Dive Brief:
- Stryker is still working through supply disruptions for its peripheral vascular business following a March cyberattack that affected its manufacturing and shipping operations, CFO Preston Wells said at the Wells Fargo Healthcare Conference on Tuesday.
- The medtech firm had hoped the supply issues would be resolved by the third quarter, but Wells said they may continue into the fourth quarter. He also discussed slower than expected hip sales over the summer. Shares of Stryker fell 9.7% between Tuesday and Wednesday’s open.
- Stryker acquired Inari Medical, a company that makes mechanical thrombectomy systems to remove blood clots, last year for about $4.9 billion. The company had been in the process of integrating Inari’s manufacturing facility into Stryker’s system, but the setback from the cyberattack had “ripple effects,” William Blair analyst Steven Lichtman wrote in a research note.
Dive Insight:
The manufacturing problem is limiting Stryker’s ability to fully supply its existing peripheral vascular customers and reach new customers, Wells said. The segment took longer to get back to capacity than Stryker’s other businesses because the company had to work through process-related challenges following the cyberattack.
Stryker is prioritizing its top customers to ensure they have enough inventory to do procedures, Wells said, but inventory levels are not where they need to be.
“It’s something that we’re working to get rectified as soon as possible,” Wells said.
The company also dealt with slower than expected hip sales in the past few months, with less of a clear explanation, the CFO said. In part, this was because of a softer year for joint replacements in general in Europe, where the company has a large presence.
In the U.S., sales were also slower than expected, which the company attributed to seasonality and vacations. Stryker is also hearing more stories about people who are deferring procedures for financial reasons, such as concerns about inflation and higher insurance deductibles.
“The amount of money that people are having to spend to get procedures done is changing,” he said. “I think all of those things are leading to a little bit of a consumer challenge.”
While analysts have asked medtech firms if they have seen an impact from people losing Affordable Care Act subsidies, Wells said he sees less of an impact from that and more from consumer sentiment, such as people being nervous to take time off from work or spend money on a procedure.
Another factor Stryker’s leadership discussed from a competitive standpoint is the lack of a hip impactor product.
Stryker did not change its financial guidance with Tuesday’s update. Offsetting its woes, the company is seeing demand for its capital equipment coming out of the cyberattack. Wells said backorders remain strong for those products.
