Stryker Corporation (SYK) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for joining us this morning. Very pleased to have Stryker with us. It's fascinating what's going on in the space. Just when I thought that orthopedics, there's no innovation, there's a lot going on in the space. To talk -- tell us more about the exciting things going on at the company, we have Spencer Stiles, Group President, Orthopaedics and Spine. And from Investor Relations, we have Preston Wells. Spencer and Preston, thank you both for taking the time this morning. Perhaps maybe to kick things off, Spencer, if you don't mind, some opening comments on the business or anything that you have to say, and then we can go into Q&A.

Great. Excellent. Vijay, thanks so much for having us. We're excited to be here today. And thanks, everybody, for listening in. As Vijay said, my name is Spencer Stiles. I have the distinct privilege to lead our Orthopaedics and Spine business. Interestingly, I was sharing with Vijay as we were prepping just a couple of minutes ago, I'm actually doing this call from our Mako innovation center in Fort Lauderdale, and I'm actually in one of our training rooms. So that's a Mako product behind me there. I'm in the partial knee demo room right now, and so they gave that to me today. But pretty exciting times here, very busy with acquisitions that we'll discuss this morning, continued innovation in our marketplace. And Stryker, even during the pandemic, has figured out a way to continue to keep the show going, as I like to say. So lots going on. And again, thanks for having us.

Stryker never sleeps. That's pretty clear. You're in the midst of fireside chats and showing customers around at the innovation center. It's pretty impressive. But maybe on the last topic that you mentioned, acquisitions that have closed recently, Wright Medical is pretty topical. Maybe let's start there. What can you tell us about the transaction now that it's closed. Where are we on Wright in terms of integration? Perhaps some updated thoughts on the deal itself.

Yes, you bet. There's extreme enthusiasm about closing on Wright and obviously, the quarters and years ahead with that outstanding portfolio that now is part of Stryker. As you know, it was a very long sign-to-close period, which has its advantages in some sense. Really through the pandemic, a lot of time and energy put into making sure we have the right integration plans in place, which is playing out well. So we closed a couple of weeks ago. And really excitingly, when we closed, about 10 hours after we made the public announcement, we were able to announce the specialized business structures all the way down from the general managers to the regional sales managers. So we've built specialized businesses, which is a key part of Stryker strategy, how to remain close to the customer. And really, we want sales, marketing, research and development closely aligned to that specialized care provider. And what that's allowed us to do in our Trauma and Extremities business is a bit transformative. Now we have a specialized Trauma business, a specialized upper extremities business and a specialized foot and ankle business. And after that close, 10 hours later, it's a pretty remarkable feat, we were able to go down all the way to the sales management structure and say, "Here's what your role is. Here's who your manager is. Here's what your expectations are." And to do that 10 hours after closing is really phenomenal. It also gives great security to the employees. They now know what the task at hand is. And if you think about another really advantage of this, we want to retain all the sales professionals that come over with Wright. And that allows us to strengthen that footprint, more feet on the street specialized around the various customer sets, and we think that's one of our advantages. Another strategic driver really behind this is moving into category leadership and how do we continue to make sure we're investing within these orthopedic segments where we can bring category leadership to the forefront. And interestingly, the combined foot and ankle business of Stryker and Wright together puts us in the #1 share position and really with strong scale and mass and a strong pipeline behind it. And on the upper extremity side, that shoulder arthroplasty portfolio from Wright is truly best in class, combining both software and hardware elements, positioning us in the #1 share position there as well. So you lean on both those strategic advantages, and we remain really excited about what we've acquired and early days in the integration. So we've been very active going out, making sure that we're both connecting with our employees, then within the same couple of days, with key customers all over, talking about the specialized model, reminding them that we have the right footprint in place to take care of their needs. And early days, integration has gone very well. Now we did have a lot of time to plan for it. That long sign-to-close helped. But we think where we're at today, we're ahead of the curve. There's been other orthopedic integrations that have taken place in the market where some of those same decisions I talked about took over a year. So us to be able to do this hours into the close really puts us on the right trajectory to make sure people understand what's expected, what their roles are, gives comfort. And again, that module around making sure we want to keep all those sales professionals is critical. So early days, good signs. And we look forward to, obviously, the weeks, months, quarters and years ahead with Wright as part of Stryker. I also want to comment I've been really impressed with the talent and the pipeline. We got to spend time with some of their leaders, and we brought some over. So actually, the person leading upper extremities comes from Wright and has rich experience there. The individual -- the general manager that's leading foot and ankle, rich experience in foot and ankle. We brought both of those over to lead those specialized business units, which is terrific, so world-class talent. On top of that, we knew the pipeline was robust. But early days and just learning more, and we've had some deep dives. We're really excited about what they have in store. And I'd say, Vijay, they've taken an aggressive forward- leaning stance on -- like Stryker has, on surrounding their implants with technology. I mean the preplanning approach with BLUEPRINT has really changed the way shoulder arthroplasty is done. You couple that with investments in their revision portfolio, it's really differentiated their options there, too. And similarly, on the foot and ankle side, they've recently entered the market with the PROPHECY platform, which is a full scan of a foot. So they are fully planning for a total ankle replacement. So they're looking at both the hardware component but then, obviously, the software and enabling technologies, as we call it at Stryker, to surround that implant. So those are things in their pipeline that are pleasant surprises that are further along than maybe we anticipated.

