Q4 2020 Stryker Corp Earnings Call
Welcome to the fourth quarter, 'twenty and 'twenty Stryker earnings call. My name is David and I will be your operator for today's call.
At this time all participants are in a listen only mode. Following the conference we will conduct a question and answer session.
During that time participants will have the opportunity to ask one question and one follow up question.
If you would like to ask a question. Please press Star then one on your Touchtone phone.
This conference call is being recorded for replay purposes before we begin I would like to remind you that the discussions during this conference call will include forward looking statements.
Factors that could cause actual results to differ materially are discussed and the company's most recent filings with the SEC.
Also the discussions will include certain non-GAAP financial measures.
Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Strykers current report on form 8-K filed today with the SEC.
I will now turn the call over to Mr. Kevin Lobo, Chairman and Chief Executive Officer, You May proceed Sir.
Welcome to Strykers fourth quarter earnings call. Joining me today are Glenn Boehnlein Strykers CFO and.
And question Welles Vice President of Investor Relations.
For today's call I'll provide opening comments, followed by Preston with an update on the current environment and.
And our most recent acquisitions.
Glenn will then provide additional details regarding our quarterly results before opening the call to Q&A.
I would like to start my comments by expressing my appreciation for their perseverance shown by our employees as they worked through the many challenges that we faced during 2020.
Throughout the year, we maintained high employee engagement, while continuing to support surgeons and caregivers around the world.
Our fourth quarter organic sales declined roughly 1%.
Selecting the impact of a resurgence of COVID-19 infections.
Offsetting by continuation of emergent procedures and strong performance by our large capital products.
We are also excited about closing the Wright medical deal during the quarter and the category leadership that we gain from the fastest growing segment within the orthopedics market.
Preston will provide some additional updates on the integration shortly.
Throughout the quarter, we maintain the financial discipline instituted at the beginning of the pandemic.
Which combined with a favorable tax rate.
Led to an adjusted earnings per share of $2.81 and the quarter up approximately 13% versus 2019 and.
And we delivered impressive cash flow from operations, which exceeded $3 billion for the full year.
In addition to closing the Wright Medical acquisition. We also made progress in many areas that will provide future growth opportunities we.
We have established a structure focused on digital robotics, and enabling technologies, where we see significant opportunity to create a companywide unified digital ecosystem, including NATO.
Maintained our commitment to drive innovation across our various business units, including Neurovascular, where we gained and new product approvals across aspiration, stent, Retrievers, and Florida, <unk> stents and.
And and our Med search segment, where we continued product introductions.
With a focus on safety and prevention.
Finally, we successfully launched our ASC sales model, which leverages the Stryker portfolio to provide end to end solutions to meet the growing demand and shift to the outpatient setting.
Our continued support for our customers and our commitment to innovation will position us well for growth as the pandemic eventually subsides.
Turning to 2021, and our people and culture of execution remains strong.
Which will allow us to deliver on our commitment to make health care better and to resume our customary strong organic sales growth and leveraged earnings.
With that I will now turn the call over to Preston.
Thanks, Kevin.
My comments today will provide an update on the current environment trends related to the latest COVID-19 impacts and update on our most recent acquisitions of Wright medical and ortho sensor.
During the fourth quarter elective procedures were negatively pressured in most regions globally is localized infection and hospitalization rates surged through the month of December and.
As a result growth was uneven and correlated to the state of the pandemic and each region.
Areas impacted the most include the U S and many other countries in Western Europe, most notably the United Kingdom, driven by a country wide lockdowns.
Even with the procedural variability we saw growth in emerging markets, including China, which grew double digits over prior year quarter.
Looking forward hospitals are better equipped to handle this resurgence and they are working to bring back the procedures that have been delayed but we expect that the variability of elective procedures will continue during the first quarter until infection rates began to decline and the distribution of the vaccines become more prevalent.
This slowdown and elective procedures had a negative impact on our more durable businesses, which make up approximately 40% to 50% of our total sales.
However, the slowdown this quarter was not as impactful as the decline and the second quarter as hospitals, we're better equipped to manage COVID-19 patients, while maintaining some level of elective surgeries.
Despite the overall slowdown we experienced continued growth and our neurovascular medical Mako and upper extremities businesses specifically.
Specifically demand for Medical's large capital products continued in the fourth quarter driven by the focus on expanding bed capacity the need for our emergency care products like power costs and the Lucas device and the availability of some remaining cares act funding and the U S.
In addition, the early trends on the launch of our new procure the bed are positive and expect it to continue into 'twenty and 'twenty one.
During the year, our Mako install base grew by 33% and exceeded another milestone with over 100 robots sold and installed and the fourth quarter.
This growth continues to highlight the demand for our differentiated Mako robotic technology as well as our ongoing success, selling and installing robots and major teaching institutions ASC and competitive accounts.
We are also excited about our recent approval for Mako, Teekay, and China, Russia, and Brazil, which all provide opportunities for growth as these markets continue to embrace robotic digital and enabling technologies.
Turning to U S knee procedures in the fourth quarter, approximately 44% of our total knees, where mako knee procedures and <unk>.
And that continues to increase the.
And the shift towards cement with knees also continued and in the fourth quarter. So net with knees made up 42% of our U S knee procedures.
During the pandemic feedback from Surgeons has pointed to limited trialing of competitive product and businesses like joint replacement and surgeons and work to perform procedures restricted by cancellations and deferrals. However, as the pandemic subsides and we returned to a more normal environment, we expect to continue to outpace the market driven by <unk>.
Mako installations throughout the year and our strong order book heading into 2021.
We are also enthusiastic about the Wright medical acquisition and the category leadership regain and both upper extremity and foot and ankle through rights diverse portfolio of implants, biologics and enabling technologies the.
The combination of Stryker and right. We will continue to drive innovation that enhances our customers' ability to address patient needs across the more than $3 billion extremities market. The.
And the integration has been progressing well over the last few months the long period from sign to close was used to ensure that the appropriate integration plans were in place and leveraging our years of deal experience to date. The teams have been focused on moving quickly to align the new combined organization.
<unk> progress has been made including the creation of specialized business units and sales forces for trauma upper extremities and foot and ankle, which is a key part of our overall decentralized strategy that allows us to remain close to the customer.
The U S sales leadership organizational structure for these three specialized business units has been announced and the rollout and full alignment of territories will be finalized during the first quarter as planned.
Outside the U S. The leadership team is working to align the sales force is throughout the year or.
Our teams are executing the sales integration, while continuing to drive day to day business and during the quarter. There was minimal disruption caused by the closing and integration activities.
Finally, I want to restate, our ongoing commitment to M&A, which was most recently demonstrated by our acquisition of ortho sensor.
Leader and the digital evolution of musculoskeletal care and sensor technology for joint replacement.
