Summary Annual Review
Business Review
R3◊ Acetabular System
Orthopaedics
Orthopaedics comprises reconstruction, trauma and clinical therapies products. Orthopaedic reconstruction implants include hip, knee and shoulder joints as well as ancillary products such as bone cement and mixing systems used in cemented reconstruction joint surgery. Orthopaedic trauma fixation products consist of internal and external devices and other products, including shoulder fixation and orthobiological materials used in the stabilisation of severe fractures and deformity correction procedures. Clinical therapies products are those that are applied in an orthopaedic office or clinic setting and include bone growth stimulation, joint fluid therapies and outpatient spine products.
Our Orthopaedics business reported revenues of $2,135 million in the year, an underlying increase of 1%.
In the US, Orthopaedic revenues grew by 2% to $1,154 million, in Europe revenues were down 4% and they grew 6% in the rest of the world.
Orthopaedic Reconstruction grew revenues at 2%, compared to the market rate of 4%. In the US, Reconstruction revenues grew by 5%. In Europe revenues fell by 4%. We have strengthened our management team and they are implementing a series of operational improvements. In the rest of the world our emerging market business remained strong throughout the year and we opened our first surgeon training centre in Shanghai, China.
Globally, our knee segment grew by 3% and our hip segment grew by 1%. Our new products, such as the R3◊ Acetabular System, and traditional hip and knee ranges, such as the LEGION◊ Total Knee System, have performed well. Our products which are targeted at younger, more active patients have not fared as well due in part to a greater exposure to the impact of the global recession. Our R3◊ Acetabular System in hips and VISIONAIRE◊ Patient Matched Instrumentation sets are now being launched in Europe and Australia. Pricing pressure increased modestly from previous years as healthcare payers have reacted to the economic climate. We completed the US Deferred Prosecution Agreement in March and have continued to enhance our ethics and compliance programme globally.
Orthopaedic Trauma revenues were $414 million with flat underlying growth. This performance was impacted by the relative weakness of the external fixation market, where Smith & Nephew has a strong position, and by some military orders we received in 2008 which were not repeated. We are focused on improving our sales and marketing execution to gain further growth from our strong product range.
Clinical Therapies revenues were down 3% to $235 million reflecting economic conditions and increased competitive pressures.
Orthopaedics trading margin in the year was 23.8%, a 150 basis point improvement over the prior year and benefited from operational improvements such as the results of rationalising our European infrastructure. We have also commenced construction of a new orthopaedic manufacturing plant in Beijing, China.
Orthopaedics revenue by business segment
Global orthopaedics competitor share
Market value: $16.8 billion
Market growth: +5%
- The global orthopaedics market served by the Group consists of orthopaedic reconstruction and orthopaedic trauma.
- Competitor shares are based on estimates for selected segments and competitors, and may not be comprehensive
Endoscopy
OSTEORAPTOR◊ Anchor
Smith & Nephew’s Endoscopy business offers surgeons endoscopic technologies for surgery and focuses on the arthroscopy sector of this market. Arthroscopy is the minimally invasive surgery of joints, in particular the knee, shoulder and hip. Products include: specialised devices and fixation systems to repair damaged tissue and ligaments; fluid management equipment for surgical access; digital cameras, digital image capture, scopes, light sources and monitors to assist with visualisation; and radiofrequency wands, electromechanical and mechanical blades, and hand instruments for resecting damaged tissue.
Endoscopy delivered revenue of $791 million, an increase of 1% on an underlying basis.
In Europe revenues grew by 6% and the rest of the world maintained double digit growth at 12%. US revenues fell by 6%, where an improved performance in Arthroscopy was again held back by a significant decline in Visualisation.
Globally, Visualisation sales fell by 20%, as hospitals deferred capital equipment purchases due to the economic climate. Arthroscopy grew by 7% driven by continued double digit percentage growth in sports medicine repair products with new introductions, such as the BICEPTOR◊ Tenodesis System for biceps tendon repair and the bioabsorbable OSTEORAPTOR◊ Anchor for use in the shoulder and hip. We are investing to improve our resection performance. For example, we have introduced more specialty blades, such as the multi-purpose BONECUTTER◊ and ELECTROBLADE◊ Resector, and launched our new platform of radiofrequency devices. During 2009 Endoscopy significantly increased its number of new product launches.
The Endoscopy trading margin was 23.9%, a 320 basis point increase on the 20.7% achieved last year due to continued favourable product mix, tight budgetary discipline and operational excellence. In 2010 Endoscopy is accelerating its investment in new products and geographies.
Endoscopy revenue by business segment
Global arthroscopy competitor share
Market value: $2.7 billion
Market growth: +8%
- Competitor shares are based on estimates for selected segments and competitors and may not be comprehensive.
Advanced Wound Management
RENASYS◊ Go
Smith & Nephew’s Advanced Wound Management business offers a range of products from initial wound bed preparation through to full wound closure. These products are targeted at chronic wounds associated with the older population, such as pressure sores and venous leg ulcers. There are also products for the treatment of wounds such as burns and invasive surgery that impact the wider population.
Advanced Wound Management revenues grew 6% to $846 million, ahead of the market at 4%, with all geographic regions contributing to the growth.
Europe and the rest of the world again produced good results, with revenue growth of 6% and 8% respectively. In the US, the largest healthcare market in the world, our performance has improved, with growth of 2%.
Within our higher added value segments, Exudate Management and Infection Management, we achieved growth of 5% and 16% respectively. This performance has been supported by the launches of products such as ALLEVYN◊ GENTLE Ag and ACTICOAT◊ Flex. Our NPWT sales doubled on an underlying basis as our position in this market continues to strengthen We expanded our NPWT dressings range, launched our RENASYS◊ enhanced pump range and won a series of intellectual property legal challenges.
The Advanced Wound Management trading margin increased by 360 basis points to 18.9%, due to strong delivery on earnings improvement programmes, other cost control measures and efficiency gains due to increased volumes. We opened our new manufacturing facility in Suzhou, China on time and on budget and it produced 9.6 million ALLEVYN dressings in 2009.
Suzhou, China
Global advanced wound management competitor share
Market value: $5.0 billion
Market growth: +4%
- Competitor shares are based on estimates for selected segments and competitors and may not be comprehensive.