The “wait and see” period for enabling technology in orthopedics is over. Commentary from executives and spending patterns of the largest orthopedic companies affirmed that message in the first three months of 2020.
Back in November 2019, Globus Medical’s Senior Vice President of Business Development and Investor Relations Brian Kearns predicted that most orthopedic surgeries would employ robotics within ten years. That assessment seemed very optimistic at the time, given the current rate of utilization for robotics. Since then, virtually all of the major players in orthopedics have shifted strategy to apply more focus and resources to enabling technology. Companies are allocating more R&D dollars to developing these internally as well as pursuing acquisitions.
The Largest Players Are All In
Seven of the ten largest orthopedic companies have invested heavily in robotics:
- DePuy Synthes (Orthotaxy)
- Stryker (Mako)
- Zimmer Biomet (ROSA)
- Smith+Nephew (Navio)
- Medtronic (Mazor)
- NuVasive (Pulse)
- Globus Medical (ExcelsiusGPS)
These seven companies generated $32.4 billion in revenue in 2019, or 61% of the $53 billion orthopedic market, according to our estimates. They play a significant role in determining the direction and pace of the industry. Companies like Stryker and Medtronic demonstrated the revenue-generating power of enabling technology, and robotics specifically, throughout 2019.
Stryker’s knee franchise grew 7.7% in 2019 over 2018 (more than double our estimated knee market rate), and company leadership pointed to their Mako robot as a primary driver. Sales and utilization of the robot both accelerated in each quarter for the year with 4Q19 achievements of 89 units sold (+65% over 4Q18) and 36,000 procedures (+48% vs. 4Q18). Likewise, Medtronic’s Mazor robot has been a consistent performer for the spine giant. Incremental revenue from the system has helped to offset the occasional soft quarter for core spine or Infuse biologics.
Zimmer Biomet hopes that their newly-launched ROSA platform can stem the tide of share loss in knee replacement. The company faces a significant challenge in overcoming Stryker’s head start, and is reallocating resources to fast track technology development. In his 4Q19 commentary, company President and CEO Bryan Hanson said, “We’ve taken a hard look at the R&D pipeline and started to bias more toward robotics and informatics. Most of the money is now shifting toward ROSA, mini robotics, informatics, efficiency in doing the procedure.”
Roland Diggelmann, CEO of Smith+Nephew, indicated that the company is pursuing a similar strategic shift in his 4Q19 comments, saying, “We want to accelerate the cadence of launches and be at the forefront of developing areas such as digital health and also regenerative medicine. We intend to invest more in R&D to achieve this.”
Likewise, DePuy Synthes’ leadership noted increased R&D spending on digital solutions that will ultimately culminate in the VELYS digital surgery ecosystem, expected to be rolled out for knee and hip replacement.
Fast-Tracking Development Through Acquisitions
Beyond developing in-house robotics, many players are upgrading their technology portfolio through acquisitions.
In 2019, Smith+Nephew purchased Brainlab’s joint replacement business, including surgical planning and navigation tools. The company also acquired Atracsys’ optical tracking technology.
Last year, Stryker acquired Mobius Imaging and its sister company, Cardan Robotics. Mobius Imaging is focused on integrating advanced imaging technologies in the surgical workflow, and Cardan Robotics had been developing robotics and navigation systems for surgical and interventional radiology procedures. Additionally, while Stryker’s pending acquisition of Wright Medical is primarily about achieving scale in extremity joint replacement, the inclusion of Wright’s Blueprint planning software could be a boon for future generations of Mako.
Mid-sized spine players ATEC and SeaSpine both made moves in early 2020 to bolster their technology assets. ATEC acquired EOS Imaging with plans to integrate it into the existing AlphaInformatiX platform. SeaSpine partnered with 7D Surgical to co-market the Machine-Vision Image Guided Surgery platform that will include SeaSpine-specific instrumentation.
Globus Medical took a different track when it acquired implant manufacturer StelKast. The success and technical superiority of the ExcelsiusGPS system in the spine segment gave Globus the confidence to enter the joint replacement market in 2Q19. At the time, Globus CEO Dave Demski said, “We’ve seen the impact that robotics can have on the implant business, and we’re happy with the success we’ve had in spine. We think we’ve developed a strong core competency there. We’ve got a great team. We were looking for other ways to leverage that technology, and in observing the success that other companies have had in total joints, we thought that was a logical place to go.”
What to Expect for the Remainder of 2020?
The adoption of enabling technology was a gradual shift for most of the last decade. We expect the pace to accelerate. Large companies are expected to expand their platforms across market segments. We predict that medium and small companies will forge partnerships with enabling technology-focused companies or release their own technology and implants that are compatible with robotic systems on the market today.
It is worth remembering that utilization rates for enabling technology are low, despite the amount of coverage and hype surrounding it. Some members of industry and surgeons are still not convinced that robotics offers significant clinical benefits. However, utilization rates are undeniably increasing, and the top device companies in the market are focusing more effort than ever to develop these tools.