Smart devices and implants will play an important role and the future of orthopedics and the addition of Ortho center will allow us to continue to innovate and advanced smart sensor technologies, including inter operating centers Wearables and ultimately smart implants.
As it relates to 2021 guidance, Glenn who will provide an update on our full year guidance for sales operating margin and EPS updates to this annual guidance will be made each quarter as necessary throughout the year with that I'll now turn the call over to Glenn.
Thanks Preston.
Today I'll focus my comments on our fourth quarter financial results and the related drivers our detailed financial results have been provided in today's press release.
Our organic sales decline was one 1% and the quarter as a reminder, this quarter included the same number of selling days as Q4 2019 pricing.
Pricing and the quarter was unfavorable <unk>, 8% from the prior year, while foreign currency had a favorable one 2% impact on sales.
Early in the quarter. There was continued momentum from Q3. However during November the impact of the resurgence of COVID-19, and the related cancellations of procedures, primarily and the U S and Europe significantly impacted our sales momentum.
However, we did see demand for certain capital products continue as we had strong results and our Mako medical beds and emergency care products.
For the quarter U S organic sales declined one 5%, reflecting the slowdown and elective procedures as a result of the pandemic somewhat offset by strong demand from Mako medical products and neurovascular products.
International organic sales were flat impacted by the resurgence of the COVID-19 pandemic, primarily in Europe, which was mostly offset by growth and Canada, China and Brazil.
Organic sales decline for the year was four 8% with a U S decline of five 8% and and international decline of two 1%.
2020 had one additional selling day compared to 2019 and for the year price had an unfavorable <unk>, 7% impact on sales.
Our adjusted quarterly EPS of $2 81.
Increased 12, 9% from the prior year, reflecting strong financial discipline, good operating expense control and a favorable operational tax rate.
Our fourth quarter EPS was positively impacted by <unk> <unk> from foreign currency.
Our full year EPS was $7 43.
Which is a decline of 10%, reflecting the impact of lower sales, especially in Q <unk> Q2, as well as the impact of idling certain manufacturing facilities during the year offset by strong expense discipline throughout the year.
Now I will provide some highlights around our segment performance.
Orthopedics had constant currency sales growth of two 8% and on organic sales decline of five 8%, including an organic decline of five 7% and the U S.
This reflects a slowdown and electric procedures related to COVID-19, and a very strong prior year comparable as Q4 2019 U S organic growth was seven 2%.
Other ortho grew 12, 3% and the U S, primarily reflecting strong demand for our Mako robotic platform <unk>.
Really offset by declines and bone cement.
And the trauma and extremities business also delivered positive growth led by our core trauma and shoulder products.
Internationally orthopedics declined 6% organically, which also reflects the COVID-19 related procedural slowdown, especially in Europe. This was somewhat offset by stronger performances in Australia and Canada.
During the quarter. The Wright medical acquisition was successfully closed for the quarter right delivered flat growth on a comparable basis.
This included positive performances and U S shoulder double digit growth and U S ankle as well as strong international growth led by Australia.
On a comparable basis for the full year right had a 10, 3% decline mainly driven by the COVID-19 related slowdown and the second quarter.
In the quarter Med surge had constant currency growth of one 5% and organic growth of one 3%, which included two 2% growth and the U S.
Instruments had U S organic sales growth of four 5% and the quarter sales growth was driven by gains and its power tool waste management and smoke evacuation products and its service business.
Endoscopy had a U S organic sales decline of 7% primarily impacted by the slowdown and the capital businesses offset by gains and the sports medicine business, which grew over 9% and the quarter.
The medical Division had U S organic growth of nine 7%, reflecting solid performances and patient care emergency care and sage businesses.
Internationally med surge had on organic sales decline of two 4%, reflecting a general slowdown and instruments and endoscopy businesses and strong comparable across most geographies.
Neurotechnology and spine had constant currency and organic growth of two 1%.
This growth reflects many strong performances within our neuro tech product line, including neuro power drills, so on a pet and neurovascular offset by the impact of procedural deferrals, especially in the U S.
Our euro or U S. <unk> posted an organic decline of one 2% as procedural deferrals impacted sales in the quarter.
Internationally, Neurotechnology and spine had organic growth of 13, 5%. This performance was driven by strong demand and Australia, Japan and China.
Now I will focus on operating highlights and the fourth quarter.
Our adjusted gross margin of 65, 1% was unfavorable approximately 120 basis points from the prior year quarter.
Compared to the prior year quarter gross margin dilution was impacted by price business mix and Unabsorbed fixed cost as production was brought in line with reduced demand during the quarter.
This was primarily offset by acquisitions and foreign exchange.
Adjusted R&D spending was five 5% of sales our adjusted SG&A was 33% of sales, which was favorable to the prior year quarter by 200 basis points.
This reflects the continued focus on disciplined operating expense controls, which had been in place since the second quarter. These cover most of our discretionary spending, including curtailments and hiring travel meetings and consultants and.
In summary for the quarter, our adjusted operating margin was 29, 2% of sales, which is a 90 basis points improvement over the prior year quarter and reflects the impact of the spending discipline and previously discussed.
Related to other up.
Operating relates to other income and expense as compared to the prior year quarter. We saw a decline and investment income earned on deposits and interest expense increases related to increases and our debt outstanding related to the funding of the Wright medical acquisition.
Our fourth quarter had on an adjusted effective tax rate of 8% our full year effective tax rate was 12, 6%.
These rates reflect one time operational fluctuations that arose due to the pandemic.
With our mix of foreign losses related to lower foreign manufacturing activity combined with reduced U S. Sourced income that resulted from the sharp drop in sales at the end of the year.
And for 2021, we do not anticipate these circumstances arising as we expect to return to normalized operations during the year and we expect our full year effective tax rate to be in the range of 15 five to 16, 5%.
Focusing on the balance sheet, we ended the year with $3 billion of cash and marketable securities and total debt of $14 billion.
During the quarter, we executed the Wright medical acquisition, which resulted in the disbursement of $5 6 billion inclusive of the retirement of rights convertible debt.
Turning to cash flow our year to date cash from operations was approximately $3 3 billion.
This historically strong performance resulted.
From the disciplined working capital management somewhat offset by lower earnings.
Turning to cash flow for 2021, we will not be repurchasing any shares and we anticipate that capital expenditures will be approximately $650 million.
Anticipating a more normalized year, and 2021 and a ramping of investment and our businesses. We expect that free cash flow conversion rate as a percent of adjusted net earnings including the one excluding the one time impacts from the Wright medical and integration of 70% to 80%.
And now I will provide 2021 guidance on a standalone legacy basis.
And further guidance, including Wright medical.
