Medical divisions give Smith & Nephew a strong bill of health

Chief financial officer Adrian Hennah said: “We had a good start to the year with our US knee franchise, sports medicine repair and negative pressure wound therapy business all continuing their strong growth.” The group’s wound management business, which is based in Hull, reported a six per cent increase in revenues to £141m, outperforming the global market by three per cent.

Smith & Nephew said the negative pressure wound therapy division achieved strong growth across all regions and it has signed significant contract wins in Europe and the US.

The company reported a trading profit of £147m for the three months to April 2.

Analysts at Shore Capital said the results were slightly above consensus, as the continued outperformance of the knee business offset the pressures on its hip business.

Mike Mitchell at Seymour Pierce said the numbers should remind investors of the robust delivery that Smith & Nephew can de-liver.

“Investors should also remember that the J&J/Synthes deal cannot go unnoticed across the industry,” he added.

Smith & Nephew reported strong growth in its US knee unit of 10 per cent, taking share from all of its major competitors, helping its orthopaedic reconstruction business grow two per cent overall in a flat market.

Its hips business has been hit by controversy about metal-on-metal technology, and sales fell two per cent in the quarter.

It is also facing pricing cuts of about two per cent as governments, particularly in Europe, tackle budget deficits.

“Our view is price declines are going to last a while, because those deficits are going to be around for a while,” said Mr Hennah.

Smith & Nephew attracted the attention of Johnson & Johnson before the US company agreed to buy Switzerland’s Synthes for £12.8bn in April.

Mr Hennah said that the J&J/Synthes deal was unlikely to trigger a wave of deals and was likely to attract the attention of regulators.

“It would not surprise us at all to see the anti-trust authorities take quite an interest in this particular acquisition,” he said.

“But assuming it completes in something like its current form, do we see it driving a major change in our markets? No, we don’t.”

Smith & Nephew’s rivals Stryker and J&J’s DePuy unit reported slower knee sales in the first quarter, although Zimmer’s results pointed to a pick-up in de- mand.

Smith & Nephew said its outlook for 2011 – of expecting to grow its reconstruction business faster than the market – was unchanged.