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Good morning, everyone, and welcome to those joining on the webcast. I'm Emily Heaven, Head of Investor Relations, and it's a pleasure to have you with us for our expert surgeon Insights event. We have a strong lineup this morning, including presentations from 5 renowned surgeons. During the breaks, I'd encourage you to visit our product fair next door, and there'll be a light lunch for those able to stay after. And now let me hand over to our CEO, Deepak Nath.

Thank you, Emily. Let me add my warm welcome to you all. So it's great to have you with us in London as we mark our 17th year as a company to showcase our innovation that's driving better patient outcomes and ultimately supporting our growth. So you'll hear from leaders across our business, demonstrating the strength of our portfolio and importantly, from surgeons themselves, the people using our products every day about what truly differentiates our offerings in practice.

As many of you know, our RISE strategy to accelerate growth and improve returns is focused on 4 priorities. First, Reach and that's about reaching more patients by driving adoption of our differentiated portfolio across indications, settings and geographies. Second, it's about Innovate, is advancing the standard of care through a strong cadence of new product launches and scaling our key platforms. The third is Scale, which is prioritizing our investment into our highest growth and highest return opportunities. And finally, Execute efficiently, and that's about driving productivity and asset efficiency across the group, particularly in orthopedics to expand our margins and improve returns. So together, these priorities underpin our ambition to deliver 6% to 7% organic revenue growth and 9% to 10% trading profit growth over the next 3 years. Now through continued strong cash generation, we expect to reach over $1 billion in free cash flow by 2028 and ROIC of 12% to 13%, which is comfortably above our cost of capital by 2028.

So today's session focuses on Innovation, the second of our 4 pillars. And in that we showcase how we're stepping up R&D investment in sports and wound while maintaining a robust front-loaded pipeline across the group, including in orthopedics. Over the last 3 years, we've successfully launched 44 products, largely on time and within budget and we plan to increase launch cadence going forward with 14 new products in '24, 15 and '25 and expanded 16 in 2026. We're also building on our 2 major scalable technology platforms, MTEC, which is -- where we just launched our next-generation leaf monitor for pressure injury prevention and wound and we'll be launching TESSA and Lumos in Sports Medicine, and you'll hear more about that later today. We also have a rapidly evolving robotic platform to drive procedure innovation across all major joints in orthopedics.

The second of our innovation platforms is in biologics and we'll build on our leadership with innovations like [indiscernible] , very creatively name, which is our next generation of regain. So with that, let's now look at some of our most exciting growth opportunities, starting with Cathy, Cathy Dalene, who'll talk to you about unlocking the value in management. So Cathy, would you come up?

Thank you, Deepak. So good morning, everyone. My name is Cathy Dalene, and I lead Global Strategic Marketing for the Wind division. At our Capital Markets Day last year, we spoke about 5 large market opportunities that we are focused on. I'm excited to share greater detail of 2 of these opportunities and our innovative solutions to address those that will unlock further value for our business. Both opportunities create new markets by preventing wounds from occurring by reducing the risk of pressure injury or reducing the risk of surgical site complications.

Today, pressure injuries are one of the most burdensome conditions in wound care, and it's impacting around 2.5 million patients in the U.S. each year alone. These injuries prolong length of stay by 9 days, and they take over 40% of nurse time, which leads to $27 billion financial burden on the U.S. health care system. We have 2 products to help prevent pressure injuries. The first is LEAF a unique fast-growing patient monitoring system, which has been shown to reduce the risk of pressure injuries by 94%. And the second is ALLEVYN Complete Care. We have recently launched in the U.S., and we are launching this quarter in Europe. ALLEVYN Complete Care is addressing with 51% better exudate management than the market leader. It also has 4x more flexible and has a unique share defense mode of action because it is the only dressing of its kind that has nonbonded layers. This feature means it has 55% greater ability to absorb friction and share.

We are excited about the opportunity to accelerate growth with ALLEVYN Complete Care. The global wound KOLs were part of the prelaunch and very early on, we had feedback from each of them highlighting key benefits of the new design. Dr. Kevin Woo recognized the impact of the High Flex design, making the dressing contour better to the patient's anatomies. Wound Ostomy and Continence nurse, Catherine Milne observed the impact of the change indicator leading to less dressing changes. And last but not least, Dr. Alicia Smith saw less friction and sheer translate to the skin of the patients that she was preventing pressure injuries. Moving now to another key opportunity in Wound Care, surgical site complications. This is an area where we are uniquely positioned to set a new standard of care that will truly help improve patient outcomes. Surgical site complications are a significant underserved problem. Complications can be devastating for patients and a huge financial burden on the health care systems.

There are 2 known factors that increase the risk of surgical site complications. The first is patient factors like BMI or other comorbidities. The second is the procedure-related factors such as time in the for example, emergency procedures. Surgical site infections are the most common complication of surgery with an incidence rate of over 5%. One infection alone can cost over $20,000. We have 2 main solutions to help reduce surgical site complications. The first one is ALLEVYN AG+Surgical. [indiscernible] ALLEVYN Ag plus Surgical last year, featuring a faster and more sustained antimicrobial action than leading competitors. It has a superior reduction of the bioburden and it has superior year pad extensibility. Finally, the dressing can manage 2.5x more liquid than the market leader. With PICO, we are committed to transforming the standard of care for surgical site complications across key specialties like orthopedics, OB/GYN, cardiothoracic, general surgery and plastics. These high-volume procedures represent a significantly underpenetrated opportunity to reduce complications and truly improve outcomes.

Today, single-use negative pressure only represents about 20% of the potential $1.7 billion addressable market opportunity. PICO is our first ever portable single-use negative pressure wound therapy device. PICO protects the incision site, simulates the biological healing process in the surrounding tissues and increases lymphatic drainage, reducing the incidence of infections and other complications. It was launched in 2011, and we have continued to evolve the product ever since. In 2014, we launched a soft port, and we continued our innovation cycle in the following years with PICO 7Y and PICO 14. In 2018, Professor Kisner at the University of Miami published a key study proving the efficacy of PICO in open wounds, extending the indication range. In 2020, we reached an impressive milestone of 1 million units of PICO sold since launch, making it one of the fastest-growing brands across all of Smith & Nephew. And we have consistently delivered double-digit growth over the last decade. I firmly believe we can maintain, if not accelerate with the right investment and focused execution. With PICO, we can reduce the incidence of surgical site complications by up to 63%, and we can reduce the average length of stay by 1.75 days.

In short, the benefit to the patient outcomes and the financial savings to the system are significant. Through our consistent investment in PICO, we have secured over 200 patents on both the pump and the dressing design, which together deliver a unique mode of action to stimulate the biological healing process. We have over 310 studies, 60 of which are RCT Level 1 studies, the highest quality and the most reliable evidence that you can get. The ultimate proof is the meta-analysis published in the Lancet, one of the world's most respected medical journals, which confirms again the effectiveness of PICO. Last but not least, we have guidance from the National Institute of Clinical Excellence or NICE, here in the U.K., which recommends the use of PICO to reduce surgical site infections.

NICE is a U.K. public body that validates both the clinical and the cost effectiveness of medical technologies, and it provides a strong endorsement for our product. In conclusion, the RISE strategy for PICO is set, and we will significantly expand the number of patients we can reach. We will accelerate innovation for PICO through our strong coming pipeline and we will build our leadership in single-use negative pressure wound therapy, and we will scale even further. At the same time, we're investing in top talent to strengthen our selling capabilities in the OR and to drive more effective execution. The unmet need and the market opportunity is clear, our strategy is set, and I am confident that we have the right product and the right team to accelerate and to deliver on our ambition.

Now it is my pleasure to introduce our next speaker. Dr. Ravi Bashyal, Director of outpatient hip and knee replacement surgery at Endeavor Health in Chicago. He is the Medical Director and Chief hip and knee replacement consultant for the National Basketball retired Players Association. He holds an academic appointment as clinical assistant professor of Orthopedic Surgery at the University of Chicago Pritzker School of Medicine. In this practice, he specializes in robotic minimally invasive hip and knee replacement and is performing approximately 600 ultra-minimally invasive total hip and knee replacements every year. while still actively participating in clinical research and education. He has published extensively on reducing surgical site complications and infections. So please join me in welcoming Dr. Ravi Bashyal.

Thank you, Cathy, and good morning to all of you. Really a great pleasure to join all of you this morning. I'm here to talk to you about what I call Destination Zero. You heard in Cathy's talk that the chance of developing a surgical site infection across all surgeries is about 5% and within hips and knees, if we look at the OUS forward-facing patient website, it tells patients they have about a 1% to 2% chance of developing an infection after their hip or knee replacement. And I always say to myself, I got on a plane to get here from Chicago yesterday, if there was a 1% or 2% chance that something really bad is going to happen on that flight, I would be doing this virtually okay?

And so Destination Zero is about really bringing that same mindset to orthopedic surgery and to surgery in general. Aviation has a spectacular track record of safety. And there's no reason that with a little bit of focus and thought we can't aim for better in orthopedics. Specifically, my practice is hip and knee replacement. And so many of the things that you will hear from me are in that context. But please understand that these are applicable across other specialties as well. So I do about 600 hips and knees every year, as Cathy mentioned, I use PICO on every single one. The question is how and why did I get there? It's not because I was going to have an opportunity to speak to all of you. I've been doing this for some time now. And it is because of this journey to try to get to 0. My #1 fear as a hip and knee replacement surgeon in my practice is infection It is devastating. And we'll talk about why and how, but it's horrible. My #2 fear, persistent infection. That's an infection that we try to treat, but it doesn't go away. And that happens more commonly than you might think. And then my #3 fear is an SSC that's not infected yet.

