Welcome to the fourth quarter 2015 Stryker earnings call. My name is Adrienne, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will conduct a question and answer session. During that time, participants will have an opportunity to ask one question and one follow-up question. If you'd like to ask a question, please press star then one on your touch-tone phone. This conference call is being recorded for replay purposes. Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC. Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparative GAAP financial measures can be found in today's press release.
That is an exhibit to Stryker's current report on Form 8-K filed today with the SEC. I would now like to call over to Mr. Kevin Lobo, Chairman and Chief Executive Officer. You may proceed, sir.
Good afternoon, everyone, and welcome to Stryker's fourth quarter 2015 earnings call. Joining me today are Bill Jellison, our CFO, Katherine Owen, Vice President of Strategy and Investor Relations, and Glenn Boehnlein, who will be taking over for Bill on April 1st. Following my opening comments, Katherine will provide an update on Mako, while Bill will offer more details on our quarterly results before turning to questions and answers. With a 6.4% increase in organic sales in Q4, we continue to deliver on our goal of driving top-line growth at the high end of MedTech. This marks the 11th consecutive quarter where Stryker delivered 5% or better organic sales growth, demonstrating strong consistency over time.
Our diversified sales footprint has once again proven to be a key component of our growth strategy as all of our segments, Orthopaedics, MedSurg, and Neurotechnology and Spine, posted good results in the quarter. These performances underscore the strength of our sales and marketing execution and our innovation engine, which is characterized by healthy R&D investment and a focused and disciplined M&A effort. Approximately 70% of our sales are derived from our U.S. businesses, which once again led growth, posting an impressive gain of approximately 8%. I am also pleased with the growing momentum out of Europe, including strong Q4 results, benefiting from the shift to the Transatlantic Operating Model at the beginning of 2015. We are building on this success as we start 2016, with Canada rolling into the model and the other regions now reporting to our Group Presidents, Tim Scannell and David Floyd.
Our international growth of roughly 4% in constant currency was once again impacted by soft performances in China and Brazil. As you've seen, we have demonstrated the ability to offset isolated geographic softness through strength in our larger markets. Turning to earnings, our adjusted EPS for Q4 of $1.56 is at the high end of our revised range of $1.53-$1.56, primarily driven by the strong top line. The balance of the P&L came in as expected, which Bill will cover in his section. Looking ahead to 2016, we expect our sales momentum to continue and are targeting organic sales growth for the year of 5%-6%. This takes into account expected softness in emerging markets for a good portion of the year.
In addition, the two-year suspension of the med device tax provides us with the opportunity to bolster investments that will help drive sales growth and innovation as we plan to invest the majority of this temporary benefit. We are also continuing on our path toward driving greater cost efficiencies, which is a multi-year opportunity. Over the past year, we have been focused on identifying and prioritizing the key target areas for cost reduction within our organization. As we shift into 2016, we are moving toward project implementation under the leadership of Group President Lonnie Carpenter. We have identified significant areas of savings centered around optimizing our plant network, rationalizing our product lines, professionalizing our indirect procurement in a similar manner as we have done with direct materials, moving to a common ERP system, and driving more shared services.
Given our history of decentralization, there's considerable opportunity ahead of us in this program. We believe a methodical and deliberate approach to these efforts will allow us to preserve Stryker's competitive differentiation in the areas of sales, marketing, R&D, and business development while helping to ensure we are consistently delivering P&L leverage. This is reflected in our 2016 adjusted EPS range of $5.50-$5.70 a share. This is an increase of approximately 7.5%-11.5% versus 2015 and includes a negative foreign exchange impact of $0.12-$0.13 a share. Finally, I'd like to take a moment to extend my thanks and appreciation to Bill Jellison, who has announced his plans to retire following an impressive 36-year career, the last three of which have been with Stryker.
Bill was able to quickly move toward implementing a layered hedging program, which has proven to be successful at mitigating our transactional FX exposure. In addition, he helped execute on a number of acquisitions, facilitated the establishment of our European regional headquarters that's enabled significant savings, and has also helped to shape our comprehensive cost reduction program. These accomplishments have meaningfully contributed to our success and were achieved while enabling our internal talent pool to develop, including Glenn Boehnlein, who has been promoted to CFO effective April 1st. Glenn has been with Stryker in various financial leadership roles since 2003, most recently serving as Group CFO for the MedSurg and Neurotechnology Group. This group represents roughly half the company and has been a consistent force behind our strong results. I am confident in Glenn's ability, in coordination with the broader finance organization, to help build on our strong momentum.
Before turning the call over to Katherine, I've asked Glenn to make a few comments. Glenn?
Thanks, Kevin. I appreciate the comments and the support, I also want to thank Bill for his leadership of the finance organization over the past few years, and for his commitment to helping ensure a smooth transition as I take on new responsibilities. It's a very exciting time at Stryker, and I'm thrilled to be part of such a great organization with so many talented and dedicated people. I'm also looking forward to meeting many of our shareholders and analysts at the various events going forward. With that, I'll turn the call back over to Katherine.
Thanks, Glenn. The focus of my comments today will be to provide an update on Mako. 2015 was a year of building momentum for Mako's robotic-assisted surgery as we continue to leverage our considerable sales and marketing infrastructure to help drive sales. We are particularly pleased with the increased demand for the hip indication, which has been augmented by combining the robotic technology with our proven portfolio of Stryker hip systems. The combination enables surgeons to use a best-in-class hip implant with a long-term proven clinical history on a robotic-assisted platform, which helps drive consistency, enhance surgeon and patient experience, and we believe, over time, clinically demonstrated benefits. In total, we sold 31 robots globally in the quarter, 24 of which were in the U.S., which represents a solid ramp from the start of the year and a significant jump year-over-year from 20 in the fourth quarter of 2014.
For 2016, we are focused on continuing to drive adoption with our current indications, which we believe offers considerable opportunity to drive ongoing robot placements. We are also excited about the potential for the total knee indication with our flagship Triathlon system. This year, our efforts will be centered around gaining user experience with Key Opinion Leaders to help ensure an optimal rollout as we look to full commercial release in 2017. We believe the commercial launch, which will be aided by podium presentations from the early users groups, will be in place as we head into next year. With that, I'll turn the call over to Bill.
Thanks, Katherine. I'd like to start out by saying I've enjoyed working with Kevin and everyone at Stryker, especially the entire finance organization, who have made significant contributions over the last few years, helping the company deliver on its financial results. Coming to Stryker was a strong cultural fit and personal fit from the first week that I joined the company. We ended 2015 at the high end of both our initial sales and earnings guidance that we set at the beginning of the year. As we look at 2016 and set our initial guidance, I am confident that our sales momentum, strong product portfolio and pipeline, and the cost containment initiatives we are driving, position us well for the future. I look forward to ensuring a smooth transition with Glenn and entering another stage of my life.
I will continue to engage actively in many of my passions, travel with my family and friends, and explore additional board opportunities. I want to thank all of you for your support. Turning to our financial performance. Sales grew 3.7% in the quarter, including a negative 3.2% impact from foreign currency translation. Constant currency sales growth was 7%, which includes organic growth of 6.4%. GAAP EPS for the quarter was $1.38 per share versus $0.68 last year in the fourth quarter, while adjusted earnings per share were $1.56 a share for the quarter versus $1.44 per share in the fourth quarter last year. This quarter's EPS includes negative impacts of roughly $0.04 per share from foreign exchange, which was in line with our guidance. Most currency exchange rates against the U.S. dollar continue to be weaker than last year in the same period.