We are providing our guidance and comparison to 2019 as it is a more normal baseline given the variability throughout 2020.
As Preston indicated we will be providing annual guidance on an organic sales growth and earnings and we will update this throughout the year as part of our regular earnings calls.
As we assess the current operating environment, we believe that the recovery ramp of elected procedures will continue to be variable based on region and geography and will continue into the second quarter of 2021.
Given this variability we expect organic sales growth to be in the range of 8% to 10% for the full year 2021, when compared to 2019.
As a reference our organic sales growth excludes Wright medical.
There are the same number of selling days in 2021 compared to 2019, and one less when comparing to 2020.
Consistent with the pricing environment experienced in both 2019 and 2020, we would expect continued unfavorable price reductions of approximately 1%.
Additionally, as we are comparing growth to 2019, our 2021 organic sales growth guidance includes two years of price reductions.
If foreign exchange rates hold near current levels, we anticipate sales and EPS will be modestly favorably impacted as compared to 2020 and 2019.
For the full year 2021, we did not expect to deliver operating margin expansion as a result of the op margin dilution of the Wright medical acquisition. However.
However, excluding the dilutive impact from right. We do anticipate expansion of 30 to 50 basis points of operating margin in 2021 for our legacy Stryker business compared to 2019.
This includes anticipated increases and hiring discretionary expenses and other costs that support future growth and business expansion as our businesses continue to ramp back to more normalized levels.
Finally for 2021, we expect adjusted net earnings per diluted share to be and the range of $8 80 to $9 20 for the full year.
And this includes the previously announced <unk> dilution driven by the addition of the Wright medical business for the full year.
All right medical is dilutive in 2021, we expect it to be accretive starting in 2022.
As it relates to other aspects of Wright medical we expect comparable growth for trauma and extremities to be and the low to mid single digits and 2021 when compared to 2019.
This includes the integration of strikes legacy extremity business with Wright medical which will all be part of our trauma and extremities Division. This growth is impacted by the recovery from COVID-19, partially offset by dis synergies from the integration activities and 2021.
We also reiterate our previous guidance on cost savings synergies from the deal of approximately $100 million to $125 million over the next three years.
And now I will open up the call for Q&A.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the queue press the pound or hash key.
As a reminder, callers will be limited to one question and one follow up question.
Your first question comes from the line of Vijay Kumar with Evercore you May proceed.
Hey, guys congrats on the on.
On the Q here and.
And I guess, maybe a high level start off on the guidance question here.
8% to nine organic.
For the base business.
What are we assuming for Wright medical here for growth from our fiscal 'twenty one.
Hello, Yeah, Hi, Vijay.
And sorry, it was on the I was on mute.
Our organic guidance is 8% to 10%.
And the guidance that we provided related to Wright medical you have to understand that it's being integrated into our trauma extremities businesses. So we will be combining in our legacy extremities business with Wright medical and running that combined group as part of our trauma and extremities division. So when you when you mix all that together and you really look at what will trauma and.
Remedies gross fee in 2021 as compared to 2019, we do think it will be low to mid single digits, but keep in mind that also takes into account sales dis synergies for Wright medical that we fully expect will happen in 2021.
Understood and.
And then Glenn maybe if I could just one quick one on Mt margins off the cash and Q4 was really impressive the margins on the Opex side and if I look at the guidance here, perhaps it seems a little conservative and then I look at the EPS guidance range.
And it's coming in and little bit wider versus the typical stryker and the guidance range. If you will.
What would cause.
And that's almost 100 basis point swing between the lower and and the high and perhaps talk about what goes in and at the low end and the high end.
Yes.
Vijay I would tell you that based on what happened this year and the variability that we saw and our operations. We fully expect to continue to experience some variability on into Q2.
And so our guidance range really reflects.
And how that ramp comes back on the low and it could it could be all the way through Q2 on the better and we start to see much more improvement towards the beginning of Q2 and really it really is going to be variable depending on that I mean, we have tasked our legacy Stryker business on the op margin front with 30% to 50 basis points improvement.
But keep in mind as you look at Q4 or if you even go back and look at Q3, it really reflected.
Pretty draconian and expense control in terms of hiring travel and meetings consultants you name it discretionary expenses and we put the lid on that and so that's.
And that's not sustainable, especially if you think about our aspirations to grow at the high end of med device and so we will start seeing that spending tick up as we as we continue to supplement and hire our sales forces as we meet with customers as we add to our prototypes and loner pools all of those things will start and to add to our <unk>.
Spencers and so that's really what's underlying the guidance.
Your next question comes from the line of Bob Hopkins with Bank of America. You May proceed.
Well, thanks, and good afternoon.
So just two quick things Glenn just to clarify that our guidance on the revenue side.
Right that youre guiding to organic growth.
But it sounds like Wright medical was flat and the quarter, which is actually pretty impressive.
So if I come out to a little bit over $17 billion for for the year just based on kind of your guidance of 8% to 10% organic and then I'm just tacking on 900 to 1 billion four for Wright medical and getting to a little over 17 billion and so I was wondering if you thought that was in the ballpark.
Yeah Bob.
Again, I just I just cant reiterate the variability that we're seeing and so.
Maybe that sort of adding up the obvious set of numbers.
If you will I think we picked the range, 8% to 10% because we do feel like there is going to be some variability that we can't exactly forecast at this point and time and where we're sitting and Q1 and what we're seeing.
As far as Wright medical goes.
We were pretty pleased with where their Q4 performance came out but they are also subject to a lot of the same variability which is why we're looking once we integrate it with trauma and extremities. We will have some sales dis synergies that just naturally occur we felt that with <unk> and spine and we will feel that was right Michael so taking.
Count that variability you really you're really looking at 8% to 10% for the for Stryker legacy and low to mid single digits as we look at the combined <unk> and trauma and extremities.
Okay Fair enough and then Kevin just quickly for you.
Just curious to get your kind of macro perspective on whats your what youre seeing out there as far as the current state of the business right now.
Hospitals willingness to buy capital kind of where we are in terms of procedure growth just just would love and updates given the environment. So volatile on on what Youre seeing right now I think that would be helpful. Thank you.
Yeah. Thanks, Bob I would say certainly at the end of the year.
Did we got that second weighted spiking and and certainly you saw that and the discretionary procedures, a pretty big slowdown after a pretty good month of October.
And we start to tail off in November December.
On the large capital front, who are actually very excited so what we experienced through tier two tier three and tier core from an order book standpoint is continuing to be very strong. So so that is really good news. It's good news from Mako, It's good news from medical.
On the small capital side, we've always said that that tends to lag a little bit that recovery and discretionary procedures and.
And you certainly saw that within certainly the Endoscopy division and the instruments Division, where I would say that those orders are maybe going to take a little longer to really come back.