Now that's great to hear. I guess for us, The Street reacts really well when we have analogies or comparisons. How would you characterize the progress on the integration side that you've made on Wright Medical versus K2? There's some fear you might have disruptions. So maybe talk about that.

Yes, it's a great question. I really want to emphasize these are 2 very different deals. A deal in Spine has different competitive sets, different realities. And if we think about bringing K2 into Stryker, we had a very short sign-to-close period, a couple of months, and then we brought 2 businesses of similar size together. So that had a different set of challenges from retention of key employees to structure, to even systems, but we're very proud of where we're at with that integration today. And I'm sure we'll get to some of those remarks on Spine, but we're making great progress. And recent quarters have shown some great optimism in our growth. So a different type of acquisition. In this particular deal with Wright, a lot more time to plan from sign to close; a lot more openness to connect on understanding what type of talent, what systems, what key changes we want to make; and making sure day 1, when we hit the ground, we're able to provide that clarity around structure, goals, incentives, compensation packages and make sure we're connecting with customers at the same time. So in an interesting way, that blessing of additional time from sign to close allowed us to prepare a bit more. So we actually believe this is a different type of integration. It also is more of a tuck-in inside a very stable and successful Trauma and Extremities business. So we have a very strong trauma leadership team. We had strong progress and growth in our extremities, both in our foot and ankle and in our own upper extremities portfolio. So bringing those 2 things together, it's a different type of integration. I will tell you though, Vijay, anytime we do deals, and Stryker remains acquisitive, we're building up the muscle of making sure we know what type of decisions to make, which ones we want to make faster, how we implement that change, how we make these employees feel when we bring in. And be that K2M or the many, many others we've done, we're learning from each one of them. So every time we do this, we're building this muscle. And this is Stryker's largest deal, but we feel very confident that the lessons learned, the muscles we're building and our ability now to walk in and make some of these decisions and really put people on the right trajectory, both our employees and customers, sets this one up for success. So we're pretty optimistic and feel confident about our integration plans with Wright.

That's fantastic. And one of my theses has been -- sell side loves to have theses. One of my theses has been, when you think about these deals and sales force disruption, it's hard to imagine any disruption going on in the midst of a pandemic, which seems to have been a sort of blessing in disguise for you guys. Would you agree with that statement? Or perhaps anything to add to that?

