $12.5 | 5.4% |
| Asia Pacific | $230.4 | $222.3 | $8.1 | 3.7% |
| Other | $48.4 | $45.0 | $3.5 | 7.7% |
| Total | $1,932.6 | $1,803.5 | $129.1 | 7.2% |
Net earnings, inclusive of all Stryker revenue, is as follows:
| 4Q18 | Amount ($MM) | % of Sales |
| Sales | $3,796.0 | |
| Cost of Sales | -$1,340.0 | 35.3% |
| R & D | -$221.0 | 5.8% |
| Selling and Admin | -$1,431.0 | 37.7% |
| Other | $1,264.0 | 33.3% |
| Net Earnings | $2,068.0 | 54.5% |
Sources: Stryker; ORTHOWORLD estimates. All revenue figures presented in USD $MM.
Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.
Stryker posted 4Q18 orthopedic revenue of $1,932.3MM, +6.5% vs. 4Q17, with full year revenue of $7,092MM, +6.4% vs. 2017. Expecting to carry 2018’s momentum forward, the company provided 2019 guidance of organic growth in the range of 6.5% to 7.5%. This is the highest initial revenue guide Stryker has provided in a decade.
Performance was...
Stryker posted 4Q18 orthopedic revenue of $1,932.3MM, +6.5% vs. 4Q17, with full year revenue of $7,092MM, +6.4% vs. 2017. Expecting to carry 2018’s momentum forward, the company provided 2019 guidance of organic growth in the range of 6.5% to 7.5%. This is the highest initial revenue guide Stryker has provided in a decade.
Performance was strong within all segments. Knees continue to grow above market, in part because of strong Mako 4Q sales, while hips are starting to gain momentum. Despite some supply challenges in 3Q18, Stryker hit the milestone of $1 billion U.S. annual sales in their Trauma and Extremity segment for the first time in 2018 (note that we break those out into separate segments). Per leadership, those supply chain issues are largely resolved now. The spine segment was impacted by moderate price pressure, offset by growth in Tritanium implant products. Finally, the company saw less erosion in bone cement products than expected, leading to stronger overall orthopedic revenue performance.
Since closing the K2M acquisition in November 2018, Stryker has focused on integrating the management team and salesforce. A global senior leadership team has been formed from the combined organizations, and the rest of the organizational buildout should be complete by the end of the first quarter. In 2019, core spinal revenue is expected to grow in the mid-single digits.
Mako had a particularly strong 4Q with 54 robots installed globally, 40% of which were in competitive accounts. Competitive accounts are a key area of focus, as Stryker sees significantly faster growth across its entire portfolio in accounts with a Mako, according to leadership. Of the 54 robots placed in 4Q, 36 were installed within U.S. accounts, an increase of 33% vs. prior year. The global total of installed units is 642 (523 in the U.S.), with the majority of these now upgraded to the Total Knee Application.
Leadership provided some additional Mako metrics:
- Within the quarter, about 250 surgeons were certified on Total Knee, bringing the total number of surgeons trained since launch to approximately 1,600.
- Total Mako procedures for the year topped 76,900 with Total Knee procedures increasing 35% sequentially to 15,500.
- Knees represented 60% of all U.S. Mako procedures in 2018.
- Utilization rates improved. The fourth quarter saw an increase of 25% sequentially and 30% year-over-year.
- The ability to perform a cementless Total Knee on the robot, approved by FDA in 4Q17, is helping drive cementless knee adoption. As of the end of 2018, 30% of all Stryker knees are cementless.
Stryker expects double-digit Mako installation growth again in 2019 with significant room for growth in China and Japan, where only a few robots have been placed. The company built a training center in Hong Kong to educate surgeons in the Asia Pacific region. Regulatory approvals for the knee application are still in progress, but leadership expects significant uptake of Mako in China and Japan starting in 2020.
