The paragraph is a transcript from the Fourth Quarter 2024 Stryker Earnings Call. It introduces the participants of the call, including the operator, Luke, and key members from Stryker such as Kevin Lobo, the Chair and CEO; Glenn Boehnlein, the CFO; Andy Pierce, Group President of MedSurg and Neurotechnology; and Jason Beach, VP of Finance and Investor Relations. The call will include forward-looking statements and non-GAAP financial measures. Kevin Lobo opens the discussion, mentioning the strategic rationale for the pending acquisition of Inari and future financial guidance. Notably, Glenn Fogel, the company's CFO for nine years, is retiring effective April 1. The call will conclude with a Q&A session.

The paragraph discusses the leadership transition at the company with Preston Wells replacing Glenn, and it highlights the company's strong financial performance in 2024. The company achieved over 10% organic sales growth for both Q4 and the full year, with significant contributions from various business segments and strong international growth led by Canada and emerging European markets. Despite the impact of seven acquisitions, the company improved its adjusted operating margin and achieved substantial earnings growth, with adjusted EPS increasing by 16% for Q4 and 15% for the full year. Looking ahead, the company is optimistic about 2025, expecting continued high-end sales growth in the med tech sector.

The paragraph discusses the company's recent financial performance, strategic decisions, and growth opportunities. They report an adjusted EPS of $13.45 to $13.70 per share, excluding the impact of Inari Medical. They announced plans to sell their underperforming Spinal Implants business to focus on high-growth areas like Interventional Spine, supported by their acquisition of Vertos Medical. They also highlight their commitment to spine market technologies. Furthermore, they are entering the peripheral vascular market through the acquisition of Inari, positioning themselves as leaders in chemical thrombectomy for venous thromboembolism, a market projected to grow significantly in the U.S. due to the low current use of mechanical thrombectomy treatments.

Since launching its products in 2017, Inari has experienced significant revenue growth and high gross margins. Inari has also invested in developing therapies for conditions like chronic venous disease and limb ischemia, representing a global market opportunity worth over $5 billion. Their international business constitutes around 7% of sales across more than 30 markets. The partnership with Stryker, a leader in neurovascular procedures, will broaden Stryker's endovascular portfolio and enhance innovation through combined R&D efforts. The collaboration benefits from strong synergies, aligning Inari’s infrastructure and mission with Stryker’s commercial strategy.

The paragraph discusses the successful integration of Inari and Stryker, highlighting Inari's achievements over the past decade and expressing confidence in the merger's ability to deliver innovative solutions and shareholder value. The focus is on achieving superior performance through a strong sales force and a compelling product portfolio. Jason Beach then provides an update on the current environment, noting healthy procedural volumes and a strong market outlook for 2025. There is robust demand for capital products and growth in medical, instruments, and endoscopy sectors. The Mako system experienced record installations and increased utilization, with significant adoption in knee and hip surgeries in the U.S.

The paragraph discusses the progress and future plans of Mako, a company involved in surgical technologies. By the end of the year, over 45% of knee surgeries and around 20% of hip surgeries globally were performed using Mako technology. Mako Spine completed its first cases in October and received positive feedback, with a full U.S. commercial launch expected in the second half of the year. The company received FDA approval for its Mako shoulder application and performed its first surgeries in December, aiming for a full U.S. launch by Q1 2026 after a limited release in 2025. Recent product launches, including the Pangia plating system and LIFEPAK 35 defibrillator, have driven strong sales growth. Mako has updated its external reporting to reflect the pending divestiture of its spinal implants business, with changes in how its spine technologies are reported. Glenn Boehnlein is set to discuss the fourth-quarter financial results.

In the quarter, organic sales growth was 10.2%, slightly down from the previous year's 11.4%. The positive pricing impact of 1.1% was offset by a 0.5% negative impact from foreign currency. U.S. organic sales grew by 10.9%, while international growth was 7.9%, driven by strong sales in Canada, Europe, and emerging markets. For the year, organic sales growth remained at 10.2% with U.S. growth at 10.6% and international at 8.8%. The adjusted EPS for the fourth quarter increased by 15.9% to $4.01, and for the full year, it rose by 15% to $12.19, despite a negative foreign currency impact. MedSurg and Neurotechnology achieved an 11.1% constant currency sales growth, driven by U.S. organic sales and growth in areas such as Surgical Technologies and orthopedic implants. Endoscopy saw a 12.9% increase in U.S. organic sales.