Vijay, I would -- a couple of comments. First off, on the attrition itself, it's been very, very low in both organizations, and we monitor it. We monitor it in our own organization and within Wright throughout the process of sign to close. And we're talking low single digits, like 1, 2, 3 employees and that's it, which I think has to be tied somewhat to the pandemic. But again, if we think about these markets, we have market-leading positions. People want to be part of this journey. They're really excited about our culture, our portfolio, our incentives and how we're going to be specialized around those customers. So we've been very thoughtful about that, very intentional about that. And we're really pleased that the majority, if not all, of the employees are saying, "We want to stay," especially customer-facing in the sales force and commercial-facing. I'd also tell you that during the pandemic, and I've made these remarks in other public settings, the value of the sales professional has actually gone up, especially in what I call the more intimate customer businesses, implant businesses, where things like inventory sets, where stuff is inside a hospital, an extra set of hands inside the operating room. Right now -- and I do want to thank all of our care providers across the world that are at the frontline of the pandemic, including our employees. Our trauma and -- our employees, people that are doing more emergent cases, we definitely want to thank them, and we line up behind their great work every day. But it's also increased the value of our sales professionals that know their way around the hospital. They know where inventory is. They can help the tired, a lot of times new nursing staff, circulating staff. So I've actually seen the medical device employee that has the type of more intimate customer relationship and knowledge of a hospital system, their value has gone up. So they're actually being asked, let's say, "Hey, can you help? Can you be here for this? Can you help us get that set and make sure we have the right inventory in the right size?" Which -- I think early days, in the front side of the pandemic, we were probably more concerned on, "Holy smokes, they're going to lock everyone out of hospitals." And -- but just the opposite, I think they've really come to appreciate the knowledge that the education, the history, the understanding of how things work that our sales professionals bring has been of great value. So I think that's another advantage that's coming to fruition throughout this pandemic.

That's a great point. I didn't even think about it. I hope that's true for the sell side as well, the value of sell side has gone up during the pandemic.

Vijay, you'll have to answer that one.

One last maybe on -- I don't want to spend too much time on Wright, but I know at the time, when -- you guys gave the synergy targets and the deal was supposed to be $0.10 dilutive in fiscal '21. Obviously, the world has changed with the pandemic. Any thoughts around the synergy targets or the expected dilution? I know the financing came in much better, but curious to hear if you had any thoughts.

Yes. Vijay, this is Preston. I'll take that one. So at this point in time, we haven't provided any updates to that. So what we said roughly 12 months ago is kind of what is still out there. As you've said, the world has changed. We're going through a lot of different updates even in our own business. So I think we will plan on providing updates to those numbers as we announce our guidance -- our plan to announce our guidance in -- as we announce our Q4 earnings in the January time frame.

Got you. And on the topic, Preston, will you be giving the annual guidance? Or is this a forward -- a 3-month guidance? How are you thinking about fiscal '21?

Yes. So '21 obviously is shaping up right now with some of the things we know to have some variability in it as well. Our plan as of now is to go forward with our annual guidance as we would on a normal basis. But we're still planning -- there's a lot still to happen in terms of the next roughly 60 days between now and when we get there. So it's something that we're going to continue to talk about. We have to understand where we are with regards to the pandemic, where we are with regards to vaccines and all the other potential changes and uncertainty and variability that exists. But at this point in time, that's our plan. But as we know, 2020 has taught us plans are changing kind of as we go.

Indeed, indeed. I mean I, for one, would be glad to see -- turn the page on 2020. Switching gears to, I guess, the pandemic and the second wave. One of your peers made comments about perhaps sequentially seeing some pressures given the rising second wave in certain parts. Not a big delta, but certainly, on a sequential basis, some -- perhaps some changes. I'm curious of what's been Stryker's experience when you think about the second wave?

