Recently, according to the Mail on Sunday report in the UK, global orthopedic giant Smith&Nephew has received a stern warning from shareholders due to poor performance. Smith&Nephew's shareholders have lost patience with CEO Deepak Nath's strategic development speed, claiming that if the company's performance cannot be improved, Deepak Nath will be dismissed and Smith&Nephew will also face the splitting of its orthopedic department internally.
It is reported that the stock price of Xerox Hui has dropped by up to 44% in the past five years. With this year's performance still not "clear up", the emotions of shareholders are difficult to calm, further putting pressure on Deepak Nat.

Century old enterprises face crisis
Shi Lehui was founded in the UK in 1856, a well-established company with over a hundred years of history. Its main businesses include orthopedics, sports medicine and otolaryngology, and advanced wound management. Currently, Shi Lehui is at the forefront of the world in four major fields: orthopedic joint reconstruction, advanced wound management, sports medicine, and trauma.

Over the years of development, Shi Lehui has also developed numerous star products: GenesisII full knee joint system (launched in 1996, with a cumulative implantation of over 750000 cases), Oxinium black crystal femoral condyle (a unique patent of Shi Lehui company, won the highest international material award ASM award in 2005), and Journey II XR knee joint replacement system (a new product in 2017).

Why does a century old enterprise, with years of stable development and a plethora of star products, face a series of controversies?

This dates back to 2019. 2019 was a watershed year for Shi Lehui. From 2015 to 2019, Shi Lehui's position in the field of orthopedics was very solid, consistently ranking fifth in the global orthopedic rankings. But after entering 2019, Xerox Hui gradually entered a period of weakness, especially in its core business of orthopedics, which only maintained single digit growth, further widening the gap between Xerox Hui and companies such as Stryker, Medtronic, Jiemai Bangmei, and Johnson&Johnson.

In order to save the company's performance, Shi Lehui began to urgently search for new growth points, and multiple acquisition cases were also implemented, such as Ceterix, NuVasile, and Integra Lifesciences Holdings Corporation's limb orthopedic business. At the same time, Shi Lehui also underwent a major internal overhaul. In the past five years, Shi Lehui has successively welcomed four experienced CEOs.

Dipak Nat, who is facing the recall controversy, took office in July 2022. Dipak Nat is also an experienced leader who had previously worked at Siemens Healthineers, Amgen, McKinsey, Abbott, and many other senior management positions before joining Xerox.

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

In addition, in the first half of this year, there were rumors of executive salary increases at Shi Lehui, further intensifying the conflict between the two sides. Due to strong opposition from shareholders over Deepak Nat's insistence on increasing his salary to over £ 9 million, 43% of shareholders voted against the proposal at the shareholders' meeting and proposed that if Nat's goals were successfully achieved, he would receive a salary of up to $11.8 million next year, an increase of 28.9% from the current highest salary of $9.2 million.

Revenue stall in China region
In addition to the controversy at the headquarters of Shile Hui, there have also been reports of senior executives leaving Shile Hui Greater China this year. Its Managing Director Hu Hai has left Shile Hui and is seeking external development opportunities. At present, Hu Hai has not announced where his next destination will be, and Shi Lehui has not yet announced a new successor.

Hu Hai previously mentioned that China is currently the second largest market for Xerox globally, the largest market in a single country, and also the fastest-growing market in the world. China plays a pivotal role in the global market. But looking at Xerox's financial report, it is not difficult to see that its revenue in China has stalled.

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

Looking at business segments, sports medicine and otolaryngology achieved a revenue growth of 7.6%, excluding the Chinese market, with a fundamental growth of 11.0%; The revenue of sports medicine joint repair business increased by 6.0%, excluding the Chinese market, with a fundamental growth of 11.8%. Especially, the knee joint repair product portfolio achieved good growth, and REGENETEN bio induced implants achieved strong double-digit growth.

The impact of centralized procurement on orthopedic equipment enterprises is enormous. After centralized procurement, the overall price has declined, and the share of orthopedics in Xerox China has gradually decreased. Sports medicine has become Xerox China's largest business department. However, it is worth noting that with the full implementation of VBP in May 2024, as of the end of the quarter, 29 out of 31 provinces have already started implementing it. Therefore, it is expected that the challenge of volume based procurement will continue to exist in the second half of this year.

However, the China region is still one of the key areas for Shile Hui's future development. This year, Shile Hui officially announced the launch of the "China Business Strategic Growth Plan", which provides an overall plan for Shile Hui's business priorities and strategic goals in China over the next three years. At the same time, Shi Lehui also reorganized its business structure in the China region, merging the Chinese Sports Medicine and Orthopedics divisions to establish the Orthopedics Comprehensive Division.

Source: https://news.yaozh.com/archive/44538.html