Finance Mako Surgical

MAKO Surgical, acquired by Stryker Corporation in 2013 for approximately $1.65 billion, revolutionized orthopedic surgery with its robotic-arm assisted technology. Understanding the financial implications surrounding MAKO involves examining its business model, investment landscape, and the impact of its acquisition.

Before its acquisition, MAKO operated with a business model that revolved around selling its RIO (Robotic Arm Interactive Orthopedic) system and associated disposable instruments. This model involved significant capital expenditure for hospitals initially, creating a barrier to entry. Revenue was generated through the sale of the robots themselves, but critically, a recurring revenue stream stemmed from the sale of single-use instruments and implants required for each procedure. This consumable-based revenue became a crucial driver of profitability, offering a degree of predictability in earnings.

MAKO's initial years as a public company (before being acquired by Stryker) presented a mixed financial picture. While the potential of robotic surgery was widely recognized, MAKO faced challenges in demonstrating consistent profitability and managing its operating expenses. The high cost of the RIO system meant sales cycles were often lengthy, and hospitals required extensive training and support to successfully integrate the technology. This placed a strain on MAKO's resources and impacted its bottom line.

The acquisition by Stryker was driven by several key financial considerations. Stryker, a major player in the orthopedic market, recognized the long-term value proposition of robotic surgery. MAKO's technology complemented Stryker's existing product portfolio, particularly in hip and knee replacements. By integrating MAKO, Stryker gained a competitive advantage, broadened its market reach, and secured a foothold in the rapidly growing robotic surgery sector.

From Stryker's perspective, the acquisition also presented opportunities for synergies and cost reductions. By leveraging its existing sales and distribution network, Stryker could accelerate the adoption of MAKO's technology. Integrating MAKO's manufacturing and supply chain also yielded cost savings. Crucially, Stryker possessed the financial muscle to invest in further research and development to expand the applications of MAKO's technology beyond hip and knee replacements, ultimately leading to the development of the MAKO SmartRobotics system used today.

The acquisition price of $1.65 billion represented a premium over MAKO's market capitalization at the time, reflecting Stryker's belief in the technology's future potential. Post-acquisition, Stryker has significantly expanded the use of MAKO robots, demonstrating the success of its investment. The financial success of MAKO under Stryker is evident in the increasing number of procedures performed using the robotic system, driving growth in Stryker's orthopedic segment. The story of MAKO Surgical underscores the importance of financial viability, strategic acquisitions, and the potential for innovation to disrupt and transform the healthcare industry. It also highlights the significant upfront investment and ongoing disposable costs associated with robotic surgical technologies.