* Essex Woodlands to take 51 pct in new JV Bioventus
* S&N to get $98 mln cash and $160 mln 5-year note
* Shares in S&N up 0.6 percent
By Ben Hirschler
LONDON, Jan 4 Smith & Nephew,
Europe's largest artificial hip and knee maker, is to spin off
its biologics business into a new U.S.-based joint venture that
will be majority owned by healthcare private equity firm Essex
The move provides a cash injection and long-term funding for
research in the high-tech area at a time when the British
company has been struggling with tough markets for its main
S&N said on Wednesday it would receive $98 million cash,
which will be used to pay down debt, and a $160 million
five-year note from the joint venture. The venture will be known
as Bioventus and owned 51 percent by Essex Woodlands.
S&N, along with competitors, has been hit by low demand for
hip and knee replacements as people postpone elective procedures
because of concerns about job cuts.
It reported disappointing third-quarter results two months
ago, and Olivier Bohuon, who became chief executive last April,
said at the time that S&N needed to adapt faster to meet market
Bohuon said the biologics deal offered a solution that would
benefit the company in several ways.
"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," he said.
The transaction is expected to be completed in the next few
months and will be modestly earnings dilutive, the company
Navid Malik, an analyst at Merchant Securities, said the
initiative made sense for the long term, since it would ensure
increased resources for one of the most innovative parts of the
orthopaedics market, which still requires heavy investment.
S&N already markets a number of biological products,
including Exogen for bone healing, and the aim is to develop new
products to heal and treat joint and bone conditions without
Shares in S&N were up 0.6 percent at 630 pence at 0836 GMT
in a flat London stock market.
S&N will transfer the majority of its U.S. biologics team
and clinical therapies business to Bioventus, in which it will
have a 49 percent stake. For the time being, S&N will continue
to distribute clinical therapies products outside the United
Its biologics and clinical therapies business had sales of
$223 million in 2010, of which $33 million came from sales
outside of the United States.
Essex Woodlands, a global venture capital and growth equity
firm, has $2.5 billion under management.