08.09.16
$4.7 Billion
KEY EXECUTIVES:
Olivier Bohuon, CEO
Roberto Quarta, Chairman of the Board
Julie Brown, Chief Financial Officer
Rodrigo Bianchi, President, Asia Pacific and Emerging Markets
Michael Frazzette, Chief Commercial Officer
Diogo Moreira-Rato, President, Europe and Canada
Cyrille Petit, Chief Corporate Development Officer and President, Global Business Services
Matthew Stober, President, Global Operations
Glenn Warner, President, U.S.
NUMBER OF EMPLOYEES: 15,644
HEADQUARTERS: London, United Kingdom
As an encore to the company’s purchase of ArthroCare in 2014, Smith & Nephew plc announced in October 2015 that it was acquiring Blue Belt Technologies for $275 million. This investment thrust Smith & Nephew into the business of next-generation robotics-assisted technologies that would further expand the company’s breadth of orthopedic surgical innovations.
The primary technology windfall for Smith & Nephew was Blue Belt Technologies’ Navio surgical system, which offers robotics assistance in unicondylar or partial knee replacement surgery. The system features computed tomography-free navigation software and a unique hand-held, robotic bone-shaping device. It can also be easily moved throughout a hospital, as it was developed to be a portable solution.
In its rationale for the acquisition, Smith & Nephew representatives cited several reasons for the transaction:
The company demonstrated that focus on emerging markets two more times during 2015. First, in March, Smith & Nephew announced the acquisition of a Colombian distributor, EuroCiencia Colombia. The firm had been the sole distribution channel in the country for Smith & Nephew since 2006. The move reflected similar transactions made by Smith & Nephew in emerging regions such as Turkey and Brazil in 2013.
Later in the year, Smith & Nephew bought the trauma and orthopedics business of DeOst LLC, as well as DC LLC, a manufacturing company in the DeOst group. The firm had been a distributor of Smith & Nephew’s products in Russia since 2009. In a July press release announcing the transaction, Bohuon said the company made the acquisition to better support its Russian customers. Financial terms of the deal were not disclosed.
These moves mirror statements made by Roberto Quarta, chairman of the board, in his overview statement, “We have continued to pursue the same strategy as in previous years, building a strong position in Established Markets, focusing on Emerging Markets, innovating for value, simplifying and improving our operating model, and supplementing organic growth with acquisitions.”
Financial Performance
Smith & Nephew reported $4.63 billion in sales in 2015, a slight increase over 2014. Looking closer at the numbers from the company, $715 million (15 percent, an increase of 11 percent over 2014) of its total revenue was credited as coming from the aforementioned emerging markets (China, Asia, India, Russia, Middle East, Africa, and Latin America). The United States, its largest market, contributed $2.21 billion, while other established markets (Australia, Canada, Europe, Japan, and New Zealand) provided $1.7 billion in revenue. Combined, the established markets saw a 3 percent increase over 2014 (individually, the United States boasted 5 percent growth).
While the company seeks to devote approximately 5 percent to its research and development expenditure each year, 2015’s final number was slightly off from that at 4.8 percent. That figure still reflects a healthy $222 million investment, but still fell short of its numbers in 2014 and 2013.
In terms of individual product group revenues, the company saw moderate fluctuation compared to 2014’s numbers (after adjusting for the effects of currency translation and the inclusion of the comparative impact of acquisitions and exclusion of disposals) with a few favorable increases. Knee implants provided $883 million in revenue, a 5 percent increase. The company’s Journey II Total Knee System along with a strong marketing campaign for its Verilast technology drove the growth, primarily localized in the United States. Also up over the prior year, sports medicine joint repair provided $606 million in revenue, reflecting a 7 percent increase. The growth was largely due to the enhanced portfolio as a result of the ArthroCare purchase in that prior year.
Also seeing gains, the trauma and extremities ($497 million in revenue; 2 percent increase), advanced wound bioactives ($344 million in revenue; 7 percent increase), advanced wound care ($755 million in revenue; 8 percent increase), and other surgical business ($205 million in revenue; 10 percent increase) were all up over 2014. These positives were the result of a combination of factors including continued success among proven product brands, expansion of offerings from the ArthroCare acquisition, and new product releases (several of which are featured in the next section).