Yes, happy to comment. As we think about the pandemic, if we go back to March, April, May, today's environment is dramatically different. I think there was great uncertainty of how to handle the virus and the volumes and things like PPE, which a lot of that has changed now. Interestingly, we hear from customers today one of the greatest risks that's out there is staffing, how do we make sure we have both the right space and staff to take care of patients on an inpatient basis. So parts of our organization right now and parts of our portfolio, something like hips and knees, we are experiencing some headwinds and some uncertainty, but it's very localized. It's geographic-dependent. I'll share, Vijay, interestingly, I'm in Fort Lauderdale, maybe things are a bit more open here. And I was with some customers last evening, and interestingly, they have 10 cases booked tomorrow and 10 a day on Thursday and 10 on Friday. However, I come from Kalamazoo, Michigan. That's where I live. And I know some orthopedic surgeons in town there that are doing 1 or 2 because the hospital is limiting the amount of procedures. And this is for a short amount of time. This is for the next 3 weeks, depending on where the surge is. So there is variability. And there is some uncertainty right now, especially in our more elective products and portfolios. And something like hips and knees, where you have a fair amount of inpatient elective surgery versus some of our outpatient elective surgery, we're seeing a bit more of that uncertainty. Now the good news is these patients don't automatically heal themselves, so they're delayed in the system. But in some states, right now, as you know, there's, "Hey, don't go outside. Don't go anywhere. Stay at home" type orders. And with that being the case, we have seen slowdowns in waiting rooms, in the operating room. And so you have this uncertainty and unpredictability a bit, and I think that will be here for weeks, if not months. I do have to comment, I think, the efficacy of these vaccine results and trials are definitely impressive. But I think now we're in the phase of how does that deployment strategy work, when does it get out really to the masses. And it sounds like we have months in front of us before we're in that case. So again, I thank the health care workers that are on the frontline helping with this. I know my surgeon colleagues and friends, they want to do more cases and they're ready for them, but I think it's a state by state, city by city. The analogy I use often, even with our own employees, is sort of like schools. And for those of us with children, it's a bizarre time. I have 3 children. They're all working virtually, so scattered throughout the house. Yet, you can go 60 miles down the road in the State of Indiana, and they're all in person and -- from early in the morning to all the afternoon. And so I just think that's the reality. And as Preston said, each day, each week, we're trying to make sense of these various localized delays, slowdowns, capped amount of inpatient procedures. So I think we're going to be in these choppy sort of waters for weeks and potentially even the next few months.

Vijay, if I could just add, if I could just reiterate. I think the key that Spencer said there is really that localized variability. That is the challenge because you could, like you said, have a hospital that is still going full go, adding additional shifts, things of that nature; and then in other parts of the world or even another county or another city right next door have a very different outcome. And I think that's the challenge that we're living with right now, is that localized variability.

That's -- those are helpful comments, Preston. Anything on U.S. versus OUS trends that you guys are seeing?

Yes. We've seen similar variability across the world. I think we've been watching the news throughout Europe, and we remain connected daily and weekly to find out the various restrictions and then progress that's made. And it looks like a general comment across Europe, things are improving, which is providing hope and some optimism. And obviously, the news in the last couple of days out of the United Kingdom is encouraging. Certain markets like Australia remain pretty steady and pretty predictable. And throughout some of our Asian markets, we have some uncertainty where it pops up and down. And so it sort of depends where we are in the world. And as Preston said, it's really localized based off the governments, their restrictions and the realities and the surge and the numbers. It's fair to say the virus hasn't gone away. It's still here, and certain places are dealing with it in a lot worse fashion than others. So I think across the world, wherever you live, you're in a microcosm of what's happening globally as well.

Absolutely. I couldn't agree with that more. I guess switching gears to robotics. I can see the Mako right behind you. How -- I guess a big-picture question. J&J has spoken about getting into the market. Obviously, Zimmer has made some comments about placements. How do you see this market shaping up? Is this because you have more voices, the whole market accelerates? Or is this sort of a zero-sum game? Maybe some thoughts on the market itself.

Sure. As we step back and think about the market, first off, it is becoming more competitive. But we look at that as an advantage. It really is pushing a comment that we use called standard of care. Robotics for hip and knee arthroplasty is now becoming more and more a standard of care, which is valuable to Stryker as we are involved in all of these conversations with customers. So yes, we are seeing more from Johnson & Johnson. We are seeing more from Zimmer. And that talk track across various markets all over the world continues to bring robotics to the forefront and allows this thought process around standard of care. Now we look at things a little different. I like to talk about installations, where we sell and put a robot in the market. And as we look back on 2020, we've continued our momentum. It is -- it really speaks to the power of Mako and the value it brings to the health care setting, and we've continued to see momentum and strong growth throughout this year. And we expect that momentum to finish throughout 2020, and when we turn the page to '21, we expect that momentum to continue. So we're really pleased and grateful for the opportunity with Mako and what it's providing. And we've been very intentional about our strategy, partnering with customers, thinking about how do we make sure we meet their financial needs and making sure we have the right financing options. We have an arm within Stryker called Flex Financial, which gives us an advantage to connect with these customers, thinking about their robot needs, but also potentially their whole portfolio and what else can we bring into the conversation. And we're doing this at hospitals, we're doing this at ambulatory centers. And it's really proved value throughout 2020, making sure we can meet these needs. Another one, Vijay, that's really helped is we've been very intentional about thinking of the teaching institutions. And I think this is a critical tipping point that, again, speaks to a broad base in the market. There are fellows now that are looking to join a particular fellowship and they are asking the question to that fellowship director, "Do you have robotics technology? Will I be trained on having an understanding for robotics?" because they want to enter their marketplace with this understanding. And we've been very intentional about this. And over the last year, we're -- Mako is in about 50% of the fellowship programs across the United States right now and some of them in Europe as well, where these fellows that are entering these programs are having access to this technology, really helping bring up that standard of care so when they graduate, which happens in August time frames and the fellowship changes, they enter into their practice and say, "Hey, I want to make sure my facility has a Mako so I can provide this care for our patients." So that's been very intentional, and we see great dividends sort of from that focus.

