Stryker and soft tissue robotics - what should they do now?

What does Stryker do now

During SRS 2024 in Orlando - the CEO of Stryker - Kevin Lobo - gave a fireside chat about the state of robotics. For me it was one of the best leadership presentations, as it came from a place of deep understanding about the reality and pain of commercialising a surgical robot. No not a soft tissue surgical robot - but an orthopaedic robot - Mako.

Now as I’ve said a hundred times - I feel that ortho navigation systems are “easy” compared to launching and commercialising a soft tissue surgical robot like a da Vinci. It’s implant based, loyal user base etc etc.

Stryker Mako

But what I saw was humility: as when asked about soft tissue surgical robotics, Kevin clearly understood that trying to go head to head with a market leader that is in an utter dominant position, and with a market cap bigger than Stryker (yes you read that right) - and with more cash on hand… it would be “Stupid” to try and go head to head with them.

Let me explain why he’s right, and then let me explain why they need to do something… and what I think they need to do, and do it now.

Background to Stryker and Surgical Robotics

From my point of view Stryker is not in any way shape or form a general surgery company. They may beg to differ - but you just need to open up their website - and you can see that as soon as any company lumps together medical and surgical in one basket - they “Ain’t no surgical company.”

Stryker's confused website

You also need to dig deeper and see that it is an utterly and totally confused bag of products that are just thrown together like a car boot sale. Urine management and surgical visualisation do not belong on the same page. I’d love a few days to sort them a strategy and clean up their web presence as, honestly, it bugs me.

But it speaks volumes - loud loud loud volumes that they are in no way into surgery. (In any serious way.)

Yet skip to the orthopaedics tab and it is a different story. Focus and presence. Order and structure. They are an Orthopaedic company… with some Neuro.

Of note… there is no cardiac or cardiology - and I’ll come back to that later.

The next thing you need to understand is the background of the CEO Kevin Lobo. Tucked away in his resumé is “He then spent eight years at Johnson & Johnson, including as President of Ethicon Endo Surgery.”

Now many may read over this and say “So what?” But Kevin was there at the same time as I was, and once Endo surgery runs through your veins - you can never - ever let go.

So what gives me a peek into that side of his psyche - is that fact they bought Novadaq - and their ICG imaging technology. The fact they have upped their game in imaging - (yes ortho and other specialties use imaging) but when you have images like this… creeping around (A gall bladder)

Stryker Surgery Image

It points to a deep psychological desire to be in general surgery. Don’t deny it! But Stryker has never ever been able to get out of the starting gate in general surgery (for many internal reasons) but for two very big external reasons…

Medtronic and Johnson & Johnson are a barrier

Of course there are many companies in general surgery (I’m including thoracic) but the two giant beasts that own wound closure (sutures), access (trocars), endomechanicals (staplers and endostaplers), energy (Harmonic and Ligasure) - are Medtronic and Johnson & Johnson.

They dominate this space as a duopoly - with lots of small peripheral companies like Applied and a host of mechanicals providers from across the world, even some small suture players. But they dominate.

You know Stryker wants a piece of this action - as they have an entire service of taking these used products - reprocessing them and getting them back on market. It’s a “poor” way of being in the contracting game on general surgery. Oh sorry did I mention contracts?

Now MDT and JNJ do not just do general surgery - they also do cardiovascular - (with JNJ beefing up lately with Abiomed and Shockwave). Why? Ohhh that’s right - contracts and offering. Oh sorry did I mention contracts?

But they both also have strong offerings in orthopaedic (and both with robots in that space for later) where they can offer a broad range of products in contracts. Oh sorry did I mention contracts?

Okay so if you want to keep mentioning contracts… I would say that Stryker’s offering when talking to large purchase organisations is very limited in general surgery, and non existent in cardiac. So they can really just go in strong (very strong) in orthopaedics. And if MDT or JNJ go in and start to talk wide basket bundles - then the offering of Stryker in ortho may seem weaker that either MDT or JNJ can offer. They can talk basket deals across general surgery, wound closure, would management, ortho, spine, neuro and cardiac.

And remember both MDT and JNJ have robotic offerings that can come after MAKO. And in fact as they build out more robots, Hugo, Ottava, Monarch etc - they start to be able to offer well connected infrastructure across multiple robotic platforms - pre - peri - post operative data. There’s not only strength in robots, there’s strength in number of robots. So you may not just want to have a single robot in one specialty. Just saying.

