Smith & Nephew Plc SN. Acquisition

  Smith & Nephew Plc (SN.) - Acquisition

RNS Number : 1779S
Smith & Nephew Plc
28 November 2012

Smith & Nephew to acquire US bioactive wound care business for $782 million

28 November 2012

Smith & Nephew plc (LSE: SN, NYSE: SNN), the global medical technology
business, today announces that it is strengthening its global position in
advanced wound care by entering into an agreement through its subsidiaries to
acquire substantially all the assets of Healthpoint Biotherapeutics
("Healthpoint"), a leader in bioactive debridement, dermal repair and
regeneration wound care treatments, for $782 million in cash.

Commenting, Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said:

"The acquisition of Healthpoint is an important step for Smith & Nephew.
Strategically, it reinforces our Advanced Wound Management division by giving
us a strong position in the fast growing area of bioactive wound care
treatment. It brings material revenues from a fast growing product range, an
attractive pipeline, and commercial and R&D capabilities upon which we will
build. The combination benefits our customers, offering them a truly unique
wound care business - having leadership positions across exudate and infection
management, negative pressure and bioactives."

The acquisition has compelling strategic and financial rationale for Smith &

· Creates a strong position in bioactives, the fastest growing area of
advanced wound management

· Brings a complementary range of bioactive debridement, dermal repair and
regeneration products generating around $190 million 2012 revenues growing at
a double digit percentage rate, driven by SANTYL ointment

· Adds an established R&D capability in next-generation bioactive
therapies including an exciting product pipeline with lead product (HP802-247)
entering Phase 3 trials

· Integration into our Advanced Wound Management ("AWM") division

‐ doubles AWM's US sales, strengthening commercial scale and

‐ strong cultural fit of innovation and customer focus

‐ opportunity for synergies over time

· Expected to exceed Smith & Nephew's cost of capital in the third full
year following acquisition; broadly EPSA neutral in 2013 and accretive

Paul Dorman, Founder, Chairman and co-owner of Healthpoint commenting on the
transaction said:

"Healthpoint and Smith & Nephew have much in common - our commitment to
innovation, the desire to serve healthcare professionals and a fundamental
dedication to improving the quality of life for patients. We are very proud
of our employees and the business we have built and believe now is the right
time to allow it to grow to the next level by joining a global organisation
like Smith & Nephew."

Strategic rationale

One of Smith & Nephew's five strategic priorities is 'supplementing our
organic growth through acquisitions', in order to satisfy our determination to
build significant value for our stakeholders.

Our strong Advanced Wound Management division has been consistently
outperforming the market growth rate for the last few years. This is despite
not having a presence in bioactive wound healing, which has an estimated
segment size of around $1 billion and is the fastest growing segment of
advanced wound care. Bioactives offer novel treatments for a range of hard to
heal wounds, including the large and increasing prevalence of diabetic foot

In Healthpoint, we have found the ideal entry into this attractive segment. It
is complementary on many levels, including product range, US scale and strong
commercial capabilities.

Healthpoint is forecast to generate around $190 million sales in 2012 from its
existing range of high growth products, driven by SANTYL, a bioactive ointment
for the removal of dead tissue in wounds. Healthpoint has a strong R&D
capability with its lead product candidate entering Phase 3 trials for the
treatment of venous leg ulcers, a large potential opportunity.

The combination creates a wound business which is unique - having leadership
positions across exudate and infection management, negative pressure and
bioactive wound care.

Details of Healthpoint

Healthpoint is a privately held company focused on the development and
commercialisation of novel, cost-effective bioactive solutions for
debridement, dermal repair and regeneration.

Its principal marketed product is Collagenase SANTYL® Ointment ("SANTYL"), an
enzymatic debrider for dermal ulcers and burns. Healthpoint's offering also
includes the OASIS® family of leading acellular skin substitutes for venous
leg ulcers and diabetic foot ulcers and REGRANEX®, a growth factor for
treating diabetic foot ulcers.

The company's research and development strategy is centred on next-generation
bioactive therapies for the treatment of chronic wounds. The principal
pipeline product is HP802-247 for the treatment of venous leg ulcers, using
cell-based therapy containing keratinocytes and fibroblasts. In August 2011
Healthpoint reported positive data from a Phase 2b clinical trial for
HP802-247 in the treatment of venous leg ulcers, demonstrating that the
compound met both its primary and secondary endpoints. The compound has
recently entered Phase 3 trials for this indication and commercial launch
could occur as early as 2017.

Healthpoint has its headquarters in Fort Worth, Texas and is an affiliate
company of DFB Pharmaceuticals, Inc. It has approximately 460 employees,
including an established sales force of 215.

Healthpoint generated revenues of $151 million in the year to 31 December 2011
and is forecast to deliver around $190 million in 2012. We expect that
Healthpoint's current product portfolio will deliver growth at a mid-teen
percentage rate for the next few years. It delivered a trading profit of $11
million ($34 million before R&D expenses) in 2011. We expect to realise the
benefit of the significant operational gearing in Healthpoint's cost

As at 31 December 2011, Healthpoint had gross assets of $98 million and net
operating assets of $61 million. All figures are unaudited.

Integration plans

Smith & Nephew intends to build upon Healthpoint's strong presence in the US,
established commercial organisation and complementary product range. The
business will continue to be headquartered in Fort Worth.

