Please welcome Vice President of Investor Relations, Jason Beach.
Thank you. Well, first off, welcome. Wow, what a turnout here in Mahwah, New Jersey. If you remember, you go back a couple years ago, the last time we did this, the environment was a little bit different, so the turnout looked a little bit different. So appreciate making the effort to be with us in person. I think it's gonna be a lot of fun today. Thank you to those on the webcast as well for joining us. So let's jump into the agenda here. You can see we have a variety of topics with a variety of speakers. I think we'll cover a lot of ground this afternoon. And then towards the end, I'm gonna point at one piece of the agenda here.
You can see at the very bottom, there's a product demonstration and cocktail session for those that are in person. So we'll get done here, we'll end Q&A, we'll go over to the Homer Stryker Center. We have most of our division presidents here as well, so that'll be an opportunity for you to spend some time with them as well in person. So I'm gonna throw up the disclaimer here, and then we'll get rolling. I'm not gonna read it to you. As you can imagine, there's gonna be some forward-looking statements as we go throughout the day today, as well as some non-GAAP financial measures. So with that, how about we get into it? I'd like to introduce to the stage our Chair and CEO, Kevin Lobo.
Welcome to Mahwah, New Jersey. We're very excited to share our outlook with you about the future. Equally important, to get you to see and get you, give you exposure to our amazing talent. You're gonna hear from many people from the stage, but you'll also get a chance to interact with all of our people at the Homer Stryker Center afterwards. Last month, I completed my eleventh year as CEO of Stryker. Time flies, for sure, but I can honestly say that I've never felt more optimistic about our future. Now, obviously, this comes on the heels of a pandemic and a supply chain crisis, so obviously, things feel a lot better now. But honestly, if I, if I step back and look at our product pipelines, they've never been stronger.
If I look at our international opportunity and how poised we are for the future, never been better. So like I always like to do, start off my presentation with our mission and values. We launched these 10 years ago. Not a single word has changed. Everybody starts our presentations with this. It's on all the walls of our building around the world. One thing we did add was the gold color. So we did not have a color, if you recall, Stryker, 10 years ago, didn't have a color. So nine years ago, we added the gold accent color, which you see all over the stage. If you go to our booths at Academy or any other meetings, you see the gold color. So that is our master brand accent color. So 10 years ago, the mission and values, nine years ago, the gold accent color.
This is our company strategy. It really has evolved a little bit over the 11 years. We've made certain changes. We have the customer focus more prominent than it was before. But since the last time we had an Investor Day, not a single word has changed on this slide. So it changed about six years ago, it changed again about four years ago, but this is a winning strategy. This category leadership approach is a winning formula for success. These pillars are the pillars that are helping drive our strong performance, both on the top line and as well on the bottom line. This is a really interesting slide here. If you look at our organic sales growth, if you recall, back in 2011, 2012, we were growing around 4% a year, then we moved it up to 5%, to 6%, to 7%, to 8%.
Of course, we had the pandemic. Then if you look at 2022, we grew 10% organically, and this year, again, we're gonna grow a little over 10% organically. Two years in a row of 10% organic sales growth. This is not what you normally see. As companies get larger, normally their growth slows down. So I think we are defying the odds by accelerating our organic sales growth as we get larger as a company. Equally interesting is if you look at how much growth was that delivering for the company back in 2011, 2012, it was about $300 million. Now, that growth is about $2 billion. That's the strength of the size and the growth engine. It's contributing tremendous amount of growth in percentage terms, as well as dollar terms.
Just kind of doing a before and after picture from 2013 to 2023, we were around $9 billion in 2013, growing at 4%. We had 14 business units. Fast-forward to 2023, we now have 22 specialized business units growing 10%. So we continue to specialize, continue to increase that focus on the customer, and that is the formula for continuing to drive very high growth, is continuing to specialize, continuing to get into faster-growing spaces. When I joined Stryker and became CEO, we were largely considered a hip and knee company. We have Don Payerle sitting in the front. He loves that, that we're considered a hip and knee company, because he's the President of Joint Replacement. We do love our hip and knee business, but to be honest, we weren't a hip and knee company back in 2013.
We're even less of a hip and knee company in 2023, as hips and knees represent 9%-only 19% of our business. Just something that I don't think people fully understand. You can do the math yourselves, but I think just the, the history of the company kind of tends to lead it, people to think of us in that context. I just wanted to put a spotlight on that. Lastly, if you look at capital allocation, we had a very balanced approach back in 2013. Balanced meaning we did buybacks, we had dividends, and we had some acquisitions. We clearly shifted our focus towards first use of capital, doing deals, and we've done over 50 acquisitions in the last 10 years, and that will continue to be our first priority for capital, doing deals.
Now, obviously, we've been in a bit of pay down debt mode, but we are really excited, and Glenn will talk about that a little later on, getting back on offense on acquisitions. Now, just putting another slant on this diversification of what's occurred in our company. If you look at these two pie charts, 2013, 2022, you can see how much our business has changed, and through that change, we've intentionally gotten into faster-growing spaces. So we are now exposed to faster-growing markets than we were back in 2013. Look at Medical. Medical was 8% of Stryker's revenue in 2013. It is now 16% of our revenue. And when you think about Medical, there are three business units in Medical.
You have acute care, which has now moved from low single-digit end markets to mid-single-digit end markets through the Vocera acquisition, giving us exposure to a much faster-growing part of the market. You look at emergency care, that's a high single-digit grower. That includes our Physio-Control defibrillator business, as well as the powered cots you see in the back of the ambulance. And then you have Sage, which is also high single-digit end markets. And of course, as you know, with Stryker, we perform a little above our markets, but we now are exposed. The medical division is a big division. It's also very fast and participating in a fast-growing segments. That's been a big transformation. If you look at 16% of sales, it's not that far away from hip and knees, if you look at the hip and knee at 19%.
This year will be the fourth consecutive year our medical division is growing double digits on the full year basis. So that is very different than it was in 2013. Extremities, obviously, a huge acquisition of Wright Medical, wildly successful acquisition. You have Tim Lanier sitting over here, who led the upper extremities portion of Wright and is now our Trauma and Extremities overall President. But that's increased from 12% of our business to 15%. More importantly, we have turbocharged our presence in lower and upper extremities, which are high single-digit end markets. So again, more exposure to faster-growing markets. People always ask me: How durable is your sales growth?
Well, I think if you look at the chart going from 4% to 10%, and not only the chart, not only what you're going to hear about our talent and culture, our 22 business units, but we are now participating in faster-growing markets than we used to participate in. And then you look at neuro. We had this big bucket called Neurotechnology at 10%. We've now divided it up into neurocranial and neurovascular, given how fast it is, and now that's at 14%. Those are, again, faster-growing markets than the traditional implant businesses. So this is a portfolio transformation that's occurred very intentionally, largely through acquisitions, but also through internal innovation. So overall, if you look at our end markets, they're roughly mid-single-digit growth end markets. Later tonight, we're going to post on the website our market outlook by division and by business.
For all of our 22 businesses, you'll be able to see what the TAM is for each of those businesses and for the next three years, whether we expect the market to be low single digit, mid single digit, high single digit, or double-digit growth. And as you look through that, you'll really understand clearly why our exposure to these markets positions us extremely well to sustain the kind of high growth you've become accustomed to. So again, that'll be available online later tonight. And then the last point on this slide talks about international. Significant opportunity for us. It's only 26% of our sales, but we've now built some muscle, and you're going to hear about that later today with the international panel. Big opportunity, multi-billion dollar opportunity in international. So here's how the day is organized.
So we're going to start off talking about our talent, our culture, our structure. We're going to have a number of presenters talk to you about organic growth and inorganic growth through M&A. We have the international section I just referenced. And lastly, we're going to focus on driving growth and profitability, and that's in Glenn's section, where we're laser-focused on improving our operating margins. I can tell you, he'll give you the details, but just to tease you a little bit, we're going to have accelerated operating margin expansion in 2024 and 2025, and then starting in 2026, you'll see kind of a resumption of a more normal cadence. But there will be an acceleration, and those details will be forthcoming. So with that, I'll turn it over to Katy. Thank you.
Thank you. Hi, I'm really excited today to get time with you to talk about some of the elements of our organization that are truly differentiating. So as I'm sure you've heard many times, our structure, our talent, and our culture are some of our secret sauce here at Stryker and are really foundational to our belief in continuing to grow. So every day, we have over 51,000 employees that show up to deliver for our customers in over 75 countries around the world. And we have the pleasure of being able to positively impact over 130 million patients every single year. These people, this talented group of highly mission-driven employees, show up to do this in a very specialized structure, as Kevin just talked about.
So when you think about our structure, our ability to really deeply understand our customers' needs is driven by and grounded in these focused, specialized commercial teams that are dedicated to our 22 business units. This unique structure allows us to very quickly identify innovation opportunities, and then it builds this engagement and collaboration within the business units, where they are highly autonomous and can make very quick resource decisions to deliver on those innovation opportunities. And then we have our enabling functions that really line up every day behind our business units to make sure that we deliver for our customers and for our patients, while also looking for opportunities for us to drive efficiency and scalability through process standardization, through systems and platforms. So to put it really simply, we are nimble and focused where it matters, and then we drive scalability and standardization where it's value creating.
But this structure is only really effective if you have the right talent in the right roles at the right, focused on the right outcomes. And that is why we are relentless in our pursuit to make sure that we are attracting, developing, engaging, and aligning people to Stryker, who are mission-inspired and driven to deliver for our customers. Now, I've had the opportunity to work at other organizations, and I spend a lot of time, networking with other CHROs. And I can tell you that the level of commitment and focus that we put on our talent practices is different from other companies. It truly is differentiating, and it starts with our rigorous screening approach. So we use an unbiased, data-based approach to really look at how we attract and bring people into Stryker who wanna deliver on our mission.
For example, we study our best performers and roles to really understand what are those attributes that make them the best, and then we take those results, and we develop interview questions that are focused on assessing those attributes and candidates as we bring them in. And then we have a focus on what we call strengths-based development. So we really think it's important to find out what people are best at doing, and then give them the opportunity when they come in, to do those things that they're best at doing, to thrive in their career and continue to grow.
All of our employees take the Gallup StrengthsFinder assessment when they come into Stryker, and that allows them to better understand themselves, and allows them to grow in their career and help us figure out how we put them in roles where they're gonna be most successful. Then if you think again about our structure, because we have these focused, specialized businesses, we're able to have people move across different businesses, into different segments, into different geographies, into different functions, which really stretches them and grows them, and they have a diversity of experience that helps them thrive in their career, builds collaboration across the company, and then also keeps this company, as it gets larger, smaller feeling. Finally, we are known for having a highly engaged workforce.
The surveys that we do show us that we're in the top quartile of engagement, and a big part of that is that we make sure we're always listening to our employees. It is so important for us to make sure that the employees across this organization have the opportunity to share with us what we can do to be better as an organization. It also drives a very innovative culture. The more that people feel that their voice matters, then the more they're willing to bring innovation. So we do this through a multitude of ways. We do it through surveying, we do it with one-on-ones, we do it with through our employee resource groups. But one thing that's very unique at Stryker is how accessible everybody is to each other. There is no ivory tower at Stryker.
Everybody is on the same team, rolling up their sleeves every single day to deliver, and our employees here know that their voice matters. It makes a huge difference, and this is really foundational to what drives our culture. So you hear about Stryker culture all the time, and it really is a catalyst for our success. And to put it in the most simplest terms, culture means this is how we get things done, and it all starts for us, as Kevin said, with our mission. We keep the patient and the customer at the center of our decision-making, and one of the ways that we do this is we regularly share patient stories around the company.
Having the opportunity for all employees at Stryker to hear from someone who has been directly positively impacted at probably one of the most vulnerable times in their lives, is so inspiring to all of us, and it keeps us humble, and it makes us hungry to wanna continue to have this impact around the world. So this makes us think about, from a growth mindset, what more can we be doing? What areas can we get into? How do we try new things to make sure that we can deliver more for more patients? It keeps us curious. We know we don't have all the answers, and we wanna figure it out, so that we can help more patients. Ultimately, it pushes us to be better. We set really high standards for ourselves and for each other, and we regularly deliver on that.
This is a performance culture. We, in public settings, regularly share who's performing well, where we have opportunities to get better, and what we're gonna do about that. We do not shy away from accountability here. We just do not. And so you've heard me say a number of things about our talent and culture and structure, that make us unique, but you don't have to just listen to me. We are regularly recognized as an incredible place to work, and these are just some of those recognitions. And although we take some pride in this, ultimately, why this is so important to us, is the message that it sends to our customers and our employees. We bring the best products and services, we keep our promises, and we are part of making healthcare better.
To share more on this, I wanna invite up Andy Pierce, our Group President, MedSurg and Neurotechnology, to talk about innovation.
All right. Katy, nice job. Thank you so much. We love talking about our people, and I'm pumped! I hope you guys are, too. I can see it in all of your faces as you're down, typing on your screens.
All right, so I am actually thrilled to be here talking with you because we love this topic. At Stryker, not only do we love talking about our great talent and culture that Katy talked about, but we love talking about our innovation and how we inspire innovation across all of those 22 business units that were mentioned in our company. So that's what I get to share, a little bit around the how. Now, we have many thousands of products in Stryker, so I won't go into each and every one of them, but I will be available in the Q&A, as will Spencer, for any questions that you have around specific technologies, new platform launches, et cetera, and of course, at the product fair. So we can't talk about inspiration and innovation at Stryker if we don't first start with our origin story.
As many of you know, Stryker Corporation was founded in Southwest Michigan by a local orthopedic surgeon, born and raised in Southwest Michigan, founded the company in Kalamazoo, and Dr. Stryker was unique. He's unique in our industry, in fact, even today, to have founded a company, and certainly one of our scale, as a surgeon. That's actually rare. So not only was Dr. Stryker a surgeon, of course, he was an entrepreneur. He started this company, and he did it for the right reasons. And you can see up there in his quotation what those reasons were: to make some tools that work when they, when they don't. So he was an inventor, he was a surgeon, he was an entrepreneur, and I think more importantly, if you ask him, relative to his company, to Stryker Corporation, he was a customer.
Yes, of course, he used the products on the patients that he served, that his company invested and built. That drive to make healthcare better, that drive to create new tools that raise the standards of patient care all around the world, is what drives us as a company today. And I do think that that's unique. When you think about the origin stories of so many companies around the world, we love business people, we love engineers who start companies, but it is unique that we have a surgeon's DNA inside of Stryker. So that innovation has to ultimately, that inspiration rather, has to ultimately lead to innovations. And as they say, you, you gotta put your money where your mouth is to some degree. And how do we do that?
We believe that we invest in our innovation at the high end of our respective markets, and you can see today that's over $1 billion annually in the company in investments in R&D and upwards of 7% of sales. We also believe that a sign of a vibrant, thriving innovation culture is a culture that invents or develops novel technology, and these are technologies, to use basic parlance, that can be patented. If you look at Stryker's patent portfolio today, it's over 5,000 patents. Sounds great, but I think what's even more impressive is you think about that vibrancy and how you're growing innovation over time, novel innovation that solves real problems, and you look at 50% growth in our U.S. patent portfolio just since 2019. And to make that, even a little more exemplary, I'll use a specific example in the company.
