Smith & Nephew (FTSE:SN, NYSE:SNN) CEO Olivier Bohoun is bullish on the prospects for the company’s Syncera pilot program, which replaces sales reps with an automated system, to become a growth driver in the years to come.
How much of a driver Bohoun thinks the "no-frills" approach to selling orthopedic reconstruction equipment will be, however, he’s keeping to himself for now.
During a conference call with analysts today discussing Smith & Nephew’s 4th-quarter earnings, Bohoun repeatedly touted the Syncera pilot as "disruptive" to the orthopedics business model, but said the company isn’t releasing any numbers on it until the middle of this year.
"We are kind of pre-launch-phase, and we have signed a number of 3-year contracts, and we expect to see new prospects. Is it meaningful? No, but it will start to have a meaningful contribution," Bohuon said. "You will have Syncera complete feedback in the half year … much more on the inside, in terms of numbers.”
Syncera aims to cut implant prices in half by removing sales representatives from the operating room and replacing them with an automated technology solution. The company launched Syncera last summer in the U.S. as part of a pilot program aimed at cutting hip and knee replacement device prices by 40% to 50%. At the time, company officials estimated the target market for Syncera at 5% to 10% of U.S. hospitals.
Bohuon told investors at the J.P. Morgan Healthcare Conference last month that the company is very satisfied with the results from the Syncera pilot and plans to expand the system into Australia, New Zealand and parts of the European Union. In San Francisco, Bohuon called the program "disruptive of the commercial model," noting that Smith & Nephew is seeing profit margins "equivalent with the classic old-style business."
Hospitals performing 700 procedures a year with the Syncera system will save an average of about $4 million in cash over 3 years, he said.
Today Bohoun told investors that the Syncera program fits within the framework of his beliefs about the need to be disruptive when it comes to the orthopedics market.
"I believe that the only way to be successful today is bringing disruptive products," he said. "It’s easier to be disruptive and essential to be disruptive when you are a small player. I’m not sure I would have been disruptive in recon if we had a 40% share."
However, he added, with an 11% share the company couldn’t afford not think about being disruptive.
Although the Syncera program certainly has sales reps and industry observers on the edge of their seats, Stryker (NYSE:SYK) CEO Kevin Lobo expressed skepticism about such so-called "repless" or generic sales models for orthopedic procedures. Lobo, also speaking at the J.P. Morgan confab, said he’s aware of programs like Syncera but doesn’t see them as a credible threat.
“I look at a generic model very skeptically, regardless of which company is offering it,” Lobo said. “Until these procedures are de-skilled it’s very hard to imagine [not having] the sales force and the services that we provide in the hospitals. If you don’t have that, the operating rooms just don’t flow effectively and efficiently. I don’t know when they launched theirs initially, but we are not seeing it in any meaningful way in the market.”
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