And the same way, but overall I mean, we have enough confidence now with the with the hospitals being ready to do these procedures as soon as.
The pandemic starts to subside as soon as the vaccines start to become more prevalent, but I'll turn it on pretty quickly and.
And there'll be pretty agile and Thats, why we feel pretty confident of being able to give a I think a healthy guide certainly going back off of 19.
It's 10% organic sales so it will spike throughout the year, starting with obviously on a.
A slower Q1.
And the good news is we have the whole year, so even if.
The discretionary procedures drag a little bit.
We saw in Q3, a pretty big Spike once they once things started getting healthy so over the course of the year per hoping that and.
And believe that the guidance will be we will be able to.
And to sustain even if it's maybe a little softer in Q2 and a little stronger maybe in Q3.
Your next question comes from the line of David Lewis with Morgan Stanley You May proceed.
Hello, and good afternoon, and thanks for taking the question just two quick ones from me.
Kevin I was sort of comparing the revenue guidance the earnings guidance and your earnings guidance kind of interesting to me and that is basically 12% earnings growth. What you guys were doing kind of last couple of years minus Wright medical but the revenue growth a little higher right. The 8% to 10% over 19 is a little better than the earnings growth guidance.
So it's above your structural growth rate, but I think some would argue probably should be just given in light of the recovery. So how should we interpret that 8% to 10% number Kevin relative to the structural growth rate and where does.
Some of the key factors are in your opinion that or how do you think about the structural growth rate of Stryker here as we come out of COVID-19, and a quick follow up.
Sure sure David I mean without getting into every single division what I would just give you as a macro comment is.
We feel that we have the right offense to continue to win and the market and to continue strong growth you saw for seven straight years, we accelerated our organic growth.
And 2019 culminated with over 8% organic growth and I.
And I think that and muscle that we developed the structure that we have with our business units the new product pipeline that we have.
Positioned us to be and above market grower and we expect fully expect that that will continue and.
And into 2021.
There are obviously differences by divisions, but we feel like we're in a very healthy position overall and Thats, what gives us confidence and the guidance clearly Wright medical is a big acquisition.
There are dis synergies that we've assumed there and it was highly dilutive to the normal operation of our business, we will see how that unfolds over the course of the year early signs of integration and are very positive.
But we have put in some some prudence there just based on what.
We've experienced with our <unk> acquisition, and what frankly, all other implant companies and experienced with their integration.
Okay very helpful. And then just lastly, just on ortho competitiveness, Kevin I know the environment is very very invisible, while we have and sort of one competitor results to go after here.
And you're reasonably to your momentum has changed at all I mean, your robotics system placements are very strong and you kind of went from 30% knees and some atlas robotic to 40% pretty pretty darn quickly during COVID-19, but any reason to believe that your relative positioning our relative share momentum versus other peers and 21 is going to look a lot different.
Yes, no we remain very bullish about our is on replacement business as well as Mako and <unk>.
And just the increase and Mako is pretty remarkable to have almost one out of two.
And that is being done on Mako and it has not been that many years since we launched the system. So unlike.
Navigation and the past, which are obviously never had this type of other on uptake.
We continue to have strong not only installations of robots, but utilization and even hips.
Seeing that continue to increase as well and.
The new hip software was installed and about 400 accounts in Q4. So we had the approval obviously earlier in the year, but because of the pandemic. It's taken us time to actually be able to go in and do the upgrades.
But that will pick up steam again and turns into 2021, and so again looking at one quarter, whether it's positive or negative and pandemic world is it's not something I'm too concerned about it just based on just based on where your regional strength is if you happen to be and a state or locality that so that was doing procedures and then you got benefit in and if you.
You didn't think about hurts, so it's a little bit Brandon during a pandemic, but structurally I think we're in great shape and with that business.
Your next question comes from the line of Larry <unk> with Wells Fargo. You May proceed.
Thank you so much this is sheldon and for Larry.
I wanted to touch on on the acquisition of auto sensor and Kevin The acquisition really marks our entry into the sensor technologies remote patient monitoring and it's Martin Glenn space and a much more meaningful way and I was wondering if you could comment on the timing why now given that you've had a relationship with them for several years for soft tissue balancing and then how are you.
Thinking about timelines for integration and launch with Michael.
And then also the launch of <unk> implants.
And you could share and.
Also if I could squeeze in one more on how you're thinking about the application of sensor technology.
These interest shoulders, and hips anything on timing would be great. Thank you.
Yes, John and this is price and then just in terms of the timing of the deal itself. I mean again, we are constantly looking at different opportunities and it was just the right time.
With the team to make this acquisition in terms of what we thought we were able to do with it. So I think just the timing of it just happened to work out the way that it did and we typically do look at our targets for a long period of time in terms of other timelines about when we're going to be bringing some of the different things to market. We're not at this point, we're not ready to disclose those.
Timelines just note that the teams are getting to work to develop pretty robust time excuse me a robust pipeline around that sensor technology and as we have more information, we'll certainly be bringing that to you guys.
Your next question comes from the line of Robbie Marcus with Jpmorgan you May proceed.
Oh, Hi, and thanks for taking the question Kevin I was hoping you could comment on.
As Youre thinking about later this year and into next year. There were a lot of patients that didn't end up getting procedures and 2020 and probably the first half of 2021.
How should we think about the potential for a bolus of patients I realize there is limitations to what the system can do but there's still a lot of patients that need to be treated. So how are you thinking about that as an organization.
Hey, Ravi, it's rustin and I'll I'll take that one and in terms of that patient backlog certainly we saw some of that being worked down and the third quarter as we saw on the recovery starting to happen and and certainly is and then we saw more deferrals happening and in fourth quarter and you saw more people being added back to that backlog and as Kevin and Glenn both both articulated as we see the.
Hovering happening in 2021, we would expect to see some of that recovery include the backlog of patients that have been deferring now for us and anywhere from three to six months or so and then we would expect to see some of that flowing back into the numbers through 2021, I think the one caveat I would give you is you won't necessarily see a dramatic spike.
And those numbers, just given certain aspects around capacity and things like that so you'll still see surgeons and hospitals and working to fit and additional surgeries and and things that the same things that we saw on the third quarter, but you certainly won't see a significant dramatic spike.
At any one point in time as a result of the backlog.
Great and maybe just one more question on Neurovascular I remember in 2019 back and the old days before Covid.
And we're hoping to at least accelerate that business and 2020, you had some new product launches and I was hoping you could just give us the update on where youre going to have new product launches in 2021, and and how youre thinking about that business. Thanks.
Yes, Thanks, Ravi first of all our neurovascular had a really terrific year doubled.
Double digit growth and the fourth quarter.
And they were obviously, just like everybody else affected and the second quarter and into the third quarter, but.