If you look at how we continue to innovate around our Mako portfolio, today, our digital robotics and enabling technology organization inside the company holds over 400 patents. When we acquired Mako in 2013, so just 10 years ago, we had 60. So if you think about the effort and energy and creativity that's coming out of all of our great, wonderful, creative engineers, it's exemplary in the fact that we are patenting more technologies every single year in this company. And last, as Katy noted, we love our culture, and there's nothing more, though, that we love than our talent, than our great people. And we believe here at Stryker, when it comes to engineering talent or creative innovators inside the company, that we have the best in the business.
If you have the best in the business, you should probably treat them like they're the best in the business, and we do that. Now, we do that in normal ways, how they're compensated, titled, et cetera, but we do it in a few unique ways as well. One, it goes back to that, that second bullet that I talked about, that second column around novel inventions, new ideas. We actually, whether it's a new idea that has applied for a patent or has actually issued a patent, we compensate around that. So we motivate through some incentive on creating ideas that matter. Additionally, we have some other unique elements that we use, mechanisms to drive motivation in the company and appreciation for our R&D specialists. One of those is we have a fellows program. What's a fellows program?
Fellows program is a recognition, a title, if you will, that we designate on the very best of the best engineers inside of our company. This is, as they say, the top of the food chain. So we have a fellows program. It's broken into two groups, what we call Distinguished Fellows, and that is a very small group inside the company. These are 15-year, 20 plus-year innovators inside the company that have a long legacy of creating technologies that make a difference for all of our stakeholders. And we have a newer program that's up and coming called Technical Fellows. Now, these are a little more junior. These are kind of in that seven-year to 10-year range engineers that also have that distinguished track record of contributing in an outsized manner. Now, what does that do?
Of course, that creates inspiration and motivation to all of our engineers to one day become a distinguished fellow or a technical fellow inside of our company. Last but not least, this would not be Stryker if there wasn't a friendly competition. Every single year, we have an annual awards banquet for our R&D professionals inside the company. What do they do inside the awards banquet? Of course, if it's an awards banquet, you're gonna compete, right? You're gonna compete. So all of our engineers across those 22 specialized business units, they submit their nominations for respective awards like Best Invention or Best Product, Best Team, Best Collaboration, and they have a spirited evening of jabbing one another and hopefully congratulating one another when they win.
So these are just some of the unique ways that we motivate and inspire our very best on the, on the innovation talent side, and some of how we believe in our ecosystem, we drive innovation across the company. Our decentralized, specialized model that Katy and Kevin mentioned is wired to drive innovation inside Stryker. We want each and every one of our business leaders, those 22 business units that we talk about, to realize the thrills of success and the anxieties of failure. This is an entrepreneurial company. We push those decisions down into our businesses, and they get to run them. And most of the time, they get those thrills of success. And sometimes, I hear some giggles over here from some of our business leaders, they also get those anxieties of failure. Very, very rare is that.
But bottom line is, they're business people that get to run their own business inside of Stryker. And what are some of the advantages that come from that? Specialization drives, and the first bullet that you see there, deep command, and Katy alluded to this as well, deep command over the needs of our customers. So when you're very narrow, very specialized, you can go very deep in your respective space as to what your customers need. So they get a deep understanding of met needs, of met needs that could use some improvement, and of course, of unmet needs. And when you have that understanding, you can put it all together and really go deep as a team and understand and make decisions around what kind of problems need our solutions at Stryker. Differentiated core competencies.
When you have this specialization and it's so narrow, and we build these businesses over decades, you get incredible specialized core competencies in our power brand areas. So if you think about power tools, the history of power tools inside Stryker for over 40 years, our bed business, Dr. Stryker invented the very first bed inside of our company over 80 years ago. Our MIS video business, which I'll talk a little bit more about, over 40 years inside the company. So we get incredibly deep technical expertise in these spaces. Kevin mentioned category leadership. This is a key means to driving category leadership, that deep expertise that we have around those core competencies.
And then finally, when you have specialization, when you have leaders who have been in their businesses for long periods of time, and they're business owners, in essence, they're entrepreneurial, they make great decisions with our resources. So if you think about an important element of leadership being resource allocation, how do we put our money to work? We believe that the best means to put our money to work is put it in the hands of business leaders who are closest to the customer, and they will make great decisions on the portfolios that they decide to invest in. By the way, we believe that's paid off quite well for us over time. So recently, we've launched a number of wonderful platforms across the company. As I noted, I won't go into each of those, but happy to take questions, as is Spencer.
But I, what I will say is these are just a small sampling of all of the products that we've launched over the last several years, and a very small sampling. We have to have some secrets over products that we're gonna launch in the upcoming years. The magic of our business is what I mentioned earlier, and that is, these are generational launches. So if you look at Procuity, I mentioned Dr. Stryker was the original inventor. He had the turning frame. Or you look at 1788, which I'll go a little deeper into, the first soakable three-chip camera invented by Stryker in the early 1980s. These are generational advancements that allow us to raise the standard of patient care over time. You see the two starred product categories. Those are two product categories that you'll be able to see at the product fair.
As noted, 1788, we'll actually go a little deeper with the team there. But we have a number of exciting products that are in the market today and making a big difference. Now, one last thing about our portfolio is, yes, we've launched a number of great platforms over the last several years. We have others coming. But if you look at our history, we've always done that. This is a durable growth company. We are launching new products that make a difference every single year. And as Kevin noted, completely agree with Kevin, that our pipeline, as we look out into the future, what's being developed inside of those specialized business units, has never been better than it is today. So I'll go a tiny bit deeper on 1788.
And really, I just wanna use 1788 as an example of how innovation happens, how it works, how we execute within Stryker. I think this is a fairly typical example. It doesn't mean it's not a remarkable story and a remarkable technology, but it's typical inside the company. How did our video business begin in Stryker over 40 years ago? Via an acquisition. We bought a small company in Silicon Valley that became our Stryker Endoscopy business, large, thriving business today. This is 1981. By the way, the chief technology officer, who we acquired as part of that acquisition, is still working on all of our camera technologies today, including the 1888, which will come next. Don't ask me when that's coming, but he's there. That announcement next, he's there. So how does this work? We acquire a company, we enter a new space. We really develop the space.
If you think about MIS surgery, keyhole surgery, safer surgery for patients, we allow surgeons to perform through smaller incisions versus larger incisions. Now, the picture on the screen, really grainy, all the technology around the platform, not very good, but it's a step change in how you can perform surgery. So what do we do? We get to work. We get to work generationalizing, like I mentioned. We make the next generation, the next generation, the next generation, up until 1788, which over the last 40 years is our 26th generation of video camera. So if you look generation to generation, you might say, well, that's very incremental, one camera to another, to another. But if you look generation, and you have the context of time, and you look to where we are today, that's step change innovation that we're driving.
That's disruptive change, but we do it in a very methodical way over time. Now, sometimes between generations, those step changes are a little bigger and a little less incremental. So if you think about moving through our early versions of standard definition, that grainy image on the screen, getting less grainy, and then boom, a step change to high definition, HD video. That happened in 2004 with our 1088. Many of our sales reps are still very fond of our 1088 system. It was a great system. Step change up to HD. And then we chased resolution for a few more generations. Crisper, clearer images, better depth of field, better color pop on the screen, and then came 2015, with the launch of the 1588, where our great engineers brought in technology that was beyond the visible spectrum, beyond what your naked eye could see.
So that means we had to use infrared light, lasers. When you couple a fluorescent imaging technology, like Indocyanine Green, which many of you are familiar with as ICG, with a laser, you can actually pop on the screen, perfusion. You can see blood perfusion inside of the patient. What does that lead to? It leads to safer surgery. Cut this, don't cut that. Fewer mistakes, better for the patient, right? That was step change that was driven with 1588. You move from 1588 to 1688, you take that fluorescent imaging, you add some more features to it, and you add 4K, so ultra-high definition. Now, 1788. 1788, brand-new camera, just launched back in September. What does 1788 bring to the table? It brings even better resolution, so that's continuing to improve over time.
But as you see right at the bottom, 1788 is future ready with more imaging agents and modalities, so more tools for our customers to be able to make better and better clinical decisions for their patient, which, as Dr. Stryker was trying to do, ultimately raises the standard of patient care, that which we get most inspired by in this company. Now, I'll give you a quick little secret. The 1788, it's an open secret. You've heard it before, but I wanna tell you anyway. 1788, we're working with a third-party company on a drug that we have, and we're selling and marketing in a co-marketing fashion today with this company. We have a modality inside of 1788 that allows us to couple that drug, which targets lung cancer, with indocyanine green to image cancer inside patients, in this case, lung cancer.
We have other modalities and other drugs coming down the pipe. So if you asked me when I started in our endoscopy division 10 years ago, if we would one day be able to see cancer inside of somebody's body, I would've said, that's a little science fiction-y, but it's kind of Holy Grail-ish. And here we are today, and you'll learn more about that in the product fair. So I wanted to use 1788 as an example of how innovation happens in our company, very methodically, very generationally, very disciplined and committed, but also very much over time. When you think about category leadership, we are not your veritable overnight success. We do it the right way, and we earn our customers' business over time.
With that, I'll wrap and simply reinforce that our decentralized operating model, our entrepreneurial culture, our innovative spirit that was laid into the DNA, the foundation of this company by Dr. Stryker, is alive and well today, and we have many, many great years ahead of us. Thank you so much. With that, we will talk about inorganic innovation with my friend, Spencer Stiles. Thank you, Spence.
Thanks, Andy.
Thank you.
Thank you. Thank you. Hi, everyone. Super to be with you this afternoon. Andy, thanks for the great remarks. You've heard a lot about growth, and I'm going to continue that story here and talk a little bit about our journey through M&A and how we think about it in the company, and maybe how we're slightly differentiated. Just for context, my name is Spencer Stiles. I lead our Orthopaedics and spine business, and Andy and I lead the commercial businesses across the world. We sort of cut the world in half, and then we cut some of the functions up, and I have M&A, a very small but mighty centralized team, and then we actually have M&A out in these business units, as has been described in the operating model. So I'm going to share a little bit about that.
I'm going to also talk a little bit about a couple of the deals that we've done and our learnings, and how this has amplified who we are as a company. But ultimately, I will build on what Kevin has said, what Katy has said, what Andy has said, that we're about growth at this company today and tomorrow. And I, too, couldn't be more excited about the direction of the organization, thinking about the portfolio, and ultimately one of our strongest strategies, which is up on the screen, and that's utilizing M&A for growth. And that strategy is not changing. As a matter of fact, we're going to remain committed to building out our core, to entering adjacencies, to finding those right gap fillers, to continue to accelerate both innovation as we think of the core in our business and accelerate new spaces.
Kevin mentioned it, we look at the markets, we look at the culture, we look at the growth potential, we look at the demographics, and we've learned a lot. As you can see on the screen now, we've spent over 10 years doing 50-plus deals across Stryker, and really, we're quite proud and humble of the learnings, but ultimately the growth and how this has positioned our company in its space. And maybe what we're most proud of when we think about this is the impact we're having on patients and the customer relationships we've been able to further accelerate and form across the world. That's ultimately why we do this, and as we think of our future, we're going to continue to do this and do a lot of it. Now, we're paying a little debt down. As you can see, maybe it's trickled a little.
Then the other unfortunate news, there's not a second slide that builds out the future. We're not allowed to share that, but know that we're working on it, and the pipeline's robust, and I'll make some more remarks about that in a couple of minutes. As you can see, we break down our acquisitions between core and adjacency. And ultimately, the majority of our acquisitions have been in the core, and that will remain true as we really think about gap fillers as our strongest returns and fastest ways to make an impact. It's also where a lot of the energy and focus in our decentralized model exists. With that being said, we've also had some bigger ones into adjacencies, and Kevin mentioned the transformation at Medical.
The addition of Physio-Control and Sage, and now Vocera, has really transformed Medical as one of our most large and strongest franchises in our organization. It's truly remarkable and a credit to Brad Saar, Jess Mathieson, and the rest of the leadership team for what they've brought to this organization. It's truly awesome. I'll touch on Novadaq and build on the story Andy just talked about with the 1788. It's really neat. As he described that evolution, I'll talk in a minute about the addition of that technology, both thinking about the core and strengthening what we do, but getting us into adjacencies and exposing us to new spaces and clearances of where we can sell those particular technologies. And then I'll touch on Mako, a crowd favorite.
We'll go a little deeper on that, and we'll also round it out with a few remarks on Wright Medical. I would love the opportunity to update you on how things are going there, so we'll talk about that and really the specializations that's brought. And then you get a deep dive into Vocera, and I will tell you, Vocera has just been an outstanding addition to the Stryker portfolio. I've been in this business now for about 24 years, and I think about the improvements in workflow, the safety, the clarity it brings to the care providers. It is just a phenomenal platform to grow, so really excited about this, and we've got a world-class leader in Jess leading that cause, and you'll hear from her in just a little bit.
So let's build on where my partner in growth, Mr. Andy Pierce, left it with the 1788. For those who don't know, I too started our endoscopy business a long, long time ago, pre the cameras that he even showed. Well, along that journey, I suppose, but well, well before 2017. And I remember when we went out to acquire Novadaq, and Novadaq was the largest deal Stryker Endoscopy had done, and really neat, it brought over a tremendous engineering competency. I think we added about 40 engineers with that acquisition. And the breadth of technology, really giving us open visualization capabilities, thinking about what could you see with an open platform, and they actually had a small MIS camera as well. But they started to say: Hey, think of the markets we serve today.
What could that look like in two years, in three years, in four years, in five years? And really crescendoing to things like today, I mean, Andy said it best, we're detecting cancer through visualization, through fluorescence, through ICGs. It's a remarkable change. And it went from a maybe feature and benefit sale, and even the value of a sales professional was features, benefits, lines of resolution, look at my image versus yours, to over here, a deep connected clinical sale, creating value in how we're taking care of a patient. A remarkable journey as we think about this, maybe crescendoed up to this, you know, breast surgery capabilities with lymphatic mapping. Just remarkable to think about where the technology is going, and all on the backs of a deal we did. So the deal obviously was built to say, oh, we've got to do this deal.
It's got to bring value, but then it drives this innovation mindset. So our gap fillers, often when we buy them, they bring us products, they bring us people, but it also brings us future innovation to build upon. Which there's maybe no better story to tell than one of our favorites, and I know we're all favorites of it now. There were some skeptics a few years ago, but the acquisition of Mako. And obviously, Mako started well before 2013. The commercialization really was in the mid-2000s when it started to gain traction, but obviously landed in the hands of Stryker Corporation, and which was a bold move by the CEO at the time to acquire Mako Corporation in 2013.
And it really then put us on a path to transform how musculoskeletal care is delivered, especially in today's environment of adult hip and knee surgery. And it's been a remarkable journey, and one that we are quite proud of. One that I think we're midway through the book, but it's a novel, and we've got many, many, many more chapters of growth in front of us as we think about the scale and the platform that exists. Really, some remarkable moves in 2015. We launched a third generation of what that product looks like. Under the Stryker umbrella, brought that technology, that competency, that know-how, partnered with our clinicians, brought it right next to our world-class implant specialized sales forces.
And since then, we have moved an unprecedented 6.6 points of market share in hips and knees since we launched the 3rd generation system in 2015. There has not been that type of share shift in orthopedics ever, period, and it's because of this technology set. The first Mako Total Knee, we were focused. We said, w e have to get this application right, and boom! It landed in 2016, and it's changed the way that we deliver knee arthroplasty today at Stryker. As you know, over 60% of our knees are done inside the United States robotically. It's a staggering statistic, and we're not done. It's growing each and every day, more, and more, and more.
