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Orthopedic and Dental Industry News Complete Archive »

Smith & Nephew (SNN:NYSE) Reports 14% Rise in Orthopedic Revenues 21% Increase in U.S. Knee Sales BY JOHN CHOPACK, AUGUST 16, 2004

Smith & Nephew reported an 8% increase in revenues which totaled '350 million for the 2Q:04. Orthopedics was the strongest segment of SNN, increasing by 14% worldwide and 18% in the US. Growth in Endoscopy sales rebounded from flat to down growth over the previous several quarters to a 6% increase during the 2Q:04. A US switch to a new supplier of a debridement enzyme adversely impacted wound management sales, and caused that business unit's growth to fall to 3% from 7% during the 1Q:04.

Although the Orthopedic division growth was significantly faster than the other divisions of Smith & Nephew, this division reported its slowest growth since the 1Q:03. Knee sales grew by 16% during the 2Q:04, well below the 24% increase reported in the 1Q:04. US knee sales increased by 21% within the US, but only 11% outside the US. Hips grew by 14% (13% in the US and 6% OUS) during the 2Q:04, also lower than the 19% increase reported during the 1Q:04. A delay in the launch of the Company's MIS knee instrumentation caused the slower growth in knees. Hip growth slowed down because of the first anniversary of the launch the oxinium femoral heads.

Mr. O'Donnell, CEO of Smith & Nephew, was very forthcoming in answering questions from the analyst committee. When asked about the deterioration of the US pricing environment, he commented that there really was no reason to be concerned. Pricing may have slowed slightly from a 3% increase during 2003 to 2% currently. He also commented that the US reconstructive market has increased in growth rate primarily because of the introduction of MIS knee systems.

While earnings per share in pounds only increased by 7% during the 2Q:04, earnings per ADS increased by 30% to $0.90 during the 1H:04. Looking forward, management is expecting to achieve high-teens sales growth for Orthopedics and single digit growth for Endoscopy and Wound Management. Additionally, the Company believes that they are on track to generate a 1% improvement for the year.

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