Smith & Nephew ($SNN) hangs its hat on reconstructive medical devices, but the U.K. giant is jumping into the world of bioactive wound therapy with a $782 million acquisition of Healthpoint Biotherapeutics.
The Texas-based Healthpoint makes Santyl, an ointment designed to remove dead tissue from wounds, and it has another treatment in Phase III trials to treat venous leg ulcers. S&N already has a strong wound therapy division, growing 4% last quarter as overall sales slid by 7.8%. But the company has thus far focused on negative pressure wound therapy devices, making Santyl a departure from tradition.
Adding a bioactive therapy to S&N's stable of wound-care products will be a boon to the already growing unit, CEO Olivier Bohuon said. "It brings material revenues from a fast-growing product range, an attractive pipeline, and commercial and R&D capabilities upon which we will build," Bohuon said in a statement.
Healthpoint is expected to bring in about $190 million in revenue for 2012, and Smith & Nephew says the acquisition will effectively double its U.S. wound care sales.
But what of that $782 million price tag? As Reuters reports, S&N shares fell as much as 2% after the Wednesday morning announcement, and a Panmure Gordon analyst told the news service the price will likely be seen as a little rich once all the pieces are in place. Bouhon, of course, said he believes it's a fair price to pay for a growing business in an expanding industry.
At any rate, one of S&N's strategic priorities is to supplement "organic growth through acquisitions," and when your biggest division toils in the dwindling market for hip replacement devices, that organic growth can be slow. Jumping into drugs is a little unusual for a device-focused outfit, but with the market for bioactive wound healing estimated at $1 billion and the company's recent success in the sector, Smith & Nephew's quest for non-device cash cow may be a sign of things to come for larger companies.
- read S&N's announcement
- read the Reuters report