Jefferies Comments on Stryker 1Q Knee Results

Stryker's SYK 1Q knee results across the board were down from 4Q, Jefferies reports. “The worldwide market was flat and U.S. was down 4%; sequentially, U.S. was 500bp slower,” Jefferies writes. “It is a bit confounding that knees decelerated so precipitously in 1Q given that several companies have been selling the add-on devices and it speaks to the very low penetration thus far. “While pricing wasn't disclosed, other custom cutting blocks are priced in the range of $1,000-$1,500—making even modest penetration meaningful; although there have also been reports of heavily discounting. A conservative assumption of 10% penetration into Stryker's U.S. knee business with an ASP of $1,000 would yield a modest $10-15mn in incremental annual revenue. However, the incremental revenue may not be as important as the competitive share gains possible now that Triathlon has a custom option.” Jefferies closed Tuesday at $62.74.