Smith & Nephew plc · LSE:SN.
Smith & Nephew — Smith+Nephew — Investor Day (2021)
79 slides from Smith & Nephew's investor day presentation, 2021
Slide 1: Meet the Management 2021
Smith+Nephew is a portfolio medical technology business focused on the repair, regeneration and replacement of soft and hard tissue. We exist to restore people’s bodies and their self-belief by using technology to take the limits off living. We call this purpose ‘Life Unlimited’. Meet the Management
Slide 2: Forward looking statements and non-IFRS measures
Forward looking statements and non-IFRS measures 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. Phras
Slide 3: Agenda
Agenda Time (GMT) Session Presentation Strategy for Growth 12.30 – 13.30 Presentation Roland Diggelmann, Chief Executive Officer Anne-Francoise Nesmes, Chief Financial Officer Break CEO/CFO Q&A Roland Diggelmann, Chief Executive Officer Anne-Francoise Nesmes, Chief Financial Officer 13.45 – 14.30 Br
Slide 4: Strategy for Growth
Strategy for Growth An inflection point – transforming to a structurally higher growth company Innovation led Productivity & Financial performance Capital Allocation Commercial commitment discipline • Existing strong portfolio Excellence driven • Pipeline of disruptive • Consistent 4-6% organic • In
Slide 5: Solid long-term demand drivers intact
Solid long-term demand drivers intact Prevalence Growth in lifestyle related health conditions Emerging markets Economic development driving healthcare access Lifestyle Higher levels of physical activity later in life Decentralised care Shift to outpatient settings accelerated by COVID Demographics
Slide 6: Smith+Nephew: A portfolio of global franchises
Smith+Nephew: A portfolio of global franchises Sports Medicine Orthopaedics Advanced Wound Management Hip and Knee Implants Trauma and Extremities $5.3bn $14.9bn $6.2bn $9.4bn +5% 2017-19 Average growth +2% 2017-19 Average growth +4% 2017-19 Average growth +5% 2017-19 Average growth Others Others Sm
Slide 7: Smith+Nephew today: three global franchises
Smith+Nephew today: three global franchises ~60% of portfolio outperforming their markets Underlying growth by segment* & market comparison Sports Medicine Advanced Wound Management 2017 2018 2019 2020 9m 2021xx 2017 2018 2019 2020 9m 2021xx SMJR 6% 8% 12% -10% 23% AWC 0% 1% 0% -7% 13% AET -3% -3% 1
Slide 8: Three simple strategic imperatives
Strategy for Growth Three simple strategic imperatives Transform our business through Transform innovation and acquisition Accelerate profitable growth through Accelerate prioritisation and customer focus Strengthen the foundation to serve Strengthen customers sustainably and simply 8
Slide 9: Delivering our strategic imperatives
Delivering our strategic imperatives Key value builders driving the growth strategy Strengthen Accelerate Transform • Optimise manufacturing and supply Productivity • Efficiencies through simplification • Maximise strong current portfolio Commercial execution • Tailor commercial approach to evolving
Slide 10: Delivering our strategic imperatives: Productivity
Delivering our strategic imperatives Productivity Strengthen Accelerate Transform • Optimise manufacturing and supply Productivity • Efficiencies through simplification • Maximise strong current portfolio Commercial execution • Tailor commercial approach to evolving Value customer needs builders • L
Slide 11: Productivity: Resolving the current supply issues
Productivity: Resolving the current supply issues Expecting full resolution of S+N specific issues in H1 2022 Challenge Status Immediate actions Smith+Nephew Staffing shortages Improving further • Closing remaining Orthopaedic production Output rising, backorders headcount gaps, focus and supply fro
Slide 12: Productivity: Executing transformation plan
Productivity: Executing transformation plan Structurally improving supply chain efficiency and resilience Moving to three Global Distribution Centres and Supply chain optimised manufacturing • Transition to 3PL* in Europe now complete, Memphis transition planned for 2022 • Plants will ship directly
Slide 13: Productivity: Ongoing efficiency opportunities
