Smith & Nephew plc (NYSE:SNN) Q4 2022 Earnings Call Transcript

First, CORI. We are the only true second-gen robotic platform in orthopaedics. So we’re at a kind of an important moment in time in orthopaedics, well, the utilization of robotics or the interest in robotics is just increased with all players kind of having a robotic offering. So it’s in that context that we’re launching CORI. And we feel very, very good about how we’re positioned relative to competing offerings. As I mentioned, there is a set of features and benefits that are already on CORI that are already differentiated relative to the competition. I talked about revision. We’re the only robotic platform to have revision indication. We’re the only robotic platform to offer soft issue balancing for the knee, which is an important consideration.

And then there’s a lineup of further benefits beyond that. So we believe quarry will be a growth driver. It hasn’t been as big a driver because we’ve been supply constrained. And here, it’s less of the logistics issues that are called that I’ve flagged previously around Orthopaedics impacting product availability. Here is truly broader supply chain impacts such as semiconductor availability that’s impacting our ability to place as many CORI systems. But as those ameliorate, as we see that ameliorate in ’23 and beyond, we expect CORI to be a driver. And then in EVOS, we’ve called for EVOS. Anne-Francoise mentioned that we now have with EVOS Small a full offering of EVOs to be able to go into RFPs and to contract to really start to compete effectively in the trauma market.

It will be a growth driver for us. And of course, you’ve got a full portfolio in knee, where we have the only truly kinematic knee on the market. We’re a highly differentiated material in OXINIUM that we’ve had for some period of time. But the combination of these factors is what gives me confidence that orthopaedics will continue to add to growth in our hands, right? So that’s the first part of where the growth is going to come from dissected by segments. The second in terms of launch intensity. There’s different ways of measuring R&D Vitality, as you know. We’ve chosen a 5-year timeframe. You could look at three. Will the numbers change? Of course, we say 60% of our growth comes from products launched in the last five years. If you narrow it down to three it will be a different proportion.

But the point we’re trying to illustrate is that innovation remains a key driver of growth in our business. So in terms of what do the numbers say just to highlight again what I said in my remarks, over the period 2017 to 2022, on average, we launched 18 products. Now again, the number of products is one thing. It’s about the revenue that each one contributes. And of course, you can parse that all different ways. But 18 was roughly the number of new products we launched from that time. We expect in ’23 to launch 25. We have a pretty good view as to what’s going to happen in 2024. Suffice it to say, we expect to maintain that intensity into the future. So that intensity of launches and growth coming from new products, whether you define it as five years or three years, we expect innovation to drive growth.

So the third piece of your question, Hassan, around kind of disaggregating further within each of the franchises. I think I got into it in some detail. But what’s important, again, to go back to orthopaedics is we’ve had some recent innovations come into our back, right, where we haven’t seen the full impact of that yet commercially. So some of the indications that I mentioned on CORI, relatively new. Cementless offering. It’s first of the other launches to come. It’s about a year and some change in terms of it being into our bag. There’s, of course, more to come in that regard. So whether you look at implant technology or you look at what’s coming down the pipe in terms of robotics and robotics enablement in Orthopaedics, we’ve got a lot coming down the pike.