Stryker turns focus to tuck-in M&As: 4 earnings call notes

Spinal Tech

Stryker plans to hone in on smaller mergers and acquisitions as part of its strategy for short-term growth, according to CEO Kevin Lobo.

Mr. Lobo and other Stryker executives spoke about the company's second-quarter performance and future strategies during a July 27 earnings call.

Four takeaways:

1. In the U.S., Stryker has seen recovery as the impact of the COVID-19 pandemic has eased, according to Glenn Boehnlein, vice president and CFO.

"The recovery ramp of elective procedures continues to be variable by region and geography and has a more pronounced impact on our orthopedic and spine implant businesses," he said, as transcribed by Motley Fool. "For the quarter, U.S. organic sales increased by 7.5 percent, reflecting the recovery of our procedural business and continued strong demand for Mako, medical products and neurovascular products."

2. Mr. Lobo said he has seen more demand for Stryker's Mako robots in the outpatient setting.

"A lot of [orthopedic surgery] volume is starting to shift toward surgery centers," he said. " It's been a real tailwind. Our ASC offense is performing extremely well. And so there are a larger percentage of our Makos that are going into surgery centers."

Stryker is also expanding its products for outpatient surgery with the launch of the Triathlon AS-i, also known as a "knee in a box," Mr. Lobo said.

3. Stryker is nine months into its integration of Wright Medical, and its pace has been going especially well in the U.S., according to Preston Wells, vice president of investor relations.

"The U.S. integration is pacing ahead of our expectations and cross-selling has begun in a limited capacity," he said. "We expect to continue to execute on our cross-selling priorities during the second half of the year as we work to fortify the supply chain and processes to support cross-selling activities."

4. Mr. Lobo said Stryker plans to focus on debt reduction and tuck-in mergers and acquisitions.

"We'll continue to look for opportunities to do that as we move forward, but we're ahead of the schedule that we thought we'd be on for debt pay down," he said. "So that's good. And then our BD teams are working and looking at smaller tuck-in M&A deals which we think actually provide the most sort of shorter-term growth upside. And so we're excited as they bring us new deals to look at, sort of in that kind of size and category."

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