So an SSC is a surgical site complication. These are simple things that may not seem like a big deal, a little bit of drainage in a wound, hematoma, a seroma, a collection of fluid, but left untreated, those can then follow a cascade and end up as that devastating complication, surgical site infection. So why? Why is this such a big deal? Why is this such a problem? It's because there's a huge patient impact when a hip or knee replacement patient develops an infection both for the patient, but also for the system. So there's a cost element. And I use that word intentionally. There's a financial cost but there's also a human cost. Here's some sobering data. As we've mentioned, about 10% of patients will develop some sort of SSC after surgery. And I always say that they sign a consent form. When somebody comes to see me, they say, "Yes, I can have a heart attack. I [indiscernible] a stroke. I can die. " But when they come to me for an outpatient total joint replacement, they're thinking about their friend who sent them to me who was playing golf in 3 weeks. They're not really signing up for that cascade, okay, even though the consent form says. And here's some sobering data.

If you look at a survivorship curve, and this is what you usually see when people are talking about cancer, periprosthetic joint infection or [indiscernible] is on that list. You have a better chance of surviving some prostate melanoma and breast cancers then you do a periprosthetic joint infection. It is not an ear infection where you just take some antibiotics, you go home and you're okay, it's a big deal. And it's also a big deal from a cost standpoint. So what you can see here is that cascade that I was talking about. [indiscernible] of patients may develop some sort of SSC. If that's not treated, they go on to some further wound complication, perhaps surgical site dehiscence. And if that doesn't get treated, you can develop a surgical site infection. And this is, again, not just damaging to the patient, it's damaging to the system. We cannot afford to be paying $53,000 for every infected hip and $41,000 for every total knee. Now we need to do that in order to take care of the patient, but that's not sustainable. And I'll show you some numbers that demonstrate that.

In 2024, we had 1.8 million total hip and knee replacements. The estimated cost to treat those infections in 2025, $3.3 billion. Assuming no inflation, no increase in cost, but just an increase in the volume of procedures, which we very clearly see is what's going on. That cost is going to be $5.6 billion in 2030. And if we look at health care across the world in the United States, I don't think that anybody is prepared to give us $2.3 billion to treat complications in 5 years. It's not there. And that's what's really interesting about this. We're going to talk about the clinical data and why this is better for patients. But we have this confluence where what's better for the patient is actually better for the system financially. And oftentimes, those 2 things are at odds. We want to do the right thing, but the right thing sometimes cost more, so we have to figure out how and when to implement it. This is a confluence we're doing the right thing and the best thing for the patient, decreasing their chances of having a detour on their journey is actually cost effective in cost savings, and we'll show some numbers around that.

But why are these things so expensive? You might say, "Doc, my kid had a [indiscernible] infection. We went to the doctor, we took some piles better. How can that cost $5.6 billion? It's because surgical site infections and hip and knee replacement cannot be treated medically. You can't just take a pill. It requires an operation. If you have a deep infection by definition, you are having a second surgery at least, okay? When you do this, you have to change out the parts. And it's simplest form, you're just changing out one part, but the more complicated it becomes, the more persistent it becomes, the more parts you have to change. And the new parts are more expensive than the primary part. So this cost starts to go up. There's additional costs that we don't think about routinely if somebody has an infected hip or knee replacement, they go home with this called a PIC line, which is a permanent IV and 6 weeks of IV antibiotics that's administered by home health. That is also extremely costly, okay? So there's all these downstream costs that occur.

And oftentimes, that -- I just gave you the best case scenario, 1 wash out, 1 quick change of components, 6 weeks of antibiotics. When you have an infection, your chance of getting a recurrent infection is dramatically higher than your primary infection rate. So now we're talking about surgeries that have might have a 10% or 20% failure rate, meaning that patient stays persistently affected. If we think about meetings like this, one or talks that my colleagues and I go to, we, in Arthroplasty hip and knee replacement love talking about technology, the newest implant, the newest robot because those things are really sexy to us. That's what we're about. We really want to put in the best of the best. And when we think about the wound, it's just remained secondary. And part of that is because we just haven't paid attention to it. We said, that's the cost of doing business. And it turns out that with some really simple interventions, it's not. And I can use the best Smith & Nephew implant with the best robot, which you're going to hear about and we have that Smith & Nephew has rather. But if that wound becomes infected, if that patient has that devastating complication, none of that matters. It all goes out the window, and we're in rescue mode. We're like, let's save this guy's leg. And that's really sobering.

And so as I said, there's been the status quo of Hey, we're surgeons. We're going to get infections. If 1% to 2% is the quoted rate and I'm doing 0.5%, I'm doing pretty good. I don't need to worry about that. But if you're told that 1% to 2% is the baseline, and you're at 0.5%, you feel like you're doing pretty good. You don't need to target anything lower. And that's what Destination 0 is about. We need to target 0 because if we don't, we're not going to get any better from where we are. And if we look at the rest of Orthopedics and how that's evolved over the past 20 or 30 years, it's incredible. If we look at infection rates, they're essentially the same as they were 20 or 30 years ago. And that's just not acceptable, especially now that we know with the data that about 60% of SSCs are preventable when you use negative pressure and that we simply just cannot afford this burden from a financial standpoint any longer.

So my own journey and evolution on this was that, hey, as I said, there's a quoted 1% to 2% infection rate at about 0.5%. I'm doing great. I'm a leader. I'm the best infection guy or low infection guy in my hospital. That mindset has to change. And that's sort of what my academic work has been focused on is the prophylactic prevention of these infections. A lot of attention gets paid on how to treat these infections once they occur, which is critically important. We do need to take care of those folks, but how about stopping it from happening in the first place? In my own practice, we've had this nice 4-year window now where I'm at 0 and my colleagues always say, don't say don't say it. you're going o get one when you get home. But I'm okay saying it because it's true. We've published it, and it's been a game changer. When you have a 0.5% infection rate and you're doing 600 cases a year, that's 3 people a year. When you have a 0% infection rate, it's 0 a year. And that change has been transformational for my practice and sort of my thought practice around it. We know we can do better than the status quo. We have to aim for 0 and we must do everything we can to manage outcomes and costs.

We care about our patients primarily and most importantly, but we live in an environment where we have to be cost conscious. So if I'm going to invest in a technology, it has to have an output that's going to be responsible. And that's what this is about. So how does this work? So these are just some examples. PICO is a very simple dressing. It's not complicated. You don't have to go to a course to learn how to use it. You just put it on the wound and it does well. This is one of my outpatient knees who's in his 80s, and he's got a nice looking scar. But not only is the star really nice looking what's going on underneath is great. There's increased perfusion, decreased lymphedema, decrease inflammation. This patient is able to get back to his life more quickly, okay? In medicine, we are driven by research, right? So we say evidence-based medicine is how we make our best choices. I won't belabor the point. But if you believe in evidence-based medicine, you have to believe that using negative pressure on a closed incision decreases the risk of that incision having a complication. That's not under debate or refute anymore. There's a pyramid of evidence that has demonstrated in this. So we can certainly go into detail on that, but it's there. And most people have accepted this.

The real question is implementation, where and how do I utilize this technology because there's a cost associated with. There's some arthroplasty data specific that shows its effect in hip and knee replacements. And then here's my data. This was looking at our run of patients. This is the one -- we have 1-year follow-up. This is at 2 years. We presented this at the hip society. And again, we're seeing a 0% infection rate, statistically significant. So as I said, we've had this 4-year window from December 1, 2021 to December 2025, and where we have had a 0% rate of infection. Now admittedly, that last group were still doing the 1-year follow-up, but they're doing fine. And that 0 having -- being able to say that and being able to publish that has really been enabled because of PICO. And that's why I use it on all of my patients. I don't think that every single surgical patient in the world requires negative pressure. But I think that every single practice, every doctor has some -- every surgeon has some patient in their practice that would benefit from negative pressure. And to Cathy's earlier point, that's what we're missing. It's underutilized. There are some people that don't know much about this, that aren't using it in their practice.

And so the available amount of folks that we have that are undertreated is massive, and that's really what we're targeting. And if we look at this, we know that every surgical practice has some opportunity to increase their usage of this. And as the data is coming out, that is what's happening and evolving. So the bottom line here is that we know that surgical site complications are costly. And again, I use that word intentionally to patients, providers and systems. We know that some SSDs are preventable. So we have a problem. We have a piece of technology that we know fixes that problem. And we know that there is clear data to show us that this technology decreases the rate of the complication that we're most fearful of getting. I'm going to share a quick patient story with you and then we'll move on to the Q&A. This is the patient that changed my practice from, hey, I'll use it sometimes when I think somebody has high risk, I'll try to guess to see where I need to put this device on.

Jazz was medically a 54-year-old active male with severe right e arthritis, no significant past medical history. I'm going to do my outpatient minimally invasive, total knee on. So from a medical standpoint, this guy is the lowest risk he doesn't need anything he's going to do great. odds are. He's going to do really, really well. I don't need to do anything special for him. But who is he really? So he was a former NBA basketball player that was sent to me by his former teammate that I did a successful knee on. He's now a business leader. He's a C-suite guy. He's running around traveling. He loves playing sports with his 3 kids. He's a coach. He's a golfer. And he's healthy enough for an outpatient total knee. He wants to have what his friend have. He signed that same consent for him, but he wants what his friends had. Get home the same day, play off in a few weeks back to his life. This was not a revision case. This patient is not more [indiscernible] obese. He doesn't have any major risk factors, but that doesn't mean the consequence of his failure is any lower than somebody that does have those risk factors, right, particularly within the hip and knee replacement world.