This has now informed us, with over 500,000 cases done, to get us to now our Mako Total Knee 2.0, which you will get to see that new software application in the product fair later this evening. Then we're really proud, earlier this year, we surpassed 100 million, million cases. Take the 100 out, 1 million cases. We're on our journey to 100 million. I got really excited. 1 million cases in our hips, knees, and partials since we brought this product to market, and we surpassed that earlier this year. So here's the beauty of our portfolio. Not only are these enabling technology robots out there, but they're highly, highly utilized. So they don't sit in the back room, they don't collect dust, they're actually utilized in surgery each and every day.
In hips, our Mako Total Hip 4.0, and then recently launched after, 4.1, was coupled with Insignia, our new hip implant, which has really accelerated our hip utilization on Mako. It was, once upon a time, a mere single digit, roughly 9%. We launched Insignia. That's now surpassed over 30% of our hips are done robotically at Stryker in the U.S. Another remarkable number. So when you think about this, this is an acquisition that standalone as a technology would have been one thing. When coupled with our world-class implants, built around the specialization of that sales force, the enabling technology, has transformed the way that we're delivering musculoskeletal care. And I suppose you want to know, what's that future look like? Now, there's not another slide here either.
However, as you know, we've talked about the additional applications that we're coming forward with, in shoulder, in spine, and you can imagine further down the road, other musculoskeletal disease applications. So imagine this, the scale and scope of our installed base, that massive utilization number. We're really thinking about a future to leverage all those installed robots and deliver more applications for greater utilization, for better use of that hardware, and continue the ability to grow and take market share out in the marketplace. So extremely exciting, and maybe will go down as one of our best acquisitions in history. There's a close battle of that, though, right now, which is our next one, and that's Wright Medical. And maybe those are stories of innovation and continuing innovation over time. This one's all about specialization.
Where do you go out and look at these markets that are growing a little faster in a place that you play and accelerate the portfolio you have through deep domain expertise in that specialization? It's truly quite remarkable. So we went out, we bought Wright Medical. We had a combined joint replacement, adult hip and knee, and trauma business together in really small extremities. And we said, w e're going to go do this deal, and we're going to build specialization across all those different business units." First, we're going to make two big divisions. One, joint replacement. Don Payerle is in charge of that, and now he has three distinct business units underneath this. He has Mako, he has a knee business and a hip business.
Tim Lanier, he runs our trauma and extremities business, a standalone division with a specialized trauma business, a specialized foot and ankle business, and a specialized upper extremities business. Oh, by the way, those businesses are rockets. Rockets! Growing like crazy. Not only are they strong markets, but we're outperforming the market by a long shot, and it's truly impressive. We believe it's because of the great portfolio, coupled with that specialized selling organization across the various geographies. Since the acquisition, we've moved to the number one market share in upper extremities and in foot and ankle. Category leaders really driving that position on top of our current and maintained category leadership in robots, and I think Don's got a plan to get to number one in hips and knees in the coming years.
So we're lined up behind this market-leading growth strategy and utilizing acquisitions to do this. A few other things: the portfolio didn't slow down at Wright. As we acquired it, you go, okay, are you gonna be able to get the products out? Our Trauma and Extremities business today, since acquisition, has launched over 40 new products, and a few more are on the horizon. Pangea, our comprehensive plating solution in trauma, is on the horizon, and we'll be seeing that in the marketplace next year. Foot and Ankle, with a variety of unique MIS technologies, as we see that market continue to shift to more MIS procedures after extremely strong position in total anchors - total ankles, excuse me. And then in Upper Extremities, the innovation just doesn't stop.
One of the neatest things that we picked up was the competency around a software solution and an implant coming together. And really, the drive behind that is a technology called Blueprint, which I've shared with many of you before. This pre-planning capability has phenomenal adoption and great clinical value, and over 65% of our total shoulder cases are pre-planned and done on Blueprint. And most recently, we've just launched the revision application of Blueprint, so you can pre-plan a revision procedure. The utilization's through the roof, and we're monetizing that technology as well. So people are paying us to utilize our pre-planning to make sure they know exactly what they're going to do when they execute a total shoulder procedure. And this is a share-taking strategy, and it's done very, very well for us. So we're extremely excited that it's a good race.
We'll see over time, Mako and Wright and where we go down in history as one of the best, and I bet Jess is gonna make an argument for Vocera when she gets up here in just a minute. So maybe where are we going, and how do we think about M&A in the future? So we love looking at accelerated growth markets. We wanna make sure that we're playing in places that we can see a pathway to category leadership. We love the idea of investing in our core through these gap fillers, but we're constantly assessing the adjacencies as well. And the beauty of our model, and as you know, there is a tremendous amount of markets that are still opportunities for Stryker, tremendous.
The beauty of this decentralized seven divisions, 22 business units is embedded in each one of those business units, is an M&A expert as well as an upstream marketer, and they are thinking about the needs of the future of that business. It is almost impossible to come across a company, a technology, a deal that we haven't heard of or aren't in discussions with. We love time over target. Honestly, our division presidents, many sitting here, they love doing deals. So if anything, we've got the reins pulled back to make sure it's creating the value that's necessary for our company, that it's the right time, that it has the right strategic fit, and that we get the culture right. Through all those 50+ deals, we haven't been totally perfect.
There are learnings, and the beauty is, when you learn, you get better, and you do this over and over and over. And you think about our integrations, we have a sophisticated, systematic approach, a playbook, and every time we do one, we look at this, and then we refresh it and get better at it. But this is all of what makes it differentiated at Stryker. And we think about this pipeline. We discuss it, we debate it, and we battle and argue about it at times in a, in a wonderful way, but it's, it's rich and robust. The lists are long, the markets are vast, and we're really excited about what we can continue to do as we think about M&A in our future. So I've talked a lot about M&A.
One area I've stayed away from is on the technology side of DRE, and this is our Digital Robotics and Enabling Technology portion of our business, and that's led by Robert Cohen. He's gonna come up in a minute. But that, too, really was built out of thinking about some of the technology that we have in our portfolio that we've acquired, that we can leverage and look across the entire Stryker portfolio and create value. So you can imagine is things like pre-planning software, technologies that we've picked up from Wright Medical, learnings that we've gotten through being a leader in enabling tech. How do we take that and build that across Stryker Corporation?
That's what Robert Cohen will share a little bit about and what he's been leading, and he'll share a little bit more about how we're utilizing some of the technology for the future. Again, thanks for your time. We're super excited about the growth, and we're now gonna invite Mr. Cohen up to stage. Robert, please join me. Thank you.
Thank you, sir. Okay, so when you hear DRE, Digital Robotics Enabling Technology, it's too hard to say that repeatedly over and over again, but Digital Robotics Enabling Technology. Don't confuse me with Dr. Dre. I know it's obvious, but that's okay. So why, why a decentralized organization, why a centralized organization in a decentralized world, right? Because there's a lot of commonalities, especially on the R&D side of it, right? So this is nothing. We don't own, go to market, those divisions, upstream marketing, partnering with the division presidents and such. This is about leveraging technologies that we have already in, in Stryker. And when we think of those technologies, there's a lot of capability of those technologies, but those technologies, they're capable of collecting some data. And think about where all those technologies are, and are we utilizing it and leveraging that to our fullest extent?
Stryker is quite unique. Now we're into this world of digital. You know, it's funny, robotics journey, you know, 10 years ago, we weren't really talking all that much about digital. Now, when you think about digital in the world, what happens when you couple digital to Stryker enabling tech? That's a very different value proposition. That's a very different value to our patients. So when we think about leveraging that, we could think about it in so many different ways. We'll also tell you the way we structure this DRE organization as a centralized fashion, it's meant for agility. For digital, if you go slow, you lose. This digital is moving so fast. This digital, you have to be careful, right? Cloud computing, product security, patient de-identified data. We got all that, and we have an infrastructure in place right now to be able to handle that.
Now, how do we build it? Well, we build on it with agility, so we set up DRE a little bit differently. We set it up as tech blocks. So we have people that know AI. We have people that know electronic health records. We have people who know connectivity. We have now structured. This is in place as I stand here today. Now, what do we do with it? Where's the Stryker advantage? You know, there's 85+ solutions already deployed around the world that have some form of digital component to it. I'm not talking about things we have to deploy. I'm talking about things that are already around the globe. And if you think of those capabilities, think about the market-leading products that Stryker has. Think about it. We're one of the only companies that can outfit a whole operating room.
We're the only one of the companies. Think about a back of an ambulance. How about all the hospital beds we have deployed everywhere? Think about patient care. Think about the continuum of patient care from pre-op, intraoperative, and post-op. Stryker is poised very, very well for this, yet all our equipment was not connected, nor did we have a common means to get electronic health records and data, nor did we look at things where we can provide more benefit to the patient. So when you think in this world, think about all of these things. Now, think about the potential for connecting it, and think about now if we looked at pre-planning and digital plans. Think about predictive analytics. Can we improve outcomes on equipment that Stryker procedures are already part of?
Think about the equipment, and think about the millions and millions of operations per day if we just focus on the operating room itself. Now, if we connected it, think about all the Stryker equipment that can then further benefit and add value. Add to that story, then, let's say, augmented reality. Can that help operational efficiencies in the operating room? Can we have more consistency? Can it help the quality of care? Think about remote sensors. Can that help the patient experience post-operatively? Think about now how we could collect data in the Stryker world from information. Let's just look at Mako. There's electronic CT scan. We also have session files on the robot, and if we have patient input software after, we could connect the whole continuum of care. Can we get to the point of predicting a patient implant size?
Can we get to the point of predicting what implant that patient is best for? How about for the hospital efficiency and perioperative? Can we help project the time of the procedure? So there's a lot of benefits we can do, and we sort of think about this in the world of improved outcomes, quality of care, safety, efficiency, economics. That could be for the hospital, the surgeon, the patient. It could be for Stryker. So there's a lot of different potential. So we'll go into maybe one of the area that everybody's talking about, and that's AI. And when we think about AI, AI is very confusing, and we could just talk about AI and say AI, and people get all excited about it. I often talk about when I present on the podium at medical meetings, the number one attended session happens to be on AI.
I'm not sure fully, or surgeons fully understand the capability of AI, but they know it's gonna be in their life, and they wanna understand why. So this is the way we break up AI at Stryker. We put it into these five categories. So Radiomics on the front end. Radiomics is so imaging. What can we do, say, with a CT Scan? What can we do when we make an impression of someone's bone? Can we get more insights? Can we look at the arthritic condition or qualify the condition off a CT Scan and more value of the CT Scans? Think Mako. Predictive Intelligence. Think about our inventory efficiencies. Think about how we can control what sizing is used for that specific patient. Think about the ASCs and ASCs which have limited space.
Could we help out in a big kind of way and partner now, looking at the profile and the usage profile of that ASC? We have that data. That data is remarkable data. We just haven't utilized it to full extent. In Intelligent Guidance, can we reduce the amount of fluoro in the operating room? Can we increase the amount of procedures? If we're putting in a stent, when you have to go right or left, can we help with that decision-making based on predictions of what we see of the model of that individual patient? Ambient Intelligence, cameras in the operating room, can we actually get into contributing to nurse workflow? And will that result in possibly the reduced nursing staff in the operating room and handle one of the biggest challenges the hospitals we work with have?
Can we actually look at where Stryker products should be? Can we improve workflows and reduce the time of the procedures? All these capabilities and generative AI, can we help surgeons look through all the Mako clinical research as an example or endo-clinical research and come up through querying all this through generative AI of what a possible solution is? So these are all valuable areas, and when we break it up, we just wanna share with you the five categories we're thinking. But we also want to remind you that we can add this, and the beauty of our enabling tech and robotics that's already in the field is marrying that with all the digital capabilities that help either execute a plan on that patient or help deliver that type of care, a nd we've done it.
The two examples, one Spencer talked about on Blueprint on the right. So this is AI, and this is AI we have already deployed. And this is AI that's contributing to the selection that best fits that patient of the implant and where that implant goes. What did AI contribute here? Individualized medicine. That's the future of it. Individualized medicine, and then coupling that with Stryker technology in the operating room to deliver that patient plan. And what you see on the left, that's Triton. So that's a blood sponge. If you think of some of the complications in cesarean births, think of maternal hemorrhaging. You know, people die from maternal hemorrhaging.
This is a capability where you take a camera, and then you take the camera and you look at the picture image of the camera and the color profiles of the blood on the sponge, and you could give that surgeon an indication of whether that person is hemorrhaging and that is not normal blood. You could do that intraoperatively where the human eye cannot see it. That is AI driven. We're sitting in a place right now at Stryker, where we're in a good position with our enabling tech. Combining digital enabling tech, we've started that. Here's two examples, and I can tell you, our future is going to be an exciting one. Thank you.
With that, we will go to a 15-minute break and be back in 15 minutes. Thank you. 15 minutes.
As care teams work to drive quality and outcomes in a changing healthcare landscape, we're right there with them. With the Vocera clinical communication and workflow platform, we're creating a more efficient and safer working environment for the entire care team and an improved experience for patients and families. Let's take a look at some familiar situations. A workplace violence incident unfolds, putting a care team member's safety at risk. With the Vocera Badge, help is never far. Its built-in discrete panic button notifies staff and security team members with a broadcast notification. The one-way audio stream and location sharing facilitates a quick response, restoring safety for all. A nurse is helping ambulate and lift a patient. With both her hands in use, she realizes that she needs help. The Vocera Badge's hands-free communication offers a solution.
She doesn't need to know who is working on which team, because Vocera already knows who to call with its dynamic master directory.
Okay, Vocera?
Vocera.
Call lift team.
While still helping this patient, a bed exit alarm is triggered by a patient in another room. Thanks to Engage, the intelligent core and workflow engine of the Vocera platform, this alarm is escalated and sent instantly to the next staff member in line. A nurse urgently requests medication for a patient who's in pain, all while balancing demands competing for her time and attention. Vocera Edge makes it fast and easy to communicate with the prescribing physician, and when she administers the medication, she scans its label and the patient bracelet for immediate documentation into certain electronic health records, so she doesn't have to enter it manually. A family member waits anxiously as their loved one is in surgery. Vocera Ease allows care teams to communicate with the family member to keep them up to date, whether they're at the hospital, at home, and even across the country.
Much more than just a better way to communicate and streamline workflow, Vocera's enterprise platform is an adaptable, scalable way to bring together all the people and information needed to deliver patient care. It's anchored in a technology platform that's purpose-built for the fast-paced, constantly changing healthcare environment, from public health crises to workforce fluctuations to whatever comes next. This is tomorrow's care delivery, delivered today.
Good afternoon. I am thrilled to be here today to highlight and give you an overview of our Vocera clinical communications and workflow platform, and how we are partnering with healthcare systems to help provide solutions to some of the biggest problems they face today. I'll try this one more time. There we go. We believe the bed outside of the OR is the epicenter of care. The patient spends the majority of their time in a hospital, on a bed or a stretcher. Important recovery and healing happens on the bed. Critical clinical observations and decisions happen at the bedside, and some of life's most important moments happen at the bedside.
