Smith & Nephew (LON:SN.) trades in the medical equipment sector. It operates in three areas:
a) orthopaedics - hip, knee and shoulder joint replacements, as well as ancilliary products like nails for hip fractures (ouch!) and bone cement. The company also offers clinical therapies like an ultrasound bone healing system.
b) endoscopy - SN. makes devices for minium intervention (think keyhole surgery), concentrating on sports medicine, particularly the knee, shoulder and hip joints. Devices include digital camera, scopes, light sources, monitors and blades.
c) advanced wound management - a range of products from initial wound bed preparation through to full wound closure. These products are targeted at chronic wounds (i.e. wounds that take a long time to heal, over three months, years, or if at all) associated with geriatrics, such as pressure sores and leg ulcers; although it does have products applicable to all ages, like wounds caused from burns or invasive surgery. Such products includes dressings, gels, draining tubes, vacuum-assisted pressure devices to promote healing.
Market and competition
- Orthopaedics. Orthopaedics isn't just for geriatrics; it encompasses younger people with sports injuries and accidents. SN. sees emerging markets, particularly China, as an important area for growth. SN. holds about 11% of global market share. Orthopaedics is not immune to wider economic woes, as weak conditions tend to promote deferrals in surgery and heightened pricing pressures. Over the longer term, SN. expects sustainable growth due to ageing populations, increasing obesity and diabetes, technological improvements allowing younger patients to be treated, and increasing demand from emerging markets.
- Endoscopy. SN intends to grow this business, and capitalise on the increasing acceptance of endoscopy as a preferred surgical choice. Emerging markets are expected to be a major driver of growth; again, particularly in China. Management estimates that the market has recently been growing between 8% and 12% annually., driven by increasing number of sports injuries, patient desire for less invasive surgical procedures, and their cost-effectiveness.
- Advanced Wound Management. SN. intends to focus on high growth, high value segments, particularly exudate and infection management. Exudates are fluids that filter from the circulatory system to lesions or areas of inflammation. So, for instance, if you cut your finger, blood flows out and forms a clot around it. That's an exudate. Growth has been about 4% during 2010, and SN. has about 18% of the market. Growth is driven by an ageing population, technology advances,…
