Stryker CEO Kevin Lobo spoke at the Morgan Stanley 17th Annual Global Healthcare Conference on Sept. 10, speaking about the company's growth and specifically its trajectory in the spine and robotics markets.
Morgan Stanley's David Lewis conducted an interview with Mr. Lobo, during which he talked about making stronger headway in the spine market for the past half-decade. With last year's acquisition of K2M coupled with the recent acquisition of Mobius, the company has taken significant steps to becoming a market leader. In hospitals, the spine service line is typically connected to the neuroscience and orthopedic lines with opportunity for innovation.
"Innovation is rewarded in spine," said Mr. Lobo, as transcribed by Seeking Alpha. "You're able to command very high prices. An example is our 3D-printed interbody device that has commanded a high premium price. There are huge unmet needs in spine, if you just look at the patient population as the largest market within orthopedics. [There are] price decreases that occur every single year [that can be] higher than even hip and knee price decreases. But there are other segments such as MIS that are very high growth and are very attractive. We think we've made very good bets with both K2M and with Mobius to have a very attractive spine offering in the future."
Mr. Lewis pressed Mr. Lobo to speak further on the company's entrance into spinal robotics with the Mobius acquisition. Medtronic is leading the market in spinal robotics, but there is room for other companies to refine the technology as well as economics around robotics. Mr. Lobo declined to give a timeline of when Stryker could be in the spinal robotics market, but he did say the company is "much closer to launch" than the two to three years Mr. Lewis suggested.
He also touched on Stryker's robotic knee and hip replacement system, Mako, and the competitive landscape as Zimmer Biomet enters with the ROSA system. "Frankly, we're pretty excited that there is no more fight about 'should there be robotics in orthopedics'; now it's a question of which robot," said Mr. Lobo. "And we love our chances going head-to-head against any of the competitive offerings out there. Right now, our order book is just as strong as ever. We expect a very strong year this year with Mako both in robot sales as well as procedures."
Looking ahead to 2020, Mr. Lobo said he isn't concerned about any of the company's business lines, although he doesn't expect the instruments line to maintain the same level of growth next year. However, after integrating K2M, Mobius and other companies, he sees 2020 being a strong year for the company.
"Everything is clicking across our divisions," he said. "We have great management teams, we got emerging markets now in good shape [and] we fortified our spine business. If you look at the last six years, the two soft spots for emerging markets in spine I now feel better about than I have in the last five or six or seven years. So, we're in good shape."
Finally, Mr. Lobo shed light on the leadership changes at Stryker over the past month. Last year, the company promoted Timothy Scannell to president and COO, responsible for Stryker's commercial business and regions. In August, the company named Spencer Stiles group president of orthopedics and spine as well as J. Andrew Pierce to the role of president of medsurg and neurotechnology. Brent Ladd became president of endoscopy and Dylan Crotty became president of instruments. His current plan is to stay "at least five more years" and at some point retire from the company.
"Tim was warranted being president and COO. He is a fantastic performer for Stryker for years and years and years," said Mr. Lobo. "He is a growth champion. Andy and Spencer are also ready for promotion. So, by moving Tim into the presidency overall, which is not being a traditional role at Stryker, mind you we are now pushing $15 million in revenue. So, we're of the size and scale that could have a president and COO but moving him into a job enabled five promotions."
He said if the promotions didn't occur, he'd end up "becoming a blocker."