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In October 2017, Mr. Olivier Bohuon announced his intention to step down after seven years in the role of Smith & Nephew’s Chief Executive Officer. Six months later, the company has appointed Mr. Namal Nawana as his successor.
Nawana’s experience includes 15+ years with Johnson & Johnson, primarily in the Medical Devices & Diagnostics segment and culminating in 2011 with his appointment as Worldwide President of DePuy Synthes Spine; during this time, he oversaw the integration of Synthes. Following his time at JNJ, he served as COO and President/CEO of Alere, a diagnostics company, which was acquired for $5.3 billion by Abbott. With SNN’s own long history of acquisition rumors, the buzz from analysts suggests that Mr. Nawana’s experience with Synthes, Alere and Abbott may serve a purpose: to clean house and prepare for a purchase.
Nawana is stepping in to lead a company that has struggled with growth in recent years. For diversified companies like SNN we estimate orthopaedic-specific revenue, though of course the CEO must lead the whole company. For 2017, we estimated SNN’s orthopaedic revenue at $3,353.4MM, +3.2% vs. 2016. Overall, the company posted full-year revenue of $4,765.0MM, +2.1% from the previous year. (Thus, orthopaedic and wound management revenue.) Overall revenue growth for 2015 and 2016 was +0.4% and +0.8%, respectively.
For 2018, however, overall revenue is guided to increase by 7% to 8% on a reported basis, supported by currency tailwinds and the acquisition of Rotation Medical. Growth is also expected to derive from knee products, the TRIGEN INTERTAN hip fracture nail and full market launch of new WEREWOLF COBLATION and LENS camera systems.
Further, in the latest earnings review call, leadership announced APEX: a cost review initiative that is expected to deliver an annualized benefit of $160MM off the operating budget by 2022—with about 75% of that expected by 2020—for a one-time cash cost of up to $240MM.
In late 2017, it appeared that U.S. activist investor Elliott Management had acquired a greater than 2% stake in SNN and could be one of the company’s top seven shareholders. Elliott would only need to declare its exact stake if it took more than 3% of SNN’s shares. Reports suggest that Elliott wants SNN to sell off portions of its business to become a more attractive acquisition target, for shareholder benefit.
A change at the helm could lead to an openness for SNN to be purchased, particularly with the departure of Bohuon, who has voiced opposition to acquisition in the past.