In the reported quarter, the company's growth was driven by strong demand for its medical and neurotechnology products, leading to significant U.S. organic sales increases in several sectors. The medical division saw an 11.1% U.S. organic sales growth due to strong performances in emergency care and Sage products. The neurovascular division had a 12% growth, with improvements in hemorrhagic and ischemic businesses, while the neurocranial division saw a 13.3% growth, boosted by sales in various surgical tools. Internationally, MedSurg & Neurotechnology achieved a 5.8% growth, with notable sales in Canada and the UK. Orthopaedics grew by 11.3% in constant currency and 10.2% organically, with significant progress in the U.S. and internationally. This included a robust increase in robotic-assisted knee and hip procedures, and a 16.2% growth in the Trauma and Extremities segment.

In the given paragraph, the company reports growth in various areas for the quarter, highlighting notable performances in their spinal implants and ortho businesses both domestically and internationally. The adjusted gross margin improved significantly compared to the previous year, aided by positive pricing and manufacturing cost improvements, while R&D and SG&A spending decreased slightly. The adjusted operating margin saw considerable improvement for both the quarter and the full year. Higher interest expenses due to a new debt issuance increased other income expenses. Looking ahead to 2025, the company expects further impacts from this debt issuance and anticipates its effective tax rate to be between 15% and 16%.

The company concluded the year with $4.5 billion in cash and marketable securities and a total debt of $13.6 billion, including $3 billion from recent bond offerings. Cash flow from operations increased to $4.2 billion in 2024, reflecting higher earnings and improved inventory and accounts payable. For 2025, capital expenditures are projected to be $800-$850 million, with no anticipated share buybacks. The company forecasts an 8%-9% organic net sales growth and adjusted earnings per share of $13.45-$13.70, aiming for a 26.3% operating margin. Price impacts are expected to be modestly favorable, though foreign exchange will likely reduce sales by 1% and earnings per share by $0.10-$0.15. The first quarter of 2025 will have one fewer selling day, with sales dynamics and earnings expected to mirror 2024 patterns.

The paragraph discusses the acquisition of Inari, which is expected to cost $4.9 billion, funded through cash and new debt, with the transaction anticipated to close by the end of February. Inari's expected performance over a 10-month period ending in December 2025 includes $590 million in sales, with a dilutive effect on the adjusted operating margin and EPS. Concurrently, the company's divestiture of its spine implants business is expected to be absorbed into overall financial guidance. During the Q&A, Kevin Lobo explains the timing of the spine business sale, citing the potential for better investment opportunities elsewhere, while noting a partnership with the VB Brothers, who bring expertise in spine innovation.

The paragraph discusses the divestment and restructuring strategy of a company, which is focusing on enabling technology while leaving the implant sector. A $700 million divestment will transfer parts of their business to a partner, allowing them to concentrate on faster-growing areas. Lawrence Biegelsen asks about deal assumptions for Inari, a company they are investing in. Glenn Boehnlein responds that while they don't typically share return on invested capital (ROIC) guidance, they aim for a return to the weighted average cost of capital (WACC) in five to seven years, and this aligns with their model for Inari. They anticipate sales growth and accretion benefits from the partnership, but note potential EPS dilution due to necessary borrowings and interest expenses.

In the paragraph, Robert Marcus from JPMorgan asks about the company's ability to maintain operating margin guidance despite selling a low-growth business, highlighting the impressive performance in achieving over 100 basis points in margin expansion before Inari dilution. Glenn Boehnlein responds by acknowledging numerous opportunities to optimize their structure and P&L, particularly through purchasing and expanding their low-cost manufacturing footprint with new facilities in Poland and Tijuana. He mentions ongoing efforts to streamline operations, especially with shared services and transactional operations, and notes the rapid growth in facilities in Asia, Poland, and Costa Rica.

