SYK
#Sure, <UNK>.
I think as you think about what we said in terms of the early launch, what they're really looking at observational outcomes, with both existing robotic and non-robotic users, but really focusing on the key opinion leaders who really have a presence at the podium.
And we're going to be evaluating everything from implant positioning, adverse events, ligament releases, patient satisfaction.
That's going to be a lot of the initial focus.
Absolutely over time we'll be developing I'm sure, more robust clinical evaluations or trials.
Right now, that's going to be the focus initially.
I think that's something that will come over time as surgeons move up the learning curve and gain greater experience, but given the very limited launch early on as we look to optimize the training protocol, that won't be the focus.
Sure.
Right now, emerging markets represent about 8% of Stryker sales.
That's clearly below med tech.
It's not a bad time to be less exposed to emerging markets.
But that doesn't mean we aren't committed for the long term.
Our India business is doing well.
China will be an important market for the future, so we're certainly not going to ---+ we're not going to invest at the same rate that we've invested for the last couple years while we weather the current storm, but we are in it for the long term and we do plan to grow in emerging markets.
It's just, we had planned previously to be a little bit more aggressive in areas like Russia and Turkey.
That's clearly not a good use of our investment right now, so we'll sort of hit the pause button in those countries.
As the market conditions improve, we'll dial up the investments.
Very pleased with the investments we have made in Europe.
Those are driving terrific returns.
As an overall Company we do want to grow our business outside the United States.
Our strong US business continues to perform very well, and we do plan to grow outside the US, and that's why the operating model changes are extending even beyond Europe to include the other countries of the world, because I think that direct connection to our product divisions will drive growth everywhere else outside the United States.
And Europe is very instructive.
What we've seen in Europe, we know we can replicate in other countries.
I'm not sure what catch-up you're referring to, because if you look at the last year's third quarter, we had knee growth of 6.8%, hip growth of 18.1%, trauma of 15.3%.
So we're posting strong growth this quarter on the backs of pretty strong growth in the prior year.
So for 10 quarters, consecutive quarters of over 5% organic growth, it's not like we're catching the tail of periods of slow growth.
We're posting consistent, steady strong growth.
Now, from quarter to quarter there's some variation between businesses, but overall, this is a very steady growth story that you're seeing at Stryker.
I'm not sure I understand the question, or if it was a specific business you're referring to.
Because on an overall basis, we're posting growth on top of prior growth quarters that were pretty strong.
We haven't quantified the targeted gains.
We have been very clear that we do expect, once it's in full commercial release, to begin to get on a trajectory to gain meaningful market share, and we would expect to be on that trajectory in 2017.
I wouldn't be assuming quite that level of share gains but we also want to get some experience under our belt.
This is brand-new to the industry, but we're really excited about the impact it will have in terms of driving share gain in 2017.
I think as we get closer to that time frame and we think about setting our targets for 2017, we'll be able to have a better sense of what that could possibly mean.
No, I think you should just assume that will be contemplated within our normal spend.
The first thing I'd say about our MedSurg businesses is they had an absolutely huge quarter in the third quarter of last year, if you look back at the numbers that we posted, close to 20% growth in a number of those businesses, so very tough comps.
We're very pleased with our medical division, and expect them to continue to perform very well.
Endoscopy, certainly, we've had a few challenges related to the vertical integration.
That's starting to pick up steam, and I'm feeling very optimistic about that.
That camera launch is sort of the end of the 1488 camera cycle, we're moving to the 1588 platform that we launched towards the end of this year, and certainly, there was a little bit of a delay in orders as people are anticipating that launch.
The one product area that is later in its cycle is our System 7 power tools within instruments.
If you look at the instruments numbers, they continue to post pretty strong results throughout the rest of their portfolio.
But that's one area, as you look into 2016, where you can anticipate maybe a little bit of a moderating of growth, as it gets toward the latter part of their cycle.
They have another range of products that they can sell, and they're performing very well.
I would tell you I'm very pleased with our MedSurg performance.
I know the absolute growth in this quarter looks a little smaller, but again, on the back of an outstanding third quarter of last year, it's not like our business is slowing down, or that we're losing momentum or losing share.
I feel like we have very, very solid businesses that will continue to perform well.
I would start by saying when you look at our portfolio, it does address both hemorrhagic and ischemic, but the majority of the revenue is still driven on the hemorrhagic side, which is going to be the coils and related accessories where we're seeing growth.
Ischemic growth is certainly outpacing that, but it's a much smaller market at this point in time.
And it's certainly benefiting from data, whether it's the MR CLEAN study that showed using stent retrievers, including the majority of the retrievers used in that device was our own, absolutely have a benefit on patients, and this was further enhanced with the AHA guidelines that came out earlier in the year.
That data is really underscoring the benefits of these devices.
They're the only devices that have clinical data supporting their use in ischemic patients.
Growth there is much faster, but obviously off a much smaller base.
There really haven't been any new entrants into the hip and knee market.
The competitive backdrop has been very stable.
I think as we think about the merger between Biomet and Zimmer, they're obviously a considerable player in the market.
We haven't seen them report Q3 results, so like you, we're at a disadvantage.