That's really interesting. A couple of statements you made caught my attention. One was standard of care. I mean that clearly suggests this penetration -- I mean this is going to now -- clearly, at a tipping point. Where do you see that penetration in 3 or 5 years? I don't know, pick a time frame. Because it feels like once you use statements like standard of care, it feels like 70%, 80% of the market should gravitate to robotics. And then second, Mako in 50% of fellowship programs. So if I was an ortho fellow and trained on a Mako, am I not using the Stryker implant? Why shouldn't I make the phased step up? As these docs evolve and their practice builds up, Stryker is in a position to gain implant share. What do you think about that longer term, 10 to 15 years?

I would agree, yes. It is -- it's great, these installations. And as you know, we celebrated our 1,000th Mako install a little earlier this year. And interestingly, that was at an outpatient ambulatory center, which sort of shows that, again, the standard of care not just in the hospital, but we're seeing more and more now in the ambulatory center as well. So having that broad-based installation and champion users -- I think an important point, Vijay, when we think about our Mako strategy is, when we sell and install a robot, we actually build championship and utilization with that robot. It's not a placement and a drop-off and see you later. It's an intimate process where we say, "Hey, physician, we need to make sure you understand the requirements here of really being involved in robotics and building a practice around this." So when these are installed and utilized, it's great utilization rates. And we have seen, short term, and we expect this to play into the long term as well, a lot of competitive implant share shifting over. On your comment about implants, we still think we have best-in-class implants, the best in the market. Triathlon has been the greatest workhorse in the knee franchise that we could ever dream of. Now we're adding technology to it as well with 3D printing and figuring out ways to continue to drive innovation, such as more cementless procedures. But we've been really impressed. And we're not sharing them publicly, we humbly chip away at this, but the amount of adoption and utilization of our knee portfolio with robotics is impressive. Year-over-year, we're increasing 5% to 10% in how much is being used on robots. So the numbers you throw out in 5, 6, 7 years, they're doable, they're feasible. And I think as we go into the future, our installed base, our strategic approach to training and educating and really sort of that championship mindset of making sure you have customer buy-in when you do the install will really create value for us. But I believe in standard of care. This is something that will be discussed more and more, and it will need to be an option. I think another thing, Vijay, when you think about the applications, right now, we've had the most success with total knee inside the United States and other markets coming online. And it's really starting to take off in Europe as well. However, as we bring other applications to the forefront and continue to improve on those applications, that will help as well. You get more value out of having this device in the operating room. And our recent launch of Mako 4.0 on hips has done just that. We've done a couple of thousand cases now. The registration effort, the efficiency of it, the software, it's changing the way these surgeons are engaging with hip. And we're seeing tremendous growth in the short term that, that product has been out in the marketplace. So having applications to build out in musculoskeletal -- and as you can imagine, we have ambition to add others. As I opened with before we were live, I'm in the partial knee demo room right now. But we have a total knee, a total hip, and down the hallway, we have a shoulder room. And we have a spine room. And so we have other applications that are in development that we're working on. So having these other applications, again, drive the value and continue to raise up that standard level of care where you want robotics as part of your orthopedics program.

Is there a time line, Spencer, on when you might get into shoulder and spine with the Mako?