The paragraph discusses opportunities for cost savings and margin improvements through various strategies, such as leveraging R&D and price gains globally. The company anticipates achieving natural leverage by growing sales 8% to 9% with their model expected to meet targets by 2025. Robert Marcus mentions observations from a health care conference indicating that ortho markets are stable, volumes are strong, and capital equipment markets worldwide remain healthy. Jason Beach agrees with this positive outlook. Travis Steed from Bank of America asks about the company's M&A strategy, acknowledging the completion of one goal with Inari and inquiring about new priorities and the potential for a digestion period.

The paragraph centers on a conversation about Stryker's strategy regarding mergers and acquisitions (M&A) and revenue growth. Kevin Lobo mentions that despite acquiring Inari and pending proceeds from another business sale, Stryker's debt-equity ratio remains manageable, allowing for continued focus on smaller, strategic acquisitions, known as "tuck-ins." These tend to bring strong returns due to existing operational synergies. Lobo highlights several areas of interest for future acquisitions, including peripheral vascular, urology, neuromodulation, soft tissue robotics, and healthcare IT. He emphasizes that most acquisitions are within existing business areas. The discussion concludes with an acknowledgment of Stryker’s consistent above-normal revenue growth, suggesting a new trend of higher growth rates.

The paragraph discusses the sustainability of growth for the company, highlighting confidence in revenue guidance with a target of 8% to 9% organic growth by 2025. Kevin Lobo expresses optimism about the company's performance, pointing to strong product pipelines and successful commercial strategies, including launches like Pangea and LIFEPAK 35. He reassures that the company's growth is consistent and ongoing. David Roman from Goldman Sachs asks about the strategic impact of acquisitions made in 2024, inquiring about their contribution to revenue and commercial strategy. Kevin Lobo responds positively, stating that these acquisitions are meeting or exceeding expectations.

The paragraph discusses the successful performance of business integrations and the company's confidence in achieving or surpassing a $300 million target. The integration process is streamlined by incorporating new acquisitions into existing business structures, sometimes adding specialized salespeople. The company routinely expands sales forces. The conversation shifts to the Mako Shoulder product, highlighting enthusiasm for its potential in the challenging shoulder market, with expectations for a positive adoption trajectory similar to that of robotic knee procedures. The complexity of shoulder surgeries enhances the value of robotic assistance, and initial feedback from surgeons is very promising.

The paragraph discusses the progress and strategy surrounding the introduction of new robotic solutions in the medical field. It mentions the need for careful change management, learning from the knee launch, highlighting that initial slow progress can lead to faster advancements later. Training protocols are being developed, with significant acceleration expected in 2026 and beyond. The shoulder business is doing well, growing in double digits since acquiring Wright Medical, and is expected to continue performing strongly in 2024 and 2025, even without Mako's impact. The robotic solution is seen as a strong differentiator. A question about spine divestitures and its impact on Stryker's EPS seasonality is answered, with assurance that the spine removal is not materially significant, and the 2024 seasonality will carry into 2025. The Medical division had a big 2024, and growth drivers for 2025 are inquired about.

The paragraph features a discussion from a company conference call, where Vijay Kumar from Evercore ISI asks questions about the company's financial guidance and recent business activities. Glenn Boehnlein confirms that the Inari deal will have a maximum 20 basis point dilutive effect on their operating margin, and that their Spine division's integration won't affect their projected EPS guidance of $13.45 to $13.70. Vijay then inquires about potential sales force disruptions from the Inari deal, given its quick turnaround, and seeks clarification on how the company addressed any concerns regarding a DOJ investigation. Kevin Lobo points to Andy Pierce to provide further details on these issues.

The paragraph discusses the anticipated closure of a deal by the end of February, expressing confidence based on regulatory filings and closing conditions. Matthew O'Brien from Piper Sandler questions the anticipated financial contributions from Inari, noting a discrepancy in growth projections compared to market expectations. Kevin Lobo clarifies that the $590 million estimate accounts for 10 months of sales, expecting high double-digit growth with no falloff, and emphasizes that the integration with their existing business will be smooth, without sales force overlap issues, aiming to maintain Inari's growth trajectory.

