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Stryker and DePuy Synthes, in its various forms, have grappled for the top spot in orthopedic sales for decades. Going back to 1999, Stryker held the summit in the orthopedic market with a slight lead over DePuy. Synthes-Stratec was the sixth-largest company that year, by our estimation. The merger of DePuy and Synthes in 2012 put the company in the top spot, which it has held until today.
After compiling our latest report, Top 10 Orthopedic Companies by Sales 2016-2023 Projected, we now expect that Stryker will reclaim the title of largest orthopedic company from DePuy Synthes in 2021.
The two companies have been on opposite trajectories for several years. Stryker’s head start in robotics and ability to successfully integrate major acquisitions have helped to separate it from the competition, especially over the last six years.
In 2016, DePuy Synthes secured sales of $9.1 billion, and Stryker’s orthopedic sales were $6.3 billion. Our 2021 projections have Stryker at $8.7 billion, inching out DePuy Synthes at $8.5 billion. We expect the gap between the two companies to grow in the coming years. Exhibit 1 shows orthopedic sales for Stryker and DePuy Synthes from 2016 to 2023 projected.
Robotics Head Start Helped Stryker Close the Gap
Stryker celebrated its 1,000th Mako robot placement in the third quarter of 2020. The system accounted for 114,000 robotic procedures between knee and hip replacement in 2019. DePuy Synthes, on the other hand, launched its VELYS robotic solution in 2021 and had completed “about 100 cases” by the halfway point of the year.
Stryker’s head start has given it time and opportunity to take share from its largest joint replacement competitors, DePuy Synthes and Zimmer Biomet. Katherine Owen, Stryker’s former Vice President of Strategy, once said, “We believe we have validated a strategic rationale and competitive advantage of Mako as witnessed by the roughly 600 basis points of U.S. knee market share that we have gained since 2013.”
Robotics proved relatively “pandemic-proof” compared to other orthopedic products. Companies like Stryker, Zimmer Biomet, Medtronic and Globus Medical all reported brisk robotics sales through 2020 despite the drastic reduction in surgical volumes. That trend continued in 2021.
But the sales benefit of robotics goes beyond the revenue infusion of a large capital placement. Robotic systems drive improved product mix, create new annual revenue streams and can be a powerful recruiting tool for competitive reps. Orthopedic enabling technologies, especially expensive robotic systems, are increasingly being leased through market share agreements which gives players more tools to enter competitive accounts. Stryker has leveraged all these factors in closing the revenue gap with DePuy Synthes in recent years.
Stryker sees Mako as an advantage in the procedure backlog recovery in 2022. “When knee and hip procedures come back, we’re in a terrific position to capitalize on those because the Mako systems we’re putting in, roughly half of those are going into competitive accounts. When volumes come back, we will be able to really take advantage of that, not just in our own Stryker-friendly accounts, but also in competitive accounts,” said Stryker Vice President of Investor Relations Preston Wells.
Stryker Threads the Needle with Major Integrations
Novel technology like robotics has differentiated the portfolios of some of the largest orthopedic companies and afforded them market share. However, successful mergers and acquisitions have been the primary growth drivers for orthopedics’ largest companies. The M&A strategy is evident when comparing Stryker and DePuy Synthes’ joint replacement and spine portfolios.
Johnson & Johnson created the largest orthopedics company to date in 2012 when it added Synthes to its DePuy franchise for $21.3 billion. A difficult integration plagued the company for years.
At the end of 2017, DePuy Synthes lamented its declining spine business and pointed to disruption from the Synthes acquisition. Alex Gorsky, Johnson & Johnson’s CEO at the time, said, “We are disappointed with the year-on-year declines in the knee and spine businesses as we continue working to improve portfolio offerings in faster growing segments of those markets. In spine, we’ve had a delay in product launches. Over the last several years this was the area most impacted by the integration with Synthes that resulted in the most disruption.”