Now not every purchasing body wants bundled baskets - in fact the EU directives on tenders try to “un bundle” but as someone that has lived that world expensively (sorry extensively) - hospitals often fall for the “might is right.” And bundles are real.

So to me it seems obvious that Stryker should be looking at a a strategy to actually do something with their general surgery offering / presence. The launch of the 1788 tower system is one great move into that area with the addition of some pretty high end imaging features that sets that system apart. But it is just visualisation when all said and done.

Oh and they do have Integrated smart ORs - with integrated systems - displays - software etc etc.

But that’s never been enough for them to be seen as in the race of minimal access surgery - general surgery. No one in their right mind mentions them in the same breath as Covidien (Medtronic) or Ethicon (Johnson & Johnson).

A big threat I see to Stryker’s orthopaedic business is the basket power of JNJ and MDT (which is growing with every acquisition). So I do think that Stryker (to stay in the broader contracts game) does need to get a strategy together for how to play in that space.

Ambulatory Surgery Centres (ASCs)

I’m going to lump a lot of things together here into ASC. I mean surgery centres, but I’ll also include low acuity sites of care across the world - such as out patient department operating suites, private clinics etc.

In the USA Stryker has done a good job of owning the ASC space. If there’s one thing you associate Stryker with - it is ASCs. And that is an important market subsection for them in my book.

Of note - in general surgery - Intuitive and da Vinci have so far not been able to get into that area. And most of the general surgery procedures in the ASC are done on lap towers and often (in the USA) a Stryker imaging system. As Stryker are in the ASC, their sales force is focused on ASC. It’s a place they have carved out quite nicely… until now.

da Vinci 5 tower

The tower from da Vinci 5 has just turned the entire world of imaging and smart ORs on its head. As much as people giggle when I say that this will start to replace standard towers (and their lucrative service contracts) Sorry did I mention contracts again?

This and other towers from other robotics companies are going to start to become the “norm” in hospitals. They will slowly (maybe faster in the main operating  blocks from what I’m already seeing) start to eat at the tower companies market share. Maybe not much of a direct attack (But I’m seeing it) but more by collateral damage.

To date the ASCs have been pretty robot free - but da Vinci 5 with the elimination of a second tower needed for entry, that ability to bring a connected smart OR into the console, and the footprint reduction of 25% starts to make ASCs a more attractive place for a robot.

Add to that the much improved workflow and ASC low acuity procedures become a big part of moving from 2.2 million procedures to 7 million. (Watch this space).

Every DV5 that enters an ASC will be one less tower that ASC needs to buy. One less smart OR upgrade - one less set of software licenses it needs to pay for.

When Medtronic and JNJ now bring their systems and towers into the OR - that erosion starts to accelerate. Why does anyone need to buy a 1788 when you have a perfectly good imaging system that can do what it does? And it’s sort of “free” right.

HUGO RAS Tower

And I can tell you - Hopsital management want procedures in the hospital owned ASC (especially those that should be in the ASC and have crept over to the main block because the robot is there.) Those procedures are going back to the ASC as soon as some form of robot is in there (for the marketing hype etc). Maybe not always a full on DV but a MIRA or other robot.

The robotic battle is coming to an ASC near you - and Stryker are going to be the number one casualty in the USA for imaging and smart OR components.

Be it Touch surgery, Intuitive Hub or Polyphonic - the writing is on the wall. These are “value adds” for “free” - so good luck trying to sell something at a premium against that.

In effect, all tower companies are under immediate threat - and just now at SRS 2024 I heard several hospital administrators say clearly. The da Vinci tower means we no longer need those other towers in many of our ORs. They not only replace the Stryker towers  - the use of them is “free” and we don’t even pay any service fee when we use them for lap. As long as we do our quota of robotic procedures under pay per click. The lap use is free. (Oh and Intuitive just happen to scoop up all that lovely lap data.)

Yes - there will still be some specialty bits of kit like fluid management etc… but if Medtronic and JNJ get in on the tower act - that’s an easy add on. They have them today.

