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4. Smith &Nephew

$4 Billion


Olivier Bohuon, CEO

Adrian Hennah, Chief Financial Officer

Jeff Adams, Sr. VP, Global Operations

Naseem Amin, Chief Science Officer

John W. Campo, Chief Legal Officer

Mark Augusti, President, Biologics & Clinical Therapies

Joseph M. DeVivo, President, Orthopaedic Reconstructionand Trauma

Michael Frazzette, President, Endoscopy

Roger Teasdale, President, Advanced Wound Management

Jerry Goodman, President, Health Care Systems

R. Gordon Howe, Sr. VP, Global Planning and Development

Kelvin Johnson, President, Emerging Markets and National Executive of China


GLOBAL HEADQUARTERS: London, United Kingdom

Forget the gold watch or personalized pen set. David Illingworth will receive a much more gratifying parting gift when he finally leaves Smith & Nephew plc in August—a sense of professional accomplishment. Four years ago, as the world economy began its gradual descent into the fiscal abyss, Illingworth vowed to transform the company into an operation that would run more efficiently, regularly out-perform the market and consistently invest in its future.

Illingworth, then CEO, figured he had a pretty good shot at achieving his goal. Then the global economy crashed and burned, jeopardizing Illingworth’s plans as well as the fortunes of his company, Europe’s largest maker of knee and shoulder implants. With dwindling demand and pricing pressures weighing heavily on the firm’s growth prospects, Illingworth wasn’t sure he’d be able to deliver on his promise.

But he did. And now, as he leaves Smith & Nephew to return to the United States, Illingworth can take pride in knowing that he achieved a most difficult goal in the most trying of circumstances. Not a bad way to end a career.

“Four years ago we set [for] ourselves the goal of significantly improving the efficiency of our business,” Illingworth said in the company’s 2010 annual report, his last with the firm (he is succeeded by Olivier Bohuon, former chief executive of French drugmaker Pierre Fabre SA).“Despite the economic challenges, we have achieved that goal. Not only that, but Smith & Nephew is outperforming the market in the majority of its business segments and we have built a culture of sustainability generating efficiency gains to fund our investments for growth.”

Those investments last year culminated in the opening of a 32,800 square-foot manufacturing plant in Beijing, China, and the creation of a new executive management position to oversee medical device development in that country. The new manufacturing facility—which replaces a smaller building the company inherited when it purchased Plus Orthopedics Holding AG in 2007—currently is producing surgical instruments as well as hip and knee replacement parts for Smith & Nephew’s international customers. The company eventually will shift its focus to domestic customers, designing parts specifically for Chinese patients once the market there evolves. Executives, however, don’t intend on waiting very long for that evolution to take place: They already have had four education centers built in China that will train 5,000 surgeons in advanced orthopedic techniques in the next five years.

To further accelerate the evolution of China’s medical device market, Smith & Nephew bigwigs promoted Kelvin Johnson, president of Emerging Markets, to the new position of National Executive for China. Johnson is charged with helping Smith & Nephew gain market share in China by fostering the development of the domestic device sector, accelerating the rollout of manufacturing facilities, and creating a “One Company” culture among local businesses. Johnson is performing his duties as NationalExecutive in addition to his tasks as Emerging Markets president.

“The Chinese market for our broad range of products is substantial,” Illingworth said in announcing Johnson’s promotion last June. “We see considerable potential to work with Chinese surgeons to develop new technologies, and we have already shown our recognition of the country’s manufacturing excellence by the construction of two factories for our Advanced Woundcare and Orthopaedics businesses. Kelvin’s appointment as National Executive…is a further demonstration of our commitment to China.”

Smith & Nephew’s venture in the Middle Kingdom, however, was just one of several areas where the company funneled investment dollars last year to shore up future growth. The firm also financed the rollout of Lean manufacturing principles in all its factories worldwide, and developed an in-house incubator process called InVentures. The program is designed to foster innovation by soliciting implant design ideas from surgeons and other customers, and turning those suggestions into new products quickly, usually in the span of 24 hours.

Hoping to eventually cash in on the purchasing power of hospitals, GPOs and government contracts, company executives created a second new management position last year, appointing former salesman Jerry Goodman as president of Health Care Systems. He is responsible for building and sustaining relationships with hospital systems, group purchasing organizations, key accounts, surgery center development companies and government associated contracting.