In the paragraph, Matthew O'Brien questions Kevin Lobo about the company's projected growth for the year, particularly noting strong momentum in the Trauma and Extremities sector and double-digit growth in Medical, specifically hips and knees. Kevin Lobo responds positively, acknowledging the favorable business conditions. He mentions that while early in the year, there is good visibility into the first eight months. Lobo notes that they consistently update guidance quarterly, having done so last year, and plan to continue product launches. If things proceed smoothly, they could achieve the upper end of their guidance range or potentially exceed it. However, he is cautious, mentioning that it's too early to predict the full year's outcome, though he feels little risk of falling short. The operator then introduces Shagun Singh from RBC for the next question, who congratulates Glenn and Preston and inquires about potential shifts in priorities during a transition, and asks Kevin a question about the Long-Range Plan (LRP).

In the paragraph, Kevin Lobo responds to questions about the company's future growth and margin expectations. He mentions that the company will provide an updated growth algorithm at their upcoming Analyst Day, reflecting their increased presence in faster-growing markets, which is expected to boost their weighted average market growth rate. Regarding operating margins, Lobo highlights a strong performance in 2024 and anticipates continued strength, partly due to strategic moves like absorbing Spine and the Inari acquisition, with minimal dilution expected. He reassures that, under the current leadership, there will be no major changes in corporate priorities. Following this, Matt Miksic from Barclays congratulates those changing positions within the company and proceeds with a question.

The paragraph discusses the positive outlook for several of Stryker's business segments, particularly mentioning their strong performance in cameras despite previous concerns about competition. Kevin Lobo explains that the company strategically launches new products before existing ones lose momentum, ensuring sustained growth. He assures that there will be no significant slowdown in 2025, as they continue to invest in R&D and keep their product pipeline robust, addressing issues experienced a decade ago when there were occasional growth gaps.

The paragraph discusses the strong growth strategy for a company's shoulder product line, highlighting their successful integration of technology and implants. The company is confident in its growth prospects, thanks to the integration of their advanced Blueprint software within their surgical ecosystem, which provides AI-guided surgical plans and works seamlessly with the Mako robotic system. This integration has driven market-leading growth without relying heavily on the robot itself. The system, originating under Tornier and Wright Medical and now under Stryker, includes state-of-the-art implants, and is expected to contribute to further growth over the next 12 to 18 months.

In the paragraph, the speaker discusses the introduction and development of their robot technology, particularly for shoulder procedures. The focus is on the Mako Shoulder application, highlighting its compelling features and promising surgeon feedback. While the shoulder business already thrives due to market-leading implants and Blueprint software for planning, the Mako robot aims to enhance operations further. The customization offered by Shoulder iD, a patient-matched solution for glenoids, is praised for improving efficiency. Looking toward the future, mixed reality might be integrated around 2026 or 2027. The speaker also addresses a question from Mike Matson regarding the impact of the Spine divestiture on Mako and Enabling Technologies, emphasizing the potential of the Mako Spine robot.

The paragraph discusses the transition from Stryker Spine to VB Spine, emphasizing minimal impact on customers, as existing sales teams and products will remain the same in operating rooms. VB Spine will aim to attract more surgeons and handle implant business, which Stryker had not focused on effectively. While contract dealings will involve third parties, overall operations are expected to remain stable for customers. The partnership with VB Brothers, experienced in the implant market, allows Stryker to focus on other investment areas. Initially, VB Spine will have exclusive rights, but future exclusivity is uncertain.

The paragraph involves a discussion about potential tariffs on manufacturing in Mexico and Canada, and how a company, which has 40 manufacturing plants globally including one in Mexico, is assessing the situation. Glenn Boehnlein mentions that they are monitoring the discussions on tariffs, but it is too early to predict the impacts. Medical companies might be somewhat excluded from tariffs, but they are in a wait-and-see mode. The conversation then shifts to questions from Caitlin Cronin, who inquires about the response to new Mako launches in spine and shoulder sectors. Kevin Lobo responds that it is still early in the limited launch phase, and they are gaining experience before actively promoting in Ambulatory Surgery Centers (ASCs), especially for the shoulder.