The weaker EUR and CHF, along with our layered hedging program, helped to mitigate some of the impact in the quarter, as many of our products are manufactured in Europe, which helped improve our gross margin rates in the period. However, significant weakening in foreign currency rates in emerging markets and the continued weakness of the JPY, AUD, and CAD, where we have minimal manufacturing, negatively impacted our gross margins and operating results in those regions. The most significant non-GAAP adjustment in the quarter were amortization, restructuring charges, and a net reduction in the charge associated with the voluntary recall of the Rejuvenate ABG II modular hip stem as we resolved some insurance matters in the quarter, which more than offset the additional charge in the period.
As I have mentioned previously, the charges we have recorded related to the Rejuvenate and ABG II recall represent the minimum of the range of probable loss to resolve this manner, and the charges may increase or decrease over time as additional facts become available and our assumptions more refined. In the fourth quarter, our organic growth rate was 6.4%, including 8.1% growth in unit volumes and mix, with price negatively impacting sales by 1.7%. Acquisitions added 0.6%, while FX had a negative 3.2% impact due to significant weakness in both the JPY and the AUD compared to the same period last year.
Full year 2015 constant currency sales growth was 7%. Organic growth was 6.1%. Looking at our segments, Orthopaedics represented 42% of our sales in the quarter. Sales of Orthopaedics products grew 3.3% as reported and 7.1% in constant currency. U.S. Orthopaedics sales grew 9.7% in the quarter. Trauma and extremities had another excellent quarter in the U.S., with sales increasing 13.6%, led by strong growth in foot and ankle, which again grew approximately 20% for both the fourth quarter and full year. U.S. hips and knees continued their strong performance of 6.4% and 9.1% organic growth, respectively, in the quarter. Knee sales were bolstered by increased adoption of recent titanium 3D printed products. Our international Orthopaedics business grew 2.4% in constant currency as sales growth continued to be negatively impacted by weakness in China and Brazil.
Our international knee business grew 5.5% in constant currency in the quarter. Finally, we sold 31 Mako units in the quarter and 72 units in the full year. Our MedSurg segment represented approximately 40% of our total sales. Sales of MedSurg products grew 3% as reported and 5.6% in constant currency. These results were led by growth in our instruments and medical business, both of which had strong mid-single-digit percentage growth in constant currency. Endoscopy also posted mid-single-digit percentage growth in constant currency in the period on the back of our new camera offering, which was launched in December. All three of these large MedSurg businesses continued to manage pricing decisions effectively, with modest price declines of less than 0.5% for the year. Our final segment, Neurotechnology and Spine, represented 18% of sales and delivered another good quarter.
Sales of Neurotechnology and Spine products grew 6.5% as reported and 9.9% in constant currency. Growth in this segment was led by our Neurotechnology business, which had double-digit growth in the high teens in constant currency in the fourth quarter and grew high teens in the U.S. Spine sales had mid-single-digit percentage growth in constant currency in the period. Had high single-digit growth in the U.S. This marks our third consecutive quarter of strong growth in U.S. Spine. Spine also has a new 3D printed interbody device launching in 2016, which we believe will be a very exciting product for the market, helping us to continue this positive trend. In looking at our operational performance, gross margin as a % of sales on an adjusted basis in the fourth quarter was 67.2% compared to 65.8% in the fourth quarter last year.
When compared to the same period last year, the rate was positively impacted by solid operational improvements, product mix, and FX rates, despite the negative FX impact on earnings per share. Price had a negative impact as pricing was lower by 1.7% in the period. Our gross margin as a % of sales was 66.5%, or 50 basis points higher than last year. Research and development expenses increased by 20 basis points to 6% of sales in the fourth quarter, compared to 5.8% in the same period last year. On an adjusted basis, selling, general, and administrative expenses represented 33.7% of sales in the fourth quarter compared to 32.4% in the same period last year. As expected, these expenses were higher for the year as we increased spending to support the cost structure of our European regional headquarters in Amsterdam and our Transatlantic Operating Model.
We are confident in our ability to leverage these expenses in 2016 as we continue to drive a number of key cost initiatives, even as we reinvest some of the savings from the suspension of the medical device tax. Operating margin as a percentage of sales on an adjusted basis were 27.4% in the fourth quarter, compared to 27.6% in the same period last year. The full-year adjusted operating margin rate was 24.9%, nearly flat compared to last year. During the year, we invested in our European regional headquarters and the establishment of our Transatlantic Operating Model, which reduced the stronger operating margins for the year. Other expense in the fourth quarter was $36 million. This increase in expense resulted primarily from higher net interest expense due to increased borrowings and foreign currency exchange transactional losses in the fourth quarter.
This is generally consistent with the run rate for this category. Our reported tax rate for the fourth quarter was 14.7%, while the adjusted effective tax rate was 16.6% for the fourth quarter, compared to 22.6% in the same period last year. The fourth quarter effective tax rate benefited from the renewal of the tax extenders, which was contemplated in our guidance. The full year adjusted effective tax rate was 17.3% compared to 22.3% last year, as we realized the benefits from our global tax structure and European regional headquarters in Amsterdam. Looking at the balance sheet, we ended the quarter with $4.1 billion of cash and marketable securities, approximately 50% of it now held in the U.S. We also had $4 billion of debt on the balance sheet at the end of the quarter.
From an asset management standpoint, accounts receivable days ended the quarter at 55, relatively unchanged from last year. Days in inventory finished the quarter at 165, which was an increase of five days compared to last year. As previously mentioned, we made significant payments earlier this year associated with our Rejuvenate and ABG II recall settlement of $1.2 billion, most of which occurred in the third quarter. Approximately 50% of the funding of the Rejuvenate liability is being sourced from OUS cash. We also repatriated a total of $1.8 billion in 2015, including approximately $1.1 billion in the fourth quarter. Capital expenditures were $270 million in 2015 compared to $233 million last year.
Finally, regarding share repurchases, in 2015, we repurchased approximately $700 million of our common stock, or approximately seven and a half million shares, at an average price of approximately $94.67. We have authorization for another $1.9 billion available for repurchase under our current authorization. Based on our strong performance in 2015 and assessment of the current economic and market conditions, we are projecting constant currency and organic sales growth in a range of 5%-6% for 2016, and expect to be at the low end of that range in the first quarter, as we are still anticipating impacts of market conditions in the emerging markets, especially China and Brazil. If foreign currency exchange rates hold near current levels, we anticipate net sales will be negatively impacted by approximately 1% for 2016.
We also expect continued unfavorable price reductions of 1.5%-2%, consistent with the pricing environment experienced in 2015. Due to the suspension of the MedTech Tax, we will also provide some additional visibility to our projected margin rates for 2016. Both gross margin and operating income margins are projected to be at least 50 basis points higher in 2016 in total. The benefit from the suspension of the MedTech Tax will directly benefit our gross profit rate. However, R&D will run slightly higher in 2016, and our SG&A rate will only show modest improvement for the full year, as we expect to reinvest the majority of the benefit we receive into this area, offsetting much of our cost reductions in 2016. As such, our gross margin rate improvements will be the driver of our operating margin rate in 2016.
We expect our full year adjusted effective tax rate in 2016 will continue to be approximately 17%-17.5%. Capital expenditures are expected to be $400 million-$450 million in 2016, as we continue to invest in our operations and IT infrastructure to support future growth. Based on the current foreign exchange rates, we expect 2016 to be negatively impacted by approximately $0.12-$0.13 for the full year and approximately $0.03 for the first quarter. This negative impact is largely driven by the translational component of foreign exchange, which we do not hedge. The transactional impact of foreign exchange on earnings is being offset somewhat by both natural and real hedges, which we continue to layer into our operations. Finally, our guidance for adjusted net earnings per diluted share in 2016 is $5.50-$5.70 for the full year, and $1.17-$1.22 for the first quarter.
