UBS casts doubt on Smith & Nephew's orthopaedic footprint
Smith & Nephew
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16:35 25/04/24
A survey of surgeons by UBS has indicated that Smith & Nephew's share of the orthopaedic surgical robots market will not be as big as first thought, leading to analysts downgrading their rating on the shares.
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UBS, which cut its rating to 'neutral' from 'buy' and its target price to 1,340p from 1,470p, said its underlying market view remained that adoption of surgical robots will be "widespread in orthopaedics".
"However we now believe our initial assumption of S&N's share of the market was too positive," analysts said, having revised their survey of surgeons and found respondents were "less aware of, and less likely to purchase" S&N's Navio than expected.
Only 4% of surgeons cited robotics as a driver for S&N share gains.
"Given the upcoming launch from competitor Zimmer Biomet and no visible acceleration in S&N knee growth one year after launch, we downgrade to Neutral. Upside opportunity remains clear, base case growth assumptions moderated.
While UBS is less positive than previously, analysts still see potential in the product and believe Navio should help drive knee growth of around 150bps above the market to 2022 and see a potential upside scenario in where the product delivers high single digit growth in knee implants, driving at least 4% of group sales growth and around 200bps of margin expansion, though there is also a risk that the hip and knee market slowdown from 3-4% before 2016 to 0-2% in 2018 "is structural".
"Following our discussions with industry experts, we also see some risk of a slowdown in wound market due to increased competitive intensity."