Broker snap: Bioventus JV a sensibile move for Smith & Nephew, says Investec

13th Jan 2012 09:52

Investec may have made downgrades to its forecasts for Smith & Nephew, but the broker has maintained its buy rating on the medical devices giant.The group agreed last week to form a joint venture (JV) with Essex Woodlands, a specialist healthcare growth equity and venture capital firm, that will see it transfer the bulk of its US biologics team and Clinical Therapies business to the new firm. The new entity, called Bioventus, will be 51%-owned by Essex Woodlands and 49% by Smith & Nephew.Investec analyst Sebastien Jantet said: "the Bioventus JV looks like a sensible move to us, allowing Smith & Nephew to focus on reconstruction and trauma and freeing up resources for investment elsewhere, whilst still giving the company access to the Biologics and Clinical Therapies markets."However, the broker is forced to cut the group's current-year earnings per share estimates by around 4% to take into around currency headwinds arising from a strengthening US dollar.Nevertheless, Jantet said that Investec remains a buyer of the stock "based on our view that underlying trading remains robust, that market conditions are relatively stable and that the rapidly degearing balance sheet should provide further upside."Shares were trading up 1.51% at 605p on Friday morning at 09:58.BC