So Stryker, Storz and Olympus are the three big potential losers as towers become part of the “robot offering” linked to smart ORs (Touch, Polyphonic, Intuitive Hub) etc. And the lap use is free at the point of use. And trust me… JNJ and MDT care about getting lap data and having people deeper into their lap ecosystem.

Storz has already moved and bought Asensus - which gives them the firepower of robotics to stay in the game. Smart smart move.

Olympus has placed a deep chip into DistalMotion - as they also know that at some point they must get into the robotic ecosystem to stay relevant. (Especially as they have energy devices and instruments). Look for moves by Olympus on DistalMotion in the not too distant future.

So what about Stryker?

What should Stryker do now?

Tower replacement is already happening. I’ve seen it first hand. Kevin Lobo did his fireside chat at SRS and he all but admitted they need to do something - but not going head to head with Intuitive “That’d be stupid.”

I’ve covered extensively in my blog the bridge between Robotic and Laparoscopic surgery (HERE).

Laparoscopy 2.0 or Advanced Assist Laparoscopy has multiple advantages for Stryker - and for me this is the natural fit for where they need to go. They need to go around the edge of Intuitive and play to their strength in the ASC.

Firstly - in Advanced Assisted Laparoscopy - it’s still laparoscopy and importantly the tower is still the “Hero”. Because the new - lighter robotic systems such as Moon Surgical’s Maestro, or DistalMotion’s Dexter are tower agnostic. So they could both make the hero the 1788.

DistalMotion Dexter

Moon Surgical Maestro

Next - both of these systems are open architecture - so do not rely on building dedicated robotic advanced energy or staplers for the robot. That is good for a company like Stryker that has neither. Because creating these from scratch is a big lift.

But it does allow them to slot in their reprocessed Covidien products or Harmonic… hmmm that works well for them.

Finally - both Dexter and Maestro are the perfect fit for the ASC (or clinics). Smaller with the right laparoscopic work flow that ASCs need to turn a profit. Their price point per case and their commercial models are also perfect for ASCs. It all fits.

Either of these systems is the way you go after “digital lap” without the need to go into the robot wars with da Vinci. It keeps the focus on ASCs, it allows the “power of the tower,,” it brings more digital data into the ecosystem with force measurements, kinematic data. It speaks innovation and gives the “robotic marketing effect.” And it allows the open use of other companies disposables. (Hmm hang on hang on… that there is good money left on the table.)

So my first and urgent action would be to get either DistalMotion or Moon Surgical into the Stryker bag. Like yesterday… yesterday. There is absolutely no time still to wait. Because if da Vinci gains ground in the ASC  (and they will, and fast) Stryker (in my opinion) will be dead in the ASCs for imaging. This is not the time for finesse where “Let’s see how Moon and Distal do once they get FDA and see if they can get traction.” FFS!

NO. Firstly, doing this lift as a small company both Moon and Distal will struggle and you will get a false answer. Moon has FDA so is oven ready and Distal will be along soon. But that doesn’t mean either can demonstrate their true potential commercially.

Also, this is a very active market right now. I personally am seeing a lot of bigger companies starting to move to buy up assets. A) because they need IP. B) because they need s system. C) because they need a “back up” system that also protects laparoscopy (hint hint). D) They don’t want other companies to get access to these assets and be able to compete.

So the team at Stryker (and I’ve dealt with their BD team……. There’s an emoji somewhere for my thoughts…) need to be on a plane yesterday with a cheque in hand. If you miss the boat then it’s a decade until you get another chance (see my post HERE). And for Stryker - in my opinion - it’s too late. They will be relegated to a marginal orthopaedics supplier where major purchasers don’t want integrated data systems and bundled deals. (Okay maybe I’m being dramatic here.)

But which one?

Okay - so both are brilliant systems. Both could be perfect for the ASC. Both make the tower the hero. Both are open systems for using other products such as staplers and energy devices and ports. Both are smaller and lighter than most systems and occupy less volume. Both could be a

‘delivered per case” system for the ASC as a service model (more on that in a future post).

So it’s down to philosophy - does Stryker want to be leaning more to robotic or more to laparoscopy?

Moon Surgical Maestro is a pure play into laparoscopy. It uses off the shelf lap instruments, and mimics lap surgery by basically giving a single surgeon the ability to use four arms. Eliminating a staff member (brilliant for ASCs by the way where staff is as big an issue as space.) (and note… It already has FDA.)

