3-D printed Triathlon Tritanium Knee System--Courtesy of Stryker |
Stryker CEO Kevin Lobo said 3-D printed titanium knee implants bolstered sales of the company's orthopedic devices, during the company's Q4 2015 earnings call. A 3-D printed spinal implant is scheduled to launch this year, and the company has a "huge lineup of other divisions with ideas and prototypes to get into 3D printed titanium products."
A 3-D printing manufacturing facility is also being built, partially accounting for a high level of planned capital expenditure, pegged at $400 million to $450 million in 2016. In an email, Stryker declined to provide the location of the plant or any other additional details.
Stryker's ($SYK) 3-D printed portfolio consist of a tibial baseplate and patella, which are components of the Triathlon Tritanium Knee System, and the Triathlon Tritanium Cone Augments for knee revision surgery.
The flurry of announcements related to 3-D printing sparked the interest of Wall Street analysts.
Lobo said 3-D printed implants gives the sales force a boost by giving them something new to talk to the customers about.
"So, as an example, our revision business lagged, our market share lagged, our primary business, and knees by about five or six market share points. So, even in a Stryker-friendly account, sometimes they would go to a competitor to do the revision procedure. Now that we have what we consider best-in-class revision cones, not only do we keep that business, that surgeon stays with Stryker, we gain that sales, but they now have something that they can go talk to a competitive surgeon about. So, I would say it's not a huge contributor, but it's an extra shot in the arm," he said.
Don't expect 3-D printed implants to replace Stryker "core" implants like the Triathlon Total Knee or Accolade femoral hip stems, Lobo said: "For the foreseeable future, at least the next three years, 4 years or so, our focus is really on innovative new products and not replacing our existing products with 3-D printed products. The pipeline of innovative new geometries that can't be made without 3-D printing is the area of focus. So, it's not about trying to replace our products and drive down cost. Over time, 10 years from now, that could be the case, but in the near to midterm, it's really focused on innovative new products."
He added that 3-D printing metal is more complicated than 3-D printing plastics "or other things that you read about in the mainstream press and that's why for us, our focus is much more on innovative new products and not necessarily replacing total systems. That'll be many, many years ahead of us."
For now, 3-D printing remains an incremental source of growth. The success of its Mako robot-assisted orthopedic surgery system is crucial to Stryker in immediate and long-term. The company staked a bet on robotic surgery when it purchased Mako Surgical for $1.65 billion in 2013.
After getting off to a slow start, the device continues to gain traction, but company officials emphasized that the technology is still in its early days; Stryker sold 31 Mako robots during the quarter and 72 for the year at a cost of around $1 million per device.
The device is entering a critical phase as the company prepares to launch total knee replacements on the platform toward the end of the year and in 2017. "2016 is about really working to make sure we are optimally set up for full commercial launch in 2017 for the total knee, so we are not expecting any real impact from that this year," said Stryker vice president Katherine Owen during the earnings call.
Lobo said that along with the Mako, the company's Trevo ProVue stent retrieval device to treat stroke is the company's best growth opportunity, thanks to a bevy studies demonstrating that the device (along with Medtronic's similar Solitaire) improves outcomes when used in combination with standard of care medications.
Other areas of focus are neurotechnology and spinal surgery implants, and on the orthopedics side, sports medicine and extremities, Lobo said.
He also said that the upcoming retirement of CFO Bill Jellison will not change the company's M&A strategy. The investment community continues to believe that Stryker has an interest in acquiring midsized orthopedics player Smith & Nephew ($SNN) to counter the recent merger of Zimmer ($ZBH) and Biomet. S&N was named the top European takeover target for the second year in a row in a recent Bloomberg survey of analysts.
Overall, the company reported quarterly net earnings of $522 million on sales of $2.7 billion, up 2% year-over-year (up 7% when adjusting for exchange rate fluctuations). Neurotechnology and spine sales grew 6.5% at constant currencies, orthopedics sales were up 3.3% and Medsurg sales grew 3%.
For the year, Stryker reported net sales grew 2.8% to $9.9 billion (up 7% at constant currencies) and earnings of $1.4 billion, up 179%.
- read the release
Editor's Note: The headline has been corrected. The previous one erroneously said that the new plant cost $400 million.