As a rule, integrations between large orthopedic companies are difficult. Spine integrations seem particularly challenging for companies primarily focused on joint replacement and trauma.
Stryker wasn’t immune to the problem when it purchased mid-sized spine player K2M in 2018. Stryker endured a period of longer than expected salesforce integration and delayed product launches before eventually righting the ship. While the addition of K2M strengthened Stryker’s business, DePuy Synthes’ spine franchise continues to lose ground.
In 2016, $1.3 billion separated the two companies. The spine franchises are within about $200 million of each other today. Exhibit 2 shows spine sales for Stryker and DePuy Synthes from 2016 to 2023P.
Stryker surprised many observers in late 2019 when it announced its intent to purchase Wright Medical for $5.4 billion. Stryker faced questions about the cultural fit and portfolio overlap that it would ultimately have to answer during a global pandemic. Given that the company stumbled during the much smaller K2M integration, the Wright acquisition seemed destined to create significant disruption.
However, Stryker learned from its mistakes and said the Wright integration was a “marked improvement” over the K2M experience. Indeed, the acquisition brought unexpected benefits.
Stryker CEO Kevin Lobo said, “Their talent is really excellent. When we buy companies, we buy them for their products. Then we must infuse a lot of our management. We’ve had an infusion of talent from Wright that for me has been a positive surprise. Their sales leader for upper extremities is outstanding. They work with fabulous key opinion leaders on both upper and lower extremities. I would say that they are better key opinion leaders than we had within Stryker.”
While surges of COVID infections make it difficult to form a clear picture in most quarters, we haven’t seen any notable disruptions for Stryker and Wright to date. The acquisition vaulted Stryker to the top spot for extremity joint replacement and helped extend its lead over DePuy Synthes in joint replacement overall.
Stryker’s joint replacement portfolio increased by about $1.1 billion, from $3.4 billion in 2016 to a projected $4.5 billion in 2021. With the exception of 2020, DePuy Synthes’ portfolio has remained in the $3.2 to $3.3 billion range during the same period. We expect Stryker to continue to experience significant joint replacement growth due to its lead in the robotic market and the fast-growing extremity joint replacement market. Exhibit 3 shows joint replacement sales for Stryker and DePuy Synthes from 2016 to 2023P.
What’s Next for These Companies?
Stryker’s relatively early entry into the orthopedic robotic market paid off, but overall robotics penetration is low. There is plenty of growth potential for latecomers, both in the U.S. and abroad. While we expect the VELYS and ATTUNE Cementless Knee platforms to bring stability to DePuy Synthes’ joint replacement business, we don’t see it growing above market average through 2023. We think Stryker and a leaner, more focused Zimmer Biomet — the third largest orthopedic company today by revenue — will continue to outperform DePuy Synthes.
DePuy Synthes may face an even tougher road in its spine business. Could it follow Zimmer Biomet’s lead with a spin-off, or divest some underperforming segments? There are very few companies with the ability or appetite to make such a large transaction currently, and there are certainly more attractive assets out there.
In considering the overall industry ranking, DePuy Synthes will maintain a comfortable lead over Zimmer Biomet for at least the next few years. In our opinion, a major catalyst for change is necessary at DePuy Synthes to reverse its long decline.
The top orthopedic growth drivers today are M&A, enabling and digital technology and ASCs. Stryker has well-defined strategies for all three. The company is likely to launch a spine robot sometime in the future. Stryker has also invested in ASC-focused sales to be an early mover on the continuing shift of volume to outpatient settings. While the company hasn’t been immune to market disruption from the pandemic, Stryker’s operational excellence has mitigated some of the impact. Its focus on supply chain resiliency in recent years, for example, leaves Stryker in a better position than many competitors in the current environment. With these factors in mind, we expect Stryker will extend its leadership position in the years to come.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
Stryker and DePuy Synthes, in its various forms, have grappled for the top spot in orthopedic sales for decades. Going back to 1999, Stryker held the summit in the orthopedic market with a slight lead over DePuy. Synthes-Stratec was the sixth-largest company that year, by our estimation. The merger of DePuy and Synthes in 2012 put the company in...