Yes. These take time. There's a lot of regulation. You have to put a lot of clinical effort to make sure you have the safety and efficacy. So we're not publicly sharing right now those time lines, but those projects are underway, fully resourced, and we are working like crazy on them. And this office has people in here every single day solving these challenges and bringing things forward to make sure we have the right application out. You can imagine -- I'll spend a couple of minutes on shoulder. Our enthusiasm and optimism was strong pre Wright. And we were really excited about what the team was working on. It's a very complicated procedure. And so bringing some predictability in with robotics and what our team thinks about and utilizing CT scanning with the haptics gives us a competitive advantage in shoulder. Well, you bring in Wright and BLUEPRINT and their preplanning approach and their auto segmentation and the ability to put this preplan into the cloud back down to the physician, the physician on a technology device can plan that case in a matter of minutes. You can imagine marrying that preplanning and auto segmentation with Mako over time really puts us in a whole different dimension of how we can provide care for people with shoulder disease. So that is one of the really exciting strategic drivers and growth drivers as we think about this. This won't come in months. We have some work to do, but you can imagine bringing these technologies together is really exciting. And again, I think surrounding these implants with this enabling technology, the software and ultimately, someday taking the data from that to help physicians make good decisions about what type of implant and what type of patients to treat really will help continue to transform orthopedics. It's really sort of a fascinating time to be a part of this industry when there is this type of investment and innovation taking place in the implant sector.

That's great to hear. And so just to summarize all of this, should placements be accelerating in '21 or '22? How are you thinking about the outlook here for Mako installs?

Vijay, we have great expectations at Stryker for continued growth. And so yes, we expect continued acceleration of installs and sales of Mako and remain humbly bullish on our opportunities in the future.

That's a great Charles Dickens quote, the great expectations.

I say it often to our point, yes.

Yes. Maybe switching gears to China. It's interesting. I've been, many years ago, to China, actually visited your China facility. I know that region has been ups and downs for Stryker. There was a little bit of leadership change going on. I think now I feel like the infrastructure is now in place, and I saw the Mako total knee approval in China. The one thing I can tell you is, looking at soft tissue robotics, the appetite for robotics, it's pretty big in China. I'm curious on how big could robotics be in China. Is that business at an inflection point for Stryker?

Yes. Thanks, Vijay. We have continued to build our expertise throughout China. And you highlighted some leadership investments we've made there. We actually took our leader that was running our European business for our joint replacement franchise, and they've recently relocated through the pandemic to leading our Asia Pac business. And why that's a really important move, they bring expertise both about our joint replacement and robotics franchises, but this individual also had previous experience in China. So they couple these 2 things together. This individual's name is John Collings, and we're really excited about John and how he's thinking about the market and making sure we have both the short- and long-term strategies in place. So from a talent front, China remains a key place to make sure we have the right people and you can imagine a top geography for us in the world to make sure we have the right strategy. On robotics, we do believe the market is ripe for continued growth, and we believe it's a wonderful place to build a long-term strategy for robotics. The regulatory path there is complicated. You need to make sure you have the right clinical backing, that you get the approvals. And as we turn the page to 2021, we're very confident that we can build the right type of growth strategy with our total knee application on robotics, and we're really excited about this. However, I want to manage expectations. It takes time. You want to make sure, like I talked about earlier, that we have the right champions in place, that we have the right service and support structure that we can make sure we have people that are appropriately utilizing that product and building a robotics program around how we generate utilization over time in China. The good news is there's not a quota limitation like there is in some capital products throughout China. There's not a limit here. It will go through the normal capital process. And in our discussions with our team there, we're already talking about what does that pipeline look like, is there a pipeline established. And you can imagine the answer is yes. 40% of all osteoarthritic patients are in China. It is a massive $3.5 billion market with about $1 billion of growth going on in hips and knees. So it is a big, giant opportunity for us, and we want to make sure we get this right. So we're going to build that program appropriately. We've had hips in place now from about mid-2018, but they -- those few customers that have it, they've been salivating to get their hands on the total knee application. So again, this will happen some time early next year as we think about our plans, and we will build that over time. It does, though, give us the license to go out and start to build this. And really, we're one of the only global players in robotics that has a smart robot with haptic technology that we think can bring significant value. And we've seen this, as you mentioned, from the soft tissue space. There is an appetite for enabling technology and willing to make these financial investments to build programs. So we think this is a critical market, but we want to be smart about it and build it over time and do it the right way. But as we turn to '21, we'll start that process and remain confident in our opportunity there.

