CEO: Kevin Lobo
Based: Kalamazoo, MI
2016 sales: $11.3 billion
2015 sales: $9.9 billion
*Fiscal year ended December 31, 2016
After acquiring just two companies—a pair of hospital bed makers—in 2015, Stryker made up for lost time in 2016. The company kicked off an acquisitive year by making three deals in February.
Stryker picked up Sage Products’ disposable devices aimed at reducing hospital-acquired infections, bolstered its emergency medicine offerings with Physio-Control’s defibrillator and CPR-assist devices, and got its hands on two electrosurgical devices that Synergetics made for Johnson & Johnson. All three acquisitions—as well as the hospital bed assets—became part of Stryker’s MedSurg division.
Sage and Physio-Control notched 11.8% and 7.4% growth in Q4 2016. And the company expected “double-digit growth” from the pair in 2017, Chief Financial Officer Glenn Boehnlein said on the Q4 earnings 2016 call. But this growth didn’t happen as Sage was hit with product recalls and Physio-Control weathered a supply disruption, CEO Kevin Lobo said on the Q2 2017 call. But Lobo remains optimistic and predicts the units will hit those numbers once it overcomes these setbacks.
In April, the devicemaker gave its Spine unit a boost with two deals, picking up SafeWire and its minimally invasive spine surgery devices as well as Becton Dickinson’s CareFusion suite of vertebral compression fracture products. Spine has historically been one of Stryker’s smaller and poorer performing units, returning to growth in 2015 and carrying that trend over into 2016, with 2% growth year-over-year, from $740 million to $754 million.
The Neurotechnology and Spine businesses made up 18% of Stryker’s 2016 sales—with spine contributing 7%—and they grew 10% between 2015 and 2016. The Orthopedics unit made up more than one-third of sales and grew 5%, while MedSurg, its largest division, reported 26% growth.
But Stryker isn’t just relying on M&A. While the company doesn’t plan to replace its “core” offerings with 3D-printed versions, it is looking to 3D printing to drive growth. The company added 3D-printed components to its titanium knee implants in 2015, sales of which took off in the fourth quarter. In January 2016, Stryker announced it was building a new 3D-printing facility. The plant, in Cork, Ireland, is slated to cost between $400 million and $450 million.
“The demand for 3D printing has been really explosive,” Lobo said on the Q4 call. In 2016, the company launched a 3D-printed interbody device for the spine, scored FDA clearance for a 3D-printed titanium lumbar cage and plunked down $52 million for Stanmore Implants, a limb salvage specialist. Stanmore has off-the-shelf implants designed to save the arms, legs and hips of people undergoing cancer, joint replacement or trauma surgery, as well as custom 3D-printed versions.
The Mako surgical robot is another avenue of growth. Stryker agreed to pay $1.7 billion—nearly double Mako’s market cap—to acquire the robotics player in 2013. It rolled out the surgical system for partial knee and total hip replacements and snagged an FDA OK for total knee replacement in 2015. Its launch in total knees was slated for 2016 but was pushed to 2017. Stryker chose the slow launch in order to develop the correct training protocol for surgeons.
In 2016, Stryker installed 86 new Mako systems worldwide, 14 more than it did the previous year, said Katherine Owen, vice president of strategy and investor relations, on the Q4 call. In addition to selling more robots, Stryker also started upgrading existing systems for the total knee application. The company is aiming for full commercial release in 2017.