Abstract
Smith & Nephew (S&N), headquartered in London, UK, is a global medical device
company engaged in the development, manufacture and marketing of orthopaedic,
endoscopy and advanced wound care products. The company operates within four
divisions, as follows:-
Reconstruction - orthopaedic hip, knee, shoulder and extremity implants,
instruments, bone cement and accessories. Products include the Birmingham Hip
Resurfacing (BHR) system, the first hip resurfacing product available in the
US. The division is the largest of S&N' s segments, accounting for 33% of total
revenue in 2006. It is managed from Memphis, Tennessee, USA. Manufacturing
takes place in Memphis, Germany and the UK.
Trauma & Clinical Therapies - trauma products include fixation devices and
orthobiologics, and clinical therapies include bone growth stimulation and
joint fluid therapy. In addition, S&N' s out-patient spinal products, including
IDET IntraDiscal ElectroThermal Therapy and discography, were transferred from
the endoscopy unit to clinical therapies at the beginning of 2007. The
division represented 18% of S&N' s total sales in 2006. The business is managed
from Memphis, Tennessee, USA, and manufacturing takes place in Memphis and
Germany.
Endoscopy - mainly arthroscopy products. Includes fluid management and
insufflation; digital video and image capture; visualisation; resection; and
instruments and fixation materials to repair damaged tissue. The unit was
expanded in July 2006 with the acquisition OsteoBiologics Inc, a manufacturer
of bioabsorbable bone graft substitutes marketed in Europe and Canada for
repairing cartilage defects in the knee. In the US, the material is marketed
as a bone void filler. The segment accounted for 24% of S&N' s revenue in 2006.
It is based in Andover, Massachusetts, USA, and manufacturing is currently
located in Andover and Mansfield, Massachusetts; Oklahoma City, Oklahoma; and
San Antonio, Texas. The Andover facility will close later in 2007.
Advanced Wound Management - wound care products used from initial wound bed
preparation to full wound closure, and mainly targeted at chronic wounds,
burns and complex surgical wounds. It previously also offered Dermagraft and
TransCyte tissue engineering products but, in October 2005, S&N announced it
would exit these operations due to delays in the products achieving economic
viability. In May 2006, the products were sold to Advanced BioHealing. The
division generated 25% of S&N' s total sales in 2006. It is headquartered in
Hull, UK, with manufacturing in Hull and Gilberdyke, UK; and Largo, Florida,
USA; as well as by third-party manufacturers.
For several years, S&N has looked at bolstering its position in the highly
competitive and dynamic orthopaedics market through major acquisitions. In
March 2003, the company agreed to buy Swiss orthopaedic company, Centerpulse,
in a transaction which would have made it the world' s third-largest
orthopaedics company. However, in August 2003, Centerpulse rejected S&N' s
proposal and instead accepted a higher bid from US-based Zimmer, making Zimmer
the market leader in reconstructive products. In March 2004, S&N acquired
Midland Medical Technologies which, although a relatively small company, was
the world' s leading metal-on-metal hip resurfacing manufacturer, providing S&N
with the BHR system and a solid position in this fast-growing area.
In March 2007, S&N formed an agreement to purchase Plus Orthopedics Holding
AG, a private Swiss orthopaedic company, for SFr 1.09 billion (US$889 million)
in cash, including assumed debt. Plus was founded in 1991 and has its origins
in European-designed cementless hip systems. The company has worked with
European surgeons to develop a range of orthopaedic implants, primarily hips
and knees, as well as small joint and shoulder products. The product range is
complementary to S&N' s and includes threaded acetabular cups and revision
products for hips, hinged fixed and mobile bearing designs for knees. The
company reported revenue of SFr 367 million (US$300 million) in 2006, an
increase of 16% over the previous year, and profit before interest and tax of
SFr 44 million (US$36 million), an increase of 33% over 2005. S&N believes the
acquisition will increase its share of the global orthopaedic reconstruction
market to around 12%, taking S&N to the global number four position. It will
also double S&N' s share of the European orthopaedic reconstruction market.
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