Not all divisions, however, enjoyed gains. If it wasn’t for the voluntary removal of certain sizes of its Birmingham Hip resurfacing System, the company’s hip implants division would have seen a 1 percent increase. As a result, however, it was flat with $604 million in revenue. Similarly flat over 2014 was arthroscopic enabling technologies ($573 million in revenue), but continued trends in minimally invasive surgical procedures should see growth in this area. The only product division to see a decrease was advanced wound devices, which saw a 3 percent drop ($167 million in revenue). Challenges in the distribution of the Renasys system negatively impacted the overall results for this area.
New Technologies
While a company’s mature product lines are what keep the lights on today, the new innovations it launches to the industry are what will keep those lights bright in the years to come. With this in mind, Smith & Nephew made several new product announcements in 2015 that will do just that. Growing its orthopedic device portfolio to address needs in both its established and emerging markets continues to be an obvious priority for the firm. Following are some of the new product highlights that were launched in 2015.
Further expanding its overall offerings, in July, Smith & Nephew announced a distribution agreement with Scopis GmbH, a German developer and manufacturer of surgical navigation systems. The arrangement made Smith & Nephew the exclusive provider of the Scopis TGS Target Guided Surgery system for ENT procedures in the United Kingdom, Ireland, and Belgium. According to Scopis, the system is a “next-generation” solution for navigated functional endoscopic sinus surgery that offers surgeons highly advanced image guidance and visualization capabilities in a single system.
KEY EXECUTIVES:
Olivier Bohuon, CEO
Roberto Quarta, Chairman of the Board
Julie Brown, Chief Financial Officer
Rodrigo Bianchi, President, Asia Pacific and Emerging Markets
Michael Frazzette, Chief Commercial Officer
Diogo Moreira-Rato, President, Europe and Canada
Cyrille Petit, Chief Corporate Development Officer and President, Global Business Services
Matthew Stober, President, Global Operations
Glenn Warner, President, U.S.
NUMBER OF EMPLOYEES: 15,644
HEADQUARTERS: London, United Kingdom
As an encore to the company’s purchase of ArthroCare in 2014, Smith & Nephew plc announced in October 2015 that it was acquiring Blue Belt Technologies for $275 million. This investment thrust Smith & Nephew into the business of next-generation robotics-assisted technologies that would further expand the company’s breadth of orthopedic surgical innovations.
The primary technology windfall for Smith & Nephew was Blue Belt Technologies’ Navio surgical system, which offers robotics assistance in unicondylar or partial knee replacement surgery. The system features computed tomography-free navigation software and a unique hand-held, robotic bone-shaping device. It can also be easily moved throughout a hospital, as it was developed to be a portable solution.
In its rationale for the acquisition, Smith & Nephew representatives cited several reasons for the transaction:
- It creates a strong combined partial knee portfolio from which to accelerate growth in the area of partial knee replacement surgery.
- Significant further upside anticipated from a range of new product launches that will expand Navio into indications beyond partial knees.
- Additional opportunities from using Smith & Nephew’s global commercial infrastructure to widen adoption of robotics-assisted technology outside of the United States.
The company demonstrated that focus on emerging markets two more times during 2015. First, in March, Smith & Nephew announced the acquisition of a Colombian distributor, EuroCiencia Colombia. The firm had been the sole distribution channel in the country for Smith & Nephew since 2006. The move reflected similar transactions made by Smith & Nephew in emerging regions such as Turkey and Brazil in 2013.
Later in the year, Smith & Nephew bought the trauma and orthopedics business of DeOst LLC, as well as DC LLC, a manufacturing company in the DeOst group. The firm had been a distributor of Smith & Nephew’s products in Russia since 2009. In a July press release announcing the transaction, Bohuon said the company made the acquisition to better support its Russian customers. Financial terms of the deal were not disclosed.
These moves mirror statements made by Roberto Quarta, chairman of the board, in his overview statement, “We have continued to pursue the same strategy as in previous years, building a strong position in Established Markets, focusing on Emerging Markets, innovating for value, simplifying and improving our operating model, and supplementing organic growth with acquisitions.”
Financial Performance
Smith & Nephew reported $4.63 billion in sales in 2015, a slight increase over 2014. Looking closer at the numbers from the company, $715 million (15 percent, an increase of 11 percent over 2014) of its total revenue was credited as coming from the aforementioned emerging markets (China, Asia, India, Russia, Middle East, Africa, and Latin America). The United States, its largest market, contributed $2.21 billion, while other established markets (Australia, Canada, Europe, Japan, and New Zealand) provided $1.7 billion in revenue. Combined, the established markets saw a 3 percent increase over 2014 (individually, the United States boasted 5 percent growth).