Grandparents meet their grandchildren for the first time, families pray over their loved ones before a family member goes into a procedure, and family members say goodbye to their loved ones, and this is what drives us within the acute care team. Unfortunately, nurses are being pulled away from the bed at a rapid rate because of all the additional tasks they are responsible for. 50% of their time is focused on non-patient care activities. On average, a nurse will execute 125 tasks an hour, with 29 seconds between each task. It's no surprise that cognitive burden is on the rise, adverse events and medical errors are at an all-time high, healthcare systems are dealing with operational inefficiencies, and nurses are deciding to leave the industry at a rapid rate, and that will be a workforce challenge that our healthcare systems face for many, many years.
That's where our Vocera clinical communications and workflow platform comes into place. We have the privilege of partnering with our healthcare systems to connect people, nurses, and care teams to devices with meaningful insights and data, and get the right alert to the right caregiver at the right time. And today, I will share four key takeaways with you. First and foremost, how our dynamic clinical workflows can help reduce cognitive burden, increase efficiencies, enhance outcomes, and ultimately create a better experience for nurses and patients. The second key takeaway will be how we have the opportunity to streamline communication and reduce the number of devices that care teams are using. The third key takeaway is around our experienced, skilled team, our clinical team, our professional services team, and our technical support team, and how they are partnering with healthcare systems to help them achieve sustained outcomes.
Last, how we have quickly leveraged our broader portfolio, specifically our beds and our stretchers, and we've introduced novel integrations with our Vocera platform, and how that has allowed us to capitalize on cross-sell opportunities. In the opening video, we highlighted some of the significant problems that healthcare systems are facing and that nurses deal with on a daily basis, and we also highlighted our technology and how we address those problems. We spend a lot of time with nurses, learning from nurses, listening to nurses, observing nurses. We have strong partnerships with the American Nurses Association and the Emergency Nurses Association, and these are the problems that they are talking about. Now, I'm not gonna go through each problem one by one, but I do wanna focus on two, and that's falls and medical errors, specifically medical errors within medicine administration.
We're gonna focus on those two because the Joint Commission, every year, releases a sentinel event report, and those two problems, every year, are always in the top 10. In fact, falls has been the number one issue in 2021 and 2022. I wanna walk you through our dynamic clinical workflows and how we are addressing these sentinel events, starting with falls. Through our ProCuity frame, we can send a bed alarm alert using our Engage rules engine to our Vocera Badge or our smartphone application. This gets the alert to the nurse in seconds, so they can immediately respond and reduce the risk and chances of a bed-associated fall. Let me walk you through the antiquated way that it happens.
If a facility doesn't have a wireless bed, that bed, to send an alarm, has to be plugged into the head wall to communicate with the nurse call system. Here's the problem, 50% of the time, that does not happen. So what that means is a care team member has to be within visual sight of that bed or within proximity to hear the audible alert, and that's when bed-related falls happen, and that's one of the reasons it is the number one sentinel event. Moving to medical errors and medicine administration, the challenge with medicine administration is a delay in getting medication to the patient, but also, unfortunately, errors when medicine is administered. I wanna walk you through our dynamic clinical workflow that provides a solution there using our Edge smartphone application.
Let's give an example of a nurse doing their hourly rounds, and they go into a room, and one of their patients, unfortunately, is feeling increased pain. That nurse, through our smartphone application, can securely message the physician. The physician very quickly can look at the patient's vitals and make a decision if they need to prescribe additional medication. If they do that, that workflow goes directly to the pharmacy, and it alerts the nurse. Just with that part of the workflow, we've significantly reduced the amount of time between the communication of the nurse, the physician, and the pharmacy. Then, when the nurse goes to administer the medication, through our smartphone application, she scans the medical bracelet and scans the label on the medication, making sure that we are giving the right medication to the patient.
With both of those dynamic workflows, and though those are just two, we have many, that work and that documentation can seamlessly integrate right into the EHR. Why that is important is we're saving another step of the nurse having to go to the workstation and document and chart that information into the EHR. We are complementary to EHRs that have an open architecture philosophy. I think it's important to talk about the technology behind our comprehensive portfolio, starting with the foundation of the Vocera platform, and that is our hands-free badge. Many times, when a nurse needs to communicate, their hands are full. They could be lifting a patient, ambulating a patient, changing a wound care dressing, providing oral care. I could go on and on about activities that require hands-free communication, and that's what our badge allows nurses to do.
We are seeing an appetite for smartphone adoption when we meet with chief technology officers and chief nursing officers. They do have an appetite to adopt smartphones. I've been asked, w ell, will that cannibalize your badge business? The way in which we see clinical communications and workflow is you always need that badge for those moments, those many moments, where you need hands-free communication. But then you also need the smartphone for more complex workflows, like the medicine management workflow I just walked you through, and also to have secure and safe conversations. Our voice software streamlines communication. No longer does a nurse need to know who the on-call physician is, who the on-call cardiologist is, who the on-call physical therapist is. I could go on and on about different care team members the nurse needs to know.
All they have to do, utilizing our badge and our voice software, is say, okay, Vocera, call the on-call physician. If a physician's in a room and they need to speak to the nurse, but maybe they don't know who the nurse is, they simply have to say, okay, Vocera, call the nurse for Jason Beach, and our software does the work in the background. We have a data analytics platform where we can provide meaningful information to nursing leadership around compliance and adherence to protocols. Just off ProCuity, we can pull 70 different data points, depending on what nurse leadership wants. Some great examples of that is adherence to beds being in the safe bed configuration. That helps us reduce bed-related falls. Another example is how quickly are bed alerts being answered?
And all of this data and insights helps nursing leadership understand how they need to staff specific units, or maybe, is there additional education that's needed? Engage is the only 510(k) rules engine. It is the brains behind our workflow. It gets the right alert to the right caregiver at the right time, and we have over 200 integrations, we believe, in open architecture, including infusion pumps, patient monitors, nurse call systems. I could go on and on with the different integrations we have. And last, we have Ease, which is our family communication application, and this streamlines communication with families. Think about a family in a waiting room, and their loved one is in a procedure. The care team in the OR can communicate when the procedure is started, when the patient's headed to recovery. Another common application is in the NICU.
Think about an infant that requires a longer stay, and the worry and the concern from parents. That NICU team can securely send messages, videos, pictures to those concerned parents, putting their mind at ease. Year to date, there have been over 750,000 messages sent on our Ease application. When we spend time with nursing leaders, they often talk about all the different devices that our nurses are using, and on the left, you can see those disparate devices. Most of them don't communicate with each other. Yes, many healthcare systems still use pagers. There's intercom systems, there's old VoIP phones, there's scanners, there's a workstation on wheels. We're not gonna take that away, but we can make that work a lot easier for nurses. And nursing leaders say, we've got to remove all of these devices. We have to remove applications.
We've got to streamline work. And we have the ability to do that by streamlining devices to our badge and our smartphone application. And again, a significant amount of the documentation and the work that happens between the phone and the badge can write into the EHR, saving the nurse a significant amount of time going to the workstation and charting and documenting in the EHR. We have a skilled team, an experienced team, that is focused on helping our customers achieve sustained outcomes. We believe the work starts at deployment, and I wanna walk you through one of the outcomes that we've achieved, and this is at Sentara in one of the NICUs. And if you think about a NICU, if you've ever been in a NICU, it's noisy. Our smallest patients, our most fragile patients, sometimes they're hooked up to a lot of different machines.
There's a lot of noise, and there's a lot of alerts, and first and foremost, it's really, really, i t makes the patients really restless, the babies restless. It also causes alarm fatigue for the nurses, 'cause there's so many different alarms that they're having to pay attention to, and quite frankly, they become numb sometimes to all the different alerts. So our team, utilizing our Engage Rules Engine and the hospital's RTLS system, that's Real-Time Location Systems, was able to drive an integration, and our technology knows when that nurse is in the room with the patient. And when that nurse is in the room, we reduce the secondary alarms that that nurse receives. And here's why that's important: it creates a quiet room, where our smallest patient- patients can rest and heal, and their tiny lungs and their brains can develop, and we know that's so important.
But secondly, it reduces alarm fatigue for the nurses, and you can see in this outcome, there was a significant amount of secondary alerts that we sent, reducing alarm fatigue, increasing the level of satisfaction for our nurses, and most importantly, creating a quieter environment for our smallest patients. We've quickly leveraged our broader capital portfolio, our ProCuity bed and our Prime stretchers, with our Vocera integration. Several weeks ago at the Emergency Nurse Association, we launched the industry's first wireless stretcher, and this slide actually does a really great job explaining the integration. As you can see, the patient is trying to get out of the stretcher, and there's a visual alert at the foot end.
There's also an audible alert, but through our Engage Rules Engine, we are sending alert to the Vocera Badge, so the nurse and the care team can react quickly and prevent a stretcher-related fall. Now, we are going to show you a video highlighting Prime Connect and our Vocera integration.
24 hours a day, seven days a week, 365 days a year, the ED never stops. Be ready and stay ready with Prime Connect. No matter how crowded, noisy, or intense it might be, the latest stretcher in our Prime series helps make it simpler to know your patient is set up for safety. It's the first stretcher on the market that offers both a visual and audible bed exit, with the ability to connect to the corridor light, a Vocera Badge, or the nurse's station through Vision. Local bed exit capabilities make it easy to identify unsafe configurations, even through commotion, with both the corridor light and the enhanced footboard display illuminating when a patient is at risk of falling.
For centralized monitoring, Vision displays what you need to know in near real-time, including an at-a-glance view of location, fall risk status, bed exit status, and more. For mobile monitoring, it can even send urgent bed exit information to the right care team members wherever they are. Because by the time a fall is happening, it's already too late. Be ready and stay connected to what matters most with Prime Connect.
Prime Connect is wonderful. It integrates the Vocera, the communication, and it really puts all that communication into one device and helps our nurses with their, alarm fatigue and brings it all together.
For us to have the ability to know if a patient is getting out of bed, it will prevent falls and prevent injury to the patient.
Having that Vocera respond to the nurse and give them that alert is gonna be really, really good for our patient safety. I can't wait to have Prime Connect in my ED, because I want it to connect to the Voceras. We rely heavily on the Voceras in my ER. That means they get to the patient quicker.
We love to receive feedback like that from nurses. When they say to us, you just made my job easier, and I'm gonna be able to care for my patients better and be more efficient and protect my patients, that's what drives us. That's why we innovate. So the four key takeaways I shared with you today is how our dynamic clinical workflows can help reduce cognitive burden, enhance outcomes, increase efficiencies, and create a better overall experience for patients and nurses. How we have the ability to streamline communication and reduce the number of devices that nurses and care teams use on a daily basis. How we have a skilled, experienced team that works with our customers to help achieve sustained outcomes. And how we've quickly leveraged our broader capital portfolio, and will continue to that, to do that, to introduce novel integrations and capitalize on cross-sell opportunities.
We believe, with our solutions, we are uniquely equipped to partner with our customers on the biggest challenges they face today, with our platform, but also with our products across the continuum of care. And with that, and as we continue to do that, we're confident in our ability to continue to gain share in this fast-growing market and continue to have a high recurring rate of software. And with that, I'm gonna turn it over to Stuart Silk. Welcome, Stuart.
Thank you very much. Good afternoon, everyone. So it's great to be here. Thank you, Jessica, for this amazing presentation. The good news about Vocera or all the other products that Andy, Spencer mentioned around from R&D or from acquisitions, they're not just for U.S., they're for the whole world where we're present. And I'm here just to share a few minutes on a snapshot of the 77 countries that we have across the world and how are we performing. Just before I do that, quick introduction. I've been with Stryker 15 years. I look after our businesses in EMEA, Latin America and Canada, and it's a privilege to work in this international world, given that my whole upbringing has been spotted all over the world.
So I feel very much at home, and very much at home in working for a global company, but it is like a global village, and I'll explain a bit more in a minute. So with that, just wanted to share a few notes around our international business, and we're gonna have a panel come up in five minutes to share a bit more about their experiences of what's happening across the globe. So over the last few years, what we've seen and experienced is a tremendous growth in the international markets. Now, we like to compete at Stryker, I think you've heard that before, and we like to compare ourselves, which is great, and we are, for the last five years, growing faster internationally than we are in U.S., from a percentage standpoint. Now, that's good.
What's even more important is that we're taking market share in every single of those geographies. What's even better is that the size of the opportunity and the size of the prize is much, much bigger. So as you can see, we're present in over 70 countries, but we also have 22 manufacturing locations outside U.S. And why do I say that? Well, those manufacturing locations are used very much for our customers who come over, be it customers from the local countries or international, but also to carry out voice of customer exercises with our innovation centers that we have, just to mention two, one in Cork, Ireland, and one in Freiburg, Germany. And also associate that with leading-edge partnerships that we've done with university teaching hospitals to train our customers.
So just to give two examples, one in Amsterdam and one in Istanbul, which are centers of excellence, where we have training programs combined with the university teaching hospitals, and just over the course of last year, we trained over 3,200 surgeons. And that really is just an example of how we are driving our business forward across the globe. Now, it's very easy to say and stand here and say that we're growing faster over the last five years outside the U.S. than in the U.S. It wasn't always the case. Yeah? So if we go back 10 years, 2013, as you can see here on the slide, we actually, the word globalization was kind of a new word.
Kevin alluded in his initial comments that a few of the things that were put in place was, first of all, set up a common mission and values across the organization. So it didn't matter if you were in China, Brazil, U.S., or anywhere in Europe, we didn't really have exactly the same values and mission statements. So that got done. Tick. The second point was putting a common strategy with four pillars. Customer always comes first, but the third pillar is called globalization. And that was something because the size of the prize of globalization is immense, and we weren't doing a great job outside. We're doing an okay job. Actually, in some markets, we're doing very well, like Australia, New Zealand, some pockets of U.K., excellent job, but the rest, we were doing an okay job. We didn't really have a fair share of the market.
One of the biggest transformations, and I was privileged enough to take part in that, together with a lot of the divisional presidents who are here, is what we call the Transatlantic Operating Model that started in January of 2015. Now, we didn't do it in a hurry. We took one year to do that, one full year with I don't know how many workshops to learn on how can we globalize and accelerate and specialize our teams in Europe and Canada? That was a starting point, and quite frankly, we have never looked back.
2015 onwards, our growth in Europe has been well above that of the market, and I'm pleased to say out of those 22 business units, we have four business units, just using Europe as an example, where we are market leaders today, and that is simply outstanding. That came through specialization, investment, and at the same time, bringing the best talent of Stryker. Katy alluded, it's not, it's not just the products, it's about driving that talent and the culture across the 17 countries of Europe. And the beauty of that is that these talents have gone to Europe, have come back here, or from Europe, have started coming here and moving around the globe. And really, what we, what we're doing over time is really shrinking the world to develop this model even further.
We get examples of talent movements that we've seen also in Asia Pacific, and my good friend John Collings, who's coming up in a few minutes, who runs the Asia Pacific business, has seen dramatic changes and improvements that we see in terms of a market share across most of the geographies. And that is despite a pandemic, despite a volume-based procurement in China, that's not helping us, but not helping anyone. The other aspect, which is fundamental, is that this has accelerated our new product introduction to create a common platform, to actually create common platforms in terms of teaching and education to our surgeons, but most importantly, to drive a global organization. So what we see here to the right-hand side, what's gonna happen next year is the future is bright. I mean, we are definitely gonna continue growing faster internationally than we are in U.S.
