Healthcare Business News

Stryker reports sales growth despite pricing pressure from hospitals

By Jaimy Lee
Posted: July 17, 2014 - 7:15 pm ET

Stryker Corp., a medical device manufacturer based in Kalamazoo, Mich., reported that U.S. sales rose 7.6% in the second quarter of 2014, but earnings growth was dampened by costs associated with acquisitions, research and product recalls.

Profits were up about 1% even though total sales grew 6.8% to $2.36 billion in the second quarter of 2014, compared with $2.21 billion in the same period a year ago. Sales in the U.S. market reached $1.46 billion in the second quarter of this year, compared with $1.57 billion in the second quarter of 2013.

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Stryker's reconstructive business unit, which includes hip and knee implants and trauma products, makes up nearly half of Stryker's revenue. It reported a 6.5% increase in sales to $1.03 billion on a reported basis. Those products have faced ongoing pricing pressure from hospitals in the U.S. as well as in Europe and Japan, but company executives told investors that the trends and pricing for hips and knees had remained stable.

Net earnings for the quarter of $215 million reflect charges for three product recalls and acquisition and integration costs. At the same time, research, development and engineering costs increased 19.7% to $158 million, while selling, general and administrative expenses went up 2.3% to $1.03 billion.

Stryker has made four acquisitions since January, including a $120 million deal to buy Patient Safety Technologies, which makes bar-coded surgical sponges and towels and scanners and software designed to prevent them from getting left in patients during procedures. Stryker also paid $172 million to buy Berchtold, a German company that makes equipment for surgical rooms, including tables and lighting systems.

Sales of Stryker's medical-surgical supplies rose 8.8% to $905 million, while neurotechnology and spine device sales went up 3.8% to $430 million.

Stryker narrowed its guidance and said it expects organic sales growth to be between 5% and 6% in 2014.

Follow Jaimy Lee on Twitter: @MHjlee

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