(Reuters) — The chief executive of Smith & Nephew (FTSE:SN, NYSE:SNN), the medical device maker that has been the subject of persistent takeover rumors, yesterday said mergers designed to gain size do not change market share dynamics in the hip and knee replacement business.
"I am not a fan of the concept ‘big is beautiful,’" said Olivier Bohuon, speaking at an annual JP Morgan healthcare conference in San Francisco.
Rumors that competitor Stryker (NYSE:SYK) is planning an imminent bid for Smith & Nephew, Europe’s largest maker of artificial joints, resurfaced late last year. A wave of mergers has swept the reconstructive joint market, but Smith & Nephew is not joining in, Bohuon said.
"We have not decided to follow this path," he said.
Analysts at UBS said Smith & Nephew could fetch as much as £13 per share from Stryker; the stock was trading at £YY in mid-morning trading today.
"As we have argued previously we see a chance that Stryker makes a bid for Smith & Nephew, based on historic multiples including Zimmer-Biomet, at a price of £13 or more," the analysts wrote. "We have also examined, in depth, the possibility of a 3-way deal with Coloplast (CPH:COLO B) amongst the bidders for the wound care business."
Although he declined to comment directly on the Stryker rumors, the Smith & Nephew CEO said market share in the hip and knee industry has remained stable for the past decade. At the same time, prices are eroding 3% to 4% a year because artificial joints have become a low-growth, commoditized business, he said.
Patients are generally satisfied with their joint replacements, especially those who receive hip implants, he noted. So there isn’t much innovation occurring in the industry, he said.
"Rather than reinventing the hip," Smith & Nephew is looking to rebalance its product portfolio to focus on higher-growth areas such as sports medicine and wound care, Bohuon said.
"For me, what matters is the ability of a company to bring to the market disruptive products. You don’t have to be big to do that," he said.
Smith & Nephew remains interested in doing "bolt-on" acquisitions, particularly deals that would help the company grow in emerging markets, he added.