And by the way, U.S. is not growing slowly, yeah? U.S. is growing pretty fast, yeah. But we wanna grow faster, but most importantly, we wanna get those 22 business units to be number one or number two across all the geographies where we play. It is where we play and how we win that shows that the size of the prize is a multi-billion size. So I, I call it the multi-billion recipe. It's a bit like if you're going to have done, you know, lunch or dinner with your, with your family, what's the multi-billion recipe? It's right here in these three bullet points. It's about how can we continue driving a market leading through specialization where it matters, but how can we customize that and execute locally, leveraging the capabilities that are already in place?
I think Glenn alluded to, or Katy alluded to, for example, you know, using common platforms for the support functions to help our sales teams to execute according to plans. And last, but not least, is about driving that amazing technology that is disruptive to make us market leaders. Vocera, this last example, the great thing about what you just heard from Jessica is that that can also and will be implemented in some international markets in the coming months and coming years. So with that, I could not be more excited. After 15 years in the company, it feels like I started yesterday. So we have a massive size to go for, and with that, I would like to invite our international panelists and Yin Becker, please, to come on stage and take a seat. Thank you. I'll say hi. Great. Satoshi. John. My mic.
Stuart, thank you for that overview. I think it's impressive to just hear that we are growing in the past five years faster outside the U.S. than we are here. You know, the formula that you put up, I think, is really where we're focused in the future. Today, I think one of the significant areas that we focused on was talent and also strong leadership. Today, we are fortunate to have our leaders from across the world share with you their perspective on how we're continuing to drive momentum and growth in our international expansion. I'd like to take a few minutes and have each of our panelists introduce themselves, and then we'll go deeper into some of the topics in terms of how we're driving that expansion. Let's start with Jim.
Yeah, great. Hi, my name is Jim Marucci. I lead our Global Neurovascular Division. I've been with the company for 22 years. In the past, I've led our enabling technologies business focused in neuro and spine. I've also led our neurosurgical business and our ENT business, and I recently relocated to the Bay Area in California to lead our neurovascular business.
Thank you. Dragana?
Yeah, my name is Dragana Bunjevac. I'm responsible for Eastern Europe, Middle East, and Africa. I have been with Stryker now for 13 years. Before I joined EEMEA, I was responsible for spine business in Germany, Switzerland, Austria, and Poland.
Satoshi?
Okay. Hello, everyone. I'm Satoshi from Japan. I joined Stryker about 10 years ago as a head of human resources in Japan, and after three years, I got opportunity to move to MedSurg business, and then I expanded my responsibility to orthopedics and spine, and then I became a president of Stryker Japan about three years ago. It's great to be here today.
Thank you, and John?
Hi, everyone. My name's John Collings, and I head up Stryker's businesses in Asia Pacific. I joined Stryker about seven years ago, and I have a 20-year career in med tech, and within Stryker, I headed up our joint replacement business in Europe, and then for the past three and half years, I've been supporting our teams in Asia Pacific.
Terrific. So let's start with you, John. As you're thinking about international expansion, what are the priorities, and what's the key to success?
Okay, well, I think the one biggest opportunity that we have is to unleash the full potential of our product portfolio in targeted, under-penetrated markets and categories across the world, so supporting our customers wherever they are to do a great job. Now, let me bring this to life a little bit. So every year, there are about 20 million new cases of cancer, every year, and about 10 million deaths. In Asia, they contribute to about 60% of those, and if you think about some of the world's most prevalent cancers, so lung, gastric, liver, the incidence is even higher. So as an example, in the U.S., there's about 5% prevalence of colorectal cancer every year.
In Japan, it's about 12%, and many of these patients require surgical intervention, and this is where Stryker's advanced imaging technology comes into play, giving more precision and better patient outcomes. So when I think about that from an Asia Pacific context, a great example is in Japan, where under Satoshi's leadership, we've engaged with customers in over 40 different hospitals to do a clinical study, 850 patients, and we've demonstrated that with Stryker's fluorescence technology, you can actually lead to better clinical outcomes, fewer complications in patients with colorectal cancer, which is quite incredible. But as I think about the impact of this technology, I'd say the opportunity lies ahead of us. So here in the U.S., Stryker is leading with surgical visualization. We've got some ways to go in Asia.
However, with the market dynamics and with our portfolio, we are positioned to win. In fact, over the past five years, in that category, Asia Pacific has been growing twice as fast as the U.S. The last thing I'd like to mention is we're bringing more products to markets quicker. Just two years ago, 50% of our growth came from new product introduction. It's now heading north of 70%, and bringing it back to endoscopy, you heard from Andy, we launched 1788 recently. Well, in Japan and Australia, we gained regulatory approval at lightning speed, so we could launch at the same time as the U.S., which is really very exciting.
So bringing the right products, making sure we get it quicker, and then I think the other thing we need to consider is the sales force. So I'm gonna go to Jim next, and Jim, talk a little bit about some of the considerations you have in terms of building a sales force internationally.
Yeah, absolutely. So our business is quite unique at Stryker. We actually have three different customers, and we think about starting with the customer first, which is what we should always do. We have neurologists, we have neuroradiologists, and neurosurgeons in different parts of the globe, so our procedures can be done differently. So the first thing we need to do is really understand our customer, and that tells us where and how to invest, which could be different by market. So we think about where we put our investments. I think one of the most critical things for us is understanding that we do have to have a global presence, so feet on the street, our sales force presence globally. Now, that could be hybrid, it could be somewhat indirect or direct, but an extension of our direct sales force.
The important thing is having the accountability to have a number or a budget around the globe, which is driving performance. It's absolutely critical. In our business, our market, in general, is greater outside the United States. There's 12 million strokes that happen globally a year. The vast majority are outside the United States. So if we think about our business, it is the unique business at Stryker, where we're about 60% outside the United States and about 40% inside the United States. I'd also say it's important for us to think about the culture locally and make sure that we're thinking about regulations, restrictions, clinical needs, medical education, so really understanding the local markets, and the best way to do that is to spend time in those markets.
And then third, which is also critically important, is to make sure that we're adhering to global standards, ethics, compliance, and we want to win. At Stryker, we win the right way and making sure that we're doing that with always keeping our compliance in mind around the globe. Those are the most important things for me in.
How do you balance what you need to do locally to build a sales force?
Yeah.
And also maintaining the Stryker culture and the Stryker sales model?
Yeah, great question. So for us, there are local considerations, and I think maybe the most important thing is to realize that every market's different. What might work in one market may not work in another. So really, as I just mentioned, understanding the needs of those markets is gonna be critical for us, and that can mean different investments at different times, but really customizing that approach. I think the second piece of that is making sure that we have global resources, regional and local resources by market. So as an example, our marketing team, we have a global marketing structure. We also have regional marketing teams. So the regional marketing teams will feed information to the global teams so that we can maximize our investments.
You think about new product introductions, we can develop a common product platform, as Stuart mentioned, around the globe, so that's consistent, and we can maximize our investments there. At the same time, t hat could also hold true for R&D and regulatory and clinical, making sure we understand the needs of the market, both locally and globally. Then coming back to it, just making sure that we think about what is critically important is to make sure that Stryker spirit, the hallmarks of the Stryker sales force that are so critical for us, grounded in performance orientation and accountability, that has to hold true around the globe. So making sure that we keep that forefront, but also customizing to the local needs is really important.
Yeah, I think that's a great point in terms of making sure that we continue to uphold the high standards of the organization, but also meeting the needs of the organizations, and that takes me to you, Dragana. As you're thinking about localization, what are some considerations you have in terms of the strategy and driving the results that you've seen in your market?
Great, thanks a lot, Yin. Yeah, just to highlight that at Stryker, no matter where we are in the world, we really live and breathe our mission and values. Alignment with our global strategy is always our priority. To be successful in emerging markets, dedicated strategies needs to be developed which consider unique opportunities, but at the same time, challenges of respective region. So critical adjustments must be made to meet individual needs of each market. And as Jim has just highlighted, what might be the key to success in one market could prove irrelevant in another. Therefore, detailed market assessments are really critical for future success. However, today in the markets where we have a direct presence, we see very strong growth, which result of, focused specialization, dedicated sales organization, and close relationship with our customers, key opinion leaders, and critical stakeholders.
Additionally, in the emerging markets where we have historically been represented through indirect commercial channels, the trend that we see is the strong growth of middle class and higher living standards. So major investments in infrastructure and, and increasing access to latest technology in healthcare represents huge opportunity for those markets, but also for us as an organization. We always create a dedicated market entry strategy with a phased approach to go from an indirect to a direct business model. So continuously assessing dynamics of our region and proximity to our customers remains a major pillar of our growth strategy in emerging markets. What I would like to highlight, that we have the right structure and best-in-place talents to drive this strategy forward, and also to achieve the positive momentum for us as organization.
Talent, culture, and then also that focus on local action and making sure that we're meeting our customers where they are. I think that's a great perspective. We talked earlier also about robotics-
Yep.
And how it is driving adoption in the U.S. Talk a little bit about robotics and how it's doing internationally, Satoshi.
Okay, thanks, Yin. So our Mako strategy is to drive installation and utilization for both hip and knees. And globally, we have the leading install base, and outside of U.S., we are still in very early stage of robotic adoption. That's why there remains a lot of opportunity to grow in international market. And market like Japan is ideal for international growth because of the stable social dynamics, aging population, and technology-driven approach. As Asian population has different anatomy, and in some cases, disease progression, Mako is proving to be very useful in treating those patients. As we expand Mako's presence in Asian market, we have the unique opportunity to keep innovating our technology to better serving those patients. So in Japan, Stryker has led the market by building the foundation of computer-assisted surgery with orthopedics navigation.
So this foundation enable us to keep leading the market, and with Mako, we are leading the way. So our TKA procedure with Mako grew by 65%, and THA procedure with Mako grew by 35% compared to last year, while the manual procedure only grew by 5% in Japan. And by the way, the market growth, entire market growth, is low single digit. And even more exciting is that more than 50% of installation this year is from the competitive account. And today, about 1/3 of Stryker TKA is done by Mako, and about a quarter of Stryker THA is done by Mako in Japan. So momentum is great, and expansion is on track, and there remains a lot of opportunity to grow in international market.
Very well said, Satoshi, and your point around momentum. Hopefully today you have a just small glimpse of the momentum and the progress that we're making in our international expansion. Our leaders have come a long way, and they're also looking forward to spending more time with you. For those of you who are participating in the product demonstration, they will be available for further questions that you may have for us. So I hope, as you're thinking about our international expansion, that our focus is on the talent, the culture, specialization of our sales force, and meeting our customers where they are through local action. Thank you. Thank you.
Thank you. Good job.
Oh, yeah. My apologies. Introduce Glenn Boehnlein, who is going to be your next presenter. Sorry.
Thank you. All right, I'd like to add my welcome to everybody that's here live, and also to everybody that is attending virtually.
So, we made it kind of to the end. That feels good, huh? Just maybe sit up a little, stretch. How great were the past presentations? But I'm thinking maybe you might wanna lean in on this one a little bit. So with that, let me just talk about and spend a little bit of time on our financial focus. You know, I was last up here in 2021, and sort of giving you sort of the continuation of what was going to be our longer term financial strategy and focus. And you can see that on this slide, our historical focus has really been growth at the high end of med tech. We are focused on delivering op margin expansion. That drops down into double-digit EPS, and then obviously, we have a capital allocation strategy that is very focused on M&A.
The good news is that you can largely edit from your past transcripts to figure out what you need to say now, because we're not walking away from a financial strategy that has worked. We are going to continue to grow at the high end of med tech. We'll focus on op margin, but as Kevin alluded, we're gonna have a little bit of a elevated focus over the next couple years on that. All of that will drop down to double-digit EPS, and you'll see that we still are gonna prioritize M&A as our number one use of capital. You know, we've demonstrated strong performance in the past. This strategy has worked. If I look at organic sales growth from 2016 to 2022, you can see that the market was growing about 4%, we were growing 6.6%.
If I look at sort of where we landed on EPS and what that growth looks like, largely 12% over that period of time, so we were delivering solid EPS on solid growth. The good news for you is that all of this is gonna continue. We believe in this strategy. We know it's a formula that works for us. So how this is, organic sales are going to continue to grow at the high end of med tech. What does that mean? That means 200-300 basis points in excess of market. We're not walking away from op margin. We believe very strongly, to use my boss's words, that we are going to sprint back to our 2019 op margin. That means 200 basis points op margin expansion in the next two years.
After that, we will get back to our regular cadence of a floor of at least 30 basis points of expansion, and we didn't put a ceiling on that because we have demonstrated in the past that we often exceed 30 basis points of op margin expansion. Moving down, that sort of op margin expansion obviously leads us to the opportunity to deliver double-digit EPS growth, and that's in an environment of rising interest rates and in an environment where we may have tax increases in the future. And then lastly, if you think about free cash flow, and cash is the engine that really fuels a lot of the things we do at Stryker, we think that our historical 70%-80% free cash flow conversion is the right place to be.
If you think about our growth strategy, it's really based in four key pillars, and I think you got a really good flavor for this first one in terms of commercial excellence. If you look at sort of, hey, how's Stryker? How do you keep delivering growth in excess of market? What is that formula? I think what you heard all day today is that it starts with commercial excellence. It starts with specialized sales forces, focused divisions, divisions that make decisions about sales, marketing, innovation and R&D spending, and business development. You know why they make those decisions? Because they are closest to the customer. They're the ones who know, not CFOs, not CHROs, not legal.
They're the ones that know, and they're the ones who know the direction to take their businesses, what strategies to apply, so that we continue to grow at that rate. You just heard from all my friends internationally. They're on that bus. They are a real opportunity to drive growth. We are under-indexed from a growth perspective around the world, and I believe Stuart used the B world-B word when he was talking about that opportunity. It's billions, and we are getting after it actively. You heard Andy talk about innovation and how innovation really is such a big driver of organic growth. You know, it's the one place where we continue to make sure that we're investing enough so that we can drive the kind of products and the kind of technologies that our customers want, and guess what? They want it more than our competition.
And then lastly, you heard Spencer talk about our strategy relative to M&A, and you know that strategy. We are very acquisitive. We have been 50 acquisitions over Kevin's 10 years, and we don't shy away from that. We may have taken a little pause, but we'll talk about how we're jumping back in on that. The next pillar is really margin expansion, and this has been a journey. You know, over five years ago, we talked about, hey, we need to get after op margin expansion. And five years ago, when I would say that in a room full of Stryker people, they might actually not even know what that meant. And so we have really driven that into our business leaders, driven it into the business people. It is part of our incentive plans.
There's not a person at Stryker that doesn't understand op margin expansion, and frankly, they're all gonna be on this journey to sprint back to our 2019 op margin. And then lastly, that leverage leads us down all the way down to EPS, and we'll be able to deliver double-digit EPS growth on that. You know, the next real big focus item in our, in our pillars here financially, that we really have driven a lot of focus around, as well as op margin expansion, is really just cash flow and generating this 70%-80% free cash flow year in and year out, so that we are making the right decisions about investing back in the businesses, being able to drive that innovation, you know, making sure our manufacturing engine is, is operating effectively.
