UBS Upgrades Stryker (SYK) to Buy; Robotic Surgery Product to Drive Share

(Updated - December 15, 2016 8:29 AM EST)

UBS upgraded Stryker (NYSE: SYK) from Neutral to Buy with a price target of $133 (from $121), saying their proprietary surgeon survey indicates MAKO total knee will drive share.

"We partnered with UBS Evidence Lab to conduct a proprietary survey of 139 U.S. orthopaedic surgeons which has provided insights and evidence which we believe highlights the share gain potential of the MAKO robotic-arm assisted surgery in the U.S. total knee market," analyst Matt Miksic commented.

He added, "We have for some time considered the MAKO total knee arthroplasty (TKA) to be a potentially significant share driver for Stryker; however, it has only recently been ramping up at a small number of early installations, making the evaluation of the system finally more feasible. As Stryker prepares for full launch in 1Q17, we see four pathways or 'methods' for SYK to drive share with the MAKO system, which we expect to reach ~6% in cumulative share gains by 2018 (the first two methods are summarized below). To put this into perspective, share has traditionally moved very slowly in ortho, with the most notable recent example being ZBH's U.S. knee share losses (~2% from 2014 – 2016), around 1% of which went to SYK."

Switching current MAKO users to SYK TKA is the most immediate share driver, the analyst commented. "Over 80% of current users of the MAKO system responding to our survey expressed interest in the MAKO TKA application, and 70% currently use total knee systems from manufacturers other than Stryker, representing a significant opportunity for share gains. Based on our survey and our baseline assumptions, we estimate the conversion of current MAKO users to Stryker total knees could drive ~1-2% share by 2018."

For an analyst ratings summary and ratings history on Stryker click here. For more ratings news on Stryker click here.

Shares of Stryker closed at $116.73 yesterday.

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