REG - Smith & Nephew Plc - Acquisition

Smith & NephewAnnouncement

22/11/2023 07:00

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RNS Number : 2004U  Smith & Nephew Plc  22 November 2023

 

Smith+Nephew acquires novel cartilage regeneration technology for sports
medicine knee repair

22 November 2023

 

Smith+Nephew (LSE:SN, NYSE:SNN), the global medical technology company, today
announces that it has entered into a definitive agreement to acquire
CartiHeal, developer of Agili-C, a novel sports medicine technology for
cartilage regeneration in the knee. Under the terms of the agreement,
Smith+Nephew will pay an initial cash consideration of $180 million at
closing, and up to a further $150 million contingent on financial performance.

Agili-C is an off-the-shelf one-step treatment for osteochondral (bone and
cartilage) lesions with a broader indication than existing treatments. It is
indicated to treat a wide patient population, including those with lesions in
knees with mild to moderate osteoarthritis, a previously unaddressed
condition, as well as the approximately 700,000 patients(1) that receive
cartilage repair annually in the US.

"The acquisition of this disruptive technology supports our strategy to invest
behind our successful Sports Medicine business", said Deepak Nath, Chief
Executive Officer of Smith+Nephew. "Agili-C's superior clinical performance
makes it highly complementary to our existing knee repair portfolio and with
our proven commercial expertise in high-growth biologics, we are confident
that we will drive further success with this compelling treatment option."

Agili-C is a porous, biocompatible, and resorbable scaffold which promotes
natural regeneration of the articular cartilage and restoration of its
underlying subchondral bone. The U.S. Food and Drug Administration (FDA)
granted Agili-C Breakthrough Device designation status in 2020 and Premarket
Approval (PMA) in March 2022. PMA approval was granted based on the results of
a two-year randomised controlled trial (N=251) that confirmed superiority of
Agili-C over current standard of care - microfracture and debridement for the
treatment of knee joint surface lesions, chondral and osteochondral defects.
Study inclusion criteria included patients with mild and moderate
osteoarthritis. At four-year follow-up the trial continues to show significant
improvement of patient reported outcome scores, low surgical reintervention,
and that the difference in improvement using Agili-C compared to the standard
of care is statistically significant - offering potential for a new standard
of care in cartilage repair.

"As a leader in sports medicine and with a deep knowledge of biologics,
Smith+Nephew is the ideal new home for Agili-C," said Nir Altschuler, Chief
Executive Officer and Founder of CartiHeal. "We are excited at the prospect of
our technology helping many more patients overcome knee pain."

"We have shown with REGENETEN(◊) that we have the market development and
commercialisation expertise to take novel technologies and successfully
establish a new standard of care," said Scott Schaffner, President Sports
Medicine,  Smith+Nephew. "Agili-C is the perfect addition to our portfolio
and we look forward to leveraging our expertise to transform cartilage repair
outcomes for patients."

CartiHeal was founded in 2009 as a university spin-out. It retains a small
facility close to Tel Aviv and a sales office in New Jersey, US. CartiHeal has
large quantities of raw material in the US and, by close of the transaction,
will also have ample US stock to support full commercial launch. All CartiHeal
employees are expected to transfer to Smith+Nephew.

The transaction is expected to close in the first quarter of 2024. Breakeven
to trading profit is targeted by 2027 with ROIC to exceed our WACC by the
fifth year. The acquisition will be financed from existing cash and debt
facilities.

Smith+Nephew's Meet the Management investor event on 29 November 2023 will
include discussion of this acquisition.

 

Enquiries

 

 Investors / Analysts

 Andrew Swift                      +44 (0) 1923 477433

Smith+Nephew

 Media

 Charles Reynolds                  +44 (0) 1923 477314

Smith+Nephew

 Susan Gilchrist / Ayesha Bharmal  +44 (0) 20 7404 5959

Brunswick

 

 

References

1.  Medtech 360, Sports Medicine Devices, Market Analysis, US, 2018,
Millennium Research Group, Inc.

 

About Smith+Nephew

 

Smith+Nephew is a portfolio medical technology business that exists to restore
people's bodies and their self-belief by using technology to take the limits
off living. We call this purpose 'Life Unlimited'. Our 19,000 employees
deliver this mission every day, making a difference to patients' lives through
the excellence of our product portfolio, and the invention and application of
new technologies across our three global business units of Orthopaedics,
Advanced Wound Management and Sports Medicine & ENT.

 

Founded in Hull, UK, in 1856, we now operate in more than 100 countries, and
generated annual sales of $5.2 billion in 2022. Smith+Nephew is a constituent
of the FTSE100 (LSE:SN, NYSE:SNN). The terms 'Group' and 'Smith+Nephew' are
used to refer to Smith & Nephew plc and its consolidated subsidiaries,
unless the context requires otherwise.

 

For more information about Smith+Nephew, please visit www.smith-nephew.com
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Forward-looking Statements

This document may contain forward-looking statements that may or may not prove
accurate. For example, statements regarding expected revenue growth and
trading profit margins, market trends and our product pipeline are
forward-looking statements. Phrases such as "aim", "plan", "intend",
"anticipate", "well-placed", "believe", "estimate", "expect", "target",
"consider" and similar expressions are generally intended to identify
forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause
actual results to differ materially from what is expressed or implied by the
statements. For Smith+Nephew, these factors include: risks related to the
impact of Covid, such as the depth and longevity of its impact, government
actions and other restrictive measures taken in response, material delays and
cancellations of elective procedures, reduced procedure capacity at medical
facilities, restricted access for sales representatives to medical facilities,
or our ability to execute business continuity plans as a result of Covid;
economic and financial conditions in the markets we serve, especially those
affecting healthcare providers, payers and customers (including, without
limitation, as a result of Covid); price levels for established and innovative
medical devices; developments in medical technology; regulatory approvals,
reimbursement decisions or other government actions; product defects or
recalls or other problems with quality management systems or failure to comply
with related regulations; litigation relating to patent or other claims; legal
and financial compliance risks and related investigative, remedial or
enforcement actions; disruption to our supply chain or operations or those of
our suppliers (including, without limitation, as a result of Covid);
competition for qualified personnel; strategic actions, including acquisitions
and disposals, our success in performing due diligence, valuing and
integrating acquired businesses; disruption that may result from transactions
or other changes we make in our business plans or organisation to adapt to
market developments; relationships with healthcare professionals; reliance on
information technology and cybersecurity; disruptions due to natural
disasters, weather and climate change related events; changes in customer and
other stakeholder sustainability expectations; changes in taxation
regulations; effects of foreign exchange volatility; and numerous other
matters that affect us or our markets, including those of a political,
economic, business, competitive or reputational nature. Please refer to the
documents that Smith+Nephew has filed with the U.S. Securities and Exchange
Commission under the U.S. Securities Exchange Act of 1934, as amended,
including Smith+Nephew's most recent annual report on Form 20-F, which is
available on the SEC's website at www. sec.gov, for a discussion of certain of
these factors. Any forward-looking statement is based on information available
to Smith+Nephew as of the date of the statement. All written or oral
forward-looking statements attributable to Smith+Nephew are qualified by this
caution. Smith+Nephew does not undertake any obligation to update or revise
any forward-looking statement to reflect any change in circumstances or in
Smith+Nephew's expectations.

 

(◊) Trademark of Smith+Nephew. Certain marks registered in US Patent and
Trademark Office.

 

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