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Stryker’s MacMillan Stays Calm
Steve MacMillan, Stryker’s Chairman, President and CEO (the CPCEO) tried to calm the swarming mob of Wall Street analysts on July 20. The mob had just descended on MacMillan after their fretting over Biomet and DePuy's disappointing spine numbers and slowing orthopedic revenues.
"We're on track," said MacMillan, "Our second quarter results reflect the underlying strength of our diverse product offering and global presence, which is allowing us to continue to deliver on the goals we outlined at the start of 2010."
MedSurg Up, Ortho Slow
Stryker’s 2010 second quarter reported sales rose by 7.6% to $1.758 billion. The company's MedSurg business grew a whopping 16.4% to $722 million, while Ortho Implants only increased by 2.2% to $1.036 billion.
Hips, Knees and Spine
Reported revenue:
- Hips: up 3%
- Knees up 1%
- Spine flat
No Structural Market Changes
MacMillan said he believed the hip and knee markets were a mid-single-digit growth business and was optimistic that knee and hip revenues would rebound with new product introductions. He added that the company wasn't seeing any structural changes in the market and that there may have been an "ever so slight" market slowing in the second quarter.
Jefferies analyst Raj Denhoy believes Stryker’s slowing sales growth for hips and knees was specific to the company. He noted Stryker's performance was in contrast with Biomet's good performance and DePuy's "largely inline" average results.
For hips, MacMillan said the company is hoping to take advantage of controversies in the metal-on-metal hip market with its ADM mobile bearing and Rejuvenate modular hips. He believes these products are "at the right place, at the right time." In knees, MacMillan was downright giddy about the introduction of the "shape changing and game changing" OtisMed surgical guide device currently under review by the FDA for 510(k) clearance.
Spine Competition
For spine, MacMillan noted some delays in reimbursement by payers, competitive pressures and delays in new product introductions. The company expects to introduce two new cervical plates this year.
In an aside, MacMillan said he hated to say this, but some of the larger players in spine with tough compliance programs appeared to be having a harder time keeping market share.
The CPCEO (MacMillan) was particularly happy to announce that the company's "quality journey" was also on track, as he announced the resolution of the two remaining FDA warning letters related to their hip production facilities. He noted the company would now be able to redirect spending to more traditional R & D functions or the costs associated with the healthcare reform law.
When the market opened on July 21, Stryker shares dropped almost 8% to around $47 per share. Company profits met analysts' expectations but missed revenue expectations by around $20 million.