Thanks for your support, and we'd be glad to answer any questions that you may have at this time.
Thank you. We'll now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. As a reminder, callers will be limited to one question and one follow-up question. Our first question comes from Bob Hopkins from Bank of America. Please go ahead.
Oh, thanks. Can you hear me okay?
Yes.
Yes.
Hi, Bob.
Great. Hey, good afternoon. First, Bill, sorry to see you move on, but good luck with the next chapter. I feel I'd be remiss if I didn't sort of ask a follow-up question on this announcement. Maybe the way to phrase the question, Bill, is, and for Kevin and Katherine, you guys have been talking about M&A for some time, and I'm just curious if this CFO transition suggests any change in strategy or maybe suggests that mid or larger deals are kind of less likely until after this transition is complete. Just kind of curious how this could affect strategy and/or the outlook for M&A. Thanks, and again, congrats, Bill, for the decision.
Thank you.
Thanks, Bob. Look, I would tell you right now the company is in very good shape. You can see the way we're performing. This is an internal transition with somebody who's inside our company. This is not like we're signaling any kind of shift in strategy. I would tell you, we've been very consistent on capital allocation since I've been in the job and even before, that our approach is to favor M&A first, then dividends, and then share buybacks. There's absolutely zero change to our operating mode. I'm expecting a very smooth transition. You can see that we have a whole quarter of overlap, and Bill's still going to be around in this community and available to help us as needed. I would tell you that you should expect more of the same from Stryker, and this should be a very seamless change.
All right. Thank you for that. As a quick follow-up, also, Kevin, from a big-picture perspective, I was wondering if you could kind of give us your sense for the outlook for hospital capital spending in 2016. What are you seeing from hospitals? Are you expecting any changes? Just wanted to get a sense for your view on the 2016 outlook for CapEx, especially since you're launching some new products into the market right now.
Thanks, Bob. Look, we see the market is very stable for capital equipment. You can see in the fourth quarter we had very strong performances on Mako selling capital. That's large capital. We also have a lot of small capital. Our instruments division did very well in the fourth quarter. We look at the market as being very stable. We're just embarking upon a launch of our new camera, the 1588, within endoscopy. They had a nice start in the month of December, and their orders look quite healthy going into the year. We're not seeing really any change, a very stable capital market.
Our next question comes from Mike Weinstein from JP Morgan. Please go ahead.
Thanks for taking the question. Good evening, everybody. Bill, my sentiments as well. Thanks for all your help, and enjoy your time away from Stryker. Let me ask a couple questions, guys. One question is the 5%-6% constant currency guidance for 2016. Obviously, you've by and large been running above that. Can you just tell us what you have baked in there for the emerging market performance? Obviously, you're still assuming a challenging emerging market environment for the year. Just want to get some sensitivities around it.
Yeah, Mike, in terms of emerging markets, which is in that 7%-8% of our total sales. China and Brazil are the biggest components, although we've been seeing nice growth in markets outside of that. We've assumed those markets remain challenging for the better part of the year. China as well as Brazil are difficult to predict given the macro issues surrounding them. We do benefit from easier comparisons as we get to the back half of the year, we assume the overall market there continues to be a bit of a challenge.
Yeah, Mike, I would say the emerging markets for us, we had similar performance in the fourth quarter as we did in the third quarter. We were slightly negative in terms of growth in our emerging markets, China, of course, being the biggest drag. For Stryker, we have a capital equipment business, especially the endoscopy division, that's quite big in China. That has a bit more of an impact than the disposables or implants on Stryker. We're expecting that to continue to be difficult, and that'll be a drag. It's early in the year, we're setting our guidance from 5%-6%. As you saw last year, we moved our guidance up during the year. If these conditions are not as severe, you could expect we would do the same. It doesn't change our outlook on our business.
We feel very good about our business, it's early in the year, we know that those markets are going to be challenged, we're just baking in some caution around those markets.
Understood. Let me just, 2 quick follow-ups relative to the guidance. 1, you started to talk about the Cost Transformation initiative in greater detail in San Francisco, and in the 2016 guidance, you're basically assuming no SG&A leverage, and that's part of it you're talking about reinvesting back in the business with the benefit of the MedTech tax helping the gross margin line. Can you just talk a little about where you're going to incrementally invest, if that will show up in SG&A, or will it all show up in R&D? 2, the acceleration of the share buyback, and acceleration maybe is not the right term, but you bought back more stock than you had been buying back in the fourth quarter. Can you just talk a little about what's in your 2016 guidance for capital deployment?
Yeah. A couple different questions there. The first 1 associated with kind of the margin rates and also the SGA area. We do and expect some modest level of improvement still in the broader operating expense category. The reinvestment is primarily taking place in both areas, but probably about maybe 20 basis points or so of an impact on the R&D-related side and the remainder kind of in the SGA area. I'd say that with the cost initiatives that we've got in place that you would've seen obviously better leverage there, but with the reinvestment, that'll slow that down at least this year. We should still be showing obviously some very solid gross margin rate improvement, and we should be getting good drop-throughs still into the operating income line for that.
As it relates to the buybacks, yes, we did jump that up to about $700 million in this year. As you can see, our cash has continued to stay very strong
We were able to bring back some additional cash. We have about $2 billion here in the U.S. at this point. As far as our guidance is concerned, we commented before that we've got the authorization out there. We expected to complete that over a 2 to 3-year period of time, barring any sizable acquisitions. Hopefully, as Kevin mentioned, acquisitions are absolutely still our first and foremost attention within that space, and we expect to be very active as we move forward, but those are all based on timing situations. That is still our number 1 focus.
Our next question comes from Rick Wise from Stifel. Please go ahead.
Hi, Kevin. Hi, everybody. Kevin, my first question would be on the operating margin outlook. Obviously, you're exiting 2015 at 27.4%. Maybe just comment, if you would, on your aspirational goals here. Is it 30%? Is it 35% over the next 2 to 4 or 3 to 5 years? Just talk about the magnitude and the durability of this seemingly long-tailed opportunity.
Rick, look, you know we only give guidance out for one year. We provided you guidance this year, which shows some pretty meaningful leverage on the EPS line coming off a year where we just delivered leverage. If we didn't have the $0.12-$0.13 a share of negative FX, we'd be giving EPS in the 10%-14% range. That's pretty meaningful leverage on a sales of 5%-6%. You should expect us to continue to drive meaningful leverage. That's the goal of the cost program. We've said before, there's significant opportunities in the hundreds of millions of dollars. As we drive those savings, if there's great opportunities to invest, we'll invest some of those dollars, and some of those dollars will fall to the bottom line.
I don't have a magical number, and I think it also depends on, as the years progress, what types of deals that we do and how that affects our margin profile. I think each year you'll expect us to give the kind of guidance we're giving you this year. Nice robust organic growth and a nice amount of leverage to the bottom line. I think I'll just leave it at that.
Okay. Katherine, maybe for you on Mako. Can you give us a little more color on your comments? You talked about increased demand for the hip indication. It seemed to me you placed a few more systems than we expected. Can you talk about the placements and the utilization and maybe where you are in the rollout for new indications and software? Thank you.
Sure. I think it really is reflective of completing year two of the acquisition. Working through the integration and really helping the combined sales forces to optimize their education around the features and benefits of our hip system on the robotic-assisted platform and getting out there and really detailing those benefits. It's a nice mix of both existing Stryker customers, but also new accounts that we're able to get into with the robots who are really pleased with the placements, as well as having a number of them outside the U.S. I would really just emphasize 2016 is about really working to make sure we are optimally set up for full commercial launch in 2017 for the total knee. We are not expecting any real impact from that this year. We have a lot of work to do to optimize the training protocol.
