At JP Morgan, Stryker CEO embraces sales reps, dismisses Smith & Nephew plan to eliminate them

Stryker CEO Kevin Lobo

Stryker ($SYK) CEO Kevin Lobo expounded on the importance of specialized sales forces during his presentation at the JP Morgan Healthcare Conference in San Francisco and took a jab at Smith & Nephew's contrasting rep-less pilot program, which aims to cut implant prices in half through the use of automation.

"In an age right now where you're seeing a lot more dispersion of sales forces, we're actually driving more and more specialized sales forces. It has been an engine of growth for us for our foot and ankle division and an engine of growth for us in many of our neurotechnology businesses as well," Lobo said.

In a previous speech at JP Morgan, Smith & Nephew ($SNN) CEO Olivier Bohuon touted his company's Syncera pilot to remove sales reps from the operating room. He said hospitals using the pilot program will save about $4 million over three years and announced plans to expand the model outside the U.S.

But Lobo told MassDevice that "Until these procedures are de-skilled, it's very hard to imagine not [having sales reps in the operating room]," adding "I'm not seeing it [Syncera] impact us in any meaningful way."

In addition to increasing costs, the common practice of placing of sales reps in the operating room has made some industry observers uneasy, but Lobo and others in the industry counter that the reps play an important advisory role during surgeries due to their detailed knowledge of the devices that they market.

Indeed, the Stryker CEO isn't shying away from his embrace of sales reps. He believes that deploying specialized sales people to Europe will help the company overcome its history of relative weakness on that continent, where its market share lags that achieved in the U.S. Lobo said the company will continue to drive sales force specialization in the neurotech arena in particular, "especially outside the U.S., in the case of Europe, where we don't have as many specialized sales people."

Lobo said the company's reorg to improve market share in Europe is underway. Under the so-called Trans-Atlantic operating model, all of the company's European units will report to Stryker's U.S. president.

The U.S. accounts for two-thirds of Stryker's sales, Lobo said.

Other planned initiatives include the continuation of a three-year, $500 million cost-cutting plan. "We're absolutely on track to hit that $500 million, but given the intensifying price pressure, we're going to actually accelerate that initiative, try to bring it in sooner, and amplify some of those goals and directives to really drive higher levels of cost reduction in our cost-of-goods area," Lobo said.

In addition, the CEO said "2015 will be a big year of product launches on the robot," referring to efforts to bring new orthopedics to the market that utilize the Rio Robotic Arm, made by 2013 acquisition Mako.

Finally, Lobo said that it will launch orthopedics made by Trauson in Brazil and India in mid-2015. Stryker acquired the Chinese orthopedic maker in 2013. Currently, emerging markets account for 8% of Stryker's sales, and Lobo said he wants "to get that into double digits in the next couple of years."

The CEO also mentioned the company's acquisition of CHG Hospital Beds, its first purchase of 2015.

- listen to the presentation
- here's the MassDevice article

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