And all of that starts with making sure that we have appropriate level of focus on free cash flow conversion. And I would tell you that, you know, we still have opportunities in working capital, we still have opportunities with operational efficiencies, but that cash flow is a prominent component on everyone's bonus plan. So I assure you, given Stryker DNA, which Katy talked about, it gets a lot of attention. And then lastly, you know, how do we look at this capital that we have, and what is the best way to put that capital work to make sure that, that we've got this model of driving growth, driving leverage? And honestly, we haven't changed that model. You'll see. I'm gonna flash that slide at the end here, and you'll see that we are still allocating the lion's share of our capital towards M&A.
I know one thing that you're probably thinking is like, okay, margin expansion, that's a pretty big hill to climb over the next two years. We've already begun that journey. You know, this year has begun a lot of the foundational work that we need to do to make sure that we're in a position to get back to 2019 margins in 2025. There are opportunities in gross margin, opportunities in ex, operating expenses, but I would tell you that, that one of the things that, that just is naturally happening is that our operating environment is normalizing. So things like, you know, and please strike these words from your transcript, spot buys don't happen anymore. We don't say spot buys around here anymore. They're not material this year. Those have really gone away.
That was a big, prominent feature in our costing over the past year. I would tell you that freight and logistics is stabilizing. Guess what? We're not putting everything on a plane and flying it over here anymore. We're actually using more economical modes for our logistics and freight that naturally drive better leverage. And in this normalizing operating environment, it's gonna allow us to go after and start attacking some of our, you know, purchasing and procurement opportunities that frankly, over the last few years, we're, we're not being able to attack just because of the inflationary environment. You know, the other thing that I would tell you in this margin expansion journey is that we're having those pricing conversations with our customers.
It really is a muscle that we have built up over the last couple years, and we won't walk away from that. And so those things are things that are already ongoing, that will carry forward in the next two years, that should give you some assurance that we'll, that we'll be able to deliver on this. But let me, just in case you still don't believe me, let me double-click down a little further into how we're gonna get to 200 basis points. So at the very sort of macro level, I have this normalized operating environment that's gonna allow me to really get after some of these cost things. Price realization is real. We have had quarters now where we have positive pricing at Stryker. The team over at MedSurg, to a division, positive pricing every single division in Q3 and Q4.
You know, I would also tell you that if you look at some of the technologies that Andy was showing you, or even if you think about some of the technologies that Jessica presented, those are market-leading technologies. And you know what happens with market-leading technologies? You charge a high price, and that is exactly what we're doing. And you don't necessarily see that, you know, in the quarterly pricing statistic I give you, because that is really just like for like product. New technologies or newer products that get released, we're able to charge a higher price.
You know, the other thing on pricing, too, is that that we've done over the last couple of years, is we combined the teams that really focus on contracting with GPOs or contracting with larger IDNs, and those teams have put together a playbook, have put together metrics, are tracking how we're doing. We don't routinely sign contracts at all. We, we negotiate. We make sure customers understand, hey, we have inflation. Prices are going up. And so even in, even in businesses where generally it has been very difficult to hold price, let alone get a price increase, we've been fairly successful at being able to do this. So that contracting excellence item is really something that's really gonna benefit us. If I think about gross margin, there's a lot of opportunities, and again, a lot of this is in process.
We opened up low-cost manufacturing sites in Tijuana and in Poland. You know, we're just beginning to really utilize a lot of those sites, but those are, you know, frankly, at a much lower cost than some of our other manufacturing facilities. You know, and we will selectively move products into those facilities to really drive lower cost. We're also looking, you know, very selectively, but through the pandemic, sourcing kind of got a really sort of unique focus. And we started to really look and said, hey, you know what? Where should we look at insourcing things because we can do it for a lot cheaper than the vendors that we're buying it for? Another great strategy. We also, frankly, have not taken our eyes off of, do we need all the sites we have?
Where do we have sites that maybe are not best economically suited for us to drive cost improvement, and thinking about rationalizing those. You know, on the operational side, if you look at sort of what we spend on sort of that last mile in sales operations, those are big dollars. And so if we think about how do we consolidate that thoughtfully and still serve our customers, there is savings to be had there. Over the past few years, we've stood up shared services in Costa Rica and in Poland, and we are actively moving sort of centralized business processes into those centers and really driving down the cost for finance, HR, IT, the more centralized services that are provided to our divisions. The other thing that we're really working on is just harmonizing our IT systems.
You know, if you think about having a big footprint of a lot of IT, that is not efficient. That's not efficient for servicing. It's not efficient for working with those vendors. So we've been on a journey over the past four years to really start to really harmonize a lot of our IT systems. And then lastly, I would tell you that when you're growing 200 or 300 basis points faster than the market, you get natural leverage. Not everything goes up at that rate, and so we actually enjoy a lot of natural leverage in the gross margin line because of volume and in operating expenses just because of pure growth. So capital allocation, I don't think I need to say a lot about this.
This slide probably looks exactly like the same it did the year 2021, the year before that, and the year before that. The only thing that's grown is the amount of dollars we're spending on M&A, and you can see that here, 73% of that $24 billion, or almost $17 billion, has been spent on M&A. I would say that is our number one priority. We haven't done share repurchases since 2019. We really, we really focus on balancing our dividend growth with our M&A prioritization, and we've had healthy dividend growth as well. All of this stems from a very solid balance sheet. You know, our, our de-leveraging commitments are on track. I fully expect that to be finished by the end of this year.
We have a credit rating that we're very happy with and allows a lot of leeway relative to to work on lending. So how should you think about this? I think the way you should think about this is that our historical formula is intact, it's working, and we are going to continue to deliver value. We will have an elevated focus on op margin. Frankly, we're doubling down, and I am very confident that Stryker is gonna get back to its 2019 op margin by 2025. We've already put a lot of the pieces in place, and we have a clear roadmap to get there. So what I would tell you is that I'm very bullish on this plan. I know everyone at Stryker is bullish on this, and I think you should be, too. Thank you.
All right, and now I'd like to welcome up Kevin Lobo, our CEO. Thanks, Kevin.
Great. Thank you, Glenn. Could I please have Dr. Mayman up as well? Okay, great. We're now gonna move to the Q&A portion of our agenda.
These two?
Yeah, these two are fine.
All right.
GLP-1s. Got through a lot of time without talking about GLP-1s. But I did promise on the earnings call last week that we would talk about GLP-1s, and you can see here we have Dr. Mayman, who is the Chief of Adult Reconstruction and Joint Replacement Service for Hospital for Special Surgery. So not too far from here. Obviously, the number one-rated, I think, orthopedic center for many, many years in the United States. He's also a fellow Canadian American, like me, so,
That's right.
We like that, too. So, let me start first with maybe you can make a comment or two about GLP-1s, and then I'd like to open it up for questions on, specific on GLP-1s.
Yeah. Thanks, Kevin. Thanks for having me here today. So, I'll just start with a story. So I was actually seeing patients in the office this morning, and I saw this woman, 63-year-old woman. I did her knee five years ago. She knew at the time she had a bad hip on the other side as well, and at some point, we were gonna have to do her hip. And then we got into this pandemic thing, and everything shut down, and she actually put on a bunch of weight during the pandemic, like many people across the country did.
And then about a year ago, she said, y ou know what? I've got to take off this weight. My hip's killing me. I know I'm gonna need to have my hip done. And now she couldn't walk very well because her hip was so sore. So she came in to see me today. She's limping around. She really needs her hip done, and she said, hey, Dr. Mayman, you know, I've put on 40 pounds since you last saw me. I saw my primary care doctor two months ago. I'm on Ozempic now.
I'm gonna be ready for you in February. So the point of the story is that when we look at these medications now, we talk about perioperative optimization of patients, so making sure that they're healthy enough for surgery, making sure that we can minimize our risks and complications at the time of surgery, and it actually makes surgery easier for us if patients are a little thinner. So we talk about mainly, you know, controlling diabetes, making sure diabetes is well controlled, weight management, smoking cessation. Those are really the things that we're looking at. So this class of medications is actually bringing a whole cohort of patients that were ineligible for surgery into that group of patients that we can now treat. So most of us, most of my colleagues, are looking at these medications thinking, wow, it's gonna help control diabetes.
People are gonna actually lose some weight. They're gonna be better candidates for surgery. So we're actually seeing, I think, more patients because of these, not less.
There are talks about how, you know, this with reducing weight, that people won't feel the osteoarthritis, or it could potentially delay the time for surgery. What's your thought on that?
Yeah, so, you know, so first of all, we've got such a backlog of patients needing surgery, that that's not really an issue today. There's no question. We talk about, you know, conservative management of arthritis, right? So we talk about anti-inflammatory medications, physical therapy, all sorts of different injections, cortisone injections, viscosupplementation injections, PRP injections, and weight loss, are all our conservative management options that we talk about for treatment of arthritis. Those have all been out there for years and years and years, yet the number of people coming in for joint replacements keeps going up. So these aren't medications that are reversing arthritis. The arthritis, once it's started, right, this is, most of our patients, it's osteoarthritis.
I explain it to my patients, it's the treads on the tires of the car, and you're wearing out those treads, and those treads will continue to wear out over time. If people take some weight off, will they wear out those treads a little slower? We haven't really seen it. The insurance companies now are also asking for weight management plans before surgery for a lot of these patients. So again, it's kind of, it's bringing more patients into that loop. It's not getting rid of them.
Okay, great. Maybe we'll open up for questions from the audience. I see Rick's hand. Go ahead, Rick. He's just right up here. I'm gonna have to stand up that these bright lights are a little hard to see.
Thank you, Kevin. I have a couple of questions, and maybe they might be directed at you and Glenn. I'll just say them both at the same time. Your excellent doc-, operating margin guidance,
No, no, hang on. We're doing GLP-1s first.
Just only GLP-1?
Yeah, yeah. So what we're gonna do-
Okay. Sorry.
You'll be first in the second portion of the Q&A.
Okay. I'll let somebody else-
I brought Dr. Mayman here not to talk about op margin.
Yeah, I can talk about hip replacements. I can talk about knee replacements.
So-
I can't talk about operating margin.
Maybe I wasn't clear. There's a two-part Q&A. First part is gonna be just with the doc, and you can ask him about other things other than GLP-1s if you like, but really, GLP-1, maybe you could talk about sort of orthopedic volumes in general. But questions for him first, then we're gonna have him exit. We're gonna bring out my management team, and then we'll do, s o you can be first in that queue.
Thank you.
Maybe just right beside you, two, two people over.
Thanks. Chris Pasquale, Nephron. One question, not solely related to GLP-1s, but you mentioned the backlog of patients. I think we've all been wondering about how quickly we would catch up on that, given the under-treatment during the pandemic. I'm curious what you see as the gating factors to catching up on that backlog and how you would characterize it today versus maybe six or 12 months ago?
Yeah. So, you know, there's definitely a backlog. I think we're starting to catch up on the backlog a little bit, but it's still definitely out there. We've just like everybody else, we're coming through a staffing crisis now. We're really starting to come out the other end. I can tell you, HSS experience specifically, we, as of three weeks ago, are fully staffed in terms of OR nursing now, and it's been two years since we've been fully staffed in terms of OR nursing. So we're coming through that. That's helping us with the backlog, but the volume of joint replacement, as you can see from some of the numbers that have been described here today, continues to grow.
So, we're having trouble keeping up with the backlog, which is a great problem for us to have.
Okay, one right here. And then Shagun, Shagun after that.
Thanks so much. Larry Biegelsen, Wells Fargo. Dr. Mayman, can you talk about two things? One, the relationship between OA and weight, and second, the med tech medical device investment community's been waiting for this Novo trial called, the STEP 9, with semaglutide. And basically, one of the primary endpoints is the WOMAC score. Most of us are not that familiar with WOMAC scores, but, but my understanding is a WOMAC pain score, you start at the same 40, you need, you know, a total knee replacement. If that goes down by 15, that's really good. So what should we, what would be a good result, and, and what would be a result that you would say, okay, that's gonna reduce total knee replacements?" Like, how should we evaluate this trial when we see a WOMAC pain score in that trial? Thanks.
Yeah, it's a great question. So, being the Canadians up here, the WOMAC score is the Western Ontario and McMaster score, so two Canadian universities. So it's a pain rating score. And, you know, when we look at outcomes for patients, and this has really been outcomes of joint replacements. We've looked at what their WOMAC scores were prior to surgery and what their WOMAC scores were after surgery, and what the differences between those scores are. They've never really been used or haven't been used well for deciding whether people need surgery or not. So if you talk about weight loss or weight and surgery, there is no question. You take 20 pounds off, and you're taking 20 pounds off your joints, and they hurt a little bit less.
What we haven't seen is people saying, oh, well, I've lost 20 pounds, and I can play tennis again, or, "I've lost 20 pounds, and I can chase after my kid and play basketball with them again. And our joint replacement patients today are much more demanding than our joint replacement patients were 20 years ago. So when I started in practice, which was 19 years ago now, a joint replacement was so somebody could walk around the block, they could sleep comfortably, they could sit comfortably, they could walk comfortably, and maybe they played some doubles tennis. And now, my patients coming in, I just had a woman that ran the marathon with a hip replacement this past weekend.
Now, that's extreme, but it happens, and everybody's out there playing pickleball, and they're playing tennis, and they want to golf, and they want to walk the golf course. So the demands are much higher, and we haven't seen weight loss getting rid of that. So we'll see what these studies show. They're probably going to show that weight loss does decrease pain. I don't think it's going to decrease the number of patients coming in for joint replacements.
Great. Shagun, up here.
Dr. Mayman, this is Shagun from RBC Capital. Just one for, for you. How meaningful is this positive impact on your patient funnel due to GLP-1s, you know, that you just referred to? You know, is that a trend? Could it be a trend? You know, and perhaps if you had to put a percentage on it for 2024 or 2025, you know, how meaningful could it be for volumes?
Yeah, so that's a great question. You know, the honest answer to that is we don't know. And the reason we don't know is because a lot of people don't show up at our doors right now because they know that they're not candidates, right? They've been told by somebody else along the way, your BMI is too high. You weigh too much. Your diabetes isn't controlled. So they don't even show up on our doorstep. So, you know, I would say that most of us would say that close to 10% of the patients that we see currently today are not eligible to go ahead with surgery because they need to be medically optimized, and this is definitely a class of medications that will help optimize those patients. How many of those patients we never even see?
I don't know.
At least 10% is what you're saying.
Yeah, I think that's a-
Okay, there's one last question. It was just behind Ariad. I think Matt. Is that Matt? I think so.
Hi. Thanks. It's Matt Miksic from Barclays. Just to maybe a follow-up on the backlog. I know that's something that Stryker and others have talked about. Everyone over the summer seemed quite bullish in the clinical community about how busy they are. You sound bullish. But there was a little bit of a general kind of market lull in the third quarter, and I'm just wondering, you know, we certainly asked a lot of questions about, hey, is people taking vacations? You know, trying to understand, heading into this, are we going to space seasonality, and we got it. I just wonder if you could maybe give some color as to, in your center, you know, maybe how it felt-
Yep
And how it feels going forward?
Yep.
Thanks.
Q3 is generally a lull in joint replacement surgery. Right, remember, a lot of these patients coming in, so you know, ages kind of 50-70, kind of ballpark patients. They've got kids at home. They've got kids that are leaving for college. They've got summer vacations or fall vacations. The surgeons take vacations that time of year, just like everybody else. So Q3 tends to just generally have a lull. I think if we look two years ago, like not this Q3, but the Q3 before, we were so backlogged that there was no lull in Q3, and we're back to a little bit more of our normal lull in Q3. So I can tell you, we had a little bit of a dip in Q3, just like everybody, and Q4 is rocketing ahead.