We're going to work with Key Opinion Leaders, both on the robotics side as well as KOLs with our Triathlon system to make sure we're meshing those observational studies to really fine-tune the training protocol. We have to train our own sales force, do the upgrades of the system. There's a lot of work to be done to make sure when we go into full commercial launch, we are set to really optimize that and have a presence at the podium. We'll continue to drive placements with the existing indications for 2016 while doing the necessary groundwork to really ensure we're in a great position in 2017 to take full advantage of the total knee indication.
Our next question comes from David Roman from Goldman Sachs. Please go ahead.
Thank you, and good afternoon, everybody. I wanted just to start with some of the investment spending that you're committing to through the P&L. Over the past several years, you've been very consistent with investing in your business, both SG&A and R&D, which has obviously produced this very nice top-line growth rate. As you look forward, as you continue to invest in the business, do you see opportunities to enhance the top-line growth rate beyond what you're performing today? Where are the most attractive areas of investment for you?
Well, I can tell you that I get a chance to travel around to all of our divisions over the course of the year, and I've yet to meet an R&D leader that has enough money to spend on new products. I would say that all the divisions have opportunities. There's clearly some areas that we would focus on a little bit more than others. You've seen our spine business really start to turn based on focused investments in R&D. We've had three great quarters in a row in the U.S. We still have to take a lot of those products outside the U.S. I would say that would be an area where organic development and spending is really paying off for us. You could expect more in that area. Sports medicine for us is a business that's growing very fast. It's relatively small within Stryker.
That's also an area of interest. Neurotechnology as well as extremities. I would say I picked those four right off the top of my head, but I would tell you we have a long list, and if my other division presidents are listening on the call, I know that they're preparing ideas for me as well. We'll obviously look at all the ideas and determine which ones we think can really provide value for us. We're not going to just spend for the sake of spending. A company as big as Stryker is with the decentralized focus, we're seeing that innovation delivers. I cited one example of 3D printing where I think we're seeing it have an impact on two different divisions of Stryker, our knee business as well as spine.
We have a huge lineup of other divisions With ideas and prototypes to get into 3D-printed titanium products. I would say those are the sort of top-of-mind areas of focus, but all the divisions are lining up, and we'll be very selective as we march through that. We'll share more as the year unfolds.
That's very helpful. On the capital spending side, the $400 million-$450 million, if you end up at the high end of that range, that would be almost a doubling from where you were, I think, in 2014. Could you maybe just help us go into a little bit of detail on where those CapEx dollars are going? How much of that are sort of the 2016 isolated in nature, and what the implications of this additional CapEx are to the rest of the business down the road?
Sure. I'd say that beyond just supporting the operations and the higher growth level that we've got in the company, there's a couple areas of specific investment. One is in the ERP transformational area, which is strengthening our global ERPs on a worldwide basis and reducing the numbers that we have so we're on a more consistent common system there. The second one is actually we're building a brand new state-of-the-art 3D printing manufacturing facility this year as well, too. We're spending some dollars, I think in some key potential growth areas for us, and we want to take advantage of that. This year is a little bit of a blip in comparison to what that normal CapEx would be.
Our next question comes from David Lewis from Morgan Stanley. Please go ahead.
Good afternoon. Just a couple of questions. One, Kevin, just to start off with the ortho market, I wonder if you could just comment on 2015, if you think about the underlying momentum in the market and your share position, how much relative share you may or may not have taken in '15, and how those dynamics, in your mind, compare to the outlook you'd see for '16, both in terms of how the market's going to perform and how you see shares shaking out.
Yeah, thanks for the question. Obviously, not everybody's finished reporting yet, so we don't have all the final results for 2015. We feel very good about the performance across our portfolio. Certainly, hips has been an area of strength for us for the past four years. We're very encouraged by what we're seeing in knees, as knees have started to pick up, and we've historically traded, the last three, four years, been in line with the market or maybe slightly below, and I think we're going to start to see a bit of over-performance there behind innovation and launching new products. We feel good about our position in those two. Trauma, of course, as you know, has been a standout for us for about four years, and we continue to launch new products and we continue to grow very well.
To us, the market seems very stable. We like our position in each of the categories. If you include spine within your definition of orthopedics, I would say that was an area that had been more troubled for us, but we feel we're on a very good path now. Across the portfolio, and I just had a chance to spend time at the sales meetings for orthopedics and spine, I can tell you they feel very good about our competitive position in a market that seems very stable. I think that we'll see more of the same in terms of volume growth, and we like our competitive position.
Okay. Thanks, Kevin. Just two quick ones. One, just Kathryn, just thinking about Mako for a second. You're now selling more systems than the target Mako ever did. I wonder, are you seeing any pushback on ASPs for the system around $1 million? In light of one of your competitors acquiring another competitor, specifically in robotics, do you expect to see some ASP pressure in 2016 or 2017? Then Bill, you sparked my interest on the 3D printing facility. Is this a facility that will be capable of doing 3D-printed full total knee and hips, or is this more sort of derivative products to the orthopedic process? Thank you.
Yeah. On the capital side, obviously, that's always going to be a conversation. You don't sell a $1 million capital easily, but I will tell you, we are selling $1 million capital. Those robots are sold. They are not placed. I think what we're doing is really leveraging the ability to offer different models. We talked about our Flex Financial, giving customers the ability to outright purchase or lease, depending on their needs. I think that's helping. It's really, I think, the difference between when Mako was standalone is we have a very large selling organization that over the last two years has really come to understand the features and the benefits.
The value proposition has only improved going from a uni, then to a hip, then to a hip with our hip systems on it, and now knowing a total knee will be coming, I think helps in that sales process as well. We are selling those robots, and I don't anticipate that changing in 2016 related to any competition that might be out there.
To the second part of your question was around 3D printing. We've launched, over the past few years, we've started with part of our knee system to enable cementless knee, so tibial base plate. We have this past year, in the middle of the year, launched revision cones with geometry that can only be made with 3D printing. We have a patella that we've launched that's 3D printed, and now we're just about to launch a 3D-printed titanium interbody device for spine. All of the products we've launched thus far that are 3D printed are all innovative, new products. In the case of the spine product and the cementless product, it allows for bony ingrowth because they're porous materials, and getting very good feedback from our customers.
For the foreseeable future, at least the next three, four years or so, our focus is really on innovative new products and not replacing our existing products with 3D-printed products. The pipeline of innovative new geometries that can't be made without 3D printing is the area of focus. It's not about trying to replace our products and drive down costs. Over time, 10 years from now, that could be the case, but in the near to midterm, it's really focused on innovative new products.
Our next question comes from Kristen Stewart from Deutsche Bank. Please go ahead.
Hi, can you guys hear me okay?
Yes, we can.
Yes, Kristen.
Okay, perfect. Bill, I'll reiterate, definitely congratulations on retirement, and we definitely will miss you. Just a question more strategically, I was just wondering if you feel good about the three main buckets that you have now, and whether or not, Kevin, you feel like there's any need to expand beyond that and get into any other white spaces at this point?
Yeah. No, Kristen, I'm going to be consistent with what I've been saying the past couple of years, is in our strategy is to stay within these 3 segments. We like our position in these 3 segments. We want to continue. If you look at all of our acquisitions, they've strengthened each of our businesses that we're currently in. Every year we do a white space assessment, and the white space assessment is not as attractive as staying within our segments. There are a significant number of targets within our segments. I know we only completed two deals. It was a little bit quieter year in 2015, I can tell you the activity level was no different in 2015, with a lot of deals being discussed.