Productivity: Ongoing efficiency opportunities We will make sustained improvements from focus and simplification Track record of efficiency: Further opportunities to focus and simplify Global Business Services Prioritising key profitable growth Simplifying the portfolio markets SKU reduction for low
Slide 14: Delivering our strategic imperatives: Commercial execution
Delivering our strategic imperatives Commercial execution Strengthen Accelerate Transform • Optimise manufacturing and supply Productivity • Efficiencies through simplification • Maximise strong current portfolio Commercial execution • Tailor commercial approach to evolving Value customer needs buil
Slide 15: Commercial execution: Maximising strong portfolio
Commercial execution: Maximising strong portfolio AWM shows ability to accelerate existing products Improvement delivered through execution Differentiate with portfolio selling Procedure first Europe AWC underlying AWB: Santyl 12-month revenue growth • Lead with offering the whole solution to the tr
Slide 16: Commercial execution: Aligned with customer needs
Commercial execution: Aligned with customer needs Positioned to re-establish Orthopaedics momentum • Leveraging leading Sports Medicine position and broad Orthopaedics portfolio under one Brad Cannon leader President, Orthopaedics, • Sales teams remain aligned with clinical Sports Med & ENT specialt
Slide 17: Delivering our strategic imperatives: Innovation
Delivering our strategic imperatives Innovation Strengthen Accelerate Transform • Optimise manufacturing and supply Productivity • Efficiencies through simplification • Maximise strong current portfolio Commercial execution • Tailor commercial approach to evolving Value customer needs builders • Lau
Slide 18: Innovation: Key projects delivered in 2021
Innovation: Key projects delivered in 2021 New growth drivers added across franchises H1 2021 H2 2021 Recon & Robotics New Hip and CORI◊ Surgical System LEGION◊ CONCELOC◊ RI.HIP Knee Instruments (EU, AUS) Cementless Total Knee Navigation on System CORI Trauma & Extremities EVOS◊ LARGE SMART TSF◊ Pla
Slide 19: Innovation: Drives performance across segments
Innovation: Drives performance across segments Segment acceleration versus market has followed major new products Underlying growth by segment & market comparison 2017 2018 2019 2020 Q1 2021 2017 2018 2019 2020 Q1 2021 Hips 0% 2% 2% -7% 9% Trauma & Extremities 4% -1% 4% -5% 12% OR3O◊ New Hip EVOS SM
Slide 20: Innovation: Preparing to launch differentiated pipeline
Innovation: Preparing to launch differentiated pipeline Processes and resourcing to launch at scale Case study with 2-year payback: OR3O Applying improvement to key launches Global Hips underlying growth S+N LEGION Next- Tula System CONCELOC Generation In-office Market Cementless Shoulder Tympanosto
Slide 21: Innovation: Investment in platform technologies
Innovation: Investment in platform technologies Disruptive platforms with cross-franchise applications Robotics Biologics Digital Today: Today: Today: CORI for total and partial knee Skin substitutes portfolio in RI.INSIGHTS analytics, ARIA care replacement Advanced Wound Bioactives management platf
Slide 22: Delivering our strategic imperatives
Delivering our strategic imperatives Key value builders driving the growth strategy Strengthen Accelerate Transform • Optimise manufacturing and supply Productivity • Efficiencies through simplification • Maximise strong current portfolio Commercial execution • Tailor commercial approach to evolving
Slide 23: M&A: Enhancing our portfolio and pipeline
M&A: Enhancing our portfolio and pipeline Continue with small and mid-sized bolt-ons Tula In-office ear Extremities tubes without 6-7% Lower general US market Extremities anaesthesia growth expected per annum Shared call points ROIC>WACC ~3-5 years REGENETEN Bioinductive Skin substitutes implant sti
Slide 24: Financial framework and capital allocation
Financial framework and capital allocation 24
Slide 25: Near-term external influences
Near-term external influences COVID China VBP Inflation Recovery and pent-up Primary Hip & Knee Raw materials and demand across systems tender implementation logistics 25