These metrics, in addition to growing peer reviewed evidence of Mako’s clinical outcomes, provide a strong position for the company in the face of competitive products launching soon (Zimmer Biomet’s ROSA Knee). Stryker CEO Kevin Lobo said, “I think that the entry of other products in the market will actually grow robotics. The whole dialogue about robotics is everywhere. They are here to stay. And I think more interest in robotics will frankly provide a tailwind in the market and a tailwind for our Mako business.”
Leadership also called out extremities as contributing to strong orthopedic performance for the quarter. Stryker had been growing their foot and ankle business in the 30% range for the first few years of building out that business, but as that growth regressed to the mean they were able to find more success in shoulders. The company expects to have a short stem shoulder in 2019 that will further increase their relatively low extremity market share.
Stryker is bullish about the prospect of another year of above market growth. They exited 2018 with a “very healthy” pipeline of capital orders as well as new products, such as the 3D-printed Trident II hip cup and next-generation 1688 endoscopy camera, that will accelerate growth in the second half of 2019.
ORTHOWORLD estimates segment sales and growth on an as-reported basis, as follows:
| 4Q18 | 4Q17 | $ Change | % Change | |
| Joint Replacement | $1,027.8 | $975.8 | $52.1 | 5.3% |
| Knees | $565.5 | $531.5 | $34.0 | 6.4% |
| Hips | $429.7 | $413.9 | $15.8 | 3.8% |
| Extremities | $32.7 | $30.4 | $2.3 | 7.4% |
| Spine | $232.1 | $187.0 | $45.1 | 24.1% |
| Trauma | $398.7 | $380.3 | $18.5 | 4.9% |
| Sports Medicine | $136.6 | $130.7 | $5.8 | 4.4% |
| Orthobiologics | $64.3 | $59.9 | $4.4 | 7.4% |
| Other | $73.0 | $69.8 | $3.2 | 4.6% |
| Total | $1,932.6 | $1,803.5 | $129.1 | 7.2% |
| FY18 | FY17 | $ Change | % Change | |
| Joint Replacement | $3,717.9 | $3,523.1 | $194.8 | 5.5% |
| Knees | $2,022.5 | $1,887.8 | $134.7 | 7.1% |
| Hips | $1,571.0 | $1,520.2 | $50.8 | 3.3% |
| Extremities | $124.4 | $115.1 | $9.3 | 8.1% |
| Spine | $781.3 | $707.1 | $74.2 | 10.5% |
| Trauma | $1,473.3 | $1,378.1 | $95.2 | 6.9% |
| Sports Medicine | $521.8 | $494.0 | $27.8 | 5.6% |
| Orthobiologics | $233.4 | $219.4 | $14.0 | 6.4% |
| Other | $301.5 | $287.0 | $14.5 | 5.1% |
| Total | $7,029.2 | $6,608.7 | $420.5 | 6.4% |
ORTHOWORLD estimates geographic sales and growth as follow:
| Geographic Region | 4Q18 | 4Q17 | $ Change | % Change |
| US | $1,408.9 | $1,303.9 | $104.9 | 8.0% |
| Ex-US | $523.7 | $499.57 | $24.2 | 4.8% |
| EMEA | $244.8 | $232.3 | $12.5 | 5.4% |
| Asia Pacific | $230.4 | $222.3 | $8.1 | 3.7% |
| Other | $48.4 | $45.0 | $3.5 | 7.7% |
| Total | $1,932.6 | $1,803.5 | $129.1 | 7.2% |
Net earnings, inclusive of all Stryker revenue, is as follows:
| 4Q18 | Amount ($MM) | % of Sales |
| Sales | $3,796.0 | |
| Cost of Sales | -$1,340.0 | 35.3% |
| R & D | -$221.0 | 5.8% |
| Selling and Admin | -$1,431.0 | 37.7% |
| Other | $1,264.0 | 33.3% |
| Net Earnings | $2,068.0 | 54.5% |
Sources: Stryker; ORTHOWORLD estimates. All revenue figures presented in USD $MM.
Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.
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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.