Great. And one on the implants side. I think one of your peers was talking about smart implants. One, please educate me. What does smart implants mean? And where is Stryker on that front? I'm sure you guys have something in the pipeline. Curious on what kind of data can we capture and timing of launch for Stryker.

Yes. I think it brings up a really interesting opportunity across orthopedics. And I'll start with sort of the ecosystem. And I've talked about orthopedics, but what's unique about Stryker Corporation is all this specialty product that we have across our very diverse and broad portfolio. So we were able to collect data and digitize that and make sense of information from all different sectors. Take that from our physio business from the back of an ambulance to maybe a hospital bed inside of medical, to our endoscopy products that are all tied into the operating room, to our communication products that are integrated, all the way down to a Mako robot that sends a tremendous amount of data and information that's captured about a patient up to a cloud, back to our organization to make sense of. We're not doing it to its full optimal sense yet, but we are putting investment behind, over time, synthesizing all that different information and data, both about how the products are used, how the product is performing and, ultimately, Vijay, what it does for the patient that we can make sense of this to start to help our customers make more proactive decisions about how they provide care, care in the pathways, care in the type of systems and setups, care even on the type of implants that they decide to utilize or a particular approach they decide to utilize for a specific patient. That's really where the longer-term vision is going, is how do you collect this information and data, how do you make sense of it, how do you repackage it and bring it to a proactive advantage. So going back into orthopedics, we think we're in a very unique position. We started this journey with Mako and understanding what information it can provide, what it knows and how we make sense of that. And we have data scientists. We're building algorithms, and we're trying to figure out how do we continue to offer a smarter experience both for the interaction and intervention, but post operating as well, how do we have a better patient outcome, how do we have better selection. And that's all on the horizon. Take that a few steps further, you brought up smart implants. You can imagine we've made investments and continue to work on sensing technology. We continue to work on wearable technology, how do you marry these things together, both inside the implant, but also externally. So as that patient gets up from the operating table after they have a new Triathlon knee, then now we can measure what's the gait, how much walking are they doing. And all these things are under development and will be part of Stryker's future. You can imagine there is a lot of excitement in this space to make sure we're building competency so you have the right employees and scientists that are making sense of this data. But then you have to, as I said earlier, package this so it makes sense back to the end user. You can imagine a real-time example of something like BLUEPRINT. Our now shoulder platform is already collecting information each and every day on total shoulders, and this allows us to be a little smarter and provide some of that information for patients. So our plan as we think about sensing, we'll build this into core orthopedic implants, but also, over time, we'll think about where else can we bring sensing technology or smart technology to things that are left inside the body, be that implants, maybe even someday, there's a dream on stents and other type of things that we do. But this is an area of great interest both internally at Stryker and there's a variety of partners that are working on this throughout the world as well. So a really cool time, again, to be in orthopedics to make sure that we're figuring out, "Hey, not only do we have to be great at implants but great now in other competencies such as digitization, enabling technologies, making sense of that information." So I think an exciting few years in front of us for sure.

It certainly sounds exciting. And just maybe switching gears to Spine. I know 3Q was pretty strong. I think the base business ex K2 was up organically in the quarter. What happened? Was this just a catch-up of backlog? And I think if I can just take a step back, at the time of the transaction, I think the goal was mid-singles pro forma for Spine. Is that still intact? And can that accelerate once you get Mako spine application?