<unk> digit growth and the fourth quarter extremely exciting portfolio of products and new product introductions.
Honestly with aspiration, we have the Doctor and 74 catheter out we have the pump.
Theyre doing very well, taking on Florida, hurting stent, the second generation corporate extent.
And the United States to surpass evolves, we have the first generation core operating stent approved in China, Our <unk> stent, which is Houston and the hemorrhagic segment jumped adjunct of state and stent is doing extremely well and China. So so we really have a great portfolio and we have <unk> XD and the next generation stent retriever as well recently.
Launch so a lot of new launches.
This management team is truly outstanding and they've been in place since frankly, we acquired the business.
They haven't been very healthy pipeline and other.
Products coming as well, so I'm very very bullish on on the neurovascular business day.
The year with great momentum and I expect they'll continue to be a very strong performer in the years to come.
Your next question comes from the line of <unk> Chickering with Deutsche Bank You May proceed.
Good afternoon, guys. Thanks for taking my questions. One quick guidance question for you and I understand you're not providing quarterly guidance at this time, but normally you get about 23% of our annual EPS and the first quarter and.
Youre still seeing pressures and deferrable procedures in January is there any.
Just some color there.
They can give us on the cadence of their first quarter earnings versus your normal run.
Run rate.
Yes, Peter I would just tell you and this is we're not and the normal normal run rates and Greg and I think Brazil coming out on some pretty variable trends that we saw and in the fourth quarter and continuing certainly end of the first quarter.
A lot of it is going to depend on on the localized hospitalization and infection rates and really how those decline over time and have and vaccine is out there and more prevalent. So I think that's what I would continue to look at it as we think about what that recovery net recovery trend is going to be at this point and be too hard really to give you too much guidance on how that is.
Going to exactly happen and Thats why you see the wider guidance that we provided.
Okay Fair enough and also for follow up as more procedures are moving into the ASC due to COVID-19 to free up our space and as capacity and the systems have you seen hospitals changed their purchasing habits to buy at a cheaper.
The game plans or pushback on pricing and where to adapt to the day lower reimburses and e&ps.
Yes.
No not at this time, we've not we've not seen any significant changes in that and those in there.
Those habits and all.
Your next question comes from the line of Joanne Wuensch with Citi. You May proceed.
Yes, Hi, this is Matt Henriksson in for Joanne.
First question, we have is just around and Mako and robotic knee systems.
You guys and great quarter, great momentum ending the year with J&J is coming out with their Dallas robot They received FDA approval and all.
And so Zimmer is kind of in full swing and launch.
And I'm, just kind of putting the two together is there any change in your commercial plans as you now have.
For technology out and the market.
Okay.
Yes. So this is Kevin I'll take that.
First thing I would tell you is the introduction of competitive systems.
And has not slowed down on Mako momentum whatsoever.
And we don't expect that to change with with one more system on the market if.
And if anything it just proves to further validate that robotics is here to stay.
<unk> and <unk>.
We really believe we have the best solution on the market.
As evidenced by the uptake and the procedures and we disclosed the fourth quarter.
And almost 100 opportunities and the United States being used with makeup so surgeons absolutely love our system and they are using it on very very high rates. There also is a synergy with Kuwait that are.
Our system insurers and absolutely perfect cut.
And with Haptics, which.
We're the only ones to have.
That is very complementary with some Atlas and we see both of those adoption rates moving and the same direction. So we love our chances of competing and side by side with anybody and we think this provides a further tailwind and the adoption of robotics in orthopedics.
Some color and thanks for that and then from a follow up just going to the Wright medical acquisition before they were acquired and they had always talked about there.
Enabling technology to their preoperative planning and software being kind of their main driver to capture share and to expand the market.
Has that strategy changed at all now that you are beginning to integrate with them or are you going to continue with that strategy of focusing with enabling technology for first and thanks again and what I would tell you is that certainly we've always been believers of enabling technologies and as evidenced by some of the different businesses that we've acquired and some of the different.
And that we've launched and really with a focus on improving patient outcomes and we believe that a lot of other technologies, including the blueprint technology that right and previously invested in our complementary really to some of the platforms that we have and as part of the integration.
And right organization and the R&D portfolio and technology teams are all working together really to build out what those long term pipeline plans youre going to be and and really leveraging all of the different and unique products and capabilities from both sides. So we will continue to see investments in those areas.
Your next question comes from the line of Kayla Crum with Truest you May proceed.
Great Hi, guys. Thanks for taking our questions. So I appreciate the guidance that you gave for 2021 and.
Can you just speak to how you think each segment of the business will grow relative to the total organic range you provided and I guess I'm. Most curious just looking at non surge and orthopedics and are you assuming that some of other medical demand slows down in the coming quarters, and net backlog ticked up and ortho and <unk>.
Any more detail on that would be super helpful.
Yeah. So Kevin we don't we don't typically provide any any of that segment breakdown in terms of our guy, but I think if you just take a look at it what we're expecting to happen in the marketplace and what's really been happening through 2020, and as you go and into 2021, certainly those businesses that we have that are affected are more affected by.
Hi, elective procedures should see the benefit of elective procedures, returning and throughout the year. The other thing I would just add as Kevin had mentioned to our smaller capital products are really those products that are facilitating many of those elective procedures should also see some of that benefit and then as it pertains to really the large capital segment. We've continued to see strong day.
And in those areas and and would expect to continue to see some of that demand throughout 'twenty, one as well.
Okay. Thank you and then just a follow up I guess to Tito's question earlier is it fair to say that and in Q1 will be sort of the softest of the year Q2 will have the highest growth kind of often easier comps and the second part of this year should feel a little bit more normal.
I think it's certainly fair to say that the.
The variability that we experienced in the fourth quarter, we expect that to continue into the first quarter and then we should see benefits happening as we progress throughout the remainder of the year.
Your next question comes from the line of Steven Lichtman with Oppenheimer. You May proceed.
Thank you hi, guys.
First I was wondering if you could provide some additional color around the ASC sales model that youre rolling out any any details you could provide on what the model looks like and any early feedback from the field would be great.
Yeah, so I'm not going to get into too much detail just for competitive reasons, but I would say that I am delighted with the with the ASC office that we put in place it involves people from different parts of Stryker.
And basically a quarterback the deal and bring in multiple divisions based on the unique needs of every ASC.
Every ASC is unique every deal is a customized deal, but the way we've navigated. This enables incredible collaboration across our divisions. We've put just absolutely fantastic people and charge and really we haven't the breadth of our portfolio with capital equipment disposables and implants.
And really for the first time as a company, we're really leveraging that and the United States. We have had success with such models, sometimes and other countries around the world, but and the U S Force ASC model has been a truly fantastic exceeded my expectations and I am bullish that they'll be able to continue to have great success, and the <unk> and <unk>.
