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Published in Manufacturing

Delayed elective procedures during COVID-19 case spike, hospital staffing shortages curtails Stryker sales growth

BY Friday, October 29, 2021 10:36am

KALAMAZOO — Stryker Corp.’s sales grew more than 11 percent in the third quarter, although a surge in COVID-19 cases and hospital staffing shortages that led to deferred surgeries curtailed sales in the company’s U.S-based orthopedic implant business.

The Kalamazoo-based Stryker (NYSE: SYK) reported $4.16 billion in quarterly sales, up from $3.73 billion in the same period a year earlier. Sales growth was aided by the company’s November 2020 acquisition of Wright Medical NV, a Netherlands-based maker of various orthopedic products.

Kevin Lobo COURTESY PHOTO

Excluding revenues from the Wright Medical acquisition, Stryker recorded organic sales growth of 4.5 percent. Stryker’s MedSurg and the Neurotechnology and Spine divisions recorded organic sales growth of 8.8 percent and 6.1 percent, respectively. The company’s orthopedic division recorded a 1.8-percent decline organically as demand for hip, knee and spinal implants eased as elective surgical procedures were delayed.

Stryker’s international sales grew 15.3 percent, outpacing the U.S. growth rate of 9.9 percent.

“While the quarter did not progress as we had anticipated due to the Delta variant, we remain confident in the outlook for our businesses as evidenced by our strong international, MedSurg and Neurotechnology performances. We expect these businesses to continue to perform at high levels with the uncertainty most concentrated in deferrable procedures in the United States,” Stryker Chairman, President and CEO Kevin Lobo said in Thursday conference call with analysts to discuss quarterly results. “We continue to feel bullish about our longer-term prospects as the pandemic recedes with our proven strategy and strong fundamentals.”

Elective procedure deferrals were “more pronounced” in the U.S. than internationally and occurred in most states, although disruption “was more widespread in the Southeast and Southwest portions of the country, impacting major markets like Florida and Texas throughout the quarter,” said Preston Wells, Stryker’s vice president of investor relations.

Stryker expects the implant business to “get back to more normal levels by the end” of the year, Wells said.

“At the end of the (third) quarter, infection and hospitalization rates were declining in impacted regions and (have) continued into October. As a result, we are beginning to see some improvements in our more impacted businesses through the first few weeks of October,” he said. “However, we expect the recovery will be partially muted by discontinued hospital staffing challenges and ongoing COVID related volatility.”

Stryker reported $438 million in quarterly net income, or $1.14 per diluted share, which was down nearly 30 percent from the $621 million, or $1.63 per diluted share, in the third quarter a year earlier.

Stryker had nearly $10.1 billion in sales through the first three quarters of 2021, a 23-percent increase from the first nine months of 2020. The company had $1.33 billion in net income.

As it has throughout the COVID-19 pandemic, Stryker provided updated guidance based on expected growth over 2019’s $14.88 billion in sales. Full-year sales for 2021 are now expected to grow organically by 7 to 8 percent from 2019, which is lower than previously expected. In prior guidance when reporting second-quarter results in July, Stryker at the time expected 9 to 10 percent full-year organic sales growth from 2019.

Stryker based the updated guidance on “our performance in the third quarter, the continued volatility experienced as a result of COVID, procedural delays in hospital staffing shortages as well as uncertainty around the pace of recovery in the fourth quarter,” said Chief Financial Officer Glenn Boehnlein.

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