Yeah, so kind of a return to normal seasonality.
Yeah, I think that's right.
Is the summary. Okay, great. So we're going to close this portion. Dr. Mayman is staying with us, so when we go to the Homer Stryker Center and do the product displays and for the cocktail hour, he'll be available for all of you to ask any other questions one-on-one with him. So thank you, Dr. Mayman.
Thank you.
So now, can I bring up the other members of the Stryker leadership team? And we're going to move to moderated questions, and I think, Rick Wise, you get to be first. We'll just wait till they take the stage. And we've included Viju, who runs our Global Quality and Operations. I think many of you know Viju as well. I could stand, but it's easier to see everybody from here-
Sure, sure
So I'm going to stand over here. Go ahead. Or I could sit.
So, Rick Wise, Stifel. I guess I got so excited by Glenn's commentary that I was rushing ahead. I don't know whether-
It's okay. Dr. Mayman was ready to jump in, but I had to-
Yeah
... hold him back.
Oh, these orthopedic surgeons, they think they can do it all. Glenn, I was-
Wow!
I think it, of all the times I've heard you present at these kinds of events, I think this was the most excited and positive and enthusiastic that you've been, which I think is a positive. It frightens me a little bit. But does sprinting back to 2019 margins, gosh, I looked at my model, that's 26.2%. The street, my numbers are more in the 25% range. Are you hoping we all leave here and head back and adjust accordingly? And maybe just talk a little bit more about. I appreciate it's everything we've seen today that's giving you confidence. I get that. But is there anything in particular? Is it the new technology? Is it the recovering markets?
What's giving you, as a financial person, such confidence?
Yeah, first of all, far be it for me to tell you what to put in your model. But I think it would be a good guide. You know, I think a couple things, Rick. Like, first of all, we really are seeing a more normalized operating environment. So that means we are working with our customers more normally. We are working with our vendors more normally. Our people are settling into the routines that they're in. I think that we're leaning into this sort of new world of inflation, and how do we think about that? And, you know, how do our customers pay for that? How do we look to our vendors to say, hey, we're growing 10%, and that's got to be worth something from a volume discount standpoint.
We're hitting the strides of, you know, looking at places for low-cost manufacturing and how those will scale for us in the next two years. But then also really hitting our stride on shared services, and really trying to leverage these locations where we can offer centralized services to the divisions at a much lower cost. And so I think the combination of that environment, plus the natural leverage I know I'm going to get off of growth, really gives me the confidence to know that we'll be able to do this by 2025.
That's, that's great. And one quick follow-up, if I could. You're internationally under-indexed around the world. Heard a lot of encouraging commentary about the potential there. But two years ago, if, if memory serves, you said, w ell, sales were all U.S. sales were like 26%, 27% or 26% of sales. Now, help us understand, what, what's changing? Why now is the growth going to be sustainably faster, which I guess means becoming a bigger percentage of Stryker sales?
Yeah.
Thank you.
Can I start on that one? So looking at the percent of business is a tricky thing when you're as acquisitive as Stryker is. Because when we tend to buy things, like you buy Vocera, you buy a ton of U.S. revenue. You buy Wright Medical, heavily indexed to the U.S. We buy Sage, it's virtually all a U.S. business. Because of our acquisitive nature, we're going to continue to be fighting with getting those products initially, which drives up the U.S. percent, and then as we extend globally, then, eventually it grows. What's more important is to say, are we continuing to grow faster outside the U.S. than inside the U.S.? We now have five consecutive years, to this year will be number six. That is momentum. That is sustained momentum. You saw the leadership that we have up there.
Never felt better about our leadership that we have in international. We had a talent deficit historically. We were subscale historically. We still are, in Latin America, subscale. We have a terrific new leader that's leading our Latin America business, that came from our Southern Europe business, and he's just salivating at the opportunity, especially with Mako and joint replacement, and that he has a lot of experience with that. So we are poised from a talent standpoint, from a business model standpoint. You know, Dragana's success has been shocking in EMEA. I had no idea we could grow this well in places like Turkey and South Africa, in the Eastern Europe markets. It's been incredible, and that's due to her leadership and her team's leadership. This is sustainable. We bought out our distributor. We went direct in Turkey. That wasn't so easy.
And so that's what we're doing. We're going to go more direct. We have confidence in doing that. We've created an indirect channel function that manages distributors way better than before. So not only does it reduce compliance risk, but we're actually putting our product in the hands of the right people in front of our customers. So it's a comprehensive approach that tells me it's sustainable. Now, don't expect that percentage to change dramatically, because if we go 12% versus 9% or 8%, it doesn't. It's going to take forever to move the needle. But the goal is to continue to grow faster outside the U.S., and then those businesses become businesses of scale, which we aren't today. We still are way under-penetrated. So it's a massive opportunity.
As we gain scale, I think you're going to see some inflection points in some of these international markets. Mako is just in the early stages. Outside of South Pacific, Australia and New Zealand is well-penetrated for Mako. The rest of the world isn't, and we are now starting to gain some steam. You know, Satoshi talked about Japan. Japan, for me, is just a massive opportunity for Stryker. We are under-indexed in Japan in some of our businesses, and these great technologies are gonna really take over. I mean, there's just no reason. Just because Olympus is Japanese, doesn't mean they should have the market share they have in cameras.
No offense to their business, but we have the leading technology with ICG, we have the leading technology with 1788 that's coming to the market, and we now have the team in place, under Satoshi's leadership, that are confident in selling against Olympus. We even have Yujun here somewhere. I think he's in the back. He came over from Olympus to join us to lead our endoscopy business. That would have never happened five years ago. He sees the writing on the wall. He's a smart guy, right? He's now over at Stryker, and so that's these are things that never happened historically, Rick. So that's why I feel. I don't know if you guys want to add anything.
Yeah, Kevin, maybe just one other comment. Thinking about the last, well, say, five years, the pandemic did slow things down. I'm amazed, and I, Kevin and I have chatted about this. A lot of times, we'll show up in a place in the world in more recent days, and they'll say, we haven't seen a leader here in a long, long time, in years. And that's because the pandemic limited our ability to go into the market, spend time with customers, understand their needs, and I'd say over the last year and a half, that's massively accelerated, including all of these presidents, my entire leadership team.
We were just in Asia with Satoshi and John Collings' leadership team, talking about what are the regulatory pathways to get the clearances of the existing products in our portfolio? That's the beauty. These are technologies we own, that we're just putting the pathways in place to make sure we can turn those products on and go. And that's been a super exciting opportunity for us.
Okay, lots of hands. We'll go with Robbie here in the front. Right up front here. We got three. We'll go one, two, three, and then we'll go over to Joanne, and we'll do that side of the room, and then behind Joanne.
Just closer.
Thanks. Robbie Marcus, JP Morgan. Two from me. Kevin, you talk about growth on the top line at the high end of med tech. Any numbers you can put around that? Is historically 6%-8%, 7%-9%, something in that range?
Yeah, no, we're not going to put hard numbers because it really depends on the market, right? So think about our history, or at least our recent history, is we're 300 basis points faster than the market. And as you know, in the slide I presented earlier, we're participating in faster end markets than we participated in 2013. So that gives me a lot of confidence. I don't want to give a number because if the market slows down, we're going to continue to outperform by that 300 basis points, call it roughly 300, but it depends on the market. If the market goes faster, expect more from Stryker. If the market goes a little slower, then our growth will be a little bit slower. But we're not going to put numbers around it.
We'll give you guidance in January for 2024, that'll be specific numbers, but this is a kind of a three-year outlook. We're just going to stay high end of med tech. You can model whatever you think the market is, + 300 basis points, that's, that's where we're going to grow.
Great. Maybe, Glenn, on margins, how do we think about the 200 basis points expansion, 2024 versus 2025? And how much is built into that for potential M&A, which it's pretty clear you're going to be doing?
Yeah, I think, in terms of the phasing of the 200 basis points, you know, we'll give, we'll give guidance in January, so you'll sort of be able to factor in what 2024 looks like, and then the rest will just be math for 2025. In terms of M&A, you know, our goal was to, to basically pay down that term loan borrowing that we, we had for, Vocera. And we will have that completed at the end of this year, and that really frees up more of our free cash flow to really direct, to M&A.
On margins. Oh, on margins. Well, it really depends on the M&A, right?
Yeah.
So not all the M&A. If you look at Wright Medical on M&A, really wasn't dilutive at all. If you look at Vocera on M&A, not dilutive at all. Sometimes deals come with dilution. Usually, it's pretty modest, the dilution, and usually, we offset the dilution. So at the time we do a deal, if it's of size and scale, if there's going to be any kind of impact on margins, that would take us off the 200 basis points or improve the 200 basis points, we'd update you at that time. But, you know, we're assuming kind of a stable environment with, let's say, call it very modest deal dilution. If something bigger, positive or negative happens, we just update-
Yeah, we'll call it out if it's going to have a big impact.
This is underlying. This 200 is underlying. We plan to drive this. Then, if something weird happens with a deal that could affect that, we just update you at that time.
Thank you.
Uh, Vijay?
Vijay Kumar from Evercore, thanks for taking my question. Kevin, maybe one for you on the top line here, revenues. Where you know, when you look at the cadence, 200-300 basis points about end markets, but should next year be a normal year, just given you have this backlog benefit, new product cadence? And how should we think about beyond 2024, right? Is comp an issue beyond 2024? Can Stryker maintain this innovative engine?
Well, look, we're growing 10% off of 10%, so comps haven't been an issue this year. I don't want to prejudge next year because Jason will kill me-
Yeah
If I start talking about 2024. We'll do that in January. We'll tell you what 2024 is going to be. You, you can tell we feel pretty bullish about the ability to sustain high growth in our company. We'll give you specific numbers in January.
And maybe, Glenn, one for you on the margins here. What are the sensitivities, variables for those margin trade when you think about FX? Is that something that can move those numbers? When you say 200 basis points, is that a constant FX margins? Or maybe talk about the plus and minuses.
Yeah, I mean, I think that number assumes that we're sort of in the FX environment that we're currently in. You know, if FX moves dramatically and we give you those numbers in terms of the impact, I think you could factor that in. But right now, it just assumes that the FX environment that we're feeling right currently in the fourth quarter here, continues over that period of time.
Okay, and then we're going to go over there next.
Great, thanks. Travis Steed, Bank of America. Glenn, any reason the margin wouldn't be more linear when you think about, like, product launches to consider? And talk a little bit about gross margin, you know, R&D, SG&A, some of the drivers where we should think through that. It's, Y ou know, 100 basis points is still a lot to think about for Stryker, you know, historically. So I wanted to think about the line items, and then, and how you thought about tax and the double-digit EPS growth, given Pillar Two.
Yeah. I think, in terms of the phasing, I'm not really going to say anything on that again, because Jason will kill me. But, you know, you'll get that in January relative to our overall guidance, when we provide that, and I think it'll be evident. You know, I'll turn it over to Viju to talk about maybe gross margin and opportunities there and how we see that playing out, and then I can talk a little bit more about operating expenses.
Yeah, I'd be happy to, Glenn, and thanks for the question. I wasn't sure when that was going to finally come. That's great. So from an operational aspect of margins. A lot of our cost structure is in our manufacturing network, and the other big part of our cost structure is the supplier network, right? So if I think about our manufacturing network, in the last three years, we have successfully, completely closed and consolidated 17 manufacturing plants across our footprint.
That's a pace and a rate that had never been done before. What that freezes up, if you, if you think about it, of all the acquisitions we have done in the last three years, our footprint today is smaller than it was three years ago in terms of the number of manufacturing facilities. A lot of these manufacturing facilities were smaller, subscale, and not in ideally cost-advantaged geographies in the world. So as we continue that, that gives us tremendous confidence. We have built the muscle and are doing it at scale.
The other aspect, as we talked about two different manufacturing plants, the last time we were here, we had just opened the Tijuana facility two years ago. That facility is about 70%-75% full already. Just to put things in perspective, we're roughly talking $18 an hour labor cost here versus $18 a day labor cost in Tijuana. We now have opened up a second facility in Poland. Our first greenfield facility in Poland, but second greenfield facility, Tijuana and now Poland. It's going to be a high-scale orthopedic implant manufacturing facility. All of our orthopedic facilities are pretty much here or in Western Europe. This gives us a scale play in a very nice cost-advantaged geography. If I now think about product transfers, there's a lot of cost it's unlocking.
So we now, just to give you an idea, just in the last couple of years, we have transferred over 100 products successfully, either from plant A to plant B, or from supplier A to supplier B, or from a Stryker plant to a supplier, or from a supplier to a Stryker plant, all of those. What that has gotten done for us is tremendous leverage when we get to negotiate with fact-based, cost-based negotiations. It's playing out in scale now. It gives us tremendous supply resiliency with dual sourcing. After the K2M acquisition, we insourced several of the K2M third-party manufactured products into our Cestas, France, manufacturing facility smoothly, every one of them at a cost benefit. So I could probably keep talking, but,
I think that last point is really important, this product transfer skill. We didn't really have that at Stryker. These division presidents would tremble whenever we'd talk about moving a product from one plant to another plant or bringing in a product from a third party because their first worry would be, we're gonna have trouble with the transfer. We're gonna be in back order. And in the old days of Stryker, they could overrule. Now it's just much more collaborative and trusting, the relationship. The timing, of course, can be. They can affect the timing of when to do it.
Yeah.
but it's happening now. And more importantly, the suppliers know that it's not an idle threat. They don't give us the price we want, they're out, and we're just gonna bring it inside. And we've now done that and proven we can do that, and that is kind of a shot heard around the world, where in the past, I would say Stryker was probably taken advantage of a little bit by some of our suppliers. So that's a new muscle, and it's that gives us a lot of confidence. Okay, I'm going to go to Joanne, and then behind Joanne.
I think we're going to do... Sorry.
Oh, sorry. Did you have a follow-up?
Yeah, yeah.
One, two, three.
I think,
Yeah.
I'll just-
You heard-
I'll add a comment about operating expenses.
Right. Oh, sorry.
If you think about the single biggest thing in operating expenses, and I'll tell you that R&D is pretty sacred in terms of percent of sales as we look at the spend. But if you move on down to SG&A, the single biggest cost in there is heads, people. You know, and I would tell you that over the past few years, we have exercised really good discipline around adding heads. So it doesn't scale, it doesn't leverage with the top line. So that discipline will continue for the next few years. And then, if you look to, you know, how we naturally budget with the divisions and the geographies, we build in leverage, and then we leave it to them to figure out where do they want to spend their dollars.
A lot of savings can be generated through this sales operations and distribution function that exists in most divisions. We also, on the G&A front, moving to shared services, it provides, you know, labor arbitrage of almost, you know, 30%, 3-to-1 cheaper. And so we're moving a lot of positions there that can operate effectively in those environments. And so I really do think, you know, SG&A has a lot of good opportunities, as well as what Viju talked about in gross margin.
Okay.
Tax on the double-digit EPS growth, that was the final question. The tax rate, what do you assume for tax with the Pillar Two?
Oh, Pillar Two tax.
Yes.