Stryker and DePuy Synthes, in its various forms, have grappled for the top spot in orthopedic sales for decades. Going back to 1999, Stryker held the summit in the orthopedic market with a slight lead over DePuy. Synthes-Stratec was the sixth-largest company that year, by our estimation. The merger of DePuy and Synthes in 2012 put the company in the top spot, which it has held until today.
After compiling our latest report, Top 10 Orthopedic Companies by Sales 2016-2023 Projected, we now expect that Stryker will reclaim the title of largest orthopedic company from DePuy Synthes in 2021.
The two companies have been on opposite trajectories for several years. Stryker’s head start in robotics and ability to successfully integrate major acquisitions have helped to separate it from the competition, especially over the last six years.
In 2016, DePuy Synthes secured sales of $9.1 billion, and Stryker’s orthopedic sales were $6.3 billion. Our 2021 projections have Stryker at $8.7 billion, inching out DePuy Synthes at $8.5 billion. We expect the gap between the two companies to grow in the coming years. Exhibit 1 shows orthopedic sales for Stryker and DePuy Synthes from 2016 to 2023 projected.
Robotics Head Start Helped Stryker Close the Gap
Stryker celebrated its 1,000th Mako robot placement in the third quarter of 2020. The system accounted for 114,000 robotic procedures between knee and hip replacement in 2019. DePuy Synthes, on the other hand, launched its VELYS robotic solution in 2021 and had completed “about 100 cases” by the halfway point of the year.
Stryker’s head start has given it time and opportunity to take share from its largest joint replacement competitors, DePuy Synthes and Zimmer Biomet. Katherine Owen, Stryker’s former Vice President of Strategy, once said, “We believe we have validated a strategic rationale and competitive advantage of Mako as witnessed by the roughly 600 basis points of U.S. knee market share that we have gained since 2013.”
Robotics proved relatively “pandemic-proof” compared to other orthopedic products. Companies like Stryker, Zimmer Biomet, Medtronic and Globus Medical all reported brisk robotics sales through 2020 despite the drastic reduction in surgical volumes. That trend continued in 2021.
But the sales benefit of robotics goes beyond the revenue infusion of a large capital placement. Robotic systems drive improved product mix, create new annual revenue streams and can be a powerful recruiting tool for competitive reps. Orthopedic enabling technologies, especially expensive robotic systems, are increasingly being leased through market share agreements which gives players more tools to enter competitive accounts. Stryker has leveraged all these factors in closing the revenue gap with DePuy Synthes in recent years.
Stryker sees Mako as an advantage in the procedure backlog recovery in 2022. “When knee and hip procedures come back, we’re in a terrific position to capitalize on those because the Mako systems we’re putting in, roughly half of those are going into competitive accounts. When volumes come back, we will be able to really take advantage of that, not just in our own Stryker-friendly accounts, but also in competitive accounts,” said Stryker Vice President of Investor Relations Preston Wells.
Stryker Threads the Needle with Major Integrations
Novel technology like robotics has differentiated the portfolios of some of the largest orthopedic companies and afforded them market share. However, successful mergers and acquisitions have been the primary growth drivers for orthopedics’ largest companies. The M&A strategy is evident when comparing Stryker and DePuy Synthes’ joint replacement and spine portfolios.
Johnson & Johnson created the largest orthopedics company to date in 2012 when it added Synthes to its DePuy franchise for $21.3 billion. A difficult integration plagued the company for years.
At the end of 2017, DePuy Synthes lamented its declining spine business and pointed to disruption from the Synthes acquisition. Alex Gorsky, Johnson & Johnson’s CEO at the time, said, “We are disappointed with the year-on-year declines in the knee and spine businesses as we continue working to improve portfolio offerings in faster growing segments of those markets. In spine, we’ve had a delay in product launches. Over the last several years this was the area most impacted by the integration with Synthes that resulted in the most disruption.”
