Stryker Corporation’s reconstructive net sales popped 6.5% (on a reported basis), to $949 million during the third quarter of 2013. Hip sales rose 5.5%, knees were flat, trauma was up 18.1% and even spine was up 4.1%.
Stryker’s 3Q “Impressive” Results Point to Ortho Growth
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“We are pleased, ” said Kevin Lobo, the company’s president and CEO. The company also jumped feet first into robotics during the quarter by acquiring MAKO Surgical Corp.
Net sales in the quarter grew by 9.6% due to increased unit volume and changes in product mix and 1.2% as a result of acquisitions. Net sales in the quarter were unfavorably impacted by 1.6% due to changes in price and 2.7% due to the unfavorable impact of foreign currency exchange rates on net sales. Excluding the impact of acquisitions, reconstructive net sales increased 8.0% in constant currency over the prior year.
BMO Capital Market analyst Joanne Wuensch called the results, “pretty impressive.”
Trauma and Extremities Shine
Wuensch said trauma and extremities sales were once again a highlight, including a 22.7% delivery increase in the U.S. “In this segment, foot and ankle sales were up a whopping 39%, with the segment now annualizing above $100 million. While management does believe that it is capturing some ‘meaningful’ share, it is also reflective of a healthy market.”
Market Growth
Wells Fargo analyst Larry Biegelsen observed that with Stryker’s report, more than 50% of the hip and knee makers have reported quarterly results. Based on that, Biegelsen estimates, that on a constant currency basis, the worldwide knee market accelerated to 3.5% in the third quarter from 2% in the second quarter, while hips accelerated to 7.1% during the quarter from 3.7% in the second quarter.
He speculates this has been driven by an improving macroenvironment, potential pent-up demand, potential patient uncertainty ahead of the implementation of Obamacare, and continued increased seasonality.
Stryker management also said the hip, and particularly the knee market, improved during the quarter and is optimistic that there will be continued improvement in knee volume going forward.
Recalls, Charges and Taxes
The company took charges of $313 million related to the voluntary recall of Rejuvenate and ABG II modular-neck hip stems and the recall of the Neptune Waste Management System. The charges for the Rejuvenate and ABG II recall in the quarter bring the total charges recorded for this recall to $700 million.
The company also said the medical device tax cost them $0.03 per share.
Lobo on Obamacare
In a recent Wall Street Journal interview, Lobo addressed the tax and implementation of Obamacare. He said the move away from pay-for-service to paying for outcomes is a positive trend. “There are many sensible elements of this legislation that I think will have long-term benefits, but clearly the med-device tax is the one area that is very punitive for us.”
He added that he believes the knee replacement business could benefit from the new law, because that’s a more elective procedure. “We’re hopeful that those patients will start to come into the health care system and the knee volumes would grow.”
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This is a fascinating development. In my practice we've seen similar outcomes with the revised protocol. The key differentiator seems to be patient selection criteria. Has anyone else noticed the correlation with BMI thresholds?
Great point. I'd push back slightly on the conclusion, the sample size in the cited study is too small to draw population-level inferences. That said, the directional signal is compelling and worth a larger RCT.
We implemented a similar approach last year. Early results are promising but we're still gathering 12-month follow-up data. Happy to share our protocol if anyone is interested.
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