Smith & Nephew CEO Reiterates Independence Amid Takeover Speculation
By Jof Enriquez,
Follow me on Twitter @jofenriq
The chief executive of London-based Smith & Nephew (S&N) reportedly describes ongoing M&A talk about the company as disruptive, and vows S&N would resist any takeover attempt, remaining independent amid consolidation in the orthopedics market.
In an interview with the Financial Times (FT), S&N CEO Olivier Bohuon, regarding continued speculation, said, “It has disrupted our sales force because every day they are with [competitors] who are saying, ‘By the way, we are going to buy you.’” However, the news outlet adds that Bohuon "has not wavered from his belief in S&N’s ability to prosper on its own," despite analysts' observation that it's just a matter of time before the British company is bought out by bigger rivals, such as Stryker and Johnson & Johnson (J&J).
Bouhon's pronouncements confirm his previous stance on the matter; he said earlier in the year that mergers were not a priority because they hardly change existing market shares or affect profit margins of involved parties.
"For me, what matters is the ability of a company to bring to the market disruptive products. You don't have to be big to do that," Bohuon said, according to the Reuters report. Likewise, in the more recent interview with FT, he said, “Yes we are the number four player, but the strategy is one of disruption in products and models. I don’t see any sign of weakness because of size.”
Since taking the S&N helm in 2011, Bouhon had steered the company away from its traditional knee and hip implant offerings toward higher-growth areas, such as sports medicine and wound care.
“I don’t like it when people call us a hip and knee maker — not because I don’t like hips and knees but because we are more than that,” Bohuon said in the FT interview.
According to a company presentation, S&N's knee and hip implants business accounted for 65 percent of its revenue in 2011. Currently, S&N's source of revenue is evenly split between its lower-margin hip and knee reconstruction business and higher-growth areas.
To achieve this rebalancing strategy, S&N in 2012 picked up Healthpoint Biotherapetuics, a specialist in bioactives for advanced wound management. In June, it acquired ArthroCare Corporation for $1.5 billion. The deal gives S&N a strong sports medicine portfolio consisting of tissue repair and handheld instruments, as well as shoulder anchor and radiofrequency technologies.
S&N has not been lax in strengthening its orthopedics business, either, having purchased recently the U.S. marketing rights for Zimmer’s Unicondylar High-Flex Knee system, as well as Russian trauma and orthopedics business DeOst.
Presently, according to FT, Bouhon is "hungry” for expansion in wound care and trauma products, such as plates and screws to fix broken bones.
While diversifying could help S&N fend off takeover attempts, it still must operate in the increasingly competitive orthopedic market. To that end, it introduced recently its "no frills" Syncera supply chain model for hospitals, which offers 40-50 percent discounts in artificial hips and knee joints.