Stryker (SYK)

• Article
• Discussion
• Edit
• History
• Bookmark

See all Bulls Reasons Bulls: Reasons To Buy My parents are getting old 100% agree My parents are getting old Although I am not a professional company analyzer, I do believe in common sense. My parents are steam rolling toward retirement, which means they fall under the 10,000 per day baby-boomers tag. This company (Stryker) makes sense for the simple reason that they are providing the... read more View or Edit Reason 2 votes 100% agree Bears: Reasons To Sell Feeling Bearish? Be the first to explain why this would make a poor investment Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

Top Contributors Krishna K Related Articles Aging Baby Boomers Zimmer Holdings (ZMH) Medtronic (MDT) Biomet (BMET) Hillenbrand Industries (HB)

Stryker(NYSE:SYK) is a medical technology company that manufactures orthopedic implants that are used in joint replacement surgeries. The company also makes hand operated surgical power tools, and medical furniture such as stretchers and medical beds.

Aging baby boomers will double the number of Americans that are over 65 by 2030. The expanding population of elderly represents a revenue opportunity for Stryker because older Americans are much more likely to require joint replacement surgeries. In 2004, the average knee replacement patient was 67 years old. At the same time improved technology has resulted in longer lasting orthopedic implants that are more viable for individuals in their 50s and 60s, expanding the overall market. In the past doctors have preferred limiting implants to older patients, for fear that younger patients would require multiple replacements due the short life spans of the implants. ^[1]. Growing obesity in the United States provides an additional tailwind for the company. As of 2006, approximately 1/3 (72 million) of American adults were obese. ^[2] Like the elderly, the obese are more likely to require joint replacement, because the excess weight puts additional pressure on their joints.

[edit] Business Overview

SKY has two main operating segments: Orthopedic Implants and MedSurg Equipment.

• Orthopedic Implants: includes implants (knee, hip, spine, shoulder, and others), hip screws, and other products which are used in joint replacement, trauma, and other surgeries. In 2006, this was the largest operating segment, contributing 57% of revenue. ^[3]

• MedSurg Equipment: includes products such as surgical equipment -- used for drilling or making small cuts in bone, surgical navigation systems -- helps surgeons use electronic imaging to align instruments better and accurately track where the instruments are relative to a patient's anatomy, and patient handling -- stretchers and other products. This division contributed 38% of revenue in 2006^[4].

SYK 2006 Annual Report^[5]

In 2006, SYK had revenue of $5,406 million, an increase of 11% over the $4,872 million generated in 2005. This increase was driven by 16% growth in MedSurg equipment sales to $2,037 million and 9% growth in Orthopedic Implants to $3,110 million. ^[6]

SYK 2006 Annual Report^[7]

In 2006, SYK generated 66% of its revenue in the US through direct marketing to doctors, hospitals and other health-care facilities. SYK generated the remaining 34% of its revenue internationally, in over 100 countries. ^[8]

SYK 2006 Annual Report^[9]

[edit] Key Trends and Forces

[edit] Medicare's failure to coverage of premium products can hurt SYK's sales

Health coverage is an important determining factor when patients and doctors choose among various treatment options. Medicare coverage is particularly significant in that it directly affects over forty million Americans, how much patients have to pay for Stryker products, and how much Stryker will receive in payments from Medicare. Currently, Medicare and other third party payors are emphasizing more cost-effective products and therapies, by limiting the reimbursement they will cover. Furthermore, even if a new SYK implant or product is cleared by the FDA, Stryker faces limited demand until Medicare and other payors approve it for reimbursement. For example, SYK's artificial spine discs haven't received broad adoption because Medicare does not reimburse for this expensive procedure on a national basis.

[edit] Older generations require more joint replacements

The number of the US citizens over age 65 is expected to nearly double by the year 2030. Stryker and other orthopedic companies are benefiting from this aging demographic since knee and hip joints tend to wear out and need replacement with age. In 2004 the average age of knee replacement patients was 67 in 2004. Similarly, the average recipient of a new hip was 66.

[edit] New technology widens Stryker's target market

New technology has increased the life of popular orthopedic implants like hip and knee replacement, by nearly 100%. ^[10] In the past doctors hesitated to perform replacement surgery on younger patients, because they feared that patients would outlive the useful lives of the replacements, necessitating multiple surgeries to repair or replace worn out implants. Longer lasting implants have led to an increase in the numbers of patients in their 50s and early 60s that are getting implants.

[edit] Obesity places extra stress on joints

In 2006, more than a third of American adults or about 72 million were obese. The hip and knee implant markets are in particular affected by the prevalence of obesity -- increased weight puts significantly more pressure on joints than they are designed for, making them wear out faster.

[edit] Market Share

SYK has Top 5 market share in several of the key implant markets.

SYK is the #2 player in the MedSurg market.

[edit] Competition

On the implants side of the business, Styker faces competition from firms such as:

• JOHNSON & JOHNSON (JNJ) - the world's 2nd largest and most broadly based manufacturer of health care products, with a significant share of the consumer, pharmaceutical, medical treatment and diagnostic device markets.^[11]
• Zimmer Holdings (ZMH) - leading manufacturer of reconstructive orthopedic implants.^[12]
• Medtronic (MDT) - is one of the world's largest medical device companies, with a specialty in cardiac rhythm management.^[13]
• Smith & Nephew SNATS (SNN) - British-based medical devices company with Orthopedics division headquarters in Memphis, TN., with specialty in hip and knee implants and orthopedic trauma products.
• Biomet (BMET) - medical device manufacturer based in Warsaw, IN, specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants and operating room supplies.^[14]

In the MedSurg segment, SYK mainly competes with:

• Hillenbrand Industries (HB) (Hill-Rom division) - leading manufacturer of medical technologies and death care products such as burial and cremation caskets.^[15]
• STERIS (STE) (Hausted subsidiary) - leading manufacturer of healthcare, life sciences, and sterilization products.^[16]

[edit] References

1. ↑ BNET.com "New Technology Allows Joint Replacement on Young Patients," November 27, 2007
2. ↑ CDC Press Release, November 28, 2007
3. ↑ SYK 2006 10k, Pg 6
4. ↑ SYK 2006 10k, Pg 12
5. ↑ SYK 2006 10k, Pg 6
6. ↑ SYK 2006 10k, Pg 28
7. ↑ SYK 2006 10k, Pg 28
8. ↑ SYK 2006 10k, Pg 26
9. ↑ SYK 2006 10k, Pg 26
10. ↑ BNET.com, "New technology allows joint replacement in younger patients," November 19, 2007
11. ↑ JNJ 2006 10k
12. ↑ ZMH 2006 10k
13. ↑ MDT 2007 10k
14. ↑ [1]
15. ↑ HB 2007 10k
16. ↑ STE 2007 10k
17. ↑ SYK 2006 10k, Pg. 42
18. ↑ SYK 2006 10k, Pg. 42
19. ↑ MDT 2007 10k, Exhibit 13
20. ↑ MDT 2007 10k, Exhibit 13
21. ↑ JNJ 2006 10k
22. ↑ JNJ 2006 10k
23. ↑ ZMH 2006 10k
24. ↑ ZMH 2006 10k
25. ↑ HB 2007 10k
26. ↑ HB 2007 10k