Mako is often part of that formula and the ASC.
But not always.
Obviously, you had a presence before with sports but.
That business. Fortunately has really started to grow as <unk> been hurt and the fourth quarter and as part of the pandemic grew over 9% and so having a strong sports business plus all of our other businesses and now with the right.
And having extremities.
Category, leading position, we just have a fantastic portfolio to serve.
And the needs of the ASC and now our commercial offense again, not getting too specific.
And let's just say, we make it easy for the ASC and we provide customized solutions.
And thanks, Kevin and then just a follow up on the fourth quarter, how did your spine franchise, specifically hold up during the recent spike in Covid cases, and and any thoughts on that on that business overall looking into 2021. Thanks.
Yes, I would say that the spine business held up a little bit better we saw and we saw spine procedures and general holding up a little better than some of the other elective procedures, particularly for our spine business outside the United States performed well and I think it's just a function of the successful integration that we've had with the K, two and business and combining that with some of the enabling technologies.
And those that we acquired through Mobius and and again, we saw some continued performance in some of the markets outside the U S that had more stability and spine related procedures, like Japan, and Canada, as well and so I think all and all of it held up a little bit better we definitely expect that business to continue to perform well as we go into 'twenty and 'twenty, one and really hard.
Dean the power across <unk>, and our legacy spine business as well as and enabling technologies.
Your next question comes from the line of Matt Taylor with UBS you May proceed.
Hi, Thank you for taking the question.
And I felt and disclosures on Mako really interesting and bullish and.
I just had two follow ups on that one is where do you think you can push.
<unk> penetration and some Atlas penetration and the U S. So over time and we'd love to hear your thoughts.
So on that question and just on the opportunity to give you just had all of these approvals and.
And new geographies.
Yes, Thanks, certainly I'm delighted with the progress both with Mako adoption as well as from Atlas.
And I don't think so amendments will ever get to where it is with hits just because of both stability, it's a weight bearing joints.
Clearly, we now see it it's going to be significantly higher than 50%.
I think five years ago, Nobody would have believed if we had said that so and that's pretty remarkable.
In terms of the actual use of Mako.
We had all from a lot of <unk>.
Robots installed this year, so I would expect that delek and the percentage of it.
And how do we use done with nickel will continue to increase same with hips.
Outside the United States, it's going it's taking a little longer obviously because of the approvals, but we're really excited about getting the total knee approved and.
China, and Brazil, and Russia, and certainly Japan, and China are going to be very very good markets for us.
And Japan, we've made some progress already.
And the approvals took a little longer there as well.
The new hip software of course is also very important as you know theres a lot a lot more hip procedures done and that part of the world and it's almost about the same as news on <unk>.
The United States. So we love the fact that we have multiple applications all approved and those markets and.
And would expect youre going to see a similar kind of growth that you saw it and the United States and may not be quite as quickly and <unk> seen that frankly with.
With intuitive and soft tissue robotics the update there. So there is a little slower outside the United States, but we expect the same kind of runway longer term and we're very bullish about the prospects, especially and in China, and Japan, and Brazil for sure we're going to be terrific markets from Mako.
Okay, great Great maybe just a quick follow up on that and it was right and the house now could you give us updated thoughts on <unk>.
Timing on a robotic solution for shoulders and for spine.
And we're not really ready to give timelines yet.
We have to get a lot closer to launch before we're going on the specific about timelines.
I'd say that I'm extremely bullish about shoulder I think I've said that in the past its a very difficult procedure to do.
There are enabling technologies and then right.
And our teams are working on with our Mako teams and we'd be very excited to be able to bring that to the market with their market leading implants.
I'm not yet ready for timelines and famous spine not not yet ready for timelines, we have two options for spine.
One is the robotic program that was being developed by mobius prior to the acquisition.
As well as Mako. So we have work going on in both areas, but that's just not not ready to give timelines robotics is complicated.
And we will keep you posted.
Your next question comes from the line of Ryan Zimmerman with <unk> you May proceed.
Great. Thanks for taking the questions just first for me.
Kevin Ron the capital equipment demand and I was just wondering if you could talk about kind of the dynamics in play and 2021.
<unk> been very strong with beds.
And you haven't said much about many booms and lights and so is this a story of kind of the first half second half and and how to think about that composition of capital equipment moving from the first half to the second half and and what that May entail in terms of your portfolio.
Yes, so booms and lights, certainly haven't been as positive as <unk>.
Mako and the beds and stretchers and and.
And certainly the distributors because the medical capital really did start to have the right a bit of a pandemic.
Tailwind, if you will and booms and lights large construction sort of slow down a little bit that should pick up starting next year and thats part of the drag that you see within the Endoscopy Division is the booms and lights portion.
But certainly a day and ASC is their busy but certainly the large large capital spend projects were delayed a little bit there is starting to pick back up again, so that's obviously a smaller business within the overall stryker.
Medical we continue to feel bullish so and so it's so we did get a bit of a pandemic benefit but this new beds and that he'd launched is really a fantastic product and getting great customer feedback.
<unk> has also picked up so that was really hit hard and.
And the second quarter third quarter had a nice pick up on the Q4 and that that business will resume its high growth as the pandemic subsides.
The diversity of our portfolio is really what gives us the.
Optimism that we're going to continue to see strong growth and medical and it wasn't just sort of a.
And the pandemic bump and then suddenly drop because of the innovation and our portfolio and.
And frankly, it just really really strong commercial execution.
Okay understood and then just a follow up for me and other business that doesn't get a lot of attention and sustainability and I'm. Just wondering if theres been any change and practice due to COVID-19 and demand for that business and kind of that the whole reprocessing.
Market itself with hospitals, and and how to think about that over time, as we potentially normalize and the strength of what that can or can't do and again I appreciate and that it's small.
Yeah sure no I would just say that it's those per those products are used and discretionary or elective procedures. So they were directly hit and the same way that you saw or other deferrable procedures being hit and so because of the nature of those products as the pandemic subsides that that growth will pick up. So there is nothing more to read into it and that our hospital.
Behaviors or didn't really change either positively or negatively if you can do the procedures. They would use the products. If those procedures were sort of shutdown and then those products weren't being used and then they werent being purchased and so I would expect it to follow a similar pattern.
And just based on other electric procedures.
Your next question comes from the line of Matt O'brien with Piper Sandler You May proceed.
Hi, guys. This is drew on for Matt Thanks for taking the questions.
Wanted to start off briefly on our rights.
Maybe you guys could help us by comparing and contrasting the right integration process to the one you went through with K too.
And what stage of the process have you already completed so far considering the longer deal closed timeline and then I guess really what I'm trying to get at is about a year and so the K. Two process you ran into a couple of additional challenges.
