Smith & Nephew mulls new direction with Nuvasive

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Smith & Nephew needs to improve its growth rate, and its newish chief executive, Namal Nawana, last week explicitly talked up the “value-creation potential” of deal-making. Reports that it has held talks to acquire the spinal specialist Nuvasive, then, have not come entirely out of leftfield. The deal is of course far from assured, and this would not be the first time S&N has been linked with a large strategic transaction only for nothing to come of it, but Nuvasive would be a solid choice of target for S&N. It is growing faster than the UK group, with products it obtained through the 2016 acquisition of Ellipse Technologies, led by the spine-straightening Magec system, having an annual growth rate in the low teens. And it meets the other main deal criterion set out by Mr Nawana, allowing “access to adjacent markets … where there’s a good strategic fit for Smith & Nephew”. The amount S&N might be prepared to pay for Nuvasive is unknown, but Nuvasive’s shares are up 14% in early trade today, conferring a market cap of around $2.9bn. S&N's stock is down 3%, presumably on fears of overpaying.

Spine vs hips: How S&N and Nuvasive compare
  WW annual sales ($m)  
Segment 2018 2020e 2022e 2024e CAGR
Smith & Nephew
Knee implants 1,017 1,094 1,165 1,232 +3%
Hip implants 613 633 652 669 +1%
Other orthopaedics 1,999 2,178 2,362 2,552 +4%
Advanced wound management 1,275 1,380 1,480 1,580 +3%
Total company revenues 4,904 5,285 5,659 6,033 +3%
 
Nuvasive
Spine surgery products 700 789 881 978 +6%
Ellipse 87 119 150 178 +13%
Surgical support 315 318 336 352 +2%
Total company revenues 1,102 1,226 1,366 1,508 +5%
Source: EvaluateMedTech.

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