I would expect us to continue along our current strategy and don't expect us to suddenly jump into a white space.
Okay. Just with respect to the neuro tech area, are there any notable clinical activities coming up or trial readouts, or can you speak to any new product pipelines or just things that we should be aware of that could help drive growth?
Well, yes.
Even though obviously it's been growing really well.
No.
sustain it.
Thanks, Kristen. We love this business and I would say our coiling and the ischemic stroke, we're in great shape and we're growing very well in those two categories. The one area for Stryker that is a slight gap is the flow diverting stent segment. We are selling that outside the U.S., we don't yet have U.S. approval. We are in the process of just completing up a trial, we'll be submitting for that, but we still have some time before that gets approved. That's the one area where we're not in. We're driving this terrific growth without being in that one segment in the United States. That's an ongoing process. We'll update you more towards the end of this year in terms of when that will come to market.
Our next question comes from Jason Wittes from Brean Capital. Please go ahead.
Hi, thanks for taking the question. It sounds like we should view the total knee coming out next year as sort of a transformational product. If I look into this year, can you maybe highlight some of the products that we should be focused on that will really drive that growth this year?
I would really look at it as across the board, very typical Stryker fashion, where it's more singles than doubles, whether it's Endo launching their new 1588 camera or Mako continuing to drive indications like hip with the new Stryker brands that we talked about, or Spine with their new products that are coming out 3D printed. It's really a story about those incremental, innovative new products. Usually, no one on its own is a growth driver. It's the totality of that offering that really allows us to sustain that organic growth at the high end of MedTech. Clearly, next year we're set up for some more impactful products when you think about Mako and the total knee and expecting to be on a clear trajectory of taking meaningful market share as we work our way through 2017. Ischemic is one more of those more transformational opportunities.
There's a lot of market development that still needs to take place there around the patient path referral systems, hospital intra-hospital transfer. We talked about that being a multi-year process, but clearly seeing some very good growth rates, but off of a still small base. I would really think about this year as a typical Stryker story. We've got a lot of products, a lot of momentum, dedicated sales force with a specialty focus that's really helping to drive that 5%-6% growth we're targeting.
Okay, very helpful. Just a quick follow-up for Mako. Can you give us a sense of how many of these new placements are to existing accounts, and how many of these are de novo? Just to get a sense of who's buying.
Out of the 31, we haven't broken out. I would tell you, though, that it is a combination of both existing Stryker customers as well as new customers where we haven't had any type of meaningful presence. We haven't given it with more granularity than that, but there is a nice mix.
Great. Thank you.
The next question comes from Matt Miksic from UBS. Please go ahead.
Hello, Matt.
Matt, your line is open.
Sorry about that, guys. Thanks for taking our questions. Super job on the numbers it looks like. I'll pass along my congratulations and farewell to Bill. We will also miss you. On Mako, just a couple of maybe broader questions on how you're positioning the platform. Robotics has been kind of a market development project for a while. Oftentimes, dealing with surgeons and helping them get more comfortable with using the technology and maybe changing the way surgery is done over the long term. What point does this become or has it already become an opportunity to drive better contracting for you across your implant lines, greater share or utilization, multi-line contracting, driven by the merits of the system and the technology? I have a couple of quick follow-ups.
Matt, I would say, look, we're still in the early stages. The Stryker hip brands are now just available recently. We haven't launched a total knee yet. I think those are the big applications. To say that it's impacting contracting yet, I would say it's too early for that. Once this becomes a more mature business, which will take a couple of years, I think, obviously, having a system that the surgeons are having a great experience, and they enjoy it, and they want to use the products, it really does provide us with great differentiation, and differentiation will show up in many different ways, including potentially in contracting. We're a way from that yet. We have a lot of work to do in the next couple of years to really gain a more broad adoption of the technology.
Another on the same topic here. Katherine, someone asked earlier about hips and what's changing and how you're improving in performance there. Put that in perspective. I remember when hips came out and when you first acquired the system. It wasn't generally thought to be really where the bang for the buck was with the robot. I guess, what's changing? Does application get a lot easier? Are they proving out the benefits of the hip? What's driving uptake in against what was historically viewed as sort of a not the greatest application for the robot?
Okay. I'll take this question. When I tell you the first iterations of the hip software were a little bit clunky, and it requires quite a bit more registration time. You have to register in the software system, so that's just an extra step that some of the surgeons were a little bit frustrated with. Over time, both prior to our acquisition and subsequent to our acquisition, we've made some enhancements of the software to make it a little bit more user-friendly. That's been one factor for sure. I think the most compelling factor is showing the surgeons on the pre and post x-rays that they put the hip exactly where they want to put it. I think even those surgeons that had some hesitations when they see the pre and post x-rays, it's a very compelling visual for them to understand. Before they weren't doing that.
They weren't able to get that same type of consistency, and that's starting to resonate with a lot of surgeons. Now being able to put our implants, in addition, with easier-to-use software and to get that kind of outcome, it's like all things that change, right? Change doesn't occur to everybody at the same time. Some people are early adopters. Some people, frankly, will never adopt. They'll just be set in their ways. What we're seeing is the middle of the bell curve is starting to shift its mindset. Frankly, the more that robotics is talked about in the community at large, we find that actually a very positive thing because we really believe we have a terrific system, and we're obviously continuing to invest in that system going forward.
Our next question comes to Joanne Wuensch from BMO Capital Markets. Please go ahead.
Good evening, and thank you for taking the question. I have two questions. The first one has to do with 3D printing. We became quite aware of that a couple of years ago. You're definitely doing a bigger focus on that. What does it take for a 3D-printed, call it hip or knee, to become more mainstream? Is it manufacturing? Is it clinical data? How should we think about this evolving?
Well, it's a long answer, Joanne. The reason I pause is to get into all the technology on 3D printing would take a long time. The quick summary is that 3D printing metal is very different than sort of the way you think about 3D printing plastic, having it on a desk in an office and cranking out 3D-printed products. Metal is much more complicated. It's explosive. It requires a lot of extra programming. You just don't buy a machine and sort of just off to the races. It's a lot more complicated than that. We've spent a lot of time. We've been working on this for many years. We have a lot of know-how on how to program the machines and optimize the machines.
There's a lot of factors that go into it to be able to create, and different types of machines work better for smaller products than larger products. It's difficult for me to just summarize in a short time. I just say that it's more complicated than plastics or other things that you read about in the mainstream press. That's why for us, our focus is much more on innovative new products and not necessarily replacing total systems. That'll be many years ahead of us.
That's very helpful. As a follow-up, what should we expect at the upcoming AAOS? Thank you.
Yeah, Joanne, I think it will be typical to prior years. Clearly, there's going to be a big focus around Mako as we think about uni as well as hip. It's too early in our initial commercial launch activities to have a big focus on user feedback from total knees, although I'm sure there'll be a lot of surgeon presence around that as they're looking to get educated on the features and benefits. We'll have a tour of the booth, as we've done previously, to highlight new products across all the businesses, from trauma, foot and ankle, spine, et cetera. We'll also have an opportunity while we're there just to sit down and meet with management and have an open Q&A forum.
The next question comes from Raj Denhoy from Jefferies. Please go ahead.
Hi, good afternoon. I wonder if I could ask a question about the CJR or CCJR program that's rolling out. I think you guys have been pretty clear, as all the companies have, that you don't think it's going to have much impact on pricing, and it's all going to be focused on the post-acute care, which pretty much mirrors what we're hearing as well. My question is really around how Stryker interfaces with that model. In your Performance Solutions business, you guys were involved in some of the bundled payment initiatives before. Is there an opportunity for you guys to perhaps benefit from the CJR program as it rolls out?