Slide 26: Commitment to consistent 4-6% organic growth
Commitment to consistent 4-6% organic growth Consistent 4-6% organic growth Mid-term pipeline: CORI platform Hip/Knee products Visualization/AI Biologics platform Active dressings Near-term pipeline: Porous knee Key products: Next-gen shoulder CORI, CORI Hip TULA JOURNEY II Next-gen NPWT OR3O, EVOS
Slide 27: Franchise level prioritisation & execution
Franchise level prioritisation & execution Investing to drive sustainable revenue growth Today Mid-term Long-term Potential Strengthen Leverage differentiation Further Mid-single Ortho foundations of Porous, OXINIUM◊, innovation to digit supply and Robotics drive growth growth execution J2 Kinematic
Slide 28: Smith+Nephew today - trading profit margin
Smith+Nephew today - trading profit margin Margin recovering, increased investment for growth Group trading margin Group R&D† as % of sales 22.0% 22.4%* 22.8% 6.1% ~6.2% †† ~18% ** 5.2% 4.7% 4.8% 15.0% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 * Excluding 50bps one-time legal gain † R&D expe
Slide 29: Growth translating to sustainable earnings growth
Growth translating to sustainable earnings growth Further Enhanced operating improvement leverage from higher At or above External market growth 21% dynamics ~18% Note: Bars are directional and not to scale 29
Slide 30: Revised capital allocation policy
Revised capital allocation policy Smith+Nephew will use the following capital allocation framework to prioritise the use of cash: 1. Invest 2. Acquire • in innovation to drive organic growth; Invest Acquire • new technologies and expand in higher growth • to meet our segments, that have a sustainabi
Slide 31: Underpinned by Culture and Sustainability
Underpinned by Culture and Sustainability Smith+Nephew is a team of People Planet Products 18,000 colleagues united by Creating a A medical Innovating our culture pillars of Care, lasting positive technology sustainability impact on our business with a Collaboration and Courage. communities positive
Slide 32: Transforming to a structurally higher growth company
Transforming to a structurally higher growth company Innovation will support consistent mid-single digit revenue growth Leadership Strong market Proven positions in fundamentals, innovation Sports and incl. COVID track record AWM recovery Productivity & commercial execution will contribute to sustai
Slide 33: Life Unlimited
Life Unlimited
Slide 34: Meet the Management 2021 Orthopaedics
Meet the Management 2021 Orthopaedics
Slide 35: Franchise Level Prioritisation & Execution
Franchise Level Prioritisation & Execution Investing to drive sustainable revenue growth Today Mid-term Long-term Potential Strengthen Leverage differentiation Further Mid-single Ortho foundations of Porous, OXINIUM◊, innovation to digit supply and Robotics drive growth growth execution J2 Kinematic
Slide 36: Aligned to Win, Reorganized for Strength
Aligned to Win, Reorganized for Strength Leveraging Portfolio and Synergies Aligned with Customer & Market Trends Bringing together Orthopaedics and Sports Medicine ASC Movement to ASC • 16% of US reconstructive procedures in ASC today3 $14.8B Market 11% share • Volume projected to quadruple from Re
Slide 37: Delivering Differentiation Across the Portfolio
Delivering Differentiation Across the Portfolio Clinical Differentiation Efficient Capital Profile OXINIUM◊ Technology CORI◊ Surgical System • Lowest risk of hip revision at 10 years1, 2 • Smarter, more efficient (4 national & regional joint registries) • Smallest robotic footprint • Improved surviv
Slide 38: Market Overview of Reconstruction & Robotics
Market Overview of Reconstruction & Robotics Hips Knees Robotics + Enabling Tech. $6.8bn $8.0bn $0.4bn (US) Total Hip Replacement Total Knee Partial Knee Replacement Replacement • Robotic-assisted surgery • Surgical navigation • Pre-operative planning • Case management platform • Data management sys
Slide 39: CORI Smarter, More Efficient, Handheld Robotics
CORI◊ Smarter, More Efficient, Handheld Robotics1 Portfolio versatility Capital efficiency for customers Total knee Smallest robotic footprint Partial knee in Orthopaedics Revision knee2 Real Intelligence Works in concert with the Hip replacement1 Applications surgical team Hip revision2 Portable; e
