By Suzanne Hodsden
Smith & Nephew’s (S&N) multi-year strategy to reorganize and diversify is starting to show results, said CEO Olivier Bohoun. Recent acquisitions in sports medicine and robotic surgery, as well as expanded focus in emerging markets and R&D have accelerated growth, a trend Bohoun expects to continue through 2016.
In 2014, The Telegraph reported that the global economic downturn had caused diminished sales in hip and knee established markets, and Bohoun’s strategy — which began when he came to the helm at S&N in 2011 — was to diversify business into sports medicine and wound care, as well as expanding into emerging markets.
In the company’s fourth quarter earnings call, Bohoun commented that 2015 “continued to deliver” on the priorities set out in 2011. S&N CFO Julie Brown reported that the company’s underlying revenue growth rose 4 percent in 2015, with a 5 percent jump in the fourth quarter compared to the same period last year.
Profits rose to $1.09 billion, confounding analyst’s expectations of $1.07 billion, reported Reuters, and knee implant sales grew 6 percent, double the pace of growth in the wider market. S&N’s sports medicine revenue jumped 9 percent, due in large part to U.S. sales and the acquisition of ArthroCare in 2014.
S&N completed five acquisitions in 2015, and Bohoun said he expected that more deals would be signed in 2016. “We have a high bar when assessing the strategic and financial rationale for an acquisition,” said Bohoun, adding that he only pursued deals with clear benefits to the company and its shareholders.
In October, S&N announced a $275 million deal to acquire Blue Belt Technologies, which would add robotic technology to its next-generation portfolio of surgical products, a move expected to keep S&N’s portfolio competitive. A recent report estimates that the surgical robotics market will be worth $20 billion by 2021.
“Regarding innovation, we have a great portfolio and many of the products driving growth today are systems that will deliver growth for many years to come,” said Bohoun in the earnings call.
Another key component of S&N’s improving performance in a challenging market has been its moves to restructure the company to reduce inefficiencies and better focus its resources in several strategic areas, including sales and R&D.
“We have created a single global R&D function to better allocate resources,” said Bohoun. “With increased focus, we intend to accelerate the development of more disruptive products and services that increasingly defines S&N and will help drive success in the future.”
Though rumors of a possible S&N takeover have been passed around for decades and Bohoun has recently dismissed talk of a mega-merger, Bloomberg reports that S&N is still a popular topic of conversation among analysts speculating about possible 2016 deals. Stryker was recently bumped from the number two position in orthopedics (J&J is number one) after Zimmer acquired Biomet, and may look to acquire S&N to regain its foothold in the market, said Bloomberg.