Do you feel you have a good head start with with that for right and what gives you confidence and the contribution you baked into guidance.
Yes, so certainly as I think about that is those two acquisitions. There are some similarities and then there are some some pretty big differences and similarities maybe by and in the foot and ankle side, where there is more of a true integration that's happening between between the Stryker business and the right business, but for the upper extremity side, it's much more of a of just bringing them interest.
<unk> and continuing on with the growth that they've had so it's a little bit different from that perspective, as we think about bringing on the acquisition of right versus K too just like with any and all of our previous acquisitions, we learn and we've learned along the way and we gave those learnings as we as we plan for additional or new acquisitions.
And they are coming to the same was true with right and so we utilized really that year long period between sign and close to ensure that we're focused on getting the correct integration plans in place. So that we can hit the ground running and to date and that's what the team has done they have they have executed to the plan and as I mentioned in my prepared remarks, we've really done a lot of.
Focus on ensuring that the sales organizations are being integrated in a timely fashion and so thats, where we are at this point and certainly we will continue to provide some updates as we continue with the integration throughout the year.
Okay, that's super helpful.
And then I appreciate the commentary on Mako and <unk>.
It sounds like Youre placement mix continued to shift a little bit today and see here in Q4.
So I guess the question is as we look out a year and a post COVID-19 environment do you see the interest from <unk> taper.
Taper and down any or do you think it continues ramping over the long term. Thank you.
Yes, I think that trend is that it was already accelerating prior to the pandemic, it's going to continue without a doubt and especially for <unk>.
Hip and knee procedures foot and ankle procedures.
Given some basic spine procedures. So I think this is a permanent trend and will continue and.
And obviously now we have reimbursement coverage for hips as well as knees through Medicare. So this is a trend for the future and I actually think it's not going to stop and the United States.
Countries like the U K and you need and Canada looking at moving to lower cost sites of care. It's a good thing for health care overall and you see.
Surgery centers make good money and they're very profitable.
And they don't have the burden of the cost of a large and patient inpatient hospitals. So.
You can debate the actual pace of the curve, but theres no doubt in my mind that this is on.
A trend that is going to continue to accelerate.
Your next question comes from the line of Richard <unk> with SBB Leerink you May proceed.
Hi, Thank you.
A couple of quick ones on ortho sensor and then a follow up on what the sensor can.
Can you just.
Remind us what you plan on doing with the intraoperative, the various and capability I know that some of your competitors are currently use that use that system and you're going to continue to sell that as an open architecture and then and then second on on Ortho sensor is just.
Excuse me should we think of when you do offer your first iteration of a product there, whether it's a wearable external or whatever it looks like.
Is that going to be something that you'll charge separately for or or do you think they'll package it and with the procedure.
Yes. Thanks for the question so on ortho sensor obviously.
And new under the belt here, a few weeks and so it's not something that we have fully developed all of the various plans in terms of how we're going to market for any other products at this point and time and so as that happens, we'll certainly be able to come back and give you updates with regards to how we're going to market and what the impacts might be in terms of what the legacy business was and what we expect it to be and.
Future and I think the same holds true as we think about future product launches as well and as I mentioned before we haven't defined all of those timelines yet and so all of the items that you're breaking out in terms of how it'll it'll commercialize how it'll be sold et cetera will all be developed and done at that point.
Thanks, and if I could just on one more on the M&A front <unk>.
Congrats on getting Wright medical finally over the finish line there.
I guess.
We think of you as it is very much out in the market.
Size of deals everything is fair game.
And and back to your kind of normal Stryker M&A not.
Not just small tuck ins or maybe and anything you would.
Care to comment on their share with respect to your view of the M&A outlook. Thanks.
Sure I think you know.
Obviously, we took on additional.
Additional debt when we did the Wright medical acquisition. We have also made commitments to reduce our debt over the next few years and so that will be something thats ongoing.
And youll see that and our financial performance, but because M&A is so important to our to our growth strategy and keep in mind that our normal M&A strategy is really just smaller tuck in deals Thats, what we do well, it's what we do best and we can execute those quickly. So I think just like with.
Ortho sensor, you'll see us continuing with smaller tuck in acquisitions like we normally do.
Through the year and I don't anticipate that Youll see sort of a big.
Acquisition of the size of Wright medical for for a couple of years and frankly.
If you think back to even when we did sage and when we did physio those were two very large acquisitions, we moved into a strategy per year or two of just doing tuck ins, which served us very well and so I think it will play out very similar to that.
Your next question comes from the line of Mike Matson with Needham and company you May proceed.
Hi, Thanks for taking my questions I guess I wanted to ask about the per acuity bed launch maybe you can give us an update on where things stand with that and.
I'm wondering if you could give us an overview of the kind of smart bed capabilities that youre planning for that platform.
Sure. So that is is that and the market and then and a limited way and the fourth quarter and really rolling out.
And for a full full launch as we think about the first quarter of 2021 in terms of the features and benefits really it's three.
Three things I would probably point out to you I think one just advanced fall prevention really focusing on keeping patients safe as well as we think about low height feature I think the bed drops down to about 11 inches off the floor and then also it's the first bed, that's really truly wireless and so really all of those items and trying to meet some unmet needs.
In the marketplace to drive benefits and the bed market.
Okay. Thanks, and then I know youre, not giving specific guidance for the margins for 2021, but.
And just given there's several moving parts, particularly with gross margin and you've got right, which I think is coming in at a higher gross margin. But then you had some fixed cost absorption issues in 2020 that could spill into 2021.
And.
Can you give us any kind of.
Insight into where you expect the gross margin to end up and and kind of the.
Sequence of that throughout the year.
Yeah.
Actually I think you did a pretty good job summarizing it right right will definitely come in and be accretive to our gross margin as those products.
Generally have a higher gross margin and then sort of the average of our of our other business. I also think too as you look at business mix that will normalize as the year goes forward and so we will also see.
Kind of those higher margin orthopedics products, becoming a bigger share of the total and I think we will.
And it will largely come back to sort of what I'll view of sort of normalized margins.
You look at 2019, Conversely, though just as a reminder, moving down to op margin you are going to see that discretionary spending hooked up as we support growth and so that will that will likely go the other way and we will be on a ramp largely a sales ramp throughout the year.
Your next question comes from the line of Josh Jennings with Cowen You May proceed.
Hi, This is Eric on for Josh. Thanks for taking the question looking at the <unk> performance and have for a minute.
As a procedure category that we had been thinking perhaps would be a little more resilient through any pandemic Edwards and the quarter. I was just wondering if you could share your thoughts on that business, particularly and particularly in the U S. Excuse me and just help us understand what's behind that.
Yes.
