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Healthcare

UPDATE 2-Smith & Nephew Q3 revenue up; guidance unchanged

* Q3 revenue $941 mln (I/B/E/S poll $928.9 mln)

* Q3 EPS 16.1 cents (I/B/E/S 17.0 cents)

* Keeps guidance unchanged

* Shares up 4.4 pct

(Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, Nov 5 (Reuters) - Smith & Nephew SN.L, Europe's largest maker of replacement knees and hips, beat third-quarter expectations after it stepped up marketing to consumers in the United States, helping it take share in a tough market.

The company, which also has endoscopy and woundcare units, posted a 4 percent rise in trading profit to $215 million on revenue of $941 million, also up 4 percent and ahead of analyst expectations for $928.9 million, for the three months to Oct. 2.

Shares in the group rose as much as 6.9 percent to a 15-week high as analysts said Smith & Nephew had done better than U.S. rivals. They were 4.4 percent higher at 583 pence at 0920 GMT.

“This has been a solid quarter for the business, contrasting with the cries of woe from its U.S. peers, and management is maintaining its full-year outlook from the second quarter,” said Seymour Pierce analyst Mike Mitchell.

“Sensitivity to the younger, insured patient market in elective surgery will remain while the economic recovery is sluggish, but the rest of the business more than compensates.”

Chief Executive David Illingworth said the performance was “robust” in markets still hurt by a tough economic environment.

“Reconstruction has outperformed the market rate, driven by strong growth in our knee business,” he told reporters in a call on Friday. “Our trauma business also continues to improve and delivered revenue growth at the market rate.”

Its orthopaedics business grew 2 percent in the U.S., fell 1 percent in Europe and grew 6 percent elsewhere in the quarter.

Younger patients have delayed reconstructive surgery, such as knee repairs after sports injuries, because they are reluctant to take time off work.

Illingworth said the company was seeing headwinds for its high-spec orthopaedics products, but was probably taking share in its traditional products targeted at an older population.

The group also saw pricing pressure, reflecting austerity measures in all markets, he said. “Like-for-like pricing is between 1 and 2 percent on an annualised basis,” he said.

DIRECT CAMPAIGN

Smith & Nephew is pushing its Birmingham Hip Resurfacing system, which Illingworth said had been sucked into the controversy over competitors’ metal-on-metal products, and its knee-replacement technology.

“We went out with an aggressive, direct-to-consumer ad campaign and quite frankly it worked well for us,” he said.

“In knees, Verilast has a 30-year wear claim approved by the FDA. It’s this type of innovation that has led our knee performance in the quarter (up 6 percent) to be market leading.”

Rival Zimmer Holdings ZMH.N said sales of knee replacement products were weak in the third quarter, though peer Stryker SYK.N posted higher U.S. sales helped by strong shipments of orthopaedic implants. [ID:nN28104416] [ID:nN19253675]

Smith & Nephew’s endoscopy business grew revenue by 4 percent to $201 million, while sales at its advanced wound management unit were 7 percent higher at $230 million.

The group reiterated guidance of growing close to the market rate in reconstruction, and above it in endoscopy and wound.

Analysts expected the company to report adjusted earnings per share of 17.0 cents on revenue of $928.9 million, according to a Thomson Reuters I/B/E/S poll of eight brokers.

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