Stryker Maintains Growth Momentum With Strategic M&A, Robotic Surgery Roll-Out
Stryker Corporation delivered its fourteenth straight quarter with double-digit growth in net sales in 2016’s fourth quarter, building on the rest of the year’s momentum and staggered roll-out of MAKO surgical robots, said CEO Kevin Lobo. Despite its pair of billion-dollar acquisitions — Sage Products and Physio-Control — Lobo said Stryker is “actively” seeking new strategic growth through acquisitions.
Despite “tough” year-over-year comparisons, Lobo reported in an earnings call that Q4 represented 2016’s highest growth quarter, with 16.2 percent growth across all of Stryker’s core businesses: orthopedics, medsurg, and neurotechnology and spine. The company experienced its largest sales bump in medsurg, with a staggering 31 percent for the quarter.
Earlier in 2016, Stryker completed a series of acquisitions, including a $2.78 billion deal for Sage Products — manufacturer of disposable hospital supplies designed to prevent hospital-related infections — and a $1.28 billion deal for Physio-Control, with its portfolio of emergency services equipment. Despite heavy R&D investment in both segments, the two acquisitions delivered 11.8 percent and 7.4 percent Q4 growth, respectively.
“We continue to complete value creating acquisitions, our globalization efforts are bearing fruit, and we are also building capability to deliver consistent leveraged earnings,” said Lobo.
Moving forward, Lobo said that he has not ruled out further investment and growth opportunities, and that the volume of M&A activity in 2016 is not indicative of a slowdown in 2017. While certain segments took on the job of the two large acquisitions, other divisions “certainly have the bandwidth” to accommodate additional deals.
“We’ve done 40 deals in the past four years, and spent over 4 billion in the first quarter of this year,” said Lobo in an interview with CNBC. Investing capital by growing core businesses with acquisitions “puts us on a level playing field with some of our competitors that have done tax inversions.”
Katherine Owen, Stryker’s VP for strategy and investor relations, spoke about the continued, multi-year roll-out of MAKO surgical robots. The company installed 32 new robots globally in the fourth quarter, bringing the total worldwide to 381, with 333 in the U.S.
An expanded limited release, said Owen, includes additional sites that will serve as training centers as Stryker moves towards full commercial release at the upcoming American Academy of Orthopedic Surgeons (AAOS) meeting in March. The company also has been updating existing robots, with upgrades including the “total knee application,” and there are currently over 50 surgeons trained on the system.
“We’ve never done a launch of this magnitude in something where we are fundamentally changing how joint replacement is done and that’s a way of saying there are a lot of unknowns,” said Owen in the earnings call. “We feel really terrific about the limited release, taking time to optimize the training protocol, to contemplate the needs of both surgeons who have a strong understanding of robots, as well as those who don’t.”
Stryker recently announced a $130 million R&D expansion in Michigan. Lobo told analysts earlier in 2016 that growing a strong, innovative internal pipeline and investment in additional research facilities is a “top priority” for Stryker.
“I am pleased with our performance in both the fourth quarter and the full year 2016,” said Lobo, in a press release. “We enter 2017 with good momentum across our businesses and look forward to building on this success.”