Becker's ASC Review

37 ORTHOPEDICS Stryker's April sales down 35-40%, but recovery expected in the coming months: 6 key points from CEO Kevin Lobo By Laura Dyrda S tryker Chairman and CEO Kevin Lobo addressed several key trends for the company over the next few months and year during the first quarter conference call, as transcribed by Seeking Alpha. 1. April sales will be down 35 percent to 40 percent year over year, but Mr. Lobo said the next few months could be better. "Looking at the remainder of the quarter, we are encour- aged by the planned gradual resumption of elective surgeries in the U.S. and abroad. Portfolio products are being impacted by COVID-19 in numerous ways. Clearly, we are seeing a deferral in elective procedures, particularly within our orthopedics and spine businesses. We fully expect, given the chronic and progressive nature of the conditions impacting these patients, that the vast majority of them will be treated in the coming months." 2. e company supported its sales force and continued to invest in a new pipeline of products to prepare for surgeries to ramp up again. It has also been moving forward with its Wright Medical integration efforts. "Given the impact of the virus on competi- tive hiring, we are expecting a minimal level of sales force attrition," said Mr. Lobo. 3. ere is pent-up demand for orthopedic procedures, and Mr. Lobo sees the recovery coming in waves. "You have a number of employees that are furloughed that would love to get their procedures done now while they have health coverage, worried about what could happen in the future. at could be the first wave of resumption procedures," he said. "You also have people who have taken time off and that may not be able to take time off later, so that could cause a slight dip and then resumption again." 4. Prior to the pandemic, there was great momentum for the Mako robotic surgical line and Mr. Lobo saw that resuming when elective procedures restarted again as well as a delay in new orders. "Liquidity of the hospitals is important when you're outlay- ing large amounts of money. But we see tremendous signs of continued interest," he said. "No order is being canceled, just being delayed a little bit until elective surgeries resume…hospitals do see it as a differentia- tor and we continue to be very bullish about the prospects of Mako." 5. Mr. Lobo said he was pleased with how the company's spine business is progressing and there were improvements since the K2M acquisition prior to the pandemic. ere were a number of products set to launch in the first quarter. "Unfortunately, that got derailed, just like everybody else's spine business … we're not immune from that," he said. "But I would say I feel as good as I felt about our spine business since the acquisi- tion of K2M. Every day, we sort of continue to build momentum." 6. Stryker has created a strategy around selling implants to ASCs over the past few years aer Mr. Lobo was initially con- cerned about how ASCs would impact the business. e company also has a flexible financial program that helps ASCs purchase the Mako robotic technology. "Now I'm ac- tually believing that [ASCs] are going to be a very good thing for us because … we have everything they need for their surgery and we have the disposables and the implants," he said. "Wrapping that up in a financ- ing solution gives us a really tremendous advantage as more and more procedures go to the ASCs." n 5 orthopedic practice mergers, acquisitions in 2020 so far By Laura Dyrda There have been five big orthopedic and spine practice mergers and acquisi- tions in the first quarter of 2020. The transactions this year so far include the following centers: 1. Tampa-based Florida Orthopaedic Institute and Clearwater, Fla.-based OrthoCare Florida combined in March to form a new entity that includes 150 providers and 17 locations. MD Healthcare Partners in Tampa led the merger and continues to provide executive management services. The group has eight affiliated ASCs and two orthopedic urgent care centers. 2. In February, Banner Health agreed to acquire The Orthopedic Clinic As- sociation, a four-location practice based in Phoenix. TOCA's 18 orthopedic physicians and nine physician assistants joined Phoenix-based Banner Health this spring. 3. PeaceHealth in Vancouver, Wash., acquired Bellingham, Wash.-based Pacific Rim Outpatient Surgery Center in the spring. The ASC includes five operating rooms and three procedure rooms where around 60 physicians perform 5,000 surgeries per year, including orthopedics. 4. Orlando (Fla.) Health acquired Jewett Orthopaedic Clinic for an undis- closed sum in January, making Jewett's 25 orthopedic physicians and 13 ad- vanced practitioners health system employees. The Orlando-based practice accommodates more than 250,000 patient visits annually. 5. Chicago Orthopaedics & Sports Medicine joined Des Plaines-based Illinois Bone & Joint Institute, an independent orthopedic practice, on Jan. 1. n

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