Yes. A few comments on our Spine business. I've been really pleased with what the team has done to bring sort of integration to a close. In particular, we spent the early days working on the infrastructure and the sales force, the customer connections, then jumped into the systems. That took a little longer, and we're finally in a good place where we have the right systems in place, we have the right inventory strategy in place and we feel really confident in our commercial structure. On top of that, some of the new products that K2M is working on now as part of Stryker are now entering the marketplace and really being met with great enthusiasm. So we're excited about this. I would characterize Q3 as great progress in the trend that we've been building over time. We did see a significant slowdown in Q2 like the pandemic, but Spine business is interesting. It's less elective. Spine surgeons have more authority to think about what's essential versus elective. And a lot of them, due to the risk factor, continue to operate at a pretty aggressive rate through Q2. And so not as much catch-up in that business maybe as we experienced in a few of the others. That being said, there's still some uncertainty, again, depending on the type of a procedure. A single-level ACDF is more elective than maybe a TLIF procedure that's, as I would describe, more essential. So that's at the hands of the variability of the disease space. But we remain optimistic and confident about the growth trajectory in our Spine business. Also important is we've made a lot of investments in enabling technology. Obviously, the acquisition of Mobius has been a big part of that. But we've coupled that with our navigation device. You can imagine Airo and having the 3D CT, another really advantageous technology that provides a lot of data and information both for the caregiver and for our future, couple that with navigation, which is a stepping stone and really slides right into robotics in the future. Interesting, all the robots in the spine space right now that are robots, they're navigation devices. They're bringing a guide into place and telling you where now to access the patient. So we have a similar competency with our navigation solution. They're different than Mako. Mako's more technologically advanced with haptics, being smart, understanding, more autonomy built into it. So that's a step-wise change when we go to those platforms at some point. We're not commenting right now when those introductions will take place. But you can imagine, down the hallway, there's a lot of activity. And R&D is well positioned to make sure they keep those investments in great innovation going. So I'd characterize our Spine business as being very pleased with where we're at right now, continued growth in the marketplace from our point of view at our Spine franchise and excited about the quarters ahead for Stryker Spine.

Got you. And then last few minutes, perhaps some big-picture thoughts on -- when should we expect the world to normalize from a procedure perspective? It looks like we're getting pretty close there. Should 2021 be a normalized year and get back at 2019 levels? Or are there still some variables when you think about 2021?

Yes. Vijay, I'll take that. I think as we think about '21, I mean, certainly, we've learned a lot in the last 6 to 9 months. I mean if you take a step back to March, April time frame and everything was kind of completely in flux and certainly, through the recovery that we saw in the back end of Q2 and some stabilization throughout Q3. While we've talked about it before, there's continued variability with infection rates rising and at the same time, that's married with this prospect of a vaccine that's on the -- really, the short-term horizon. So I think we would expect that, with all of these learnings with the new information that's coming, that certainly '21 will be more stable than '20, but there are still a ways to go. I mean there's a ways to go in terms of when that vaccine becomes fully available to everyone. There's a ways to go in terms of the continued infection rates that might be continuing to cycle up and down throughout various regions. So I still think that it's going to be some bumpiness as we think about the next several months, but certainly, nothing like we saw in 2020, especially in the second quarter. But our expectation is that, as we enter into '21, that we're going to attack it like we do any other year. And as Spencer mentioned before, we're looking at opportunities to grow our businesses and really move forward with our category leadership.

Got you. And then one last one, CapEx environment for next year. I know you guys have been paused on the order book on the capital side. How is CapEx shaping up for next year?

Yes. I mean I would say the same thing there, right? A lot of that, as we think about hospitals and their ability and willingness to spend capital, is going to be dependent on the stability of things like elective procedures and the profitability and the cash flow that, that throws off for them. The other thing is, obviously, the prospect of additional government stimulus will be a potential aid in that area as well. As it pertains to our capital specifically, our large capital items, I mean, Spencer talked about it. The Mako product, we've had high, high, high expectations, and that continues. We've continued to see great progress in our beds and stretchers, especially behind the launch of our new ProCuity bed that we have coming. And then as we think about small capital for us, that -- those are the items that really help facilitate some of those elective procedures. So we would expect that the demand for those will continue as that elective procedure volume stabilizes. And again, those will be prioritized in order to keep those elective procedure volumes going.

Fantastic. I think with that, we're at the end of the time, Spencer and Preston. Thank you so much for the time this morning. I wish you guys all the success for next year. And I look forward to the day when we have smart implants and envision myself as the new terminator.

Thanks for having us, Vijay.

Thanks for having us. All the best.

Thanks, guys.