So what we've said on the earnings call is, we believe we're gonna be okay for 2024. We are aware that there's an impact, but we have tax planning strategies that can get us through 2024. Not sure yet on 2025 and beyond. That fair?
We'll provide guidance in January.
We'll provide guidance in January, but we're not, I know other companies have kind of flagged 2024 being a challenge. I think you could expect a more normal year in 2024. So this year, we're guiding to 14%.
Yeah.
That's a little bit, a little bit low because we had some discrete items, but it won't be materially, you know, materially higher than that next year. 2020, we're still working on plans for 2025 and beyond, so there could be an impact in, potentially in 2025. Stay tuned. Okay, now we finally can go to you, Joanne.
Thank you. Joanne Wuensch from Citibank. You gave a statistic I found interesting: 60% of knees done in the U.S. are done robotically. And so 60% of all of Stryker knees?
Stryker knees.
Stryker knees.
60% of our knees are done robotically.
Yep.
Okay, and then I think I heard a statistic for, some segment in Asia, a third of the procedures? Or just if you can clarify that.
In Japan.
In Japan. A third of Stryker's Japan knees-
Are totally-
On total knee are done. So let's say 33% in Japan's total knees are done on the Mako. 60% of U.S. knees are done on Mako. So Japan's in an earlier phase of its life cycle. And not only does the percent matter in a place like Japan, where our market share is not as high, not only will the percent go up of Mako, but our business will go up as a result, 'cause we're gonna take a lot more share.
That's helpful. One of the things you didn't mention, or maybe I missed it, was the ASC, which is an area Stryker's been at the forefront of for the last several years.
Yeah, we love the ASC.
Thank you.
Why don't one of you two guys wanna take it?
You can start, go ahead.
Did you have a specific question, Joanne, or?
I'm more curious it wasn't mentioned. But also, you know, what percentage of revenue, if you can share, is done in the ASC or knees or hips or anything that you can sort of ground us?
You can talk knees and hips. Yeah.
Thank you.
Thank you. Knees and hips.
Sure. It wasn't intentionally not discussed. As a matter of fact, we're extremely bullish on our ASC program and the success we've had yet again this year in 2023. It's really quite a fascinating phenomenon, where we've seen this shifting site of care, and more and more, in particular, adult hip and knee procedures being moved to the outpatient setting. A little bit like what Dr. Mayman said, part of this is a space reality and an efficiency reality, where there is the demand. They're saying: Well, we can, we can move this to the outpatient center, and there's some economics that are favorable there for the physician ownership if that's how it's set up. We've been really excited about our progress, in particular, led by Mako.
Mako's been a phenomenal tool to actually drive a broader conversation about the portfolio that Stryker can offer, which is second to none. No one has the breadth of portfolio when we're talking about an ASC, either an existing ASC or one that's from the ground-up build. It's probably a great differentiator for Stryker in the marketplace. If you recall how we do this, we provide our specialty sales forces that are domain experts in their clinical capabilities, like a hip and knee, but then we also have a resource that helps guide this to be the single point of contact to sell the entire breadth of the portfolio. This, compared to anybody else, is it can't be competed with. It's been really successful.
There's still great opportunity here for us, and so I think we're still in early days of the growth trajectory in outpatient surgery, especially in hips and knees. The last thing I'd share, what I've personally seen, I'm still often surprised if there is a physician that has strong brand loyalty of product X, when the adult hip and knee surgeon comes in and says they want to use Mako, that loyalty flies out the door to that other competitor, and they quickly switch to Stryker's comparable product there. It's really a fascinating phenomenon, and one that we're continuing to build upon, so.
Yeah, sure. The only thing that I would add, and Joanne, we talked about this in the last Investor Day. We actually had a panel on ASCs, as you recall. We built and launched our dedicated ASC team in January of 2020. So we're almost four years in, and actually, it sounds like it could have been bad timing because there was a pandemic, but we know the pandemic drove cases to the ASC, so it was actually really amazing timing. And we were first to market in building an ASC organization. We would say we're the most mature process-wise, the most mature in building the key relationships to drive these wins in ASCs.
And how it works internally, as Spencer mentioned, how we, using an American football term, how we quarterback these deals with our ASC regional managers, we're pretty advanced now. So if you look at growth in the ASC, we talk about accretion in our international markets, the growth in our ASCs has been very accretive to Stryker's growth over the last few years. And Spencer's absolutely right, there's only upside to come as that momentum, particularly with the total joint, moves from the hospital to the ASC.
Yeah-
Very bullish.
Roughly. Yeah, right behind you. Pass the mic behind you. Right, roughly 10%-12% of our hips and knees are done in the ASCs-
One, two
But it's growing at a faster rate than in the hospitals or in the hospital outpatient, and that number is only going to continue to rise. And I tell you, the business, of the 22 businesses, the one that loves the ASC the most is our Sports Medicine business, which has been a huge beneficiary, and that sits inside our Endoscopy Division. That continues to just drive incredible growth, sometimes on the back of Mako and some of the other products that are offered in the basket of products that we provide at ASCs.
Thanks, Kevin. Ryan Zimmerman, BTIG. You know, we hear you guys talk all the time, acquisition, acquisition, acquisitions.
Right.
We've never, I mean, in my 10 years covering the company, I don't think we've ever talked about a divestiture. And I'm wondering, at what point does it make sense to get smaller, to get bigger, and how you think about at, you know, what point you would consider something like that, if at all?
Well, you know, a lot of other companies are, spinoffs are in, right? They're spinning stuff off or they're divesting things. Typically, it's because they're not growing in the businesses or the businesses don't fit with their existing business model. All the products we sell are sold to the same customer. Hospitals buy all our products, every single one. We don't have sideline businesses that are sold to a, to a different customer. And we believe, if we can grow something, why would we want to sell something? And if you look at the last decade, other than spine, which has been a little bit, you know, up and down and, and maybe not growing as fast, every other business has had fantastic growth. They're all high-growth businesses. Why would you want to sell something that's a high-growth business, that's complementary?
Think about the ASC offense, which, by the way, spine is wonderful to have in an ASC, 'cause a lot of times spine procedures, cervical spine, increasingly lumbar spine procedures are done. When you have everything you can offer for that ASC, whether the foot and ankle, shoulder, sports, hips, knees, spine, we, we have it all, and we can block out the competition. It's, it's a tremendous thing. And so we love the fact that, that we're in this big market of spine. I wish it was an easier market. It, it has started to consolidate quite a bit. Still more players than you see in most normal markets. But because of our enabling technology platform, I'm really bullish on the future of spine.
If I didn't have Mako Spine coming, if I didn't have the other product, which is, you know, I think the project name is Copilot, which is gonna be able to do, you know, bone preparation for certain procedures within the same ecosystem as our Q Guidance system. If I didn't have the enabling technology platform, that could be one you could talk about. But the problem for Stryker, you know, unlike Zimmer, they were, they were able to spin out their spine, they didn't have a neural business. If you're doing a neuroscience deal with a hospital, they need spine. They need spine with the neurodrills, with the neurovascular, with the CMF, with the ENT, and when we're increasingly within Andy, you know, Andy's offense, which was an ASC offense, we've now created a neurotech offense.
Let's call it a baby-sized organization for now, but we've already started to win some neurotech deals, and spine is a critical part of being within neural, 'cause the neurosurgeons are doing spine procedures. So if you just look at it from a growth standpoint, that would be the one you'd say, well, what about that one?" It's strategically really important for us. We can also leverage robotics. We can leverage enabling technologies. I think, c an you comment at NASS what the reaction was? The surgeons that saw the enabling tech was in a private room.
Yeah, as we've shown-
Provide a little color.
Customers, the ecosystem of the enabling tech, they say it's differentiated versus anything else they've seen in the marketplace.
Mm.
And that comes on the back of the technology of Mako, and then obviously, the decades of experience in our cutting accessories that comes out of our instruments business. So you bring those together, and it's really impressive. Also, rest assured that part of Andy and my job is to push the divisions to look at their portfolios. There are some small product divestitures we've done over time, and Andy and I go through a portfolio assessment discussion all the time, and we look obviously at the long-term strategy, the demographics for the market. We assess the geographies, we assess the connectivity of the KOLs, what impact this has, and it points to everything Kevin just shared. We feel really good about our holistic portfolio right now.
Yeah, I mean, juvenile tumor system we sold. We sell little things.
Yeah.
They're just little products. They don't hit your radar screen. But so we've sold little things over time, but the reality is, we like the business that we're in. You know, our growth is pretty good.
Yeah.
Right? And if we weren't able to grow our businesses the way we are, then potentially we would think differently.
Okay. And then just a follow-up. This is more for Robert, but you may not let him answer this, so I'm gonna ask you, Kev-
Go ahead.
As you think about the digitization of your technology, I mean, how do you decide kind of what to monetize and kind of what to make value additive? As we think about software as a percentage of Stryker sales today, you know, what does that look like in five years or 10 years as you're making these inroads into Vocera and, you know, other areas?
Look, we're wildly excited about the digital robotics enabling tech, and everything we launch is gonna be smart in the future. Just about everything. And the question of what we can monetize and what we cannot monetize, believe me, those are active discussions going on. I don't know if you want to add anything to that, Spencer.
Sure. Yeah, we have them on a portfolio-by-portfolio basis, and we actually have some active projects underway where we are monetizing capabilities. So I mentioned the revision capability of Blueprint. We actually have a monetization sales structure in place, that's been growing like crazy. I just checked before today, and we have well over 500 customers now that are paying, Stryker an ongoing service fee to utilize that particular platform to plan their revisions, as an example. So we look at that, and we build this. And our theory is, we don't have to ramp it overnight, to look like the Nike Swoosh. Instead, I think we want to do it the right way and build the technology capability where the customer really goes, okay, this is bringing value to me-
I'm worth-
And that money will come.
Yeah.
We're seeing it. We're having these discussions now. We also have some XR technology, even in our upper extremities business right now, they have an XR capability. There's a solution-based sale that's in place. Vocera has some amazing software capabilities and obviously the model that supports this from a monetization standpoint. It's still a small percentage in Stryker's revenue portfolio. With that being said, this will be something that will continue to grow over time.
Yeah, it will accelerate without question over time.
Yeah.
Jason, how are we doing for time? It looks like we're up against it. Maybe we'll just take these last two hands here. Sorry. But we're gonna be around for the cocktail. You can grab us at the cocktail hour.
Thanks for taking the question. Rich Newitter from Truist Securities. Kevin or Glenn, it sounds like, you know, you're clearly ready to get a little bit more aggressive on the M&A front after, I guess, you referred to it as a pause.
Right.
You're an increasingly larger organization than you were several years ago, bigger growth rates to maintain valuations in the sector if re-rated downward. You know, should we think of the needs for a larger deal to move the needle, factoring into the M&A strategy? Or said another way, what's your appetite for larger deals?
Look, I think the majority of our deals will still be those smaller kind of deals by number, but we're not against doing larger deals. I don't feel any pressure that I have to do something of size, given that we're driving pretty good growth without doing anything of size. If a larger deal is what we think very value creating, like we did with the Wright Medical, if something of that size or scale we think could be value creating, we're not going to be afraid to pull the trigger, but we don't feel a need to get big just for the sake of being big. But everything will be on the table now that we're getting our debt ratio, our debt equity ratio, to a very healthy level, meeting the commitments to the rating agencies.
If you remember, we sort of jumped the gun a little bit on Vocera because it was just too good to wait on. Thank goodness we did. But that was a little bit ahead of our commitments to the rating agencies. This time we're actually going to fulfill the commitments we made, and then get back on offense. So, you know, nothing's off the table, but that's not new. That's kind of the same open-mindedness that we've had for the last decade. We still have today. Okay, Matt, you get to close out the Q&A here. Last one.
I'll try to keep this simple. So just one, one question on on MedSurg and the product cycles there. I think over the years, everyone, you know, has often been surprised by just how fast that business grows, and often has something to do with, you know, just a great product cycle or series of product cycles. We're kind of in the middle of that now. I'm just wondering if this kind of cluster of of products that are all kind of coming out at the same time, does that say something about bandwidth? Does it say something about your business lines, that we may just be seeing more of these kind of overlapping, like, products cycles in MedSurg going forward? And I have just one quick follow-up if I could.
Well, I'll let Andy answer the MedSurg question.
Yeah. Yeah, thanks. Thanks, Matt. And I'm glad you recognize that we have a lot of products launching recently. But I did allude to it in my comments earlier, that historically, we have been prolific in new product launch, new generation, particularly of product launches in our MedSurg business. This is where we have that deep command. Here's where I think we are getting better. I think we're getting better in two key areas. One, how we utilize our resources. So project selection. In the past, we may have had a number of singles and doubles, and now we have, you know, doubles and triples and maybe an occasional home run.
So bigger projects, bigger impact take a little more time and a little more engineering resource, but have a more material impact on our customers and on our company, of course. And I think on the second part of my two, we're getting more effective at moving our projects through the system faster. So removing low or non-value-added tasks in our quality system, so something that may have taken 48 months, we may have shaved eight or 10 months off of that today, and I think that will continue over time. I'll also add, I mentioned it, Kevin mentioned it, that our pipelines today are as strong as they've ever been. So these are products that are not on the market yet. They're coming down the pike. So should we expect that on a continual basis going forward? Absolutely.
Absolutely.
That's what we do.
Yeah, we have, we now have what's called a PMO Council, Project Management Council, of professionals that are helping us launch these products with tremendous rigor and tremendous cadence. 12 years ago, when I joined the company, if you said the word project management, people would just kind of look around or look at their shoes. It just wasn't something we valued at Stryker. And so we're, not only are we launching at probably a faster clip, when we launch, we don't have to go back and kind of pull back, and we don't go into backorder right away. We're launching with excellence out of the gate because we've really professionalized project management. It's a badge now. Being a PMO person, project management office person-
True
Is kind of a badge of honor at Stryker. That was not the case 12 years ago, not even close. So you should expect this to continue. I think one of the good decisions we made was when the pandemic hit, we did not take our foot off the gas on R&D. You saw our R&D spending didn't slow down at all, and we're obviously benefiting from that. But I think MedSurg is an underappreciated part of Stryker. I mean, these are fast, high growth end markets. We have tremendously high market share. We know our customers very well. They renew very quickly. They're eager to see our next product, and they're eager to buy our next product, just based on the legacy that we've established.
But because a lot of our competitors are private or it's harder to line up our businesses, I think it gets kind of overlooked. But if you look at the last decade, there's been a tremendous amount of growth coming out of the MedSurg. MedSurg is now our biggest of our three, you know, reporting segments, and that's not a coincidence. And some of the acquisitions we've had are tremendously high growth. If you think about Physio-Control, which is a deal that many of you weren't so thrilled about, I mean, that's been an absolute home run of a financial deal. Spent $1.2 billion for a $500 million business that's grown double digits since we've owned it, and has a big backlog.
I mean, in our hands, that's just been a home run of a deal, kind of lost in the overall size of Stryker. But you can count on MedSurg, right, Andy?
Yes.
Continuing to drive tremendous growth in the years ahead.
There's a few people over here you can ask later, Matt.
Yeah.
Yeah, yeah. We're gonna have some of our MedSurg presidents here, and you can ask them that. We're gonna have to close down the broadcast now. So thank you all of you who are attending virtually. We're gonna exit the panel, and then you're gonna hear some instructions about moving over to the product tour and then the cocktails. Thank you.