Mako is primed to “Stryke” in the second half of the year.
Stryker (NYSE:SYK) acquired Mako Surgical in 2013. It did so with a plan to combine the company’s leadership with Mako’s innovative robotic arm assisted surgical products in an effort to transform orthopedics. In 2017, that plan came to fruition with what the company described as a first and only robotic arm assisted technology for total knee and hip replacement procedures.
By the end of 2019, Stryker finally felt justified in its purchase, which was originally considered a steep price at $1.65 billion. The company delivered the strongest robot quarter since the launch of Mako, and it celebrated 40 consecutive years of sales growth since the company went public. Then, the COVID-19 pandemic hit. As a result of the public health crisis, medical procedures were postponed, sales slowed, and its stock price tanked. In Stryker’s most recent quarter however, earnings per share (EPS) topped estimates, and revenue increased slightly, though it still missed the mark from some analysts’ perspectives.
Delays are a minor setback
For Stryker, the time to recoup and strengthen its revenues should not take long. A human’s physical condition, such as the need for knee or hip replacement, won’t miraculously fix itself, though some of us might wish that weren’t the case as we get older. At some point, the surgical procedures that were delayed because of the pandemic should take place.
On top of that, Stryker is expecting big things from its spinal surgery line of products in 2021, following 3.5% sales growth in that area for the fourth quarter of 2020. The wildcard for Stryker is whether it can develop and to go to market with a successful robotic spine surgery product, which may either come from its more recent acquisition of K2M or further development of the Mako system while facing growing competition.
Competitors in the water
With Mako leading the way, Stryker is navigating murky waters. The company is holding steadfast in its determination to grow revenues and to focus on the Mako system for knee and hip replacement procedures. However, as with any industry that is projected for strong growth, this one is packed with strong competition. The battle for dominance in the medical technology (MedTech) space is getting especially intense in the knee replacement area, mostly due to competition from Zimmer Biomet (NYSE:ZBH) and its Rosa robotic surgery platform, as well as from the ATTUNE Total Knee System from Johnson & Johnson (NYSE:JNJ). J&J also plans to take steps toward being more competitive in the spine and trauma areas.
By Jeff Little | The Motley Fool
Image Credit: Stryker
As an investor I have watched the Mako technology for a long time. It is a very interesting tech but they had a huge head start. Unfortunately for them, this lead will slow greatly this year due to all the new competitors that have solid surgeon relationships and the fact that Stryker has gotten greedy and decided to drastically cut the commission structure for the sales force that created this market for them. A
lot of their top sales talent has already left or will soon leave. They’ll easily miss by over 100 robots in 2021. The ortho revenue will miss and I see the stock pulling back 50%. I would avoid investing in SYK for this year.