So what he came for was this, right? This great little package that I can offer everybody. Here's what happened. He had early wound drainage and I said, "Oh, we got to look at this. He comes in to prove infection in the hip or knee, you got to take fluid out of it. So I ask Brad, it is me, -- sure enough. You had an infection. So we had to go to the operating room. This was early, so I just washed it out and changed out the plastic. So he gets to IV antibiotics, get this pick line. The cultures came back positive for MRSA, all right? So he gets pick line IV antibiotics. We watched it out. We're hoping for the best. It comes off the antibiotics, still has an infection. Now we have to go in and put in what's called a spacer and that's no fun to have. It's a temporary knee replacement you're supposed to live with for 2 or 3 months. We come back, still infected. Okay, which can happen with MRI say, he gets another spacer, and all the while on IV antibiotics. And he's not doing any of those things that I told you to find who he was. He's just trying to cope with his knee sitting at home with IV antibiotics with a space here need.

We did finally eradicate this infection and about 1.5 years later, you got a revision knee replacement. As I said, that's not what he signed up for. legally, he said that he knows that those things could happen, but that's not what he wanted. I like the term high consequence. Instead of risk stratification, I consequence stratify my patients. And every single primary hip and knee replacement that we do is high consequence. We cannot afford for that patient to get an infection, financially or from an outcome standpoint. So again, is routine pathway, that's what we're aiming for, but that's what we got instead. And along with that, came increasing cost. And so the dressing that I use, PICO, was slightly more expensive than a standard dressing. But that wasn't the expensive part. Him having this complication was the expensive part. And there's more and more data showing us that's going to be forthcoming that demonstrates that this case is proven out on an economic standpoint as well. So this is his life for 1.5 years. None of you would want to get on that airplane.

So as I said, it's not the dressing, that's the expensive part. The human and financial cost is what's expensive here. For me, all elective total joint replacements are high consequence. And to answer that question that I asked at the beginning, that's why I use it on every patient. He wasn't supposed to get an infection, but he still did. So if I just risk stratified my cost, all that stuff, I would have still paid that price for him. He would have still paid the price. And in this case, he did. But for 4 years, I haven't had to pay that price in neither of my patients. And to me, that's really been practice changing. Thanks for your time, and I think we're going to take some questions.

Perfect. Yes.

[indiscernible] Snatkin, Deutsche. Just you mentioned you're obviously using on every case. So clearly, you're a believer in sort of implying that others could do more. Just wondering what is the sort of #1 sort of factor preventing broader adoption? And then two, how do you sort of -- what do you think differentiates PICO from sort of other systems?

Yes. Great question, and I'll try to answer it briefly. There's a few things that are packed in there. What is preventing broader adoption I think some of it is a lack of awareness of how simple and easy this is to use. I think that surgeons in general are focused on the operation, the implant, the technology and this has fallen a little bit by the wayside. And so through medical education, we're attempting to improve and grow that. And as I said, I think that there is some sense of, hey, this is the cost of doing business. We can't do any better.

And the data is showing us more and more than we can. And this is where the cost is actually going to drive. So if a surgeon says that, he has a 1% infection rate and he's doing fine. At some point, the system is going to say, we can no longer afford this, and we need to move it that way. So I really do believe that in the next couple of years, the finances are going to push that awareness and adoption, even though we're working on that medical education standpoint.

In terms of why it's different than competitive products, and this is critically important. PICO is set at negative 80 millimeters of mercury as a pressure setting. All of the data that I kind of went through quickly, all the clinical benefits that we've seen, including increased perfusion, decreased edema, decreased inflammation, these are all studies that are done at minus 80%, more or less this is not necessarily going to have the same effect. So until other products can prove that they can do that, PICO is still the leader in this space. And I always encourage surgeons to look closely at the data just because it looks like a PICO or sounds like a PICO, doesn't mean it's a PICO.

Yes. Thank you. I think we had one, yes.

David Adlington, JPMorgan. I just wondered how the number of SSIs have trended over time as it so up down sideways. And what are your thoughts on the impact of robotic surgery on infection rates? Do you buy the thesis that the longer surgery times required robots increases infection risk?

Yes. So that's a fact that longer surgery time does increase infection risk. I think that within robotics, the platforms are evolving to become more time neutral. And I think you're going to hear some things about the [indiscernible] robot specifically on that track. So I don't think that that's driving up infection rates. I don't think robotics is driving up infection rates. To your first question, that's what keeps me up at night. SSI rates and hip and knee replacements have been the same for about 20 or 30 years. So they've remained baseline because we've just stopped focusing on that. We've said 1% to 2% is good enough.

And just follow do you absorb the cost of PICO or do you get your payers to pick up some of that cost?

So within our system, we have the bundles coming in the United States, it will be absorbed within that. But we have some data that we're looking at that would suggest that long-term routine use of that will actually still be a cost savings over time versus an extension of spend.

Any other questions? Okay. Thank you.

Thank you, Cathy, and Dr. Vishal. Hello, everyone. My name is Christie Van Geffen, and I lead Global Strategic Marketing for Sports Medicine. It is my pleasure to present to you on our Sports Medicine business. And today's focus is on what we call the big 4, all category-defining technologies, each at a different stage in unlocking their potential. REGENETEN, our bioinductive implant has been available now for over 10 years and is the established leader in biologic healing. [indiscernible] tendency from our recent acquisition of Integrity Orthopedics is at the start of a very exciting growth journey and can significantly improve repair strength when compared to a traditional rotator cuff repair.

The CARTIHEAL Agili-C implant offers a new treatment option for patients with damage cartilage, including those with mild to moderate osteoarthritis, which is a large and underserved population. Lastly, TESSA, our tracking-enabled spatial surgery assistant is pioneering dynamic real-time arthroscopic video-based navigation. It is currently under review with the FDA pending commercial launch. These 4 platforms are sports medicine driven by our focus in innovation and commitment to market development. This is underpinned by sustained investment in clinical evidence, market access medical education and commercial execution. And together, we expect the Big 4 to drive a significant portion of our growth over the next 5 years.

So let's dive into Rotator cuff repair. The rotator cuff consists of a group of muscles and tendons that come together to drive stability and move the arm around. Rotator cuff tears are extremely common with an estimated 1.2 million tears that are surgically treated per year globally. Most often, the tendons terrace, patients age unfortunately, about 25% of rotator cuff surgeries fail due to poor tissue quality and the tendons inability to heal back to the bone. Smith & Nephew is changing the standard of care in rotator cuff repair with not just 1 but 2 technologies that address both pillars of healing, the biologics and the biomechanics.

So let's start with our REGENETEN bioinductive implant another way to address biological healing of tendons. It is a type 1 collagen scaffold placed over the tear, which aids postoperative healing and thickens the native tendon. It has been shown to reduce retail rates by 65% and at the 2-year follow-up mark in a randomized controlled trial. A key driver of its adoption is the simplicity of surgical technique. The implant is delivered via a well-designed insertion device which goes in unfolds and is then fixed to the tendon and bone. And within 6 months, the implant is replaced by tissue, which promotes tendon healing. REGENETEN has been used in over 250,000 patients globally to date, delivering fantastic patient outcomes. However, great technology is not enough. To unlock reimbursement and drive adoption, you must also prove its value through clinical evidence. We have been committed to a 10-year market development journey to do this. Our evidence is unmatched including 3 randomized controlled trials with over 30 studies from multiple sites published in high-tier journals, all showing consistent positive outcomes. This is now shaping clinical practice and we are very proud that last year, the American Academy of Orthopedic Surgeons issued a strong recommendation to use bioinductive implants in rotated of repair based solely on the evidence generated from REGENETEN. This will open doors with payers and will embed REGENETEN into everyday clinical practice.

And we see significant opportunity to expand the use of REGENETEN in other tenders beyond the rotator cuff. It has already been used in hip tendons and in the foot and ankle like on Achilles task. Most recently, we received clearance to use REGENETEN for the repair of ligaments, which can be leveraged in the hip capsule closure which Dr. Ranova will talk about later. So turning back to biomechanics, traditional biomechanical repairs rely on multiple individually delivered anchors with sutures managed at discrete fixation points. These complex constructs remain vulnerable to [indiscernible] formation during rehabilitation and can lead to potential repair failure. Tendency reimagines this approach, drawing inspiration from textile engineering to create a continuous media them construct with connected but individually locked points of fixation. This unique system delivers a stronger, more stable repair that significantly minimizes gap formation and supports the repair through the healing period. With tendon teams disruptive technology then the initial repair construct and REGENETEN's proven ability to promote biological healing over time, we can present surgeons with a more complete repair strategy that addresses both the biomechanical and the biological drivers of successful cuff repair.

Together, these can change the standard of care and set a new bar for patient outcomes. And we look forward to Dr. Clift sharing his experience with both of these later on this morning. Now let's turn to CARTIHEAL AGILI -C and it's used in cartilage repair. The knee is made up of 3 court issues, ligaments, meniscus and cartilage. Cartilage is a vascular so it doesn't heal well on its own and can cause significant pain. Damage can occur in various forms, cartilage alone, cartilage with bone known as osteochondral defects, or cartilage damaged in the presence of osteoarthritis. Current methods of repair have limitations. Microfracture isn't very durable beyond 2 years. Cell-based therapy requires 2 surgeries and donor tissue an osteochondral allograft transplants are limited by donor tissue availability in the U.S. and even more so globally. So enter, the AGILI-C implant. This is a new treatment option designed to help the body regrow healthy cartilage and heal damaged bone in the knee. It's highly effective with twice the pain reduction relative to the current standard of care microfracture. [indiscernible] versatile can be used across a variety of sizes. And uniquely, it is the only cartilage repair technology that can be used in the presence of mild to moderate osteoarthritis. It's also convenient because it can be implanted in 1 surgery without any donor tissue. And last year, a new Category 1 CPT code was created that we can leverage starting in 2027.