We feel very pleased with the momentum we're seeing in the business.
We have said it's usually a few quarters in before you really get a sense if any dissynergies are tracking above or below what they anticipate, but we're really focused on our business, we've got a great portfolio of products.
Obviously the MAKO and the new indication we see as a huge benefit.
We'll see what happens to them, but really the focus right now is gaining traction with our own customers and using MAKO to get into some competitive accounts.
I would say when you think about it, right now, essentially all of our focus is on the recon market.
I can't underscore enough the amount of time and energy that's being put into the Total Knee launch to make sure it is executed as close to flawlessly as possible.
We do think that is the biggest indication, and can have considerable impact on the market.
I think there will be downstream applications in other areas of joints, whether it's in the shoulder or in the spine, but that is multi years away from where our focus is right now.
New markets are often difficult to predict.
So when we created our foot and ankle business unit a few years ago, I really didn't expect that the market would be this big, and that the growth would be this high.
So it's been a fantastic business unit for us, performing extremely well, mostly with organic growth.
We had obviously the SBI acquisition as well.
The market still seems to be very hot.
There's still a lot of surgeons that are increasing their volumes, and more and more surgeons getting trained.
So we do believe that this will be a high growth market for the foreseeable future.
Whether it stays up at the 20% or starts to moderate, I'm not sure.
We're not really concerned about competitive dynamics.
We have a great product portfolio, very strong sales force execution.
When you're riding market growth, and you've got the products and the sales force, it's a good place to be.
The latter, very small, and it really covers the entire range.
We're seeing all sorts of customers out there.
I wouldn't be able to characterize it as one specific type of hospitals.
We have some hospitals with one robot, some with multi.
We have some that were existing customers, some that are competitive customers, some that are buying the robot, some that are leasing the robot.
It really is the full range.
There's not one specific characteristic that I would point to.
M&A, the timing of M&A is always difficult to predict, and valuations is one factor.
It's not always the only factor.
We also have issues sometimes around quality, and remediation that's required.
Sometimes it's cultural fit.
There's always a range of issues that we go through, when we're looking at a target, and as we get under the covers and do due diligence, then we figure out whether we really want to move forward or not.
Valuation clearly is always one of the factors, but I wouldn't say suddenly, just because we have a temporary market pullback that the companies are ready to sell to us at a much lower price.
So I think it will take a little time for that to settle in.
But clearly, valuations is one of the factors that we look at, and one of the reasons that we won't move forward.
It's not the only reason.
Yes, so I tell you that we're not focused at all on the competition.
We really don't see Blue Belt as a fully robotic solution.
It's really, in our view, it's an enhanced navigation system.
It doesn't have the type of features that our system has.
We really believe we're alone in the purely true robotic space, and that we have a long runway ahead of us, and we're really not concerned with competition.
Sure.
So I mean one, we don't break that down externally at all.
But I mean, you should expect that any of our businesses that are seeing mid digit plus organic level growth, we would expect to get reasonably good operating margin improvements on that over time.
Based on the market growth dynamics in different geographies and/or in aggregate for a business, if the growth rates are down in the lower single digit range, you probably shouldn't expect really any operating margin improvements.
As that goes up, though, we should definitely get operating margin leverage in almost any of our businesses.
And I think that in general, that's what we're driving to achieve over a two, three year period of time on average.
<UNK>, just I want to make sure I'm understanding the question.
You're saying how long it takes to physically upgrade an existing account to the new indication, to the new robot, the software and the related hardware components.
I would say, at the end of 2016, we feel like we'll be in the very good position to go into a full commercial launch, and we won't be limited by the need to upgrade existing customers.
You're always bringing on new customers, but that's part of the reason to have a very measured controlled rollout, is to make sure we're in a position really to put the pedal down, and when we go into full commercial launch.
As far as the gross margin rate question is concerned, so yes, it was a very good quarter.
As I mentioned really in the early part of this year, both in the first and second quarter, we talked that our gross margin rates were going to improve as we moved into the third and even into the fourth quarter of this year.
Our expectation from a breakdown of some of the categories.
So two of the biggest impacts in this quarter are FX and mix, and maybe a little bit on the pricing, since pricing was only 1.3% for us.
But FX and mix were probably, if you look at the total improvement, they're probably each in the 50 basis point plus range, as far as the impacts that they have.
Keep in mind that a lot of our products are manufactured in Europe.
As the European or the euro currencies have been declining this year, and the US has stayed strong, we've actually continued to get improved gross margin rates from FX, despite the fact that FX on the bottom line at the EPS level has actually been negative for us.
And then same thing on the mix side.
I think that you should expect both of those to continue as we move into the fourth quarter, and then you should look more from an anniversary perspective that the improvements that we'd expect next year would be relatively modest at the gross margin level, but we'll get into that as we announce our overall expectations for the year.
Generally, if price is at the upper end or in the 1.7%, 1.8%, to 2% range, we'd expect our gross margins to be relatively flat in that kind of an environment.
Thank you all for joining our call.
Our conference call for the fourth-quarter 2015 results will be held on January 26, 2016.
Thank you.