Yeah. We agree with your comments. We don't think it's going to have a meaningful impact. We have seen it pass with some of the prior programs. It really does drive a focus on post-acute and patients that are discharged right to rehab, given the high cost there. We do have a small business, our Stryker Performance Solutions, that we think can help work with hospitals to help them make them aware of the data so they can have a sense of what best in class is and where some of the cost benefits they can realize, whether it's around infection rates, transfusions, et cetera. It's not a huge part of our business, but it is one that provides insights and does help them as they think about their overall cost structure.
Clearly, we continue to believe, based on everything we've seen, that it's going to be post-acute care. We haven't seen any meaningful change at all in price between those trial areas as it relates to implant pricing. Really, the cost savings they can realize focusing on rehab really do dwarf anything else at this point in time.
Right. Maybe just as a follow-up, if you think about that service offering, if that's the way to describe it, which Stryker Performance Solutions certainly does some of, as you think about the next several years, do you envision that service component becoming a bigger part of the business, offering not just implants to hospitals, but perhaps something a bit broader?
Yeah, that division is continuing to focus on that. It's not a huge part of our company. I think we see the CCJR as a terrific example and opportunity for us to grow that business. It's not at a scale at which I really want to start highlighting it. I would tell you a year from now, I think we'll have a much better idea of the scope of CCJR and whether that can become a broader business for us. Services is not something new to Stryker. A lot of our MedSurg business provides services to hospitals. We have people in the hospital that our customers pay for to make sure that all their uptime is working on their equipment. We're not against services at all. We don't like to get out in front of ourselves.
Let's see how this year unfolds, and if the business becomes something that could be scalable, then we'll talk about a lot more. Right now, it's a small part. I agree with you that CCJR does provide an exciting opportunity for that business. It's a very small part of Stryker.
Our next question comes from Larry Biegelsen from Wells Fargo. Please go ahead.
Good afternoon, guys. Thanks for taking the question. I wanted to start with M&A. About a year ago, Kevin, you said you expected to put the balance sheet to work, I just wanted to confirm that that's still the case. I'm asking because obviously you've been relatively quiet on the acquisition front over the past 6-12 months, which is atypical. Is there any reason you haven't pulled the trigger on more deals? I had one follow-up. Thanks.
Sure. I would tell you just, look, deal timing is inherently unpredictable. There is absolutely no change in the statement I made before. I still intend to put the balance sheet to work. The reason we got the extra share buyback approval level was just in case deals don't get over the line or drag on for extended periods of time, we would start to step up the buybacks. You should expect us to continue to be a very active acquirer. You've seen in the past, right? Sometimes some years there's one or two deals, and other years you see many more deals. Our level of activity hasn't changed. I still see many exciting prospects out there. We're staying the course with the existing strategy.
Earlier you said that in Q1 you would expect to be at the low end of the 5%-6%, I think, constant currency growth rate because of what you're seeing in emerging markets, you expect emerging markets to be relatively weak throughout 2016, I believe. My question is, does getting the growth rate up above the low end of the range, does that depend upon an improvement in emerging markets? If not, how do you get that growth rate up? Thanks for taking the questions.
Yeah, I would just comment that if you look at the cadence of quarters last year, we had some difficult comparisons in the first quarters that related to emerging markets. More of the pressure, particularly in China, unfolded as the year went on. We're going to have easier comps in the back half of the year. We tend to have a seasonally stronger second half of the year, particularly as it relates to the fourth quarter. It's more just reflective of how our quarters tend to play out in some of the year-over-year comparisons.
Our next question comes from Glenn Novarro from RBC Capital. Please go ahead.
Hi, thanks. Kevin, your U.S. hip and knee business had a strong fourth quarter, up 6% and 9% respectively. Did you see in the fourth quarter the U.S. orthopedic market accelerate or pick up a bit, or do you think that was more share capture from Zimmer, given the integration between Zimmer and Biomet? Then I had a follow-up question on robotics.
Yeah. Look, until we see everybody report, it's really difficult for me to say how much of it is the market versus competitive share capture. The knee number we're very encouraged about. We tend to believe our knee improvement is more driven by the new products, the revision cones, and more of uptake of our cementless knee offering. We believe that's more of the issue than what's called sales force disruptions or any other factors that are occurring at other companies. This is more about our innovation. When I talk to our field, the sense I'm getting is a very stable market. A few years ago, we saw this big seasonal fourth quarter lift. Now we're seeing a typical fourth quarter. This December was more or less typical. It's more active, but it was more active a year ago, too.
We didn't see anything major from quarter-to-quarter, you do sometimes see slight upticks or downticks, until they report, it's going to be difficult for me to comment. I think you had a second question?
Yes, Katherine, in your prepared remarks, you talked about with the Mako system podium presentations in 2016. Can you describe what type of presentations? I'm assuming these are clinical trials. What type of trials, and when can we see these trials being presented? Thank you.
Yeah, my comments were that we were going to do observational studies in 2016, really looking at Key Opinion Leaders who have extensive experience with robotics to understand how we can fine-tune a training protocol and optimize the rollout. We're also going to be doing observational studies with Key Opinion Leaders who have a lot of familiarity with the Triathlon system we can mesh those two data sets and really put us in a position to have a presence at the podium in 2017, not 2016. We think combining the full commercial launch and being in a position in 2017 for those initial users, those Key Opinion Leaders, to talk about their experience and how they were able to optimize both the robot as well as our Triathlon will help drive the adoption.
We're going to continue to collect additional clinical data, that is going to take a number of years. This is really focused around observational studies to help optimize the training protocol.
Our next question comes from Mike Matson from Needham & Company. Please go ahead.
Hi. Thanks for fitting me in. I guess I just wanted to start with the new camera at the endoscopy business. How does this compare to the prior model? Is it more of an incremental improvement? Just in terms of the impact on the growth rate there, do you expect that to be more of a step change or more of a ramp in terms of the growth at endoscopy? Then I have one follow-up.
No, the 1588, each time we have a new version and we call it, the last one was 1488, as you know. Now we're calling it 1588. AIM is the name of it. I would say it's meaningfully better. Certainly 1488 had terrific resolution, but we've improved the backlighting and some of the image clarity for certain procedures like ENT. Our product works well in a wide variety of procedures, but there are certain procedures where the lighting just wasn't quite as optimized, and we made some nice enhancements there. Across the range of procedures, surgeons are all going to have a delightful experience, whereas in the past, it was not necessarily across every specialty. That's the first thing. The second thing is we have ICG built into our light source, which we've never had before.
With the press of a button, you can light up the organs. I'm sure you're familiar with ICG with a competitive product out there, but this doesn't require an extra piece of capital. It's built right into the existing light source, easy for the surgeons to use, which is wonderful. It also includes another product for GYN that lights up parts of the anatomy, too. It's really a safe surgery launch. It enables safe surgery with enhanced visualization. We just launched it in December, we don't have a huge amount of sales yet, I would say the early clinical feedback has been very positive. I do expect endoscopy to have a better year in 2016 than they did in 2015.
Okay, thanks. Just with regard to this big ERP project that you have, what's the execution risk there that some balls get dropped in terms of the inventory levels and things like that and causing an impact on your overall results for the company? Thanks.