We -- this code is essential for future revenue growth. It gives us the opportunity to work with U.S. payers to access broader reimbursement coverage while leveraging the clinical data and our surgeon advocates in parallel. CARTIHEAL AGILI -C

Stands apart from other technologies with a Level 1 randomized controlled trial and 5-year follow-up published early this year in the peer-reviewed American Journal of Sports Medicine. Dr. Ranaut will get into greater detail later, but I'd like to highlight key findings, twice the reduction in pain when compared to microfracture or debridement, significant improvements in overall CUS scores which is a patient-reported outcome looking at knee health symptoms and functional abilities, consistent results regardless of osteoarthritis status and reduction in relative risk of patients progressing to knee replacement. This underlines that the CARTIHEAL implant is having a sustained positive impact on patients' lives a great new option for our surgeons and patients alike.

Now let's talk about the last of the big 4, TESSA, anterior crucial ligament, or ACL reconstruction surgery is all about visualization and tunnel placement. And where you can't see well, it can be challenging to get good results. In fact, 34% of ACL failures are caused by technical error. The first ACL reconstructions were done as open procedures. Then in the early '70s, camera-based visualization was introduced, creating the field of arthroscopy, where a surgeon would insert a scope and watch on the monitor. Since then, arthroscopic surgery has barely changed until TESSA. This is the first of its kind arthroscopic video-based navigation system that provides guided visualization and advanced imaging. Everyone remembers using a physical map, but now we can all use Google Maps because it is digital, dynamic and has a real-time update. TESSA applies that to arthroscopic surgery. So if the surgeon is the journey and the surgeon is driving the car, TESSA the surgeon real-time assistance to stick to the surgical plan he or she is created at the beginning of the surgery, making sure that the surgery is completed as planned. TESSA takes surgeons away from basic analog imaging to digital dynamic augmented reality that is personalized to the patient.

The first application is going to be femoral tunnel drilling, but this technology is a platform for further surgical arthroscopic applications. And from here, we'll move on to tibial drilling then to increase applications in the knee, shoulder, hip and beyond. I hope you've enjoyed learning more about Sports Big 4 and how we are committed to accelerating innovative technologies and capitalizing on our expertise in market development. But in summary, I want to underline that our purpose is to help people live a life and limited and that patients are truly at the center of everything we do. These are 2 patient stories where we helped Chris get back to walking his dog and running to work after being treated with CARTIHEAL and Nick, who is treated with REIT in his shoulder so that he could get back to doing what he loves, which is being a coach and a great dad to his kids. That's what gets me up every morning and excited and working here at Sports Medicine, my team and I get to impact millions of patients' lives every day globally.

And with that, I'd like to introduce Dr. Anil Ranawat who is an orthopedic surgeon from HSS New York, focusing on hips and shoulder and me. He is constantly pushing state-of-the-art advancements in joint restoration, including both nonoperative and operative management of these conditions. He serves on numerous orthopedic boards, including AO SSM and EOA, and lastly, is the orthopedic surgeon for the New York Rangers ice hockey team. Dr. Ranawat will share with us his perspective on 3 of the big 4 technologies in terms of how they are used in his practice today and their potential in the future. Dr. Ranawat, it's a delight to welcome you here today, and I [indiscernible] invite you to the stage

Thank you, Christie. I want to thank Deepak and Scott. And it's really an honor to be here. We give a lot of talks. I don't usually even like look at slides anymore. I just kind of talk to the audience. But these are kind of more unique talks. I've -- in the last year or 2, I've given this one in New York at that capital markets. Also with TESSA, we presented with Brian to the FDA. That was a fascinating little kind of endeavor. So I'm really enjoying this journey as we're all calling it. And it's a team journey. And my father, my late father was a very famous [indiscernible] peak surgeon, heated arthoplasty kind of like our other colleagues here and he said a couple of things.

First, work with the company to really help patients. That's really -- there's this new philosophy that working with companies are [indiscernible] and we treat conference of interest and all this stuff. It's actually the only way we can really drive technology when our incentives are aligned. And our symptoms is to help the patient wait Christie up in the morning when she sees her company can help people. And that's all I want to do for you guys to show us how our efforts and their efforts can help people. These are my disclosures are not relevant. Talk about my background, who I'm from my kind of experience with Smith & Nephew and then 3 of the Big 4 just my full disclosure is, I am a hip and knee surgeon. I do a little shoulder Clifton will talk more about the shoulder. I am any shoulder operation has a Frenchford, [indiscernible] or rent massage, I don't know because they don't speak French, so that's where I end to begin. I've been an attending surgeon at HSS for now almost 20 years. I'm the Chief of the hip knee sports department. HSS has 160 surgeons at HSS. We have 50 surgeons in the sports department. We have as many sports surgeons as most orthopedic departments have in the world. So it's a pretty big place. We actually call it the big house, and we have a lot of my colleagues here to talk about the big house. and I'm a media director of various different off-sites in the system. I am a Duke too, and I did a lot of fellowships. And one of the [indiscernible] so I did was actually, although we are American, I try not to be an aggregate American, I did 1 year in Pittsburgh, and then I learned this kind of organization called [indiscernible], an international organization.

So then I went -- spent 6 months to Sholto's insert, and I spent 3 months here in the U.K. at Extera, Oxford, Cambridge and up the street at King's College. And I learned a lot of different ways of skin of cat. So that's one of the things that I love about Smith & Nephew, global company, global ideas, global change. So these are my affiliations. I do take care of a line of professional athletes. It's fun. I'm not really a football professional athlete and I'm talking more about hockey and baseball but I've -- I take care of a lot of athletes. But I also take care of a lot of average does, and you have to recognize what's the disease ahead of you? Is this a disease of an ate that has to get back really quickly or is the disease of an aging tendon that doesn't actually have an injury. It's just more deterioration. And it's a very different treatment algorithm based on what you see before even sometimes it can be both. And that's really what I do. I want to prevent degradation. I want to fight God, God usually wins. It's a hard battle. But what I don't want to do, I want to get you guys all running around on the TAMs and enjoying your life. I never wanted to be a general [indiscernible] surgeon. That was like blasphemy for my father because I don't want to talk about infections all day. That's not really boring.

I want to talk about getting people back in the game, right? Having them rise. So that's really been my approach. Get people back on the field or the pitch. So let's just talk about what's the one-stop solution that Smith & Nephew are getting to. Let's first talk about cartilage. And as Christie said, cartilage actually Dr. Robert Hunter, very famous U.K. physician. We're surgeons. So we're from the barber line. We're misters. We're not -- and I can explain that to you over a couple of coffee later. But Dr. Hunter, who was a smart guy, I recognize if you open cartilage up and you cut it, it doesn't heal. That was quarter that in '17 '20, still true to this day. There's been a 1,000 different ways of heal college, none of them really work. And they're all really expensive. And it's a huge clinical problem. There's not one person in this room if I took an MRI underneath that doesn't have a [indiscernible] defect. It's ubiquitous. Now some people have verse, but it's a massive disease. The muscoskeletal burden in the United States is huge. So let's talk about how we fix early or these. We're not talking about [indiscernible] That's what our colleagues have talked about replacements. Earlier threats, which is an even bigger category and it's actually more important because, yes, it's important to get grandma out to walk around, but I want to get her son 40 more years until he gets in the replacement or maybe never give them a knee replacement. So what do we have out there? We have [indiscernible] you can take your own plug of your own body, put it into your thing, Well, that's kind of Robbie Peter to pay Paul only or extend would do something silly is that -- let me take one part.

Well, if God didn't want it there, he wanted to put it there. so we get smarter. Let's take a dead person and put it into side you need Well, usually, when you take a debt persons, you need like this is not. So when you do a liver transplant, you have to be cross match. If you don't cross match miss with skeletal tissue. So there's a level of rejection. So autograft do grade for 5 years. And then there's a thing called microfracture, which is still the standard poke little holes, and we're going back to Dr. Hunter's principles. It doesn't work. cartilage doesn't heal by itself. And then there's fancy things were out of Scandinavia, they create cell base where we took your cartilage, grow it up in the lab and then put it back in your knee. Well, that's 2 surgeries a lot of money, and it still doesn't work. It's actually illegal in Europe. So if it was so good and the Navy and there's so much data about it, why can't you do it in Europe and only in the United States? That's like a little head scratchy because the data isn't there, and that's what we care about. We care about data. What about ACL? What's the clinical problem with ACL? The clinical problem of ACL is what we called tunnel positions. What was an ACL, you have a femur or tibia, you drill a tunnel in each. If you put the tone in the wrong spot, the graph to impinge the graft impinges, it cars or it's too loose. It's as simple as that. We're battling the tunnels in the right spot because right now, the human body is a 3D structure. When we look at a screen, it's a 2D structure.

Whenever I take a resin, I can tell them 30 seconds, I always a trick my father said he is I take an unusual object. Put it before you close your eyes lifted up and spin it in the x axis, then the y-axis. You can do that maybe you can become a surgeon. Now spin the X-axis, 80% of people can't do that. And once you can do X axis, then your last name is around a lot. I'm just joking. My daughter is here, so I said that for her. No pressure, Vive. And then tendon healing. Tendon healing is fastening People think the average person thinks a tendon healing is just like bone healing. When you break a bone, it's very reproducible to heal a bone. It works. The nonunion rates of bone healing is under 1%. Actually, usually the only times bone don't heal when we put too many plates on it. We try to fix it too well. But by doing nothing, maybe putting a little screw little plate on it. It heals very particularly tend into bone doesn't hear predictively because it's not a traumatic event. It's 95% of the time, it's a degradated process now. You can go skiing in some beautiful places in France and [indiscernible] cup at 40, but that's a very rare event. More likely, you actually break your bone or greater tubrosity.