We will continue to invest in Healthpoint's bioactive R&D capability,
including funding the HP802-247 Phase 3 trials and commercialisation over the
next 5 years. We expect this investment will drive annual R&D spend in the
medium term to around $40-50 million per annum.

Healthpoint will be integrated into our Advanced Wound Management division.
In order to minimise business disruption, we intend to integrate gradually. We
expect to achieve annual cost synergies of around $20 million by 2015 and
incur integration cash costs over this period of around $25 million.

Financial implications

The purchase price of $782 million in cash will be financed from Smith &
Nephew's existing cash resources and bank facilities. In the event that the
transaction is not completed by the end of 2012, a further $10 million
consideration will be paid.

The transaction is value and growth enhancing for Smith & Nephew. It is
expected to generate a return exceeding Smith & Nephew's cost of capital in
the third full year following acquisition, and to be broadly EPSA neutral in
2013 and accretive thereafter, including the significant R&D investment in

The acquisition is structured as the purchase of assets (mainly in US), which
will provide Smith & Nephew with a material cash tax benefit.

Smith & Nephew expects the anti-trust clearances and other customary
requirements, to be fulfilled in time to enable completion of the transaction
by the end of 2012.

Deutsche Bank is serving as financial adviser to Smith & Nephew on the
transaction and BofA Merrill Lynch and JP Morgan as financial advisers to

Analyst conference call

A conference call to discuss this announcement will be held at 8.30am GMT /
3.30am EST today, 28 November. This will be broadcast live on the company's
website and will be available on demand shortly following the close of the
call at If interested parties are unable to
connect to the web, a listen-only service is available by calling +44(0)20
3364 5381 (passcode 9377430) in the UK or +1 212 444 0895 (passcode 9377430)
in the US. Analysts should contact Jennifer Heagney on +44 (0) 20 7960 2255
or by email at for conference call details.


Phil Cowdy                        +44 (0) 20 7401 7646
Smith & Nephew
Charles Reynolds                  +44 (0) 20 7401 7646
Smith & Nephew
Andrew Mitchell / Justine McIlroy +44 (0) 20 7404 5959

Technical glossary

Acellular skin substitute

Artificial skin made of a matrix or scaffold composed of material such as
collagen which does not contain cells (as oppose to 'cellular' products which
contain living cells).

Bioactive wound care

Bioactives are innovative technologies for the prevention and treatment of
acute, chronic and burn-related wounds. These are typically hard to heal
wounds, including the large and increasing prevalence of diabetic ulcers. As
such, bioactive wound healing is the fastest growing segment of advanced wound
care. The broad category of such products includes those designed to enhance
the body's natural healing processes and bio-engineered products.

Cell-based therapy

The repair, replacement or restoration of damaged tissue through the use of
cells that have been manipulated or altered. The cell source can be:
autogenic (same patient), allogenic (same species donor) or xenogenic (another
species donor).


The process of removing dead or infected tissue from a wound in order to speed
healing. Debridement can be carried out in a number of ways, such as with a
scalpel (surgical debridement), water (hydrosurgery), or the use of bioactives
or chemicals to dissolve the tissue.

About Healthpoint Biotherapeutics

Healthpoint Biotherapeutics is a biopharmaceutical company focused on the
development and commercialization of novel, cost-effective solutions for
debridement, dermal repair and regeneration. The company's research and
development strategy is centred on next-generation bioactive therapies for the
treatment of chronic wounds. Currently marketed products include Collagenase
SANTYL Ointment, OASIS Wound Matrix, OASIS Ultra Tri-Layer Matrix and REGRANEX
(becaplermin) Gel 0.01%. Healthpoint Biotherapeutics is also committed to
advancing the care and treatment of wounds through support of industry leading
continuing education from The Wound Institute®. Healthpoint Biotherapeutics
is a DFB Pharmaceuticals, Inc., affiliate company, and is based in Fort Worth,
Texas. For more information, visit the company website at

® Healthpoint and related logo, SANTYL, The Wound Institute and REGRANEX are
registered trademarks of Healthpoint, Ltd. OASIS is a registered trademark of
Cook Biotech, Inc.

About Smith & Nephew

Smith & Nephew is a global medical technology business dedicated to helping
improve people's lives. With leadership positions in Orthopaedic
Reconstruction, Advanced Wound Management, Sports Medicine and Trauma, Smith &
Nephew has almost 11,000 employees and a presence in more than 90 countries.
Annual sales in 2011 were nearly $4.3 billion. Smith & Nephew is a member of
the FTSE100 (LSE: SN, NYSE: SNN).

◊ Trademark of Smith & Nephew. Certain marks registered US Patent and
Trademark Office.

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 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: economic and financial conditions in
the markets we serve, especially those affecting health care providers, payors
and customers; price levels for established and innovative medical devices;
developments in medical technology; regulatory approvals, reimbursement
decisions or other government actions; product defects or recalls; litigation
relating to patent or other claims; legal compliance risks and related
investigative, remedial or enforcement actions; strategic actions, including
acquisitions and dispositions, our success in integrating acquired businesses,
and disruption that may result from changes we make in our business plans or
organisation to adapt to market developments; and numerous other matters that
affect us or our markets, including those of a political, economic, business
or competitive 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, for a discussion of certain of these

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.

                     This information is provided by RNS
           The company news service from the London Stock Exchange


ACQEAKFPALPAFEF -0- Nov/28/2012 07:01 GMT
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