Smith & Nephew PLC Innovation in Focus - Virtual Investor Event Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tom Jones - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I had two sort of bigger picture questions really about robotic surgery. The first is regarding the economic aspects of it. I mean, you pointed out quite rightly, I think that there's a significant cost effectiveness, economic argument for the use of robotic surgery in Total Joint Replacement. And I don't switch answers with this question specifically, but broadly speaking, how much of that economics or improved economics do you think will accrue to health care systems more broadly, i.e. the payers? How much do you think will accrue to the hospitals? And how much do you think can accrue to your shareholders? That will be my first question. And I've got sort of a follow-up one on the back of that.

Question: Tom Jones - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : But it's sort of relevant one, I think. Is it -- I mean, if all the benefit just accrues to the hospitals and the payers, then you've kind of put a lot of effort into nothing, to be honest.

Question: Tom Jones - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Perfect. That's very clear. And also, neatly kind of segues into my next question, which was about the issue of closed versus open systems. Now in terms of gaining market share, clearly, it only -- this kind of rationale only works if you have a closed system and everyone has been down that road to start with. I've seen this happen in other industries where companies have used some kind of hardware to try and drive consumable volume. And it works for a while until someone's hardware stops being competitive and they kind of give up and go open source. And then just have a business model that is purely selling the equipment rather than a kind of razor blade model, at which point, the economics for everyone else then start to unravel because nobody wants to buy a system where you can only use one type of implant or consumable, and they're keener to buy something, which has broader applicability and allows you to mix and match consumable providers. So there's no sign of it yet. But my question for you is, do you think there is any risk at all in the foreseeable future that somebody either within Orthopaedics or outside it breaks ranks and launches some kind of open source system that allow surgeons to use whatever implant would do? And if so, how would you respond to that as somebody who currently has a closed system? Would you continue to try and push the same business model or are you open to adopting a different business model as the market potentially shifts in this regard?

Question: Tom Jones - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes. And maybe a sort of follow-up question. I mean, how much differentiation do you think you need to drive somebody like a major Zimmer user of Zimmer implants on to Smith+ Nephew implants with the robotic surgery platform? Because surgeons do tend to be quite wedded to the implants they use. And it's quite a wrench for a facility to invest in a robotic surgery system as well as move all their surgeons over onto a different implant system. So as one of the sort of arguably smaller players in orthopedic implants, to what extent is that a competitive challenge for you in that you finally say, okay, it's an easy sell to add this to your existing customers. But when you're trying to take a big Zimmer or a big Stryker user to invest in their technology, they're not going to invest in your technology if they're only going to use it on a handful of implants every now and again. So the surgeons are going to have to change over, otherwise, again, the economics aren't going to work for the hospital. So does actually being one of the smaller players in the orthopedic surgery market present additional challenges for you? Whereas for -- that might not be the case for somebody the other way around, who's got a much larger market share, and it's maybe a bit easier to keep the surgeons on the existing platform and then just add -- even though maybe an inferior technology adding somebody else's, either MAKO or ROSA, because they get the benefit of being able to tell the patients that they do robotic surgery and surgeons get to play with the lovely whizzy toy. And even though REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.