What normally is in which I could see right now, when I see people like last time we gave a lecture like, okay, who can do this right now with the right arm, who played a little tennis yesterday and be like got my cuffs hurting a little bit. All right at for me. Again, if you really is, a lot of people like, yes, it does. You're developing cuff disease. Cuff disease is spectrum. If you use it, you will lose it, and you will go from partial to full thickness. So this process of degradation of tendon dying is really -- it's really hard. And even when we fix it, and we've got 85% success rate. But what does that success for? That means the patient say they're happy 85% of the times. If you look at the healing rates on ultrasound and MRI, it's like 50 or even lower. Look, I'm no shoulder surgeon, but I can tell you this, there's tenders all over the body. And those tenants are feeling whether it's a glut tendon, which I take care of. Whether an Achilles tenant, every Achilles tenant an the MDA now by a senior colleague line get to REGENETEN in the patch, every single one. become now standard of care for the most high-profile players. So if it's worth $100 million contract ankle, then maybe it's worth 55-year-old shoulder for me, maybe a lift to fix my cuff. So let's get into the details of cartilage.

Cartilage -- CARTIHEAL has this massive group. And it's kind of like the group before us. I'll have some people, some of the younger analysts -- we'll have an isolated defect. Some in the middle age, we'll have 2 or 3 holes. And some of the older guys like me will have pretty extensive disease. So you have really what this implant showed that it wasn't just for isolated disease. It carried a long spectrum of indications. And from a selling purposes, that's a pretty simple thing. That means there are a lot of patients you can sell it to. So that's good. And it worked. So how do I use CARTIHEAL today? Well, when I see a cartilage or really a scale with a bone lesion, I use it every time. Because CARTIHEAL turns into bone. Allograft does not only turn into bone and even autograft doesn't heal OEs to bone. CARTIHEAL is very predictable to bone and then the cartage grows on top and I do it with either mild or moderate disease. If you truly have a date, a dance OA, anything one-on-one, I refer to my colleagues, Dr. Data asked. And as I said, the healing rates, the scientific cumulates are very profound. 75% in both the bone will heal, that's more like 95%. Coral is a really osteoinductive agent and conductive agent. And then the [indiscernible] Shield are at 75%. So you get bang for your book. And as we heard, you could do this with a lot of other complex procedures I use with an ACL or do it with an osteotomy, escalate it's we and sports have an armamentarium where Smith & Nephew helps us a lot to fill out this [indiscernible] And ultimately, it can either prevent or delay arthroplasty.

And that's really what we want. We want the people to get back in the game and play as much as you can. So here's a little quick low video here's an isolated lesion, you do a minarthrotomy. You drill, when I do an oats plug or an allograft, it takes me 30 minutes to do. This takes me about 6. It's another powerful thing. It's so easy quick to do. And it's very reproducible. So a lot of times, we have things that are great biologically, but they're hard to put in some things are easy to put in and terrible biologically, this is a win-win. Great biologically, easy to put in. You line it up. Some of these things, I don't do as much because I have a little ADD, as you can tell. I don't wash it out 3 times probably only once. I do like to do this low step and makes it looks really -- I don't see they wash out again. I don't do that. Come on. I don't change my gloves. And then -- but it goes in -- but here's the thing you want to -- you actually recess to plug a millimeter or 2. So cartilage regrows on top. So it's not a flush in plant. It's not an osteochondral autograft or an autograft and you own a space now.

What we have now is that we have now developed a kit. So it used to be in trains, you have to sterilize trains. The future of orthopedic surgery is we're hearing from the arthroplasty guys outpatient. It's all outpatient. So it's all surgery center business. So we don't want to do trade Cooking trades costs a lot of time and energy. I think Mike will talk a lot about this. This is all the single disposable kit. It's another big advantage of this system. And here's when we talk about the data. Our CT data in cartilage is obnoxious, how little there is -- and we do these operations all the time. I'm looking at like Data Hosts so true. Like we're such worse doctors than artists, but they can occur 1,000 patients in a week. That takes us years to do that. But with this RCT showed and then we have got FDA approved that compare the microfracture or debriement, their problem scores were way ahead of them and MRI data. Then they repeat at 5 years and showed consistently. But let's get delve a little deeper into that data. If you look here, the orange is cartel. They had a 58% reduction in any failure surgery or injection, a 76% reduction in injections. That's profound. Subsensory 20% and the risk of total joint replacement or style the ultimate failure of your procedure 80% at 5 years.

There are a few things we can really say in orthopedics that are disease-modifying right? Totally is not disease modifying. One of my professors would used to call it its internal amputation of the knee. That's an orthopedic joke. I never appreciate that because the tone got me through college. So I was like a little harsh, not helped, but disease-modifying means that you can change to natural history, right? PICO can be disease modified. If it changes the attrition is size. This is disease modifying to change the natural history of the failing need. And that's what's exciting. That's why joint preservation is exciting to me. So the 5-year results of the RCT shows lower intensive treatment failure, lower risk of major surgery, equivalent outcomes actually depending on your [indiscernible] , which is really fascinating. You would think the single minor disease guys would do better than the more massive disease guys, no, all comers are pretty close. And the pain reduction was twice as better than standard of care. So this is just the case where we did one. This is what a plug looks like. I did one the other day. This is one, I did on the fireman where you can see much more extensive disease this what I did with an osteotome. And this is what I said to you before, it's really filling out the whole armitarium.

So let's get to TESSA. As we heard a lot, traditional ACL surgery is hard, and we're living in the 2D world for a 3D concept, and we're using mechanical guides, it's amazing when I do an ACL and now I look to my friends and colleagues that look at Dr. As next to in the same surgery center, he's got a robot for grammar and have an ACL for his son -- that seems weird because he wants it my operation the last for 50 years. So we need to modernize sports medicine surgery because traditional marketing using mechanical guides, whether inside or outside are wrong. So video processing and on materiality guidance can really make 2D, 3D. And really what it is, you have your TV and then you have an image-based whether an MRI or CAT scan overlapped the image, and you're holding your hand and seeing my tunnels in real time. It is a game changer. It is -- it will blow you away as a surgeon because what those guys have, the robots are still pretty cool, but they're still looking at an image that's not real -- I'm looking at a real-time 2D image, and then I have the actual imaging on top of it. It's a really powerful thing, and it's what's going to give me the ability to get my tunnels in the right spot. So it's patient-specific because it's image-based, as we talked about, first, with the ACL, but now on the FEMA [indiscernible] it's all segmentation. It is literally -- it's funny that we're here. I guess there's a plaque. It's using all AI technology. It's fast. It's all based on QR codes.

So the QR code has the big scanners that they use now. arthroscopic we're using a small QR code. It's fascinating. We did a paper showing that with 15 [indiscernible] it's 10x more accurate than the free hand. That's one thing I can tell you about all robotics navigation, all modern technology. When you compare that to the freehand Robots navigations, the robots are always better. It's a little depressing. It makes us feel like we're not so good. We still have to control the robot. We said the control of everything in navigation, we said the talent where to go. That's always a debate. But in terms of the sites, they will always beat us if you're just asking them to make a straight cut. So let me quickly go to 10 the healing. We heard about REGENETEN. We're going to hear a lot more. So I don't want to go too much about that. As I said, I am not a French shoulder doctor. I'm an American hip doctor, but I use this for the glut. I use this for patellar tendon. [indiscernible] , these are all tendons and athletes that fail because the tenant is actually degenerative. And that's the pre-existing condition. And the way I think of REGENETEN, it's food for your tendon, attending is slowly devascularizing. -- it's food for the tendon and it feeds the tendon and thickens it. And we've actually proven that in the paper. This is just an example of one doing the hip that where I do it for all my gut needs like this, and we have an MRI paper to show that the thickness of the tendon after the Regent in patch is 6 millimeters thicker. And this is consistent with RCT data in the rotator cuff. So now we're having multiple joints and then just amount of time until we show this in the Achilles that the tenant is thicker and healthier. This is just a standard way to fix anything. This could be a road haircut. This is actually a glut media or minimus, and you pass it and you'll see how we normally do our construct, right? So again, to go back to Christie's point, you first have to do biomechanics, Isaac Newton. Adesis funeral in Westminster, but it's kind of cool because -- he was kind of my hero growing up. We're all about mechanist as [indiscernible] risen. And then you add biology. It's the 12 combo. And this is the potential, all the other outcomes.

And this is that paper I wrote where we talked about increased healing. And then we can use it for the capsule as well and a lot of other indications. And this is just an example of the patient that I did it on, and this is how we do it. So just because of the time, I want to just say, I really believe the Big 4 -- 3 of the Big 4 that are mine are really a -- it's a vision to the future how we think of improving biomechanics, biology and enabling surgical technology because we're not doing this for the sake of here's a new anchor, that's how other companies do it. Now here are clinical problems. Cartage doesn't heal, tenants don't are dying, and it's hard to do surgery sometimes. Go after clinical problems find a company that's merely ethically responsible to give you a clinical solution to that clinical problem and you help patients. Thank you very much.

Thank you very much Dr. [indiscernible] Very passionate presentation and very durable. A couple of questions for me. One, can you maybe talk when you clearly, you find these products work very well. But why do you think other surgeons don't use them? And maybe talk about how this changes the duration of the surgery, the cost of surgery? What are kind of the barriers that prevent folks from using REGENETEN in every single procedure.

I mean I think REGENETEN has created a lot of adopters. REGENETEN was the first guy out of the block, right? And -- with it's pretty close. You know that you did something well. Like when you come to a first great one with Artico something like that. So I've seen a lot of nonspecific users use it and then eventually they try other ones, but it's still the best because it has the most science. And that's really the thing. And then when you have the science, you then eventually can go to your payer and saying, "So I would want to put REGENETEN in my shoulder. And that's usually the best way you ask a surgeon if they believe in the product, would you take that product for yourself or put it into your own family members. That's what I would say.

So I'd say there is a cost, obviously, it's added cost to an operation. But again, I'm saying, why did we pick grower off because it's failing tremendously. -- from really healing rates. So there's room -- I never wanted to be a hip replacement surgeon because it was the operation was 92%, 98%. -- what room you have to grow. So rotor cuff at 50% real to go. So that's a good reason to. Go for the money.