Yes, so I think Kevin Kevin outlined it pretty well before I mean, I think overall, just looking at one quarter and the mix and the midst of the pandemic is tough to do because of the variability and really the localized impacts that we're seeing from our elected procedure standpoint. So certainly you would expect that that hits might be a little less deferrable than knees.
Given the nature of that.
The disease and degeneration, but at the same time.
Electric procedures, depending on where you were in the world.
Being stopped until it hits, we're not immune to that like some of our other elective procedures as we look forward certainly with the rollout.
All of the installations for Mako that we've done this year as well as our new hip software, we're really expecting continued above market growth from our hips and knees as we move forward.
Understood. Thank you and then quickly I was wondering if you're able to share what percent of the REIT business is levered to outpatient procedures.
No that's not something that we're sharing.
Your next question comes from the line of Jeff Johnson with Baird. You May proceed.
Thanks, guys. Good afternoon, and most of my questions have been answered, but I guess, just one last one just a it sounds like China, and Latin America held and better and the fourth quarter have you seen any change and that trend line over the last few weeks or as we've gone into <unk> here just are those continuing to hold and better than some of the European and U S markets are and anything we should be thinking about even on those markets early in the year. Thanks.
Yes, I would tell you we haven't seen any significant trend shifts heading making that transition from fourth quarter and the first quarter.
Your next question comes from the line of Kyle Rose with Canaccord. Your line is open.
Great. Thank you for squeezing me in.
Two questions one Kevin you mentioned.
<unk>.
And of strength, just wondering if you could flesh that out for us really what's driving that is the new products and that we should be focusing on and then secondarily.
And you talked a lot about building and connected ecosystem on implants, and enabling technologies I think we understand the opportunity would make them pretty well, you've clearly got a sensor and thats going to flow and but maybe just help us understand what that means for the company and longer term does it does it bring.
And you're closer to your customers and <unk>.
<unk> share loss or competitive loss and net new revenue streams that come in and just from a big picture perspective, how should we be thinking about that over the next several years.
Okay sure so I'll start with the second part.
The World is obviously going more and more digital.
We have a stryker health cloud, there's all types of data that we're collecting from Mako that we wont be able to mine that data with thousands and thousands of procedures already being done.
And and really connect that with sensors and so we really see this is not just limited to joint replacement, it's going to be across all of our businesses, whether it's trauma, whether its cranial maxillofacial sports.
And so this is something we're really excited about and we named Robert Colin and be ahead of that business on behalf of all of Stryker and so we already had and initiatives going on and different parts of the company and we were sort of bringing it all together to really create more leverage and really be able to have centers of excellence around different types of technology blocks.
And so to us it's extremely exciting Robert knows the company very very well and I think many of you know Robert.
Very well positioned to lead this function for the company and and sorry can you repeat the first question and I'm, sorry to cut and.
I didn't catch it on just about the strength that you saw on sports medicine.
Sports, Yes, so sports has been on just a fabulous story from Stryker, but when.
And when I joined the company almost 10 years ago, our sports Medicine implant business was really tiny.
Most people didn't even though we had a sports medicine and implant business and and we have grown it pretty dramatically since then.
Primarily through internal innovation, but we've also done a series of very small acquisitions and one of them was pivot you may recall for and hip arthroscopy.
More recently, we launched a lateral roll anchor for shoulder, which has been and we call. It per Omega is the product name which is that.
Fantastic product, we picked up.
I through IV are we picked up another product as well, which are these are all key fundamental products, whether it's a knee, whether it's and HIPAA whether it's from shoulder. So we know we have all three of the joints very well covered and sports and we are just growing and again very very robust rate.
And the timing couldn't be better with the shift to the surgery center and being able to use sports combined with our other divisions and.
Again, we really poured it on and the last few years and sports and cause a lot of investment internally that we've done.
And we have a fabulous leader of that business is run out of Denver, and and we're really excited about the progress we've made and and sports.
Your next question comes from the line of Matt <unk> with Credit Suisse. You May proceed.
Hey, thanks, so much for taking the questions.
And so just one on on shoulder and right and one on just to follow up on some of your comments on market share trends. So I was wondering.
If you could talk a little bit about your thoughts on the overlap.
Bright surgeon customers and shoulder width with sort of your traditional end markets and.
And what if any opportunity there is there for sort of cross selling point to relationships that sort of thing and that is and actually just one quick follow up.
Yes, sure. So clearly right medical had a much bigger shoulder business than Stryker.
And a lot of the Stryker business, frankly, where they'd be hip and knees searches that also did on some volume of shoulder and.
And the teams are obviously working on that through the through the sales deployment trucking at which surgeons are going to be allocated to which salespeople. They made great progress on that front and cross selling opportunities will exist but.
And as Preston mentioned before this integration is not going to be as tricky as the integration on foot and ankle just given that we tended to they tended to be strong with the with the I'll call. It fully dedicated upper extremity.
Surgeons and we tended to be stronger with those surgeons that did a smaller number and just as a general statement. So I think this integration is going to be terrific. We were really thrilled to make will have.
The leader from from Wright Medical takeover, the combined business of upper extremities and their head of sales is also running the combined.
Sales organization and they are both outstanding leaders and and we are delighted not only to bring the business and the products from Wright medical but being able to bring over some of their key leadership.
Even the leader of our combined foot and ankle business came from Wright medical. So so not only are you bringing over great technologies and we're also bringing over.
Great talent, and so with that acquisition.
That's great. Thank you for that and then just to follow up on current market trends.
You've mentioned here just in Q&A that you expect to continue to go above the market and joins her and orthopedics or and knees, if I heard correctly and I'm just wondering for clarity looking back on Q4 understanding a lot going on and regional differences et cetera.
Is it your is your expectation that your numbers, they're also represent sort of above.
And market procedure growth or is it just or is it just too hard to talk about that given that the variability.
Variability.
Yes, Matt I would just tell you at this point, it's very difficult to really talk about it just given the variability and it's not dissimilar to what we've seen really in second and third quarter as well in terms of how the surgeries are being deferred and where they are being deferred.
And how they are coming back so I think that really its difficult to use one quarter and certainly difficult and amidst this pandemic to use one quarter. So I think as we look at it and we're looking at as we get to those normalized rates and and knowing what we've done from a mako implement a mako.
And then placement and and install standpoint that we have a lot of runway to go in terms of growing our hips and knees.
And there are no further questions at this time I will now turn the conference over to Mr. Kevin Lobo for any closing remarks.
So thank you all for joining our call.
And I'm very very pleased to have 2020 behind us and looking forward to a strong year in 2021, and we have to get through obviously the share.
The remainder of this pandemic, but as you saw from our guide we are feeling very confident.
And that's in the future.
And we look forward to sharing our Q1 results with you and April Thank you.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
And we're gaining momentum.
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And then.
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