Smith & Nephew plc (SNN) recently unveiled a strategic partnership between its Advanced Wound Management (AWM) franchise and United Drug Medical. This new partnership, effective Jun 1, 2013, will promote Smith & Nephew’s IV3000 range of cannula dressings in the UK.
As per the partnership, United Drug Medical will be liable for sales, customer service and distribution of IV3000 in the UK. We believe that the partnership will strengthen Smith & Nephew’s sales and distribution network for the post operative dressing IV3000 brand in the country.
Additionally, IV3000 clientele will gain access to higher level of support and resources. The company will stress on in-use training and education for the product line. Besides, Smith & Nephew plans to unveil product development initiatives in the near-term on the back of the strategic partnership. This new deal extends the long-standing association between the companies.
We are encouraged by Smith & Nephew’s consistent focus on AWM franchise. Based on the company’s efforts, the AWM business growth surpassed the market growth rate in the in the most recent quarter. AWM franchise rose 12% against market growth of 2% in the first quarter of 2013.
Further, advanced wound care (includes the IV3000 range) under the AWM business grew at par with the market growth rate. The upside was led by solid results from the emerging and international market.
Even in 2012, IV300 range posted solid performance as it gained traction in emerging and international market on the back of product training and education. Thus, the partnership with United Drug Medical should yield positive outcomes in the upcoming quarters.
Although Smith & Nephew’s increasing focus on the AWM franchise is paying off, the sustained weakness in the orthopedic reconstruction business is a cause of concern. Nonetheless, we are encouraged to note the gradual stability in the U.S. market, though the challenging scenario in Europe continues to be an overhang.
Currently, the stock carries a Zacks Rank #3 (Hold). While we remain on the sidelines for Smith & Nephew, we are more positive about other medical stocks such as Haemonetics Corporation (HAE), Myriad Genetics Inc. (MYGN) and Natus Medical Inc. (BABY). These stocks carry a Zacks Rank #1 (Strong Buy).
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