Great. It's Graham from UBS. Could I ask one, you talked about your experience learning abroad and spending time in Europe. In terms of sports medicine, we think of the market being so well to well progressed in the U.S. and maybe not as common as growth in Europe right now. What differences do you notice in terms of practice and the availability of some of these products?

Yes. I mean, obviously, it's every European country is vastly different. If you -- I had a cousin in the NHS, if you have -- there's no [indiscernible] repairs in NHS, because the time the kid gets to ACL surgery. It's 2 years waiting has been a shredded versus you go to Harley Street, they fix Monsey, like it's candy. So there's that 2-tiered system in certain countries. There are other countries like Italy, where they're very aggressive, and their NHS is a little bit more better -- I think better access. So it's very country specific.

I will say this, they're all realizing now that sports medicine is a field. And it used to be -- traditionally, the European system was that you were in the search. You did everything soup to nuts in to me. And America had this false thing of joints and sports. And the reality, the answer is that the pros and cons are both. But I do see now the traditional knee German surgeon who used to just do us and he told me and then do a scope. There are now people who really just focuses on sports. And the way you know that is look at Esca and look at Esaase. Those are the 2 biggest growing organizations in the world. So I would say Europe is a huge market to grow for Sports Medicine.

There are 2 webcast questions, so I'll just go there. The first is how much cost and time do you think TESSA adds to [indiscernible]

For any robot as we heard before, it takes said, it takes time in the beginning. But if it takes time to lower your failure rate is worth it and then as you get better at it, that time goes away. That's just true for all of us. So yes, the first -- it's usually a learning curve in 10 cases. Now again, cost is always going to be the issue. But if cost lowers your -- the ACL failure rate in a 16-year-old young athlete is 30%. And if you tell that to the young athlete every time they show up to you, the parent should walk right out of your door. But you have to kind of tell them it's insane. So we have room to do better. We have to -- I mean, if you take a 6-year old and you do enough of these and they come back with a failure and you thought you did a really good job. That apes devastated. So I don't want that because I had 2 ACLs and my needs are not so good now. And that was 4 years ago. So we have to do better with this. There is a clinical need here.

And then the second question was just how does what you've talked about today translate into procedure volumes for the hip and knee replacements down the line?

As much as I would say, I want to eliminate hip replacement, hip patient is not going anywhere, okay? It's such a good operation. And it's -- but we're not talking about attacking hip and not replacements. We're talking about the middle, the injection middle where you just say, "Oh, don't know, my [indiscernible] one is going to work. my PRP is work -- it's no, no, this PT will work now. And it's really about going after that middle age population where we could say we could do better. Because when arthroplasty surgeons tried to address them 20 years ago, they realized that they did not have good results. That's the -- the irony if you take care of just Medicare patients over 65 United States, you will have much happier patients than if you -- once I go after the 54-year-old, that's more higher stakes.

We're now just going to a break, so everybody can go and get some tea in coffee and see the product fair, and we'll be back here at 10:05. So 20 minutes. Thank you.

[Break]

Well, welcome back, everyone. I hope you enjoyed that quick break, and hopefully, you also got to see some of our innovative portfolio in the adjacent room. My name is Mayank Shandil, and I lead our global portfolios across orthopedics and robotics. Over the next 10 minutes, I will take you through how we are going to build our competitive advantage across knees and robotics.

We have a strong track record of innovation across both robotics and enabling technology, along with implant design. With the acquisition of Blue Belt Technologies in 2026, we have pioneered the use of handheld robotics for total neothroplasty. In fact, Smith & Nephew remains the only company with FDA approved robotic indications for partial, total and revision knees. The digital tensioner launched in 2023 was yet another unique solution that helps make the procedure more precise and reproducible. I will speak more to this in subsequent sections. On the implant side, we were the first to bring to market the asymmetric joint line with Journey, which helps match the average patient anatomy more accurately. Across our Legion and Journey platforms, we offer surgeons distinct choices on both implant geometry and materials to help personalize the procedure for every patient. Finally, [indiscernible] in the OR, it is the implant that the patient goes back home with and its design must accommodate bearing needs in the future.

So let's talk about those needs. The expectations from all of our stakeholders, starting with the patient, but across surgeons, our staff, administrators, even payers are evolving rapidly. Our key objectives will always remain the same, make patients happier and improve their satisfaction from knee replacement surgery. And what we are seeing is personalization of the implant position makes patients more satisfied with their outcome. So future implant designs must accommodate this. While implant geometry plays an important role, it's really the technology, the robot that helps position the implants accurately, precisely and reproducibly every single time. The purpose of this technology fundamentally has to be to make more complex surgery easy and to make less complex surgery more reproducible. And finally, the shift from hospitals to ambulatory surgery centers or ASCs they're known, is driving a distinct need for streamlined workflows and efficiency. I realize that ASC is a very U.S.-centric acronym. But think of these as smaller outpatient of day surgery centers, and we'll discuss these in greater detail in our subsequent sections. For now, I will concisely state that at these outpatient centers, cost of technology, its footprint and procedural breadth, even the number of instrumentries can all contribute to significant inefficiencies. So any solution we build for the future must address all these needs, always starting with the patient, making sure technology is doing what it's supposed to do. That's more complex surgery, easy, less complex surgery reproducible. And they're doing that while driving leaner and more efficient workflows.

So now while we clearly understand these needs, at Smith & Nephew, we are also aware that our current knee portfolio is complex with as many as 4 knee brands. Any solution we create for the future must ensure that we are not only evolving our knee procedural offering, and that's across the implant design and surgical workflows, like I said, but also actively streamlining our portfolio. So we manage significantly fewer SKUs across the value chain. Since we announced this objective last year, I'm happy to report that we are well on our way with production stopped on 10% of primary in SKUs already. By making these strategic portfolio choices, we would reduce our overall SKU burden while at the same time, adding an innovative new knee system and I will share more on that soon. Before I do though, let's dive a little bit deeper into how we look at the future of knee surgery. We really have 3 key design priorities. First and foremost, it's the ability to personalize the position of the implant for each patient's anatomy. And like I said, the implant design must accommodate for this personalization.

Second, the implant and the robotics solution needs to work together to unlock better outcomes for our patients. And lastly, going back to that really important point around efficiency, the solution must offer all these benefits without adding significant cost or complexity in the OR, especially in the ASC. So starting with personalization and without getting into too much technical detail, we know that satisfaction in a knee replacement procedure is driven significantly by the balance of the soft issue around it. These are typically the ligaments that support the knee, especially on the inner and outer sides till the invention of this device on your screens, most surgeons were using some subjective ways to assess tension and ligaments. We have learned that the subjectivity can create variation and assessment, not just across different surgeons but also for the same surgeon between their first and last cases on the same day.

Our unique digital tensioner is the first step towards an objective assessment of each individual patient soft tissue that will eventually help us personalize software retention for every type of patient. The clinical impact is actually already showing up in level 1 evidence. Smith & Nephew handheld robotics significantly reduced soft issue releases while improving patient-reported outcomes and natural joint feeling at 1 year. Here is another great example of how our robotics and implant systems can help personalize the surgical process, even in complex surgical settings. In a revision situation where there is bone loss and limited reliance on anatomical landmarks, our unique CORI division workflow simplifies the procedure significantly through accurate implant placement and the ability to plan for bond defects. We can even use the digital tensioner typically used for more straightforward primary cases, to dial in the right soft tissue tension for each patient eventually improving function and outcomes even in these complex revision scenarios.

With this simplified workflow multi-center data across 100 revision knee cases shows CORI, reduces mental and physical demand on OR staff by 54% versus conventional instrument without compromising on surgical performance. I'm going to now switch from personalization to performance. But before I do, this is LANDMARK . There are 3 things I want you to remember about our new knee system. One, LANDMARK will incorporate the differentiated kinematics of our journey platform while retaining the simplicity of use of our Legion platform. But that also means -- it is compatible with existing instruments and will allow us to retain our customers while being offensive with convergence across full cemented and cementless offerings. Second, LANDMARK will be our most robotically enabled in the ever period. PINK simplified workflows, advanced telethemoral planning and industry-leading soft [indiscernible] optimization and much more. And lastly, and perhaps most importantly, LANDMARK will have industry-leading leanest tray configurations, including for robotic cases without compromising on interop options for the surge [indiscernible] so the ability to dial in patient-specific alignment with prior planning, so without compromising on function or survivorship is one of the holy grails of need replacement today.

Typically, plus or minus 3 degrees on alignment is considered safe, although some surgeons can go beyond that. But within those 3 degrees, the landmark design actually covers 90% of the patient population out there. So think of it as for 90% of patients that are out there, LANDMARK does not require additional cuts to accommodate for patient variation. This equates to easier workflows and less compromised in the position of the patellofemoral joint -- this is the LANDMARK advantage with alignment. Another area where LANDMARK has differentiation is the design of the telofemoral joint. LANDMARK is designed to allow for the Patella to find its natural position by changes made to the patella group along with the ability to prevent rotational compromise of the femoral component. I'd mentioned Landmark will be our most robotically enabled me ever. This is another area where you will see that come to life. I can't disclose too much here today, but please know that CORI's unique capabilities lend themselves really well to planning and executing the patellofemoral joint in a total knee. Besides improving function, this can also help reduce the incidence of anterior knee pain, which remains a common problem with knees even today. All of our new platforms across hips, these and shoulders will have best-in-class trade configurations that drive efficiency.

