“We are developing a product which sprays cells on the wound which regenerate
the skin. It’s unbelievable. This is basically treating wounds which would
normally not be treatable.”

These innovations may fail to attract the same level of attention as the
latest breakthroughs in cancer or heart medicine, but they are crucial for
an ageing population in which the growing prevalence of health problems such
as diabetes are making wound management much more complex.

Smith Nephew has been in the wound-care business since it pioneered the
sticky plaster with Elastoplast in 1928 but the company is still best known
for its joint replacements.

Bohuon is swift to point out, however, that hips and knees now only make up a
third of sales – down from a half when he took the helm in 2011. This is no
accident. When he arrived, Smith Nephew’s joints business was suffering in
the wake of the global economic downturn and it still faces falling sales in
the established markets. Bohuon has two major acquisitions under his belt,
both of which eroded the company’s reliance on hips and knees. After
snapping up Healthpoint in 2012, he went about buying the sports-medicine
specialist ArthroCare, announcing the acquisition earlier this year.

He has also spent his three years in charge intensifying Smith Nephew’s
focus on the emerging markets.

Bohuon had spent his entire career in pharmaceuticals until joining Smith
Nephew, a background he says gave him foresight into the issues the medical
tech sector was starting to face.

“It felt like I had arrived on another planet. It was a place I had seen 20
years ago in pharma in terms of market dynamic, and a lack of interest in
emerging markets,” he says.

The drugs industry started turning its attention to the emerging markets as a
source of new growth two decades ago as its first wave of blockbusters
started losing out to cheaper generic competitors – an issue not shared by
medical device companies since their products are more difficult to imitate.

The post-2007 economic slowdown instead provided the trigger for Big Medtech
to look elsewhere for growth. Although the developed economy demographics
ought to have created a fast-growing market for joint replacements and wound
management, the payers in those same countries were tightening their purse
strings.

Smith Nephew had already ventured into a number of emerging markets by the
time Bohuon took charge in 2011, but he was dissatisfied with what he saw.

The company’s premium medical devices were missing out on the most exciting
growth story in the emerging world: the burgeoning middle class.

Smith Nephew had given its managers the task of selling its products into
the so-called “mid-tier” of the emerging markets as well as the richest 1pc
who enjoyed the same spending power as established market customers.

“You can do both when you are schizophrenic. But if you are not it’s
difficult. It’s a very different way of doing business,” he says.

He leaves little doubt over his enthusiasm for the alternative strategy he
developed, leaping up from the table to make use of the flipchart in the
corner of the room to spell it out. The problem was, he explains, that the
price tag attached to Smith Nephew’s products was an order of magnitude
too high for customers in the mid-tier. Simply applying a discount would
erode margins and cannibalise sales to the richest part of the population,
and probably fail to make meaningful headway into the mid-tier since Smith
Nephew products would still be at the expensive end of the scale.

So, Bohuon overhauled the company’s emerging markets operations, separating
premium business from the mid-tier. He went about developing new product
ranges tailored for the middle classes in each of the emerging markets Smith
Nephew operated in, using centralised RD and manufacturing facilities
dedicated to the emerging markets. He also lowered the cost base by trimming
down the added extras that Smith Nephew provides with its premium
products, such as on-hand technicians.

The strategy is starting to pay off. Emerging markets are contributing to half
of Smith Nephew’s revenue growth, and the share of total sales made
outside the company’s established markets has edged up steadily since Bohuon
took charge.

His plan has worked so well he is now mulling something which would have been
unthinkable just a few years ago: using the same approach in Smith
Nephew’s established markets, where price pressures continue to intensify.

He reveals that the company has spent the past few months piloting a “light
touch” alternative in the US, for payers, mainly hospital administrators,
who are unwilling to shell out for Smith Nephew’s premium package.
Hospitals using Smith Nephew products typically get a start-to-finish
service, with the company managing the supply chain, providing the operating
equipment and sending a company technician to attend the procedure. The “no
frills” approach will provide the same device without the added extras.

The plan has been brewing for 18 months. A few weeks ago the company launched
its pilot. If successful, Bohuon plans to bring the model to Europe.

The Smith Nephew boss is clearly pleased with the progress he has made so
far, but he is far from complacent. “We all have a duty to innovate, it is
not the private property of RD.

“Business models, the way you look at a customer, the way you look at your
business. We can all innovate. It is a philosophy of the company,” he says.

It doesn’t sound like this reconstructive surgeon will be putting his tools
down any time soon.