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Smith & Nephew Endoscopy acquires privately held Osteobiologics, Inc.

11 July 2006

Provides the only off-the-shelf bioabsorbable implant for articular cartilage repair on the market in Europe

ANDOVER, Mass., JULY 11, 2006 - Smith & Nephew's (NYSE:SNN; LSE: SN) Endoscopy division, the global leader in arthroscopic surgery, announced today its acquisition of privately-held, San Antonio-based OsteoBiologics, Inc. (OBI).

OBI markets innovative bioabsorbable bone graft substitutes (BGS) in Europe to repair cartilage defects in the knee, and offers the TruFitTM BGS Plugs in the U.S. as a bone void filler. OBI's products are an exciting addition to Smith & Nephew's existing comprehensive arthroscopy portfolio and will be sold through Smith & Nephew Endoscopy's global selling force.

"We're extremely pleased to welcome OBI and their employees to the Smith & Nephew family," commented Mike Frazzette, president, Smith & Nephew Endoscopy. "Their proprietary technology will allow us to provide even more choices to surgeons when it comes to treating injuries within the joint." Smith & Nephew has agreed to pay a net consideration of $72.3m in cash for OBI, whose 2005 sales revenues were $3.3 million. The acquisition is expected to reduce earnings by $7m in the second half of 2006 and be broadly neutral in 2007.

OBI's primary product marketed in Europe, TruFitTM CB is a one-step arthroscopic procedure for repairing bone and articular cartilage defects. Cartilage is a protective covering of the articular surfaces of bones that reduces friction and provides flexibility within the joint. Cartilage defects are often a result of traumatic injury or degenerative conditions and are often found in conjunction with meniscal tears or ACL injuries. There is strong evidence that articular cartilage defects can lead to osteoarthritis.

Currently, less than 20 percent of cartilage defects in the knee are treated due to the lack of an efficacious and patient-friendly solution.

"Efficacious repair of articular cartilage defects represents a significant unmet need of sports medicine surgeons," said Joe Darling, VP, Marketing, Smith & Nephew Endoscopy. "The availability of OBI's simple-to-use TruFitTM CB will allow these defects to be treated before they lead to additional damage within the joint.

In addition, OBI is a powerful complement to our comprehensive knee repair product offering and further strengthens our industry-leading arthroscopy portfolio."

The TruFit implants are manufactured with poly (D,L-lactide-co-glycolide) polymer, formed into a bi-layered cylindrical scaffold that is absorbed by the body within six to nine months.

About us

Smith & Nephew is a global medical technology business, specialising in Orthopaedic Reconstruction, Orthopaedic Trauma and Clinical Therapies, Endoscopy and Advanced Wound Management products. Smith & Nephew is a global leader in arthroscopy and advanced wound management and is one of the leading global orthopaedic companies.

Smith & Nephew is dedicated to helping improve people's lives. The company prides itself on the strength of its relationships with its surgeons and professional healthcare customers, with whom its name is synonymous with high standards of performance, innovation and trust. The company has over 8,500 employees and operates in 33 countries around the world generating annual sales of $2.6 billion.


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Contact

Joe Metzger
Smith & Nephew Endoscopy