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Smith & Nephew To Acquire Exogen

26 July 1999

Smith & Nephew plc, the worldwide healthcare group, announces a further strengthening of its orthopaedic business, having reached agreement with the Board of Directors of Exogen, Inc. on acquisition terms. Exogen is a leading producer of non-invasive ultrasound devices for accelerated healing of bone fractures. A tender offer on the NASDAQ exchange to acquire all the outstanding share capital of Exogen will be commenced no later than 30 July 1999. The total cost to Smith & Nephew of acquiring the 93.6% of shares not already owned by the company is £40m in cash. Exogen will be integrated with the Orthopaedic business of Smith & Nephew and is expected to be earnings neutral in its next financial year and earnings enhancing thereafter.

Exogen's Business
Exogen, based in the US, designs, develops, manufactures and markets medical devices for the non-invasive treatment of musculoskeletal injury and disease. It is the only company to have received US Food and Drug Administration approval for the marketing of non-invasive stimulation devices for fresh fracture healing. Exogen also has a portfolio of pre-clinical developments, including non-invasive devices for cartilage repair and osteoporosis treatment.
The Orthopaedic business of Smith & Nephew entered into an exclusive agreement with Exogen in August 1998 for the distribution of its ultrasound bone healing devices in the US, with rights to extend this to worldwide distribution, excluding Japan. At the same time, Smith & Nephew acquired its 6.4% share in Exogen.

For the year ending 30 September 1998, Exogen had sales of £7.0m and a pre-tax loss of £4.6m. In the nine months to 30 June 1999, sales were £6.7m, a growth of 36%, and the pre-tax loss reduced to £2.5m. Net assets amounted to £7.7m, of which £6.1m was in cash and short-term investments.

Tender Offer
A tender offer for all of Exogen's outstanding common stock will commence no later than 30 July 1999 and is expected to close in September 1999. The tender offer will be subject to certain government and other approvals, and to Smith & Nephew receiving tendered shares that represent at least a majority of Exogen's outstanding shares on a fully diluted basis, inclusive of Smith & Nephew's existing 6.4% holding. Smith & Nephew will fund the acquisition from its existing cash resources.

Smith & Nephew announced in December 1998 that, as part of the Group's strategy, it would prioritise investment in three business units with strong global prospects, Orthopaedics, Endoscopy and Wound Management. The acquisition of Exogen, with its innovative bone healing technology, will further develop Smith & Nephew's portfolio of next generation orthopaedic products.
Commenting, Smith & Nephew's Chief Executive, Chris O'Donnell said "We have worked closely with Exogen since commencing US distribution of their ultrasound bone healing devices last year. This acquisition will strengthen our Orthopaedic business in this important emerging field".

Exogen's Chief Executive Officer, Patrick McBrayer said "Exogen's proprietary ultrasound and mechanical stress technologies are based on the well established principle that bone growth is stimulated by mechanical force. This advanced technology, combined with Smith & Nephew's worldwide distribution and marketing expertise, will provide a distinctive competitive presence."


Chris O'Donnell Tel: +44 (0) 171 836 7922
Chief Executive
Smith & Nephew plc
Fax: +44 (0) 171 240 1343
Peter Hooley Tel: +44 (0) 171 836 7922
Finance Director
Smith & Nephew plc
Fax: +44 (0) 171 836 0007