Breaking news! The CEO of a global orthopedic giant may be dismissed

November 16, 2024  Source: drugdu 85

"/Recently, according to the British "Mail on Sunday report", the global orthopedic giant Smith & Nephew has received a severe warning from shareholders due to its poor performance. Smith & Nephew's shareholders have lost patience with the strategic development speed of CEO Deepak Nath and declared that if the company's performance cannot be improved, Deepak Nath will be dismissed and Smith & Nephew will also face the split of the orthopedic department.

It is reported that Smith & Nephew's stock price has fallen by as much as 44% in the past five years. As this year's performance has not yet "cleared up", shareholders' emotions are difficult to appease, further putting pressure on Deepak Nath.

Century-old enterprise faces crisis

Smith & Nephew was founded in the UK in 1856. This old company with a long history of more than 100 years has three main businesses: orthopedics, sports medicine and otolaryngology, and advanced wound management. Currently, Smith & Nephew is a world leader in the four major fields of orthopedic joint reconstruction, advanced wound management, sports medicine and trauma.

After years of development, Smith & Nephew also has many star products: Genesis II total knee system (launched in 1996, with more than 750,000 implants), Oxinium black crystal femoral condyle (Smith & Nephew's patent, won the highest international material award ASM Award in 2005), Journey II XR knee replacement system (new product in 2017).

Why is it that a century-old company with many years of stable development and a number of star products is facing a series of storms?

This can be traced back to 2019. 2019 is a watershed year for Smith & Nephew. From 2015 to 2019, Smith & Nephew's position in the field of orthopedics was very solid, and it has always ranked fifth in the world in orthopedics. However, after entering 2019, Smith & Nephew gradually entered a period of weakness, especially orthopedics, which is its core business, and only maintained single-digit growth. This further widened the gap between Smith & Nephew and companies such as Stryker, Medtronic, Zimmer Biomet, and Johnson & Johnson.

In order to save the company's performance, Smith & Nephew began to urgently look for new growth points, and a number of acquisitions were also implemented, such as Ceterix, NuVasive, and Integra Lifesciences Holdings Corporation's limb orthopedic business. At the same time, Smith & Nephew also carried out a major internal change. In the past five years, Smith & Nephew has successively ushered in four experienced CEOs.

Deepak Nath, who is facing the dismissal storm this time, took office in July 2022. Deepak Nath is also a very experienced leader. Before joining Smith & Nephew, he worked for Siemens Healthineers, Amgen, McKinsey, and Abbott, and he also has experience in senior management of many companies.

However, since Deepak Nath took office, Smith & Nephew's recovery strategy has not achieved good results. Berenberg analysts have also expressed concerns about the prospects for Smith & Nephew's financial improvement in the coming year. It has been more than two years since Smith & Nephew launched its transformation plan, and the slow progress has also raised questions about the potential impact of management strategies in the medium term.

In addition, in the first half of this year, Smith & Nephew also had a salary increase for senior executives, further intensifying the conflict between the two sides. It was caused by Deepak Nath's insistence on increasing his salary to more than 9 million pounds, which was strongly opposed by shareholders. 43% of shareholders voted against the proposal at the shareholders' meeting and proposed that if Nath's goals were successfully achieved, he would receive a salary of up to 11.8 million US dollars next year, an increase of 28.9% from the current highest salary of 9.2 million US dollars.

China revenue slows down

In addition to the turmoil at Smith & Nephew's headquarters, this year, news of the departure of senior executives from Smith & Nephew Greater China was reported. Its managing director Hu Hai left Smith & Nephew and sought external development opportunities. At present, Hu Hai has not yet announced where his next stop will be, and Smith & Nephew has not yet officially announced a new successor.

Hu Hai had previously mentioned that China is currently Smith & Nephew's second largest market in the world, the largest market in a single country, and the fastest growing market in the world. China plays a vital role in the global market. But looking at Smith & Nephew's financial report, it is not difficult to see that its revenue in China has stalled.

In the first half of 2024, Smith & Nephew's global revenue was approximately US$2.827 billion, a year-on-year increase of 3.4%. Among them, the revenue in the Chinese market was approximately US$112 million, a year-on-year decrease of 8.9%.

In terms of business segments: Sports Medicine and Otolaryngology achieved a revenue growth of 7.6%, excluding the Chinese market, and an increase of 11.0% on a fundamental basis; Sports Medicine Joint Repair business revenue increased by 6.0%, excluding the Chinese market, and an increase of 11.8% on a fundamental basis, especially the knee repair product portfolio achieved good growth, and REGENETEN bio-inductive implants achieved strong double-digit growth.

Centralized procurement has a huge impact on orthopedic device companies. After centralized procurement, the overall price has declined, and the share of orthopedics in Smith & Nephew China has gradually declined. Sports medicine has become Smith & Nephew's largest business unit in China. However, it is worth noting that with the full implementation of centralized procurement (VBP) in May 2024, as of the end of the quarter, 29 of the 31 provinces have begun to implement it. Therefore, it is expected that the challenges of volume-based procurement will continue in the second half of this year. However,

China is still one of the key areas for Smith & Nephew to develop in the future. This year, Smith & Nephew also officially announced the launch of the "China Business Strategic Growth Plan", which has made an overall plan for Smith & Nephew's business focus and strategic goals in China in the next three years. At the same time, Smith & Nephew also reorganized its business structure in China, merging the Chinese sports medicine and orthopedics divisions to form an orthopedics comprehensive division.

By editor
Share: 

your submission has already been received.

OK

Subscribe

Please enter a valid Email address!

Submit

The most relevant industry news & insight will be sent to you every two weeks.