Some of Smith & Nephew’s past investments began to bear fruit last year, as new additions to the Allevyn product line and favorable patent litigation rulings both domestically and overseas helped expand Advanced Wound Management sales by 7 percent to $912 million and operating profit by 52 percent to $220 million. The new products included Algisite Ag in Japan; Opsite Visible Drain dressing and negative pressure wound therapy dressing kits with ports in both Europe and the United States; Allevyn Gentle Border Lite, featuring a silicone gel adhesive that minimizes pain and trauma to a wound upon removal of a bandage; and the No-Sting Skin-Prep Spray, a liquid film-forming dressing that dries in less than 30 seconds and lasts up to four days.

New product launches also were responsible for boosting 2010 sales in Smith & Nephew’s Endoscopy segment, where revenue swelled 7 percent to $855 million and operating profit climbed 16.5 percent to $197 million. Arthroscopy device sales, which grew 11 percent to $720 million, comprised the bulk of the revenue in this segment. Executives attribute the healthy gains in arthroscopy sales to the launch of several new repair and resection products, including the Bioraptor Knotless Suture Anchor, a device used to repair a torn labrum in the hip and shoulder; and the Biosure Sync Tibial Fixation System, a product that features a sheath and screw that can achieve a 360-degree graft-to-bone contact throughout the tibial tunnel. The company’s Twinfix and Footprint suture anchor product lines received a boost from the incorporation of the Ultrabraid suture, which provides stronger knot strength and a low profile knot stack, and the Twinfix Ultra PK Suture Anchor, a device that addresses variation in bone density and tissue quality for rotator cuff repair in the shoulder. Both the Twinfix and Footprint product lines are designed to provide easy, secure and strong repairs with precise control over final tensioning, according to merchandising data.

In addition to the new device launches, the Endoscopy segment secured regulatory clearances for various products in most major markets. In Japan, where the approval process is more lengthy, regulators gave their okay to the company’s Ultra Fast-Fix Kinsa RC, Endobutton CL Ultra and various Twinfix suture anchors.

The Orthopaedics segment—the largest of the company’s three business units—maintained its sales lead in fiscal 2010 (year ended Dec. 31), generating $2.19 billion for the company, a 2 percent increase compared with the $2.1 billion the unit garnered in 2009. Operating profit spiked 22.6 percent on the solid sales of both reconstruction and trauma products. Reconstruction products comprised the lion’s share of revenue for the segment, earning $1.5 billion, a 3 percent increase compared with the $1.4 billion those devices collected in 2009. Trauma products grossed $435 million, while clinical therapies sales slipped 5 percent to $223 million. Executives blamed the decrease in clinical therapies product sales to the divestiture of the company’s niche pain management business and the dissolution of its small spine distribution business in Germany. The losses, however, were somewhat offset by strong sales of the Exogen Ultrasound Bone Healing System and the firm’s joint fluid therapies.

Besides retaining its sales edge, the Orthopaedics segment also shouldered the brunt of new product launches and regulatory approvals last year. In what seemed like a repeat of its 2009 agenda, the company received at least 20 product approvals and clearances worldwide, including those for the Trigen Sureshot Distal Targeting System for Intramedullary Nailing, which helps reduce surgery time and X-ray exposure. Other approvals were granted for the VLP Foot and Ankle Plating System (a plate and screw system to manage foot and ankle fractures), instrument upgrades to the Birmingham Hip Resurfacing System, additions to the R3 Acetabular device, and the Journey Select Knee System and Legion Porous Plus HA primary Femoral Components.

The company received CE Mark approval to use Exogen on all osseous defects and Durolane for osteoarthritis pain relief in synovial joints as well as for pain relief after arthroscopic surgery. European Union regulators also gave their blessings to the Sureshot Distal Targeting System, Visionaire Patient Matched Cutting Blocks, and the use of Durolane for treatment of mild to moderate osteoarthritis in a broader range of joints.

Overall company sales of $4 billion grew 4 percent compared with 2009. Operating profit jumped 27 percent to $920 million, and earnings per ordinary share climbed nearly 16 cents to 69.3 cents.

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