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VOL. 127 | NO. 89 | Monday, May 07, 2012

Smith & Nephew Reports 3 Pct. Profit Growth

By Aisling Maki

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Smith & Nephew last week reported its net profit grew 3 percent in the first quarter, helped by an increase in revenue, profit and trading margins in the company’s Advanced Surgical Devices and Advanced Wound Management divisions.

The London-based medical device maker, which has facilities in Memphis, said Q1 highlights included a 6 percent growth in revenue from the company’s knee implants and a strong quarter for its Negative Pressure Wound Therapy portfolio.

Revenue in established markets grew 2 percent in Q1, while the company saw a growth rate of 12 percent in emerging markets.

Trading profit was $252 million, up 5 percent from $241 million in 2011 – exceeding expectations.

“Smith & Nephew has had a good first quarter,” Smith & Nephew CEO Olivier Bohuon said in a statement. “We grew revenue, increased profit and improved our trading profit margin. We saw the first results of our actions to make Smith & Nephew more fit and effective.”

Smith & Nephew said the improvements also reflect some strategic steps it has taken to reshape the company. In Memphis, the company has opened a new innovation and training center, which will be used to deliver surgeon training programs.

The multi-disciplinary facility includes implant, trauma and sports medicine, allowing people of different specialties to share learning and innovation.

Bohuon said 2012 is a critical year for implementing its new strategic priorities.

“Our plans to progress the structural changes, additional investments and, of course, greater efficiencies, are now under way,” he said. “Throughout Smith & Nephew, at every level, there is a clear sense of direction, as we work to reshape the group for future growth.”

Smith & Nephew in February reached a settlement with the U.S. Securities and Exchange Commission and the U.S. Justice Department in connection with an investigation into the medical device industry and paid $22 million in fines and profit disgorgement. Those payments were provided for in Q4 2011.

The investigation focused on criminal and civil allegations of the company bribing Greek government doctors to secure business.

The U.S. Justice Department’s Foreign Corrupt Practices Act prohibits the bribery of foreign government officials or company officials to secure business. Under Greece’s national health care system, most physicians working in hospitals are government employees, making them foreign officials under the U.S. anti-bribery law.

In 2007, Smith & Nephew and other medical device makers were asked by the Justice Department and SEC to look into improper payments to government-employed physicians and voluntarily report any issues.

According to the Justice Department, Smith & Nephew acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents who made various improper payments to publicly employed health care providers in Greece over a 10-year period between 1998 until 2008 to win business.

London-based Smith & Nephew PLC paid $5.4 million to the SEC, while its U.S. subsidiary, Memphis-based Smith & Nephew Inc., paid a $16.8 million penalty as part of the agreement.

Also in February, Smith & Nephew announced it planned to reduce its global workforce by 7 percent over a three-year period.

The company said the majority of those structural changes would impact its general and administration expenses.

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