For LANDMARK, we will be able to support a robotic totally replacement with up to 50% fewer trays than some of our competitors, while offering multiple implant options as well as cemented and somatostatin. This is significant. -- sense it not only reduces sterilization costs, but also the burden on our stuff. Remember, ASCs are typically leaner on staff compared to hospital ORs. The commercialization of LANDMARK will focus on our full procedural offering for knee arthroplasty pairing together a distinct implant design that replicates the normal position and movement of the knee with the amplifying power of handheld robotics. Whether surgeons use LANDMARK with manual instruments or with the CORI robotic system, LANDMARK will bring amplified efficiency, personalization and performance to every procedure. Finally, and most importantly, while we continue to innovate with the robotic platforms and implant systems, we continue to generate valuable data across the episode of care. Starting with our image agnostic codiograph prior planning, all the way into inter-open post-op data around outcomes and function, we have the ability to create this connected ecosystem that would eventually help build algorithms, algorithms that can 1 day drive clinical decision-making for patients with different anatomies, disease progression or even functional expectations.

Our exclusive partnerships I'll speak more to this when I talk about ASCs, enable us not only to capture the clinical data across the episode of care, but also critical health economic data that can unlock value for hospitals and ASCs and even payers and policymakers in the future. I'm very confident about our direction on robotics and knee surgery, and I'm convinced that this will create competitive advantage for Smith & Nephew in the coming years. With that, it is now my pleasure to introduce Dr. Steve Haas from the Hospital for Special Surgery in New York. Dr. Haas, besides being an accomplished surgeon and a global thought leader is also the immediate past President of the American Knee Society and has been the Chief of Knee Service at HSS for the last 18 years. He will talk to us about the evolution of implant design and enabling technology from his unique vantage point. Dr. Haas, please.

Well, before I begin, I want to thank Mia and Deepak for inviting me to come I have a special warm spot in England. I studied here when I was in school and spent a year in London and another 4 months up at Oxford. And I love London and I love England, and it's a real pleasure and honor to be here. So I'm going to speak as you heard about LANDMARK and CORI. And I think I'm going to try to share with you why I think this is really the next evolution of knee replacement. I think something that probably that most people don't know is some of the great limitations that we've had in knee replacement up to this point. It's a great operation. I love it. I do it all the time, but we have had problems and sort of a bit of what Anil talked about before, it is true that hips are about 95% perfect. Knees are not 95% perfect. They're 80% perfect, maybe 85% perfect. So it gives us as an academic, you say, I have things I can do to make it better. And in partnership with you guys, I think that we may have done that. Okay.

So with that, we have to look at what we -- the reality of the world today. Our patients today are not what they were 20 years ago. Our expectations of what our patients want to do. They're not all the 65-year olds or 80-year-olds who just want to walk down the street. They want a ski, they want a mountain climb. Some of the more professional at rates that I have that want to do that, which I wouldn't suggest the bungee jumping for most people. And somebody want to do, frankly, whatever this patient was doing, she wanted to do that. I don't even know what she's doing, but that patient the demand of the patient has restored them to the activities that they want to do. And many of the patients are, in fact, younger or if they're older even much more active than they used to do. So the demands on us is to make patients happy, we have to meet their expectations. I'd like to share a little history of knee orthoplasty to understand how we got to where we are and what the limitations have been up to this point in time.

Knee replacement started in the 60s really as hinges. That's where determine if I could outlaw the term, knee replacement, I would, I can't. Knee replacement at terrible term. We don't do an internal amputation. It was, in fact, an internal amputation when you put a bit of [indiscernible] But in the '70s and '80s, the first successful were servicing replacements were developed. Actually at HSS by Neil's dad and my mentor, who is British, John Mense, who trained at Cambridge. And that was a revolution because knee replacement turned into like a dentist cabinet tooth, just capping the end of the bone in the shinbone the [indiscernible], the tibia and the cap with implants to we're about 1/3 of an inch thick, about 7 to 10 millimeters thick. And that was a great innovation. Now that worked amazingly well, but there were no lesion rights at that time, okay, if you again to understand how we got to where we are. There were no lifts and rights. There were 1 or 2 sizes. Those things worked and they last a long time, but they were rarely crude. You matched essentially the patient to the implant rather than the implant to the patient. But the concept of resurfacing was started.

And in the '90s, that was improved upon you focus on refinement of this basic design and prove instrumentation so it could be put in. And that brings us to about 2006 to 2013. And you -- I don't think probably people think about this, but the knee replacements by the 3 major companies Veoneminth and Nephew, Stryker, Zimmer and DePue, all those systems were developed Literally, they were released in 2006 to 2013. So these are going in today, they were designed then and the philosophy and science of the time is what's used today, okay? Now what happened since that time? There were improvements. And in fact, the main improvements were, well, there were new polyethylene inserts that had some asymmetry in them were introduced and there was the introduction of 3D printed technology, which was applied to only the tibia and the patella. So those were improvements and I think really great improvements but limited, okay? But the big limitation is, well, if your designs, your femur in particular, was designed in 2006, it's stuck with that. It's symmetric. It's mostly symmetric They're left and right, but only a little bit left and right. And they're based on science of time of 2005 to 2013. It's really not what we think today. So those are limited by those concepts.

And why do we care? Well, if you look in the arthoplasty, again, very happy, makes lots of patients have last a long time, but the reality is that lots of patients aren't satisfied with the result. A lot of them are, but a lot aren't. And so 10% to 20% of patients are not satisfied with their results. And especially if you look at the younger patients, I mean younger is that people in their 50s and 40s, okay, especially in their 50s, we do a lot of patients and about 15% of those patients aren't satisfied with the results. And this has happened to be a publication we did, but it's been reproduced software, and you had about 20 to 25, we're only moderately satisfied. So they're happy. They have the operation again, but they aren't thrilled and they don't always return to the activities they wanted to do. So with this, if you look at the world of orthopedic arthroplasty, okay, new concepts have been developed to improve these outcomes, which is what makes it fun, okay? We have these new concepts. It's a really exciting time in orthopedics because we have technology and science that have introduced these new concepts.

What are these new concepts? Well, the first one is it seems so simple to me, but restore native anatomy. We want to restore the anatomy and that means restoring the anatomy of the femur, the thigh bone, the tibia, the shinbone and the overall alignment delay. Years ago, what we did is we thought everybody -- in part because the best we could do, we said everybody ought to have a straight light. They make a difference how you started. And we like all things in life, not everybody is the same, right? Now people aren't vastly different, but people are a few degrees one way or the other. And if you start off with the bow leg a little bit about, maybe that's the way we ought to put you back in the first place, not say you were straight and the person a little knocked you be straight and everybody got the same. So the restoration of that concept and that concept applies to both the thigh bone and the shinbone reproducing anatomy, a personalized alignment strategy. The next is restoring the natural motion pattern. The knee is not a hint. It doesn't just bend. It actually rotates, it bends, it slides. It has a multitude of motion activities and trying to reproduce that natural stability and motion is actually a goal of this new concept.

The third one, I already talked a bit about is 3D printed technology. 3D printed technology has proven to be very successful in the tibia and in the patella and for reasons I'll talk about it a little bit later, but that's 1 of the third concept. And the last one is, what makes a lot of this possible as robotics because of the accuracy we get with the robotics and the reproducibility we get with the robotics we can do some of the other things that are the earlier concept, okay? So if you look at this, the fact LANDMARK is the first knee [indiscernible] to incorporate its design to incorporate all these concepts into the design. The other can't because they were designed long before these concepts were actually thought about. I'm going to try to explain that. And I actually -- this is actually a pretty simple concept. You'd say, why didn't the Les do this all along, but they didn't. And they didn't because they started at HSS and other places as symmetric designs and then just grew out of that, okay? This is looking at the knee, we were looking like at the knee as it was bent just again straight at the end of the 5 bone. This is the femur, okay? What you want to do is essentially match the back, which would be touching the tibia and shinbone and the front which is where the knee cap sits. So it's pretty simple.

If I'm doing a resurfacing the operation, I want to match that any, right? Simple concept. Well, in fact, traditionally, these don't do that. They match -- if you match the back, the knee cap isn't in the wrong place. The grow for the knee cap is not in the right place because they weren't designed to match the front and back at the same time. They simply weren't designed anatomically. They weren't asymmetric. They were designed in a way that didn't match anatomy. And in fact, to show you this, this is actually a real case. This happened to be a Mako case, that's a Stryker knee, and that's a trap on need placed on -- and as you see, the back line is up in the back, but the groove is there, and that's where the group at the Patel is. So you can do -- you say, well, I'll match the front, but then you're not going to match the back. So at the end of the day, you're making a compromise. And with LANDMARK since it was designed anatomically, it's a simple concept. It's designed like the natural anatomy. We simply took what the average anatomy is and we put it back together and said, it's asymmetric, but that's what it looks like. That's the natural anatomy. So it matches the back and the front because the kneecap groove is in the correct place. It's a simple concept, but knee replacements because of their vintage did not do that because it wasn't thought of.

Well, there's another aspect to it, too, because what this is a diagram of essentially looking at the alignment, it has the overall leg alignment, it's called CPAC and it's the overall alignment. It's a classification system. So you look at -- you have bowlegs on the on the left, knock me on the right and the individual categories of how the bow leg and not [indiscernible] made up either of the femur and tibia. And ideally, you want to match it all and the green dots are the distribution of normal patients. Okay. Simple. Those are distribution, those are their alignments, okay? Well, if you take the and you say, well, I'm going to put it in the way we know is a safely to put it in the way that we've gone to custom to and say this, we know is safe. We have lots of data saying 3 degrees plus/minus is okay to do it. Well, you can only match the anatomy with the conventional needs that are out there, those other designs in about 40% of patients. So you may want to, but you can't. And if you want to match them to a larger proportion, you have to make cuts of the bone that were not known to be safe. We don't know. I think probably some of them are okay, but some of them probably aren't, and some of them aren't okay in patients because historically, we know that if you deviate from those guidelines, that especially in heavier patients, which a lot of patients are, you get failure. So we don't know that deviating is safe and the only way to match anatomy with the [indiscernible] is to deviate from that conventional way we do it.