Slide 40: S+N Aligned with Customer Needs in Robotic Surgery
S+N Aligned with Customer Needs in Robotic Surgery Key Features Competitor #1 Competitor #2 Competitor #3 Robotic Assisted Capabilities ✓ ✓ ✓ ✓ Small OR Footprint Medium Ideal for ORs with limited space ✓ Small 9.1 kg Large 400kg Large 500kg > 75 KG complete System weight Portability Easily moved be
Slide 41: Real Intelligence: A Broad Portfolio for Digital Surgery
Real Intelligence: A Broad Portfolio for Digital Surgery Platforms KNEE Applications HIP Applications Care Management and Outcomes Robotic-assisted surgery CORI◊ Surgical System The latest innovation; offering smarter, more efficient robotics Navigation KICK® Small, sleek and powerful navigation sys
Slide 42: Knees - Positioned for Growth
Knees - Positioned for Growth We have what it takes to win Entering Cementless Advanced Kinematics • Unique JOURNEY◊ II TKA design replicates • Portfolio gap resulted in lost cementless procedures, not lost customers normal knee shape, position, and motion • Compelling clinical evidence demonstratin
Slide 43: OXINIUM Material – Differentiated Performance
OXINIUM◊ Material – Differentiated Performance Investing in Clinical Evidence and Market Development Activities to Drive Adoption Proven Clinical Performance • Lowest risk of revision in four national hip registries1-4 • Almost 2x lower revision rate in knee patients under 65 years old1 Unrivalled M
Slide 44: Hip - Innovation Driving Growth
Hip - Innovation Driving Growth Materials Innovation Clinically superior material • Proprietary bearing material, OXINIUM◊ DH (ODH) delivers outstanding performance, wear, and safety • Excellent ratings by Orthopaedic Data Evaluation Panel (ODEP) • Validated by 10+ years of clinical & scientific dat
Slide 45: Market Overview - Trauma & Extremities
Market Overview -Trauma & Extremities Global Trauma $6.8Bn Global Extremities $4.9Bn Plates and Screws Intramedullary Nails Lower Extremity Upper Extremity Stabilize fractured bones Metal rod inserted into bone Foot & Ankle repair Hand, wrist repair providing rigid internal fixation for fracture sup
Slide 46: Trauma & Extremities Commercial execution
Trauma & Extremities Commercial execution • Strengthen supply to drive EVOS◊ growth Win in Trauma • Shift hip fracture standard of care with INTERTAN◊ evidence • Penetrate large trauma centers with EVOS◊ line extensions • Reinforce limb restoration portfolio with SMART TSF◊ Expand • Scale US commerc
Slide 47: Innovative, Differentiated Trauma Technologies
Innovative, Differentiated Trauma Technologies EVOS◊ Simplicity & TRIGEN◊ Shifting Hip Fracture Plating Efficiency INTERTAN◊ Standard of Care System Simplicity Improvements in clinical outcomes compared with Comprehensive plating system that addresses all other IM nails1 fragment surgical needs Pote
Slide 48: Commercial Synergies and Extremities Growth
Commercial Synergies and Extremities Growth Complementary Shoulder Ankle • Expands our portfolio to address a broader range of procedures with increased value to surgeons • Leveraging Orthopaedic & Sports Medicine commercial channels for growth in Shoulder • Extremity and Shoulder segments increase
Slide 49: Committed Leadership - Positioned for Long Term Growth
Committed Leadership - Positioned for Long Term Growth Commercial Excellence Brad Cannon Randy Kilburn Craig Gaffin Hjalmar Pompe Scott Curtis • Commitment to President, Orthopaedics, Sports Medicine & ENT, Executive VP and GM SVP and GM SVP and General Manager Vice President execution Reconstructio
Slide 50: SmithNephew
SmithNephew
Slide 51: Meet the Management 2021 Sports Medicine & ENT
Meet the Management 2021 Sports Medicine & ENT 1
Slide 52: The Foundation, The Drivers
Sustainable Pipeline Commercial Execution Portfolio Segments Frontier of Technology Our Winning Culture Large Attractive Market and M&A: Driving Revenue and Profit Acquisition of New Technologies Market Development The Foundation The Drivers 2 2
Slide 53: Franchise level prioritisation & execution
