"The goal of this acquisition is to be able to leverage the product portfolio into other emerging markets," Katherine Owen, Stryker’s vice president of strategy, said in a conference call with investors Wednesday.
Owen said the deal for Trauson helps Stryker expand its product portfolio into the "value segment" of the orthopedic trauma market. The Kalamazoo, Mich.-based medical device company earlier this month inked an all-cash deal to buy the Chinese spinal products maker for $685 million.
"To date, Stryker’s presence in China has been focused on the premium segment, which is dominated by multinational players. However, the value segment of the market is growing at a faster rate, with local manufacturers the key players," Owen said. "We have prioritized China and the value segment of the market in particular as a critical market, given that the device segment is growing at roughly 20% annually, with the overall market expected to more than double in the next 5 years."
Owen touted Trauson’s portfolio (about 120 marketed products), R&D pipeline and distribution networks as a platform for expanding Stryker’s reach in the all-important emerging markets, which have become critical to the future of several of the medical device industry’s biggest players.
The deal also provides a glimpse at how Stryker will attack one of its glaring weaknesses: international markets.
"Globalization’s an enormous opportunity for Stryker, we clearly have room to grow outside the U.S.," Stryker president & CEO Kevin Lobo told an audience at the J.P. Morgan Healthcare Conference in San Francisco recently. "The U.S. is still representative of 65% of our total sales. That is a ratio that hasn’t changed in about 10 years."
Stryker’s reliance on domestic sales is higher than its medtech peers, which derive about 58% of their sales from international markets.
Stryker derived about 37% of its roughly $8 billion in sales in 2011 from international markets, from strong positions in Japan, Australia, Canada and parts of Western Europe. In 2012, that number dropped to just 35% of the company’s $8.65 billion in sales.