Insights Into Top Orthopedic Company Dynamics
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Summer is one of our favorite times of the year for many reasons: warmer weather (although we admit this year’s extreme heat is a bit much), more hours of daylight, and vacations. We also look forward to our favorite seasonal read—the top companies reports in both MPO and ODTmagazines.
This column will focus on the companies in ODT’s top 10 list: Stryker Corp., DePuy Synthes (DePuy), Zimmer Biomet Holdings Inc., Smith+Nephew, Medtronic, Arthrex Inc., Enovis, Globus Medical Inc., Ossur AB, and Orthofix. A discussion of the top four entities follows, with an analytical spotlight on four areas—the U.S. ambulatory surgery center (ASC) battleground, international challenges, enabling innovation, and strategic partnerships and/or M&A activities. We also share our thoughts and observations about the other six companies, too.
Stryker (ranked fifth in MPO’s Top 30 report)
1. U.S. ASC Battleground: Stryker has been using its Mako robotic-assisted technology to gain market share in both the hospital and at the ASC level in the United States. This strategy has been successful for the company so far. But it remains to be seen whether Stryker can maintain its early dominance in the ASC market as the procedural battle expands beyond knees to hips, ankles, shoulders, and other parts of the musculoskeletal system.
2. International Challenges: While Mako has been very successful in the United States, its footprint, procedural costs, and workflow have created challenges overseas. The company will need to improve its “value-based care game plan” to gain market share using robotics as a growth driver on a global scale.
3. Enabling Innovation: While Stryker is making significant investments in artificial intelligence (AI) and enabling innovation, neither focus area is helping the firm overcome its biggest weakness—Mako clinical workflow.
4. Strategic Partnerships/M&A: Historically Stryker has made huge strides through acquisitions, but its “buy vs. build” strategy currently seems to be more of a hinderance than a help in achieving the necessary breakthroughs to secure future market leadership. The company may need to re-assess and become more aggressive again on strategic partnerships and/or M&A in the near future.
DePuy Synthes (part of J&J MedTech, which ranked second in MPO’s Top 30 report)
1. U.S. ASC Battleground: DePuy Synthes has been surprisingly slow to respond to the robotics challenge pitched by its rivals. While the company’s Velys system is now available for knees, DePuy Synthes is lagging behind both Stryker and Zimmer Biomet in market share and innovation.
2. International Challenges: The slower adoption of robotics in many international markets is a benefit to slow-moving DePuy Synthes. Perhaps good, old-fashioned commercial execution will keep the company in the game until it figures out how to become more competitive with its innovations.
3. Enabling Innovation: While DePuy Synthes claimed to be making significant investments in AI and enabling innovation, it has not yet shown up in the firm’s market offerings. Consequently, DePuy Synthes should consider more external strategic partnerships and/or M&A if it really wants to improve its enabling technology offerings.
4. Strategic Partnerships/M&A: DePuy Synthes has made some interesting moves here—the most significant of which was its 2018 deal for surgical technologies developer Orthotaxy, which (at least) put the company in the robotics-assisted surgery conversation going forward. However, DePuy Synthes is so far behind its competitors in enabling technologies, it will have to re-think its strategy here or risk being left behind.
Zimmer Biomet (ranked 17th in MPO’s Top 30 report)
1. U.S. ASC Battleground: Under the leadership of CEO Ivan Tornos, Zimmer Biomet understands commercial execution. Leveraging innovation in both sports medicine and robotic knee replacements, the company is ensuring it remains in present and future conversations.
2. International Challenges: While Zimmer Biomet is doing okay internationally, the multinational firm is constantly restructuring its commercial teams on a global scale to find the right mix for growth and efficiency. The jury is still out on future successes outside the United States.
3. Enabling Innovation: Zimmer Biomet is taking an interesting approach to enabling innovation through both internal investments and strategic partnerships. If successful, some of these investments/partnerships could potentially bear fruit—particularly in the U.S. ASC markets.
4. Strategic Partnerships/M&A: Zimmer Biomet has made some interesting moves in this area, including its collaboration with the Hospital for Special Surgery (New York, N.Y.) to create innovative technological solutions; its relationship with Apple to use the Apple Watch for post-operative patient reported outcome monitoring (PROM); and its partnership with Canary to enhance post-operative care via a smart sensor that measures knee implant efficacy. Zimmer Biomet’s most recent alliance—with THINK Surgical Inc.—seems to be a calculated move to erode Mako’s (Stryker’s) robotics market share. Let the battle begin.
Smith+Nephew (ranked 23rd in MPO’s Top 30 report)
1. U.S. ASC Battleground: Smith+Nephew has struggled to gain traction as an orthopedic implant supplier to U.S. hospitals and ambulatory surgery centers. However, the company’s respectable performance in sports medicine compensates for that shortcoming and prevents it from being totally shut out of the market.
2. International Challenges: Since it is based in the United Kingdom, Smith+Nephew seems to consider execution on a global scale. Technology is adopted more slowly on an international scale, and that fits nicely with the company’s worldwide commercial execution.
3. Enabling Innovation: Like its peers, Smith+Nephew is continuing to work on enabling innovation and occasionally makes some interesting product improvement announcements but the company continues to struggle to develop a truly breakthrough technology that sets it apart from its competitors.
4. Strategic Partnerships/M&A: In the decade before COVID-19, Smith+Nephew was fairly aggressive in M&A. However, since its March 2019 acquisition of Brainlab’s orthopedic joint reconstruction business—which at the time created concern from competitors about their ability to compete—Smith+Nephew hasn’t done much to change the game. It appears those fears from its competitors were unfounded.
Other Key Players
Medtronic: (the top-ranked company on MPO’s Top 30 list): A market leader in spine, Medtronic also has enabling technologies that help the healthcare behemoth maintain its growth and market leadership. Key question: Can the company find a way through acquisition to broaden its scope in orthopedics (beyond spine)?
Arthrex: This Naples, Fla.-based company has made quite a name for itself in sports medicine and arthroscopic repair technology. But it’s been slow to develop internal enabling innovation, so it hasn’t been much of a competitive threat to major implant manufacturers. Key question: Is the company content with its current niches or does it want to become a future major player across all orthopedic segments?
Enovis (formerly DJO Ortho): Historically, Enovis has been a limited player beyond soft goods in sports medicine. But the company’s $846.4 million acquisition of LimaCorporate S.p.A. (the deal closed in January) gives it an international footprint and a foundation in orthopedic implants. Key question: Will Enovis acquire or develop the enabling innovation required to make the company a global contender in the orthopedic implant market?
Globus Medical: Its combination with Nuvasive Inc. has turned Globus into a formidable force in spine. Key question: Why is the company now launching a robotic knee solution? Will that help the company grow overall or distract it from dominating in the spinal arena?
Össur: This Icelandic company is a market leader in changing patients’ lives with prosthetics and other solutions. No key questions here–only our sincere hopes that Össur will continue to make a difference for those who truly need it.
Orthofix: Its merger with SeaSpine (the deal closed in January 2023) was essential to keeping both companies a credible player in spine. Key question: What is going on with management? The company has had several C-Suite changes since the merger. Will it survive these changes or be gobbled up by another larger player?
There are certainly a lot of interesting dynamics at play within the top 10 orthopedic companies. Stay tuned, as their organic and inorganic decision making is sure to continue throughout the rest of this year and well into the future.
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.