S&N in £489m deal for biotech group

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SMITH & Nephew took a major stride into the fast-growing regenerative medicine market with a $782m (£489m) deal for a US biotech firm.

The medical devices giant will bolster its Hull-based Advanced Wound Management (AWM) division with the purchase of Healthpoint Biotherapeutics. A leader in bioactives, its treatments encourage the body to repair itself.

S&N’s wound arm has consistently been its fastest-growing division, but has seen growth ease to four per cent in recent months.

S&N said Healthpoint brings double-digit revenue growth, a strong product portfolio and pipeline and research and development capabilities.

“We see this as a very attractive area with a lot of potential,” said AWM president Roger Teasdale. “We think this is the future of wound management – it’s very important that we are part of this.”

He added Healthpoint is a “ready platform”, rather than the costly and laborious process of building a bioactives business from scratch.

It targets a bioactive wound market worth around $1bn – the fastest-growing segment of wound care.

“The US market is about 40 per cent of the world market in wound management,” said Mr Teasdale. “We see a worldwide market of about $6bn – $2.6bn of that is in the US and growing nicely. It really supports the group’s ambitions.”

The Fort Worth, Texas-based business, researches, makes and sells products used across the bioactive sector.

It will have sales of about $190m this year, driven mainly by its Santyl ointment, a debrider used to treat skin ulcers and burns. Debridement is a process of removing dead or infected tissue from a wound to speed up healing.

Its Oasis acellular products comprise artificial skin, made from a matrix or scaffold, which do not contain cells and are used to treat leg and foot ulcers. Its Regranex growth factor gel is also used to treat diabetic foot ulcers.

“It’s very easy to apply. People can go home and don’t need to be hospitalised,” said Mr Teasdale. “All their product range absolutely fits what we stand for, which is reducing the human impact of the wound and the clinical impact, and making sure our products deliver superior outcomes while conserving resources for the healthcare system.” Healthpoint’s pipeline of R&D includes a number of potential therapies for ulcers, with one compound due to enter third-phase clinical trials and a possible launch date of 2017.

“We feel that absolutely we’ve chosen the most compelling (company in this space),” said Mr Teasdale. “It’s not just about today’s product; it’s also for the future. But I would not rule out further transactions in this space. This is a very attractive area.”

S&N said it will make synergies or cost savings of $20m, thought to be in back office and administrative functions.

Healthpoint has about 460 staff, and S&N’s US wound care workforce will rise to about 726. Its US woundcare sales force will more than double.

Ramping up investment in Healthpoint’s pipeline will increase the group’s R&D spend to $40-$50m annually.

Healthpoint earned trading profits of $11m in 2011 on $151m revenues in 2011. Mr Teasdale said he does not expect any immediate impact at its East Yorkshire home. “But at the same time, we’re a business headquartered in East Yorkshire, where we have 800-900 people in the Hull site, and we’re investing $782m in that business.

“It re-affirms the growth and potential we see in that business. It will bring very positive things for the area and the region.”

He added there is “potential” for some of the acellular Oasis products to be used in orthopaedics. “The science and capabilities that they have extend absolutely into other businesses,” he said, but added the core rationale is around wound management.

Mr Teasdale said the price is around the “middle of recent transactions”. “It’s hard to value it based on EBITDA (underlying earnings) because the company has been in investment phase,” he said, adding the deal brings tax advantages.