DistalMotion Dexter leans in harder into mixed surgery. Combining the ability to do at the table lap surgeryfor as much of the procedure you want - but then docking the wristed instruments of Dexter at the right moment to do that part (say suturing) of the procedure. Without breaking the sterile field. It allows more complex procedures robotically - as well as low acuity combined procedures. (It almost has FDA.)

So does Stryker want to claim next generation laparoscopy in the ASC setting or does it want to lean in harder into “robotic”. That answer tells them which system to go after.

But with both - they keep their tower technology at the heart of it. Something that they (and Stryker and Olympus want as they carry the lucrative service contracts.) Sorry did I mention contracts again?

Oh and on Olympus - let us not forget that they already have a foot into DistalMotion through their investment  - so they have a DD lead on Stryker right there.

So it’s hard for me to advise which one - as both are great systems. But if you tell me “get off the F’in fence” - I’m going to say Moon Surgical today. As it is FDA cleared and oven ready right now. It fits into Stryker today with little to no effort of any product development.

Every other system out there will take Stryker into a much bigger head to head with da Vinci - and Kevin was clear he doesn’t want to go there. Nor do they have the ability - money - or depth of knowledge in general surgery to take on a surgical robot that doesn’t lean into the laparoscopic knowledge that users have today. It’s way too late and too big of a lift. Just to get organised they will be out of time and money.

Why stop there?

But… why would you stop there. I mean let’s say they buy Moon Surgical.

(Okay some will say - go cautious - do a co- sell distribution agreement first to test the water.)

No. Co-sell is No-sell. Sorry I hate co-sell and seen many failures this way. Buy them and leave them alone by all means - but own it.  If Stryker doesn’t own it - they have no skin in the game. See the failed co promotion of JNJ and CMR as a good example. It sadly just doesn’t work and the team in the middle trying to be the glue get super frustrated… It gives false results to then make a purchase decision on.

But also - if Stryker are going to jump into the water - why would they leave cash on the table. Every ASC case will use trocars, many will use advanced energy… maybe even staplers.

So Stryker could look to get more into the general surgery market, by say working with or bringing in a strong access company like Applied Medical? They would get trocars and an energy device - and a few cool accessories. Long shot - but if they want to clean up their mess of a surgery page - this is one way they can have enough mass to warrant a stand alone page. Eventually they could also look at a smart stapling company like a Lexington. Then they are really competitive.

It all depends if they want to be able to offer a wider basket to the purchase organisations or not. Plus if they are in that space with a sales team, support team - they can leverage those overheads and have a set of consumables that can make them juicy profit. (Maybe not but worth a look.)

The clock is ticking

My final comment is that no matter what, the clock is now ticking at a very fast rate for Stryker. People will predict they won’t see any impact from DV5 and other robots for a decade… I predict they will see it at the end of 2025.

When US Hopsital systems are buying six, ten and fifteen da Vinci 5s at a time with three or four extra towers to boot… then every tower company in the USA will feel that in the main block. But as DV5 targets into ASCs (and it is) then companies with prevalence in ASCs selling towers and contracts will feel that fast. And hospital systems have declared they are buying DV5s for the ASCs. Da Vinci in the USA next year will sell about 400 to 600 DV5s and even one of those is a potential killer of at least one tower system. If some of those take the multiple tower route - as they will you could see 800 towers impacted in 2025. Thats eight hundred - and I don’t care which company you are - trying to grow your business while losing hundreds of tower systems just makes it harder.

If the team is still there saying “we will just sit back and see how this all plays out…” then all I can say is “Good luck with that one.”

If another company gets these assets - and brings their towers to the ASCs - that attack is then from all angles.

And in my mind this is not just about towers in the USA, in ASCs being under threat. Those big contracts (I keep mentioning) in basket deals - will start to bite once JNJ and MDT enter the fray and sort their tower strategy. That will then absolutely have some impact on the orthopaedic portfolio - not just the towers. You’ve been warned.

Don’t think so?

Deals in Europe with one of the big player’s hospital systems / contracting arm discussed how their soft tissue surgical robot could go in against some of their cardiovascular products and orthopaedics products discounts - so those discussions are starting and real.

With that in mind - I’d say the clock is ticking…

These are just opinions of the author for educational purposes only. No investment action should be taken against this gibberish.