The Wider View: Knees-up - or skirmish - at AAOS as Zimmer Biomet launches new kid on the robotic block

The annual American Academy of Orthopedic Surgeons (AAOS) conference kicks off on March 12 in Las Vegas and this year's meeting will see, among other things, the much anticipated launch of Zimmer Biomet's Rosa robotic system for knee surgery. The unveiling of this new market entrant - just approved by the FDA in January - should lead to interesting debate on where this leaves Stryker, which is currently leading the charge in robotic knee surgery with Mako.


What's happening

The biggest event in the orthopaedic industry's calendar, AAOS is taking place this week and one of the most anticipated technologies to be launched at the conference is Zimmer Biomet's Rosa robotic surgical system, cleared by the FDA under two months ago to perform total knee replacement surgeries.

The company has been very scant with details about the new knee application for Rosa - the technology is already approved for use in neurosurgical applications. It told analysts on its fourth-quarter earnings conference call last month that it will provide more insight at AAOS as to what Rosa's unique selling point is - what value it provides surgeons - and what the commercial strategy for the system is to capitalise on the market opportunity.

Zimmer Biomet's robotic knee rivals, Stryker and Smith & Nephew, will also be showcasing their respective technologies in this field at AAOS.


The wider view

Robotics is not a new subject in orthopaedic surgery, but interest in this technology has only sharpened with time. All the key players have robotic assets in their portfolio - Medtronic with Mazor, Johnson & Johnson with Orthotaxy - but so far, robotically-assisted technologies have arguably had the most tangible impact on knee surgery.

Here, Stryker is the undoubted leader; the company disclosed during its Q4 2018 earnings call that just under two years since its full launch of Mako, the worldwide installed base of the system stood at 642 robots - of which 523 are in the US - at the end of last year. The number of surgeons trained to use the technology since launch is now around 1600, and Stryker reported that it has seen significant growth in utilisation rates on the robots, up 30 percent in 2018 from the previous year.

Smith & Nephew's Navio, which got FDA clearance a year after Mako in 2016, differentiates itself from Mako by not requiring the use of CT scans to help with visualisation. The company reported that it had doubled the number of Navio systems sold in 2018 versus 2017 - although it did not disclose specific figures - and that it is second behind Stryker in knee implant sales growth (helped by Navio).

But it is Zimmer Biomet's Rosa, the latest arrival to the market and like Navio is CT-free, that seems to be deemed to be a worthy competitor to Stryker.

While remaining tight-lipped about Rosa at its recent earnings call, Zimmer Biomet's management did point out that one of the key things the company wanted was for the technology to get high-volume surgeons using robotics.

In a January 29 research note by Stifel analysts, after Rosa Knee's FDA clearance, positive feedback from a high-volume orthopaedic surgeon about the technology seems to indicate that Zimmer Biomet had indeed succeeded in what it set out to do. Rick Wise, author of that research note, wrote that the surgeon viewed Rosa to be "the first real competition" to Mako and that the Rosa platform was a more efficient robot than Mako due to the unchanged clinical workflow.

"Speaking to Rosa's design and capabilities, the clinician indicated that Rosa has been developed to not only facilitate better, more consistent implants, but to do so with minimal disruption to the surgeon's already-existing workflow," Wise wrote, adding "as a result, [the clinician] views Rosa as a feasible platform for even high-volume implanters like himself (~5-8 procedures/day) to fully convert to robotic procedures over time."

Zimmer Biomet has some way to catch up with Stryker thoug,h and Morgan Stanley analyst David Lewis said he expects Rosa to enter a limited launch this year so will likely have a minimal near-term impact on Zimmer Biomet's top-line and also to Stryker's. Lewis indicated that looking further ahead, the two companies may be able to co-exist without one taking out the other. "The Street appears convinced success for one means failure for the other, but we see independent paths to outperformance in 2019 for both," he wrote. The analyst believes Stryker should be able to sustain market share gains with Mako, while Zimmer Biomet's performance this year will be less predicated by Rosa alone, but by wider issues like the company's ability to maintain its growth recovery.

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