News Feature | January 29, 2016

Stryker CEO: "We Have The Lead" On 3D Printing And Robotics

By Jof Enriquez,
Follow me on Twitter @jofenriq


Stryker CEO Kevin Lobo believes robotics and 3D printing will set the company apart from its medtech rivals in the near future. It may take a few years to draw tangible results, but this early, Stryker is making these platforms a focus and is making the necessary investments to support them.

During a recent earnings call, the company disclosed plans to build a brand new, state-of-the-art 3D printing manufacturing facility this year in an undisclosed location. This would support plans of making more 3D implants, a promising area for growth as 3D printing becomes more widely adopted in device manufacturing. Stryker already makes 3D-printed components such as tibia base plates, patella, revision cones with geometry, and a soon-to-launch 3D printed titanium interbody device for spine, and its top executive told investors recently that the company has "a "huge lineup of other divisions with ideas and prototypes to get into 3D printed titanium products."

However, given that metallic 3D implants — compared to plastic 3D implants — are more complicated to manufacture and require more programming, it may take a while before 3D printed devices make a significant impact in the company's bottom line.

"For the foreseeable future, at least the next three, four years or so, our focus is really on innovative new products and not replacing our existing products with 3D printed products. The pipeline of innovative new geometries that can't be made without 3D printing is the area of focus," Stryker CFO Bill Jellison said during the call. "So it's not about trying to replace our products and drive down cost. Over time ten years from now that could be the case, but in the near to midterm, it's really focused on innovative new products."

The area of robotic surgery could yield more immediate results for Stryker. The company says that this year, it is conducting more observational studies to optimize the training protocol for surgeons and sales people on the features and benefits of Stryker's hip system on the robot-assisted platform Mako, ahead of full commercial launch of total knee replacements on the platform in 2017. As Mako gets more indications, the company expects more placements for these robots, which sold 31 units globally in 2015’s fourth quarter (24 in the U.S.), and 72 units in the full year.

"With robotics and 3D printing, we believe we have the lead on both of those areas and those are things we can talk about that differentiate us from our competition," Lobo said during the call. "[They] are not a huge component of our growth or our actual dollar sales, but we believe they are the ones that are causing that extra piece of growth and in a different view of Stryker for the future."

Lobo said while these innovative products provide "incremental growth," sales of Stryker’s Triathlon Total Knee and Accolade hip replacement system represent "core growth" as the company's latest quarterly results bear out.

Stryker reported that its Hips and Knees business increased 6.4 percent and 9.1 percent respectively in the quarter. Knee sales were bolstered by increased adoption of recent titanium 3D-printed products, according to the call transcript. Trauma and Extremities grew 13.6 percent.

Overall, the Orthopedic segment, which represented 42 percent of sales, increased 3.3 percent. MedSurg products grew 3 percent, and Neurotechnology and Spine products expanded 6.5 percent, according to the company. Net sales rose 3.7 percent to $2.7 billion in the fourth quarter, and 2.8 percent to $9.9 billion, for the full year.

The suspension of the device tax is expected to positively impact margins. Stryker plans to re-invest the majority of the tax savings.

"Due to the suspension of the MedTech tax we will also provide some additional visibility to our projected margin rates for 2016. Both gross margin and operating income margins are projected to be at least 50 basis points higher in 2016 in total," Jellison said during the call.