The paragraph discusses the company's future product launches and performance in various market segments. It highlights the success and strong brand of Mako, particularly in knees and hips, while mentioning that the launch of spine products will proceed more quickly than shoulder products due to less change management required for surgeons. The company plans to provide updates in future quarters. Caitlin Cronin inquires about the Foot & Ankle business, which faced a weak market earlier but improved in Q4, largely driven by the shoulder business and core trauma, attributed to excellent sales execution and a positive impact from Pangea. The company anticipates a strong year for Trauma and Extremities in 2025. Richard Newitter addresses the CapEx environment and notes the company's insights into hospital C-suite level conversations.

The paragraph involves a discussion about potential health care policy changes and their impact on customer behavior, with Jason Beach indicating that despite the uncertainties, they remain positive about the capital environment as they move into 2025. Richard Newitter then shifts the conversation to a due diligence process related to a publicly traded company, Inari, suggesting the process moved quickly because much of the necessary information was publicly available. Kevin Lobo confirms that they were well-prepared due to prior extensive research on the company's market segment.

The paragraph discusses Stryker's strong position and enthusiasm regarding the expansion of Ambulatory Surgery Centers (ASCs) in the U.S., which is benefiting several of their business units. Kevin Lobo suggests that the ASC infrastructure build-out is still in its early stages. Stryker's various units, such as hips and knees, Orthopaedic Instruments, Foot & Ankle, Sports Medicine, communications, booms and lights, and stretchers are heavily involved in these projects, highlighting the company's broad engagement in ASC developments.

The paragraph discusses the growth and dynamics of Ambulatory Surgery Centers (ASCs) with a focus on hip and knee procedures in the U.S. market. It highlights that the percentage of these procedures done in ASCs has been steadily increasing, hitting record highs in the fourth quarter. The limitation to faster growth is the construction of new ASCs, which takes time. The trend is expected to continue on a linear trajectory, as ASCs offer a positive experience for patients and surgeons, separating healthier individuals from those who need hospital care. The paragraph also briefly touches on acquisition strategies in the cardiovascular sector to enhance market growth.

In the paragraph, Kevin Lobo and Glenn Boehnlein address questions from analysts regarding Stryker's business strategy and R&D spending. Kevin Lobo, responding to a question about Stryker's focus on the peripheral vascular sector, states that the company intends to integrate its current initiatives within this space and explore opportunities there before considering a move into the broader cardiovascular market. He emphasizes the potential for growth within peripheral vascular technologies and the need to focus on existing commitments. Glenn Boehnlein, responding to a question from Danielle Antalffy about R&D spending, highlights healthy growth in R&D investment for 2024, linking it to new product development and pricing strategies. He mentions Stryker's goal of sustaining growth through a consistent rollout of new products.

The paragraph features a conversation primarily about Stryker's research and development (R&D) investment strategy, which consistently targets 6% to 7% of sales. Danielle and another speaker express strong commitment to maintaining this level of investment, with no plans to decrease it. They highlight the integration of Inari's innovation with Stryker's Neurovascular business as a point of synergy. Additionally, they mention potential efficiencies in R&D related to software, AI, and digital advancements. The paragraph concludes with a shift to a question from Michael Polark regarding organic revenue growth projections for the company, especially relating to the Spine segment, and directs him to follow up with Jason for detailed clarification.

The paragraph discusses Stryker's anticipated 8% to 9% organic growth rate, noting that the divestment of their Spine business, which is growing at a lower rate, will have a minimal positive impact on overall business performance. The impact is expected to be offset by a calendar effect with one fewer business day next year. The paragraph also mentions that Jason can provide further details off-line if needed. The operator indicates there are no further questions, allowing Kevin Lobo to give closing remarks. Kevin thanks a colleague, Glenn, for his nine years of service and his role in developing strong finance talent within the company. He emphasizes Stryker's robust organizational functions that support the business and mentions the anticipation of sharing Q1 results in early May.

This summary was generated with AI and may contain some inaccuracies.