As a rule, integrations between large orthopedic companies are difficult. Spine integrations seem particularly challenging for companies primarily focused on joint replacement and trauma.
Stryker wasn’t immune to the problem when it purchased mid-sized spine player K2M in 2018. Stryker endured a period of longer than expected salesforce integration and delayed product launches before eventually righting the ship. While the addition of K2M strengthened Stryker’s business, DePuy Synthes’ spine franchise continues to lose ground.
In 2016, $1.3 billion separated the two companies. The spine franchises are within about $200 million of each other today. Exhibit 2 shows spine sales for Stryker and DePuy Synthes from 2016 to 2023P.
Stryker surprised many observers in late 2019 when it announced its intent to purchase Wright Medical for $5.4 billion. Stryker faced questions about the cultural fit and portfolio overlap that it would ultimately have to answer during a global pandemic. Given that the company stumbled during the much smaller K2M integration, the Wright acquisition seemed destined to create significant disruption.
However, Stryker learned from its mistakes and said the Wright integration was a “marked improvement” over the K2M experience. Indeed, the acquisition brought unexpected benefits.
Stryker CEO Kevin Lobo said, “Their talent is really excellent. When we buy companies, we buy them for their products. Then we must infuse a lot of our management. We’ve had an infusion of talent from Wright that for me has been a positive surprise. Their sales leader for upper extremities is outstanding. They work with fabulous key opinion leaders on both upper and lower extremities. I would say that they are better key opinion leaders than we had within Stryker.”
While surges of COVID infections make it difficult to form a clear picture in most quarters, we haven’t seen any notable disruptions for Stryker and Wright to date. The acquisition vaulted Stryker to the top spot for extremity joint replacement and helped extend its lead over DePuy Synthes in joint replacement overall.
Stryker’s joint replacement portfolio increased by about $1.1 billion, from $3.4 billion in 2016 to a projected $4.5 billion in 2021. With the exception of 2020, DePuy Synthes’ portfolio has remained in the $3.2 to $3.3 billion range during the same period. We expect Stryker to continue to experience significant joint replacement growth due to its lead in the robotic market and the fast-growing extremity joint replacement market. Exhibit 3 shows joint replacement sales for Stryker and DePuy Synthes from 2016 to 2023P.
What’s Next for These Companies?
Stryker’s relatively early entry into the orthopedic robotic market paid off, but overall robotics penetration is low. There is plenty of growth potential for latecomers, both in the U.S. and abroad. While we expect the VELYS and ATTUNE Cementless Knee platforms to bring stability to DePuy Synthes’ joint replacement business, we don’t see it growing above market average through 2023. We think Stryker and a leaner, more focused Zimmer Biomet — the third largest orthopedic company today by revenue — will continue to outperform DePuy Synthes.
DePuy Synthes may face an even tougher road in its spine business. Could it follow Zimmer Biomet’s lead with a spin-off, or divest some underperforming segments? There are very few companies with the ability or appetite to make such a large transaction currently, and there are certainly more attractive assets out there.
In considering the overall industry ranking, DePuy Synthes will maintain a comfortable lead over Zimmer Biomet for at least the next few years. In our opinion, a major catalyst for change is necessary at DePuy Synthes to reverse its long decline.
The top orthopedic growth drivers today are M&A, enabling and digital technology and ASCs. Stryker has well-defined strategies for all three. The company is likely to launch a spine robot sometime in the future. Stryker has also invested in ASC-focused sales to be an early mover on the continuing shift of volume to outpatient settings. While the company hasn’t been immune to market disruption from the pandemic, Stryker’s operational excellence has mitigated some of the impact. Its focus on supply chain resiliency in recent years, for example, leaves Stryker in a better position than many competitors in the current environment. With these factors in mind, we expect Stryker will extend its leadership position in the years to come.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
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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.
