Smith and Nephew hives off US Biologics arm

4th Jan 2012 07:19

Smith and Nephew, the medical technology business, has agreed to form a joint venture 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 (S&N). In addition to receiving a stake in the joint venture S&N will pocket $98m in cash and will receive a $160m 5-year note from Bioventus.Though the company has transferred its US Clinical Therapies business over to Bioventus, S&N will continue to distribute Clinical Therapies products outside the US, at least for the time being. Bioventus will continue to market its current portfolio of products, including the EXOGEN Ultrasound Bone Healing System and joint fluid therapy, and will seek to add further offerings. Both of the joint venture partners are committed to investing a significant proportion of Bioventus's cash flow into research and development over the next five years. The Bioventus business will be head-quartered in Durham, North Carolina, the head office of the S&N Biologics business, and the existing management team, led by its current President, Mark Augusti, will transfer to Bioventus. Smith & Nephew will retain its research facility at York, UK."In a single act we have given our existing Biologics business the resources to address longer-term development projects, retained access to the exciting area of orthobiologics, realised value for reinvestment in nearer-term opportunities, and freed up management resource to focus on driving efficiencies in established markets," claimed Olivier Bouhuon, Chief Executive Officer of S&N. Marty Sutter, founding partner and Managing Director of Essex Woodlands, was equally enthusiast. "We see tremendous growth potential with this new venture as more patients discover how active products can help heal and treat joint and bone ailments without invasive surgery," Sutter said.In 2010 Smith & Nephew's Biologics and Clinical Therapies business generated a trading profit of $44m on revenues of $223m, of which $33m came from sales outside of the US. As at October 1st, 2011, the business had unaudited gross assets of $121m. The transaction is expected to be completed in the next few months and will be modestly earnings dilutive.--jh