Health Devices Company Quizzes Sales Methods at Plus Orthopaedics; MEDICAL

Article excerpt

An internal probe by Smith & Nephew has turned up "unacceptable" sales practices at a newly-acquired business and yesterday the company warned the problems would hit sales and profits in 2008.

Shares of Europe's biggest medical device maker, which has an operation in Birmingham, dropped nearly seven per cent following news the company had hired outside legal and accounting experts to look into a Plus Orthopaedics, the Swiss company it bought last year for nearly pounds 500 million.

Smith & Nephew said the problems were mainly in Greece and forecast a resulting drop in 2008 sales and profits by about pounds 50 million and pounds 12.5 million, respectively.

Weak margins in the wound management business related to new products in the United States and 11 per cent growth in its key US hip replacement business was below analyst expectations of 16 per cent growth.

"This has caught everybody on the blindside," said Charles Weston, an analyst at NomuraCode Research. "Most people would have expected them to find any sales issues like this quite quickly."

Smith & Nephew, which reported higher adjusted quarterly per share earnings, said it took quick action and nearly shut down its Plus business in Greece. …