Franchise level prioritisation & execution Investing to drive sustainable revenue growth Today Mid-term Long-term Potential High-single Sports Platform expansion & new market Leading biologics & digit entry digital innovation growth • REGENETEN◊ global market expansion • REGENETEN◊ indication expans
Slide 54: Sports Medicine portfolio
Sports Medicine portfolio Restore Life Unlimited Biologics Joint Repair Hip Repair Knee Elevating Standard-of-Care Shoulder Small Joint Enable Video Increasing Value of the Tower Fluid Management COBLATION◊ Arthroscopic Enabling Mechanical Resection Technologies Patient Positioning 4
Slide 55: Sports Medicine portfolio
Sports Medicine portfolio Portfolio size Restore Life Unlimited Biologics Repair Elevating Standard-of-Care Hip + Small Joint Joint Repair Rotator Cuff Repair Hip Labral Repair Biologics Foot & Ankle Shoulder + Knee Shoulder Instability Hip Meniscal Repair Knee Shoulder Ligament Reconstruction Small
Slide 56: Market: Large, attractive and S+N well positioned
Market: Large, attractive and S+N well positioned Segment position Global Sports Medicine market Opportunity to leverage broad ($ million) S+N portfolio to create value 5,262 5M 5,007 4M 4,612 Patients expecting faster 3M 5% -12% recovery and 2M return to active lifestyle 1M 0 2018 2019 2020 • Joint
Slide 57: Driving revenue and profit improvement
Driving revenue and profit improvement S+N revenue ($ million) 1,385 • Sports Medicine delivering 1,265 1,317 revenue growth 1,227 • Profitability recovered to near pre-pandemic levels: Trading 4.1% 5.2% -11.4% margin pre corporate costs H1’19 30.0%; H1’21 28.0%) • Market growth drivers remain stron
Slide 58: World-class commercial execution
World-class commercial execution Balanced selling Sales targeting Opportunity management • Growth across all segments • Prioritization • Aligned & • Segmentation prioritized Strong Skill Enhancements opportunities Aligned commercial Learning Unlimited incentive reach, planning 85% direct Advanced Sy
Slide 59: Arthroscopic Enabling Technologies
Innovative and sustained pipeline Biolog ics Hip Knee S h ou ld er 2019 2020 2021 S m a ll Joint Video F lu id Ma n a g em ent C OB LA TI ON ◊ Me c h a n ical Resection Patient Positioning Bio Global expansion in Hip Advances our meniscal repair portfolio allowing surgeons to reach 40+% more tears l
Slide 60: Innovation: On the frontier
Innovation: On the frontier Next Generation Tower Scalable Biologics • Spans applications across Sports • Transform procedures and Medicine and Orthopaedic shift standard of care procedures • Pursue solutions to facilitate • Provides intelligent integration of healing tower devices • Penetrate globa
Slide 61: Commercial execution and market development
Commercial execution and market development • Compelling clinical evidence to address clinical unmet needs Commercial Compelling Model Evidence Example: McIntyre LF et al. Full-Thickness Rotator Cuff Tears Can Be Safely Treated With a Resorbable Bioinductive Bovine Collagen Implant: One-Year Results
Slide 62: M&A: Acquisition of new technologies
M&A: Acquisition of new technologies Biologics Meniscal Repair Circumferential Compression Stitch • Promotes tendon • Expands meniscal repair regeneration and solutions for thickness integrity underserved tears – i.e. radial & complex tears • Improves patient satisfaction with pain • Aids in elimina
Slide 63: ENT: Scale portfolio now and in the future
ENT: Scale portfolio now and in the future • Epistaxis • Turbinate Reduction • Tonsil & Adenoid Removal • Septal Closure Nose Throat • Laryngeal surgery 80% of procedures Pediatric and General ENT • Market recovery continues following COVID impact • Significant market potential remains • Strategic p
Slide 64: ENT: Tula as a growth driver
ENT: Tula as a growth driver Scale and Grow Standard of Care • In-office ear tube placement option for pediatric patients • Proprietary technology to numb the Surgeon child’s tympanic membrane Awareness & Establish Surgeon Education Market • Specialized automated tube delivery Awareness & Access dev
Slide 65: Leadership team: Winning culture to deliver
