Good News for Stryker – Analyst Blog

Stryker Corporation (SYK) recently received a clean bill from the U.S. Food and Drug Administration (FDA), the latter declaring that the actions undertaken by the company to address the issues raised in a 2007 warning letter are sufficient. No further formal corrective actions are required by the company.

 

In 2007, the FDA had issued a warning letter to Stryker regarding compliance with certain quality system requirements at the company’s reconstructive implant manufacturing facility in Mahwah, New Jersey.

 

The resolution of the warning letter indicates Stryker’s focus on improving quality systems throughout its organization.

 

Stryker is one of the world’s largest medical devices companies operating in the global orthopedic market. In the orthopedic space, Stryker faces competition from major players like Zimmer Holdings Inc. (ZMH), CONMED Corporation (CNMD), Smith & Nephew (SNN), Johnson & Johnson/DePuy (JNJ) and Wright Medical Group Inc. (WMGI).

 

Stryker’s products are not life-sustaining in nature. As a result, the company’s business is highly susceptible to an economic downturn. Patients can afford to defer elective procedures as they are not life-sustaining in nature and hospitals can delay their buying decisions due to the financial crunch.

 

Furthermore, the orthopedic industry faces severe pricing pressure due to the advent of group purchasing organizations (GPOs). GPOs act as agents that negotiate vendor contracts on behalf of their members. The current economic climate has bolstered the bargaining power of GPOs, thereby putting pressure on the company’s top line.