Smith & Nephew is one of the major players in the orthopedic devices and implants market. Here are 15 things to know:
1. The global medical device company has a history that dates back over 150 years. In 1856, Thomas James Smith opened a small pharmacy in England that would grow into the device giant we know today. In 1914 the pharmacy was contracted to supply surgical and field dressings. Smith & Nephew was incorporated and listed on the London Stock Exchange in 1937 and in 1999 it was also listed on the New York Stock Exchange.
2. Smith & Nephew's business is diversified with devices for the orthopedic reconstruction, advanced wound management, sports medicine and trauma and extremities markets. The company includes nearly 14,000 employees worldwide and has a presence in more than 100 countries.
3. The company's key products include devices from the JOURNEY II Active Knee Solutions Family, such as JOURNEY II Bi-Cruciate Stabilized Knee System, as well as the LEGION Total Knee System. Another key product is the BIRMINGHAM HIP Resurfacing System which has been used in more than 170,000 implantations worldwide.
4. Smith & Nephew's biggest competitors are orthopedic device companies DePuy Synthes, Stryker, Zimmer and Medtronic. These four companies accounted for around 70 percent of the total revenue for 2014 in the global orthopedic device market. DePuy Synthes led the market last year with nearly 30 percent of the space. However, if the rumored Stryker-Smith & Nephew acquisition had taken place, the combined company would have taken a leading position in several orthopedic device arenas.
5. Smith & Nephew has a sizeable share in a number of global markets, such as:
• Hip and knee implants market (valued at $14 billion) — 11 percent
• Sports medicine devices market (valued at $4.3 billion) — 20 percent
• Trauma and extremities devices market (valued at $4.9 billion) — 10 percent
• Advanced wound management market (valued at $7 billion) — 20 percent
According to an iData Research report, Smith & Nephew has a market share of 10.3 percent in the U.S. orthopedic trauma device market, the third-largest in that market after DePuy Synthes and Stryker.
6. The company is dedicated to incorporating sustainability into its business model. In 2014, Smith & Nephew reduced landfill waste to 2,168 metric tons from 2,662 metric tons the year before. Smith & Nephew's team at the Global Distribution Centre in Memphis now makes shipments to Europe via ocean instead of airfreight.
7. The company is led by Olivier Bohuon, who has leadership experience in a number of pharmaceutical and healthcare companies such as GlaxoSmithKline.. Prior to joining Smith & Nephew, he was president of Abbott Laboratories. Julie Brown serves as the company's CFO and Gordon Howe is the president of global operations.
8. In the first quarter of 2015, Smith & Nephew reported $1.1 billion in revenue, up from $1.07 billion in Q1 2014. The sports medicine joint repair and advanced wound care segments saw a 9 percent increase in revenue. The completed ArthroCare integration contributed to the revenue increase in the joint repair segment. Smith & Nephew acquired ArthroCare in a $1.5 billion transaction in 2014.
9. The company also saw continued momentum in emerging markets with 22 percent revenue growth in Q1 2015. Smith & Nephew's presence in Latin America was further strengthened with after acquiring EuroCiencia Colombia, the company's sole distributor in Colombia since 2006. Additionally, sales of Smith & Nephew's JOURNEY II Total Knee System drove 3 percent revenue growth in the U.S. knee implant segment for Q1 of 2015. The company expects to deliver higher underlying revenue growth in 2015 as compared to 2014, as well as an improvement in trading profit margin.
10. For the full year 2014, the company earned a gross profit of $3.4 billion, up from $3.2 billion the year before. The operating profit decreased to $749 million from $810 million in 2013.
11. In the first quarter of 2015, Smith & Nephew's trading cash flow was $781 million and trading profit margin was 22.9 percent. Operating profit margin was 16.2 percent.
12. After the ArthoCare acquisition, rumors swirled that Stryker may acquire Smith & Nephew. In December 2014, Smith & Nephew stock jumped when anonymous reports emerged citing new details about Stryker's desire for the company. It was rumored Stryker would be willing to pay a 30 percent premium for Smith & Nephew. The rumors have since died down — especially after Stryker bought back $2 billion worth of shares in March of this year, according to a Bidness ETC report.
13. In 2014, Smith & Nephew launched Syncera, a service-light implant model for lower-cost devices that aims to streamline cumbersome, traditional orthopedic supply chains. The Wall Street Journal reported that only around 5 percent to 10 percent of hospital administrators in the United States could impose the program, which, according to Smith & Nephew estimates, saves 30 percent per implant in a three-year contract. Physicians make the final decision about implants at most institutions and aren't incentivized to change.
14. Smith & Nephew also made moves toward supply chain optimization and acquired two software assets from S2 Interactive in May. The applications allow hospital and ambulatory surgery center customers to access, analyze and manage real-time data related to instrument utilization during surgery. The two applications are used by Syncera. Here are some other recent Smith & Nephew acquisitions.
• In April 2007, Smith & Nephew acquired Plus Orthopedics, a Swiss orthopedics company, for $889 million.
• The acquisition of U.S. wound-care business, BlueSky, for $110 million followed shortly thereafter, in May 2007.
• The company acquired Healthpoint Biotherapeutics, a specialist in the bioactives are of advanced wound management, for $782 million in December 2012.
• On June 24, 2015 Smith & Nephew announced the purchase of Zimmer's Unicompartmental High Flex Knee system in the U.S. market. The acquisition includes all existing inventory and certain intellectual property. The terms of the transaction have not been disclosed.
15. Smith & Nephew closed a 10-plus year lawsuit last week when the U.S. Court of Appeals for the Federal Circuit affirmed a $95 million patent infringement judgment against Arthrex, in favor of Smith & Nephew. The patent was related to "fundamental technology" used to implant suture anchors. Smith & Nephew expects more than half of the payment amount will be recognized in the second quarter trading report. Arthrex continues to challenge some rulings in the case through the appellate courts.