Yeah. Like with any system implementation, there's always some degree of risk. We're being very thoughtful and careful about how we go about the project. We're staffing, we're putting our best people on it. They're in a dedicated workspace. In fact, my former head of HR, who also has run businesses, is going to be leading the business component of that, and I've appointed a new head of HR. That sent a terrific signal through the organization of the kind of commitment we're making. It'll be a measured launch, so it'll take a number of years before complete. We're starting off with our instruments division, and we're going to continue. We have a steady march planned. We have an IT leader who's partnering with the business leader who had a previous large MedTech company doing exactly this kind of an implementation over the past few years.
We believe it's all about talent, staffing the right people who know our business, and we're going to do our best, obviously, to mitigate the risk. We had a painful experience in Japan a couple of years ago. I can tell you the approach to this project is radically different to the approach we used in that project. We feel we'll be in good shape, and it's not a big bang launch. We're going to do division by division, region by region, and there'll be a steady cadence. Even if something does start to wobble a little bit, it should have very little impact.
Our next question comes from Matt Taylor from Barclays Bank. Please go ahead.
Hey, thanks for taking the question. Can you hear me okay?
Yep, we can hear you.
Great. I was just wondering if you could follow up on some of those comments on 3D printing and just talk about the materiality of the contribution in the quarter and what you expect now that you're going to be investing more in this new plan. How big is it and how material could that be?
Yeah. For the moment, these are innovative products that are adding, I would call them incremental growth. It's not the core growth. The core growth is our big systems. Our Triathlon, our Accolade. That's where the core amount of our sales comes from. This gives a little extra boost and puts a little bit of jump in our sales force step, gives them something new to talk to their customer about. As an example, our revision business lagged, our market share lagged our primary business in knees by about five or six market share points. Even in a Stryker friendly account, sometimes they would go to a competitor to do the revision procedure. Now that we have what we consider best-in-class revision cones, not only do we keep that business, that surgeon stays with Stryker.
We gain that sales, they now have something that they can go talk to a competitive surgeon about. I would say it's not a huge contributor, but it's an extra shot in the arm. With robotics and 3D printing, we believe we have the lead on both of those areas, and those are things we can talk about that differentiate us from our competition. Again, even today, robotics is not a huge component of our growth or our actual dollar sales, but we believe they're the ones that are causing that extra piece of growth and a different view of Stryker for the future. Over time, I expect robotics and 3D printing to take on a more important portion of our overall sales, and they'll be sustainable and sticky if we have something that the competition doesn't have.
Okay, great. Just one question on the Transatlantic Operating Model. It seems like you're making some progress there. Can you talk about where you are and how much that's helped to improve some of the OUS results and where you think that could go?
Yeah. Look, Europe has exceeded my expectations. Our international growth doesn't look fantastic, you don't see it. Europe had a mid-single digit growth year, and it improved progressively from the first quarter to the fourth quarter. That kind of uptake is frankly ahead of where I expected it to be. It's been masked a little bit because of the sluggishness out of China. That has dampened our international sales, but it's been a really great success. I'm excited about what I'm seeing across our businesses in Europe. Some of the divisions took off faster than others, like trauma, extremities, and endoscopy took off really quickly. Now I'm starting to see some nice uptake in instruments and spine towards the end of the year. More to come in Europe. We made a number of investments over the course of the year.
Those investments are now taking hold, I think you'll start to see Europe become a division that delivers better top line and starts to deliver some leverage going forward. We've added Canada, those are now directly managed. A division president has direct P&L accountability for Canada, the U.S., and Europe. The other regions we haven't yet folded into the model, but by eliminating the group president of international role, we now have them reporting directly to our business group presidents. It just increases speed and connectivity from our regions to come straight to a group president. Over time, we'll see whether those countries will roll into this model, but we don't want to run too fast to fully integrate complete global business units, especially with markets like China that are so different or Japan. We're very pleased with the progress so far.
Taking out that position was nothing about cost reduction. That was 100% just to increase speed and connectivity of those countries to our businesses.
Our next question comes from Matt Keeler from Credit Suisse. Please go ahead.
Hey, guys. Thanks for taking the questions. Just two quick ones. First, on hips outside the U.S., you highlighted the drag from emerging markets, your knee growth actually picked up pretty nicely. I'm just wondering if there was a much more pronounced impact from that emerging markets drag on hips relative to knees, and if there were any other factors that impacted your hip business outside the U.S.
No, nothing particular. You see this from quarter to quarter. Sometimes you'll see hips jump. In the case of hips, Canada as an example, there was a hip tender that we lost. That accounted for some of the hip growth. There's not one sort of overriding factor. It's sort of a story by story, country by country, we see this from quarter to quarter. Sometimes you'll see knee-- our business is not as big outside the U.S., you do see a little bit more volatility in our numbers, whether it's hip, knee, spine. Once those businesses get larger, you should expect that there'll be less volatility.
Great. Thanks. Just lastly, instruments growth was pretty strong in the quarter, I think you've highlighted that that business is later on in its product cycle. Just wondering if you think the level of growth we saw in the fourth quarter, if that's sustainable going forward, and what are some of the sort of the products to watch where you may be a little later on in that product cycle?
Yeah. The power tools is the product that we refer to as being late in the cycle, the System 7 power tools, which is probably the biggest single product category within instruments. Instruments has a lot of other products. They have Neptune. They're launching a new Signature line of drills. We actually report that as part of the Neurotechnology, but it's run by our instruments division. Yes, they have the sponge counter as well, patient safety company that we acquired. These are different kinds of businesses that can drive growth. It's a little less predictable than power tools. I think we're very excited by how they finished the year. They finished the year very strong, and we think they'll have a good year. Being longer in the cycle, sometimes we do see them tailing off a little bit.
I would expect a year that's similar to the year that they had this year overall.
Our next question comes from Richard Newitter from Leerink Partners. Please go ahead.
Hi. Thanks for squeezing me in. Kevin, I was hoping I'd just get some comments on spine. You characterized the market as stable, and you're clearly seeing some nice uptick in the growth rates there. You have some new product launches. My question really is, has there been any change, or can you give us your updated thoughts on how you view kind of external versus internal investment in this division for you now that things seem to be on better footing?
Yeah. I'm really excited by what we're doing organically. We've retooled our R&D organization, some of our marketing organization over the past few years, and this business is hitting its stride. We're launching more and more new products. We're getting into MIS, which was an area that we were softer in before, if you look back three, four years ago. It's great to see the organic growth. Organic growth obviously is much more financially attractive than going out and spending a lot of money on companies. Over time, I do want this to become a bigger division, and I think you'll likely see a combination of both organic and acquisitions. It's always better to have a strong organic business.
I do not feel at all that I need to do an acquisition because of the strength and what we've started to build internally. That's something that will likely happen over time.
Okay, thanks. Just on extremities, again, your foot and ankle growth, I think you said it was 20%. This business continues to truck along. Any comments on kind of the end markets versus potential share gains that we might have seen in the quarter? Specifically, are you seeing any disruption from recent M&A in the field? Thanks.
Yeah, I would just say these are markets that continue to be very healthy, growing double digits. We do believe we're taking market share. We've got a dedicated sales focus there, some great products, and I wouldn't call out any disruption that we're seeing in the marketplace. I think it just continues to be really good execution in a market that has favorable underlying growth dynamics.
Our next question comes from Josh Jennings from Cowen and Company. Please go ahead.
Hi, good evening. Thank you. Kevin, I just wondered, hoping you could touch on pricing. I think recently you had some public commentary about some potential moderation in the pricing headwinds that you've historically been experiencing. Any comments in terms of assumptions for pricing headwinds within guidance, then any outlook for pricing, particularly in orthopedics?
