Smith & Nephew Impresses with Data

International medical technology major Smith & Nephew plc ( SNN - Snapshot Report ) recently revealed clinical data from two independent studies. The objective was to evaluate the efficacy of PICO Negative Pressure Wound Therapy System (PICO) in preventing surgical site infections (SSI) after a Caesarean section.

One of the studies presented by Tacoma, Washington-based MultiCare Health System demonstrated favorable outcomes from new post-operative strategy introduced this month to manage C-sections. The use of PICO in high-risk patients also showed impressive results. The outcomes implied an 83% reduction in SSI, underlying a probability of 0.5 or six in 1,200 to record SSI in patients.

Another study, which enrolled 50 high-risk patients, also presented encouraging data. These patients, prone to contracting an infection post C-section on account of clinical obesity, reported no infections and zero readmission.

According to a study by Jeanette Harris – an Infection Preventionist, post-operative SSI in patients might lead to re-admission for seven patient days at a cost of approximately $50,000. Thus, the clinical studies demonstrate a significant reduction in post-operative SSI, resulting in improved standards of care and lower healthcare cost.

The data presented by Smith & Nephew is encouraging and demonstrates further favorable safety and efficacious clinical superiority of PICO. We are especially encouraged by the clinical benefits of PICO in high-risk patients.

Neutral on Smith & Nephew

Notably, the company is increasing focus on the Advanced Wound Management franchise, away from a congested orthopedic space. However, the international market for advanced wound management remains highly fragmented with Smith & Nephew enjoying 18% market share in 2011 on a worldwide basis.

We believe that the company’s market share is likely to increase on the back of the recent acquisition of Healthpoint Biotherapeutics. Further, Smith & Nephew expects to achieve above-market growth in Advanced Wound Management in the upcoming quarters.

However, challenging conditions in established markets and lukewarm demand in the orthopedic market remain. This is on account of deferred elective procedures and is expected to weigh on the company’s performance. We currently have a long-term Neutral recommendation on the stock which carries a Zacks Rank #3 (Hold). One of its peers in the orthopedic market, Zimmer Holdings Inc. ( ZMH - Analyst Report ) , carries a Zacks Rank #2 (Buy).