Recent operational improvements feature a 12-point plan aimed at enhancing productivity, optimizing the supply chain, and improving commercial execution. The company's net sales are distributed across its activity sectors as follows: orthopedic surgery accounts for 39.7% of sales, primarily through orthopedic implants for hips, knees, and shoulders.

Sports medicine, arthroscopy, and cervicofacial surgery make up 31.4% of sales, including products and instruments for surgery and damaged tissue repair, as well as visualization products. Wound care represents 28.9% of sales, encompassing skin grafts for major burn victims and treatments for leg ulcers, amongst other products. Notably, the US represents 53.8% of Smith & Nephew's net sales.

Portfolio expansion

Smith & Nephew PLC has expanded its Advanced Wound Bioactives portfolio in the US with the launch of the CENTRIO Platelet-Rich-Plasma (PRP) System, a biodynamic hematogel derived from the patient’s own blood. CENTRIO PRP is designed for point-of-care use in hospitals and clinics to treat chronic exuding wounds such as diabetic foot ulcers, venous leg ulcers, pressure ulcers, and tunnelling wounds.

It has demonstrated efficacy in two randomized controlled clinical trials. Critically, the system benefits from Medicare coverage for chronic non-healing wounds in diabetic patients, removing adoption barriers. The launch, under an exclusive distribution agreement with Nuo Therapeutics Inc., enhances personalized wound care and marks a strategic move for Smith & Nephew in the US advanced wound management market.

Significant advancement

Smith & Nephew has announced significant new clinical evidence and expanded patient access for its REGENETEN™ Bioinductive Implant, following substantial research investment and key regulatory milestones. Recent updates to the American Academy of Orthopaedic Surgeons (AAOS) Clinical Practice Guidelines now strongly recommend bioinductive implants to augment rotator cuff repair, citing lower re-tear rates and improved patient outcomes.

A pivotal two-year randomized controlled trial showed a 65% reduction in rotator cuff re-tear rates with REGENETEN versus standard repair. Additionally, the implant’s approved indications have broadened to include extra-articular ligament injuries in the US, aiming to benefit more patients with tendon and ligament conditions. Over 150,000 global procedures underscore its transformative role in soft tissue healing.

Strong growth projections

Smith & Nephew has posted a revenue CAGR of 3.7% over FY 21-24, reaching $5.8bn, driven by strong growth in the Sports Medicine & ENT and Advanced Wound Management franchises, increased investment in innovation, robust new product launches. EBIT rose at a CAGR of 7.6%, reaching $886m, with a margin of 23%. However, net income decreased with a CAGR of 7.7% to $412m.

Cash inflow from operations rose from $877m to $987m. Moreover, the ROA improved slightly from 4.1% to 5.4% in FY 24.

In comparison, Glaukos Corporation, a global peer, fared worse, reporting a revenue CAGR of 9.3% to $383m in FY 24. EBIT rose at a CAGR of 26.9% to minus $108m. Net income increased at a CAGR of 43.4% to minus $146m in FY 24.

Looking ahead, analysts anticipate revenue CAGR of 5.4% over FY 24-27, reaching $6.8bn in FY 27. In addition, analysts expect EBIT CAGR of 10.9% to $1.4bn, with margins expanding by 297bp to 21%. Net income is estimated to increase at a CAGR of 28.4% to $873m. Likewise, analysts estimate an EBIT CAGR of 187.5% and a net profit CAGR of 171% for Glaukos Corporation.

Stable dividend yield

Over the past year, the company's stock delivered strong returns of approximately 17.5%. In comparison, Glaukos Corporation’s stock delivered negative returns of about 34.5% over the same period. In addition, the company paid an annual dividend of $0.37 in FY 24, resulting in a dividend yield of 3%.

Smith & Nephew is currently trading at a P/E of 24.7x, based on the FY 25 estimated EPS of $0.8, which is lower than its 3-year historical average of 41.5x but higher than that of Glaukos Corporation’s P/E of minus 69.5x. In terms of EV/EBIT, the company is currently trading at 16.1x, based on the FY 25 estimated EBIT of $1.2bn, which is higher than its 3-year historical average of 14.6x and Glaukos Corporation (minus 77.1x).

Smith & Nephew is monitored by 18 analysts, with eight having ‘Buy’ ratings, and 10 having ‘Hold’ rating, with an average target price of $18.6. However, the stock has already reached its target price, any near-term correction in the stock prices could provide investors with a buy opportunity.

Overall, Smith & Nephew demonstrates strong growth potential and strategic advancements in the medical technology sector, particularly in orthopaedics, sports medicine, and advanced wound management. The company's focus on innovation, operational improvements, and expanding its product portfolio positions it well for future success.

However, Smith & Nephew PLC faces risks including tariff uncertainties, restructuring costs, acquisition-related challenges, legal and regulatory issues, macroeconomic pressures, and high net leverage. These factors could impact profitability, free cash flow, and operational margins, particularly in regions like China.

https://www.marketscreener.com/news/smith-nephew-expands-its-advanced-bioactives-portfolio-ce7d58dad88bf520