Leadership team: Winning culture to deliver Leadership Brad Cannon Scott Schaffner Meghan Mavity Luis Davila President, Orthopaedics, Sports Medicine & ENT, Executive VP and GM Sports Medicine Vice President Global ENT Sr. Vice President, Research & Emerging Development • Experienced Americas Sports
Slide 66: Slide 66
Slide 67: Meet the Management 2021 Advanced Wound Management
Meet the Management 2021 Advanced Wound Management
Slide 68: AWM prioritisation & execution
AWM prioritisation & execution Driving sustainable revenue growth and value creation Today Mid-term Long-term Potential Focus on commercial Transform standards-of-care Mid-High Ortho AWM execution through innovation single digit growth • Continue to invest in growth • Launch next-generation pipeline
Slide 69: Our vision, Our mission
Our vision Continually shape what’s possible in wound care Our mission Alongside our customers we won’t settle until we’ve solved the challenges of preventing and healing wounds, because they hold back too many lives 3
Slide 70: Large market driven by underlying fundamentals
Large market driven by underlying fundamentals $9.4bn Existing market Market drivers Population demographics - ageing population - ↑ diabetes - ↑ obesity - ↑ peripheral vascular disease Financial burden on health systems - reduced patient quality of care - ↑ burden on healthcare facilities (e.g. hos
Slide 71: Consistent market growth on significant base
Consistent market growth on significant base S+N is the only company who can maximise the opportunity across all segments to support full protocolisation Global market by segment Portfolio strength AWC AWD AWB Sales AWC AWD Biologics Skin 2019 subs Size (2019) ($bn) $5.9bn $1.9bn $1.6bn CAGR 3M (KCI
Slide 72: Broad portfolio to prevent & treat large range of wounds
Broad portfolio to prevent & treat large range of wounds S+N’s innovative products deliver clinical and health economic benefits across all key wound indications and care settings Pressure Injury Prevention At risk Surgical Incisions Chronic Wounds Acute Wounds PREVALENCE 30.9M^ 8.4M* 46.5M~ 8.2M+ P
Slide 73: Our portfolio is recognized for innovation
Our portfolio is recognized for innovation S+N products demonstrate proven clinical outcomes and overall value PICO◊ ALLEVYN LIFE◊ 63% reduction in SSIs1 47.1% reduction in mean weekly dressing change NICE recommendation frequency2 Only sNPWT device 58.7% Red Dot Award reduction in mean weekly dress
Slide 74: M&A: Osiris acquisition delivering on key expectations
M&A: Osiris acquisition delivering on key expectations Strategic intent: Bridge portfolio gap (skin substitute) Generate commercial synergies Create upsides with geographical expansion Leverage expertise across entire company (R&D, reimbursement) Significant improvements made since acquisition Outlo
Slide 75: 3 key pillars driving strong performance
3 key pillars driving strong performance People Commercial execution Product innovation Strengthened leadership (Global, US) Optimised commercial model and sales execution Acquired 2 companies in high growth segments e.g. new sites of care, evidence based selling 5-fold increase in engagement metric
Slide 76: Innovation across care continuum to improve outcomes
Innovation across care continuum to improve outcomes Past Present Future Industry historic focus Massive unmet need across Market requires on product innovation markets and diseases connected ecosystem PRACTICE PATIENT WOUND Market flooded with products and Market potential is ~3X current market Tra
Slide 77: Expert team will further accelerate performance
Expert team will further accelerate performance Winning strategy in a robust market full of opportunity Execution has delivered significant improvement and there is more to come Our track record Our plan Our aspiration Returned the franchise to growth Continue to invest in growth Product innovation
Slide 78: Important Safety Information for SANTYL
Important Safety Information for SANTYL Indications: Collagenase SANTYL Ointment (“SANTYL”) is a prescription-only medication indicated for debriding chronic dermal ulcers and severely burned areas. Contraindications: SANTYL is contraindicated in patients who have shown local or systemic hypersensit
Slide 79: Slide 79