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Stryker Blames $105 Million Impairment on Chinese Price Controls
Medical device maker suggests winning Chinese tender offers make little economic sense.
November 10, 2021
Ninety days after warning of a possible asset impairment related to China’s national and regional volume based procurement (VBP) of high-value medical devices, Stryker (SYK) is signaling even a winning bid will negatively impact the company’s financial performance. Government contracts will be awarded to the lowest bidders who are able to satisfy China’s quality and quantity requirements.

In its latest 10-Q, Stryker— after saying it expected to be the winning bidder in several VBP tenders last quarter— revealed the consequences associated with winning:

“We expect that the prices required for a successful bid will, nevertheless, negatively impact our existing commercial operations of joint replacement and trauma products in China. As a result of the outcome of certain regional programs for our trauma products and the national VBP program for hips and knees we recorded charges of $105 to impair certain long-lived and intangible assets in the third quarter of 2021.”

Regarding spine products, which are part of the VBP in one province, Stryker says it’s not clear to what extent spine products will be included in further VBP initiatives at the provincial or national levels. In the latest filing, Stryker included new language suggesting it’s more optimistic than it was three months ago regarding possible impairments related to spine VBP tenders:

“We do not expect any significant impairments related to the potential Spine VBP programs. Our business in China represented approximately 2% of our revenues for the year ended December 31, 2020.”

In 2020, China accounted for approximately 2% of Stryker’s total revenue.
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