While the company seeks to devote approximately 5 percent to its research and development expenditure each year, 2015’s final number was slightly off from that at 4.8 percent. That figure still reflects a healthy $222 million investment, but still fell short of its numbers in 2014 and 2013.
In terms of individual product group revenues, the company saw moderate fluctuation compared to 2014’s numbers (after adjusting for the effects of currency translation and the inclusion of the comparative impact of acquisitions and exclusion of disposals) with a few favorable increases. Knee implants provided $883 million in revenue, a 5 percent increase. The company’s Journey II Total Knee System along with a strong marketing campaign for its Verilast technology drove the growth, primarily localized in the United States. Also up over the prior year, sports medicine joint repair provided $606 million in revenue, reflecting a 7 percent increase. The growth was largely due to the enhanced portfolio as a result of the ArthroCare purchase in that prior year.
Also seeing gains, the trauma and extremities ($497 million in revenue; 2 percent increase), advanced wound bioactives ($344 million in revenue; 7 percent increase), advanced wound care ($755 million in revenue; 8 percent increase), and other surgical business ($205 million in revenue; 10 percent increase) were all up over 2014. These positives were the result of a combination of factors including continued success among proven product brands, expansion of offerings from the ArthroCare acquisition, and new product releases (several of which are featured in the next section).
Not all divisions, however, enjoyed gains. If it wasn’t for the voluntary removal of certain sizes of its Birmingham Hip resurfacing System, the company’s hip implants division would have seen a 1 percent increase. As a result, however, it was flat with $604 million in revenue. Similarly flat over 2014 was arthroscopic enabling technologies ($573 million in revenue), but continued trends in minimally invasive surgical procedures should see growth in this area. The only product division to see a decrease was advanced wound devices, which saw a 3 percent drop ($167 million in revenue). Challenges in the distribution of the Renasys system negatively impacted the overall results for this area.
New Technologies
While a company’s mature product lines are what keep the lights on today, the new innovations it launches to the industry are what will keep those lights bright in the years to come. With this in mind, Smith & Nephew made several new product announcements in 2015 that will do just that. Growing its orthopedic device portfolio to address needs in both its established and emerging markets continues to be an obvious priority for the firm. Following are some of the new product highlights that were launched in 2015.
- Addressing needs for rotator cuff and labrum repair where anatomic space is limited, the Q-Fix All-Suture Anchor was announced. Repeatable, consistent performance in the expanding anchor and its indication for deployment in tight spaces should help this product to become a long-term success for the company.
- Suturefix offered surgeons an ultra-soft suture anchor for hip and shoulder labral repair. “When the design team started working on this anchor, surgeons were very clear with what they wanted—a small, soft anchor that is easy to deploy and delivers excellent fixation in a variety of bone qualities,” said Scott Schaffner, vice president of the Global Sports Medicine Franchise.
- At the Orthopaedic Trauma Association’s annual meeting in San Diego, Calif., Smith & Nephew announced the launch of its Trigen Meta-Tan, representing an expansion of the company’s femoral nail portfolio. The product’s design enables it to be used to address a number of femoral fractures, from specific hip fractures to mid-shaft fractures and fractures near the knee.
- Following the medical device industry trend toward resorbable technologies, the Nasastent Dissolvable Nasal Dressing was launched. Following sinus surgery, this device—made from a plant-based material—is used to minimize bleeding and prevent post-op adhesions. Unlike other dressing alternatives, this product does not need to be removed by a physician after breaking down. Instead, it converts into a gel after absorbing sufficient nasal fluid and drains with the natural outflow.
Further expanding its overall offerings, in July, Smith & Nephew announced a distribution agreement with Scopis GmbH, a German developer and manufacturer of surgical navigation systems. The arrangement made Smith & Nephew the exclusive provider of the Scopis TGS Target Guided Surgery system for ENT procedures in the United Kingdom, Ireland, and Belgium. According to Scopis, the system is a “next-generation” solution for navigated functional endoscopic sinus surgery that offers surgeons highly advanced image guidance and visualization capabilities in a single system.