Yeah. You saw for the full year, our price did moderate somewhat from the prior year. There was a lot of concern as we exit. If you remember, as we were exiting 2014, there was a lot of concern that pricing was going to accelerate in 2015. In fact, it hasn't. It actually moderated a little bit. It's modest, right? The moderation is very modest, and in our guidance, we suggest that the price will be between 1.5%-2%. I would say it's a stable market. We continue to have price pressure. It's not going away, but we don't see any accelerators to that price pressure, and that's why we feel it's going to be pretty stable going into 2016.
Great. Just one follow-up on Mako. We haven't heard much over the last year on the Uni knee product. Any commentary there in terms of how it's contributing to growth in your knee franchise and just overall growth for that product line? Thanks a lot.
Thanks. Obviously, the Uni market, when it's put into context of overall Stryker, it's a very small part of the overall business. I would say it's a steady contributor, but there's nothing remarkable to say about it. It's a good business, but it's a very small part of our overall knee.
Sorry.
I have to say, were you talking, Josh, specifically about for Mako?
Oh, he got cut off.
For Mako, it's a first indication, and they're continuing to drive uptake for that as well as with hip. As we get additional indications, I think it does help drive adoption as some customers were not interested in just the Uni. As we get more indications, they're starting to adopt for that as well as the others.
I'm just trying to interpret. Sorry that Josh got cut off. Just interpret that the growth to 9% in the U.S., that spike in growth, it really wasn't driven by Mako Unis. That's driven more by the broader knee business.
Your next question comes from Matthew O'Brien from Piper Jaffray. Please go ahead.
Afternoon. Thanks for taking the questions. Just quickly on Mako again. The number of systems you placed internationally accelerated here in Q4. Was there anything that you could call out as far as maybe a little bit of a tipping point in terms of interest in the robotic system, OUS, and maybe that could be an even more meaningful contributor here in 2016?
It's still the lion's share of the focus, and the revenue is coming from the U.S. We did place more systems outside the U.S., and we'll continue to focus on those opportunities, particularly places like Australia and certain other markets. The bulk of the revenue stream has been and will likely continue, at least near term, to the U.S.
It tends to be a country-by-country thing. Australia had a terrific year in robot sales. I think within Europe, we're going to see certain countries are going to adopt Mako much more quickly than other countries. I think each year you'll see the international volume starting to increase, but it might be Italy this year, it might be the U.K. next year, over the next few years. Again, to Katherine's point, the market that's the most important by far is going to be the U.S. market.
Just to follow up a little bit on Rich's question, a little more broadly on trauma and extremities. I think we saw some acceleration here in Q4 beyond what we've seen over the last several quarters, and I'm curious if that acceleration was specific to any couple of products or geographies around, particularly the U.S., and if that level of growth is something that you think is sustainable here in 2016.
I think you've seen our trauma business in the U.S. It's been four years of really terrific growth. That to me is sustainable when you are growing at that level. We're very pleased. We've rounded out our portfolio completely, and so that enables us to do complete hospital conversions, something that was impossible at Stryker five, six years ago. Europe really picked up quickly. As we moved to the Transatlantic Operating Model, I was very encouraged by our trauma success in Europe. We have not been nearly as successful in Europe as we have been in the United States, and we do now have the same products, which are all approved. I expect more commercial success in Europe as well as Japan.
Some of those products take a little longer to get approved in Japan, I think that once those products start to arrive, we'll start to see more of an uptake in Japan as well. I would say We're in very good position in that business. We have a very strong leadership team, and we expect to continue to have success in trauma extremities.
Our next question comes from Jeff Johnson from Robert W. Baird. Please go ahead.
Thank you. Good afternoon. Bill, just want to say best wishes. I was looking back this afternoon. I think it's been 14 years that you and I have overlapped, thanks for all the conversations, all the help over that time. Kevin, just wanted to ask one question, one follow-up question here, just on the phasing or maybe gating of some of the med tech tax savings. Is there going to be any timing differential between when the med tech tax savings start coming in and influencing the cost of goods line versus when you start reinvesting those dollars back into SG&A and R&D? Should those match up pretty evenly on the P&L or just how to think about the gating throughout this year?
I think that that's fair to say, Jeff, thanks a lot for your comments. I think that on the cost of goods sold category, obviously that'll start right off in the beginning of the year. Our investments as we are targeting right now, moving again through 2016, we would also expect to be doing that reinvestment pretty much consistently throughout the year.
Yeah. All right. That's all I have. Oh, sure.
Yeah, sorry. It's going to be clean from the beginning of the year, from the beginning of this year to 2017. It starts immediately. There's no lag effect, which I think had happened prior with a different company. For us, it's clean. You'll see it cleanly in the two years.
Got it. Thank you.
Our next question comes from Steve Lichtman from Oppenheimer. Please go ahead.
Thanks, guys. I actually just have one follow-up on ERP. You talked about the investment on the capital side. Are there any P&L impacts that we should expect over the next couple of years as you start to implement ERP? When do you anticipate the system being fully in place?
A couple different questions again there. On the ERP side of the equation, from an investment perspective, we won't see the first implementations really for about another year and a half or so, and then those will be rolled out over the next few years after that. As far as the cost side of the equation goes, we would not expect that to be a big blip once we get to kind of the stabilized level that we've got kind of in 2016 here. Moving forward, in fact, if anything, as those systems are implemented, we would expect some of the benefits. Plus with the CTG initiatives that we've got kicked off, those will continue to roll in at different points throughout different years. We do have multi-hundreds of millions of dollars targeted for that.
Keep in mind as well that we have price downs in the $150 million-$200 million range that we need to be working to offset. As far as the impacts associated with the investment, again, that should be pretty consistent as we're moving forward beyond 2016.
Yeah. Just to add to that, I would say we do have some expense that will be hitting our P&L, we're absorbing that within the guidance that we have provided to you.
Got it. Thanks. That's all I had. Thanks, guys.
Thank you.
Our next question comes from Kaila Krum from William Blair. Please go ahead.
Hi, guys. Just a couple quick ones for me. The first, clearly you all are still emphasizing M&A as a key priority herein. I'm just curious if you can touch on how or if those conversations have changed tone, just with some of the valuation pullbacks specifically that we've seen in recent weeks.
Yeah, I would say that shorter time period doesn't have an impact, and as Kevin articulated, we continue to be focused on M&A externally. There's going to be periods where it looks more or less active depending on timing. Internally, the teams have never been busier, and there's no change in the strategy, and the recent market disruption is what it is.
Okay. I guess just to follow up on an earlier question just around whether or not there's this potential for longer term growth rates to accelerate. Just pairing that with your earlier comments about Mako and the likelihood that 2016 is more of a setup year for 2017, is it fair to assume that overall top line growth could modestly accelerate heading into 2017 from 2016 levels?
It's always our goal to grow sales at the high end of MedTech, and certainly we've got some nice opportunities between ischemic and Mako, but they're going to be in the early stages next year, so probably premature to start to push towards higher growth rates than this year. We feel really good with what we've set up for this year and hopefully can build on that in 2017.
Yeah, and I think we're going to learn a lot. I think towards the end of this year, we'll be able to share more of the two additional platforms, both Mako and ischemic stroke. Those are the ones that I think can provide, let's call them change of trajectories and growth for the company. Whether that happens in 2017 or 2018 or 2019, they're new platforms, so it's not easy to predict, but I think we'll learn a lot over the course of this year and certainly be able to share more with you when we provide our guidance in the following year.
We have no further questions at this time. I'll now turn the conference call over to Mr. Kevin Lobo for any closing remarks.
Thank you all for joining our call. Our conference call for the first quarter 2016 results will be held on April 20th. Thank you.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.