If you look at LANDMARK, simply with doing it, the conventional way that we know is safe to do. It's just easy. It matches now. And again, if you take it and design like the average person to get to the bell shaped curve doesn't take very far. If you're designed like an outlier where people aren't symmetric, then it takes a big deviation to match all the anatomy. So I think the first goal matching anatomy, the second is respiration of that normal rotational motion. We think that, that will also make the knees feel more natural and function better. And in fact, we build on the proven technology of Journey II publications. This happens to be a publication by me, but there are publications literally 20 or more publications on Journey showing it has the most natural motion pattern of any need. What we did is combine that with the ease of use and the versatility of Legion and then built on that to make this a simple thing to restore that native rotational motion and natural motion pattern. Additionally, by doing that, we can optimize the Patella groove. By optimizing the Patella groove, we said, "Well, we want that groove to be good even if we modify those cuts a little bit. So that group is very forgiving. And not only is it in the right anatomic position to start with, it's forgiving for variations in alignment. So I think it has, by far, the most advanced Patella groove certainly in the industry. And if you look at this, what the other designs did basically because they were designed they wanted this rotational motion, they introduced the asymmetric plastic. So they didn't necessarily make that theme with the tibia. They took an existing fumer and said, "Well, let's make a plastic to make it. whereas Landmark was designed in conjunction.

The whole system was designed together with mating those 2 together to optimize that stability and rotational motion that we need to get. 3D printed technology. I've already alluded to this, 3D-printed technology, it's actually interesting because there's a picture bone and there's a picture of the 3D-printed titanium and they look pretty much the same. And that's part of what induces the bone to grow into it. And it's really been shown that there are fewer failures of 3D print and technology and really all contemporary ibis and patellas that are porous-coated or noncemented R 3D printed. But because the fees were designed in 2000 to 2013, they weren't, and they didn't change that other than sort of smaller niche products, they did not change the main femoral components. So they still rely on using older porous technology. So LANDMARK again, is the only need that is incorporated into the whole system, 3D printed technology for the entire system. The femur, the tibia, the patella, the entire system, which I think will eliminate some of these outlier failures that you do get in noncemented the arthroplasty.

So now we'll move on to robotics and talk a little bit about the history of robotics and how we got to where we are in robotics. Well, robotics first started in the 2000s really as navigation. It was just to guide you on how to do it. And then 2008, the Rio Robot, which ultimately became Mako was introduced. And it was a big advance. It was a first robotic platform that was really successful. It relied on the CT scanning, so you had to have a CT scan. It did have a Haptic saw/burr that you could use and though some of the limitations, it's still and to this day, still requires manual assessment of ligaments. In other words, you have a device that's accurate within a degree or so to make the bone cuts. But when I assess the ligaments the soft tissues, I literally tag on them. I say, I hold it and I pull on it one way or the other or stick a spoon. literally, a little spoon underneath to say is the ligament looser type, which is which we've shown and is, as you can imagine, in less than accurate because I might pull a little harder if I drank some more coffee or if I'm a big guy or what the days like how hard I'm going to tug on the leg. So that's a limitation of it.

And I would argue the biggest limitation is and I can't argue because in 2008, that was probably not a bad idea. It's a big truck in the OR. And so the big truck on the OR is a more and more problem as we go into ambulatory surgery and efficiency of surgery, which I'll go into. 2012, 2020, well, you had NAVIO. And NAVIO was a great innovation because it was handheld robotics. You actually had a robot that you held in your hand that could execute the plan that you designed on the computer. So that was a great innovation. The other thing that it has had the ability to map the bone and do it image free. So now you didn't have to get a CAT scan ahead of time you could map the bone accurately and do it in a -- without the added ability or requirement of getting a CT scan. As you know, it was acquired by Smith & Nephew, and then CORI came along in 2020, and it has been improved on an CORI XT. And those improvements included, you've heard some of them the ability to add a tensioner now to robotically and accurately measure the soft tissues and personalize the soft tissues. Additionally, the additions of if you want CT guided, you can do CT preplanning, you can do and develop the image from a CT or an MRI.

So the versatility of having an image diagnostic doesn't require you to have a CT. It could be image free is actually very useful and I suspect in Europe where you're much more cost constrained. And in the U.S., once you actually -- I have to like the preop planning with MRI or CT. But actually, once you do the image free, you say, well, gosh, it saves my office a bunch of time. So you find that you may even prefer that. And certainly having the versatility of all 3 CT, MRI and image free is the best of all. Well, on the robots came along, too. In fairness, we did have ROSA and you have [indiscernible] same truck, but didn't even do much of what -- it doesn't even have a cutting device. It does put a guide in front of the bone. So I would argue that that's a much more limited kind of platform. But in fact, they do share with Mako and having the large robot. And to give you this sort of visual, I thought this is a good way to describe the 2. The robot is in the orange of holding my hand. That's the CORI core robot. That is a robotic device that automatically will remove the bone. I'm going to show how it does that, okay? And it's doing the same thing as the Mako robot on the right has an arm with a saw on it or a burr on it. I have the burr in my hand, but it's robotically controlled, meaning turn on or off, go in out.

I'll show you. The ROSA rollout, which is equally -- it's actually as big as the make, and it doesn't even have anything to remove bone. It just puts a cutting guide, which I have to then take a saw and manually cut it. So the idea of having this small mobile device creates huge efficiency ergonomics. It's just -- it seems like that's a difference between a big brick phone or having your iPhone in your hand today, okay? So how this works, essentially, what you have is you have this robot in my hand, and the bird will come in and out, on and off and it comes out to the depth it needs to come out to. So if I'm doing this, that's me ruling the bone looking at the screen. I'm just waving my hand in front of the bone. In fact, it will come out to the depth. And if I push it in further, it's going to pull back. It's going to move exactly the bone and it has a bounded control which is, I would argue, an improvement on haptics because it just shuts off. It doesn't stop me from doing it just turns off. It pulls the bird back. If I go off the field where bonus foster move, it just pulls back, it's gone. So I can't move bone from bone. I'm not supposed to move. It won't end to soft tissues because it's going to disappear and shut off.

And so it allows me to remove exactly the amount of bone I'm going to move in a very expeditious fashion. So as I said, there are a multitude of things that I think are improvements, having the versatility of CT, MRI scans having the robotic tension. And as Mark said, there's an indication for primary total knee, [indiscernible] provision total knee, total hip replacement with CT guidance and total solar replacement and it's the only revision FDA approved in the U.S. This -- I think there's a good visual also about telling how the efficiency -- if I'm going to do a case, and I'm doing it either in the Ambular towards surgery or if I'm in a hospital, where I've got one room and I'm going into the other room, which is frequent. It's for efficiency, surgeons will get the one room prepped and ready when they finish the other room. They can go right into another room. And that's really the way that many efficient hospitals or most in the U.S. are going to do it. And I suspect a lot in Europe as well. And in fact, what has to happen if you're using a Mako robot is that robot has to get rolled into the room. It has to get that [indiscernible] -- all those arrays have to be put on and then it has to be registered. And that -- there's just no way about it. It takes time to do. And you talked about does it affect infection rates. Well, I'm not sure it does. We haven't shown robot has increased. Although I would more worry about when I have a truck revenue running in the room, from one room to the other and have to get it ready right away.

When we are doing CORI, each CORI, the card is where the brains are but the robots and the handpiece each cart comes with multiple handpieces. So when I go to the room, that's my ENG, rolling the card into the room, from one to the other, -- that's a pretty simple thing to do, then that repeat it's not in the surgical field. And the robot is my circle is not exactly right, but my robots already there on the table, okay? So that's already sit there. So I just walked in the room and I use it, they plug it in. And that to me is, I mean, obviously, a much more efficient setup and doesn't require the drain prepping that is necessary with the larger robotic trucks. You already saw this much more efficient as far as with LANDMARK and CORI, you have many fewer trays. So you just don't need to -- and that is crucial for the ambulatory surgery. Mike is going to talk about that. But they can't cook 10 baskets over and over during the day. Fewer instruments create efficiency and not only efficiency, the cost to sterilize in this and frankly, the cost of being around this for a long period of time, the cost of manufacturing, all those instruments, as developer scientists, I would always be frustrated because what limits you in innovating in the design of an implant, is often you built all these instruments, you can't change anything because the instruments are already built and the instruments are so expensive. So the more extra instruments you need, the more limits you are in future progress. So there are lots of reasons why having fewer instruments is a far for the system, the company and for the surgeon.

So in summary, LANDMARK as I hope I shared with you why I think it's the next evolution of knee orthos. It's the easiest need to restore natural anatomy, optimizes this for activities that our patients want to do. We've already shown we can reproduce natural motion patterns in the knee. It's the only new incorporated all the 3D printed technology. And I think that's really where the arthoplasty world is going. I think CORI obviously optimized for mobility, efficiency. He really -- it's shocking me that no one has using robotic tensioners -- there's one other that has come along, but none of the major companies have it. And I think that's see want to get all this accuracy in our bone cuts, but soft tissues are vitally important. So getting the accuracy and then with a robotic tension is so important. And as I mentioned, has the broad indications. So I think that's the next evolution.

We can do a couple of questions.

Thanks for that presentation, it was excellent. Could I just one on robots. If you think about over the last, say, like 15, 20 years, I get the sense ex the Mako, people would buy the robot from the company from which they were already buying most of their implants because you could use the robot for a portion, but not that many necessarily of your procedures. Do you think we've tip that over to the point where people will buy the best robot and adjust their implant behavior as a result? And do you think that makes a difference for because it is genuine?

I will say, actually, it's an interesting thing because I think for a bunch of years, people didn't like of trap on -- so they got the credit for doing it first. But I would be critical to them because they've sort of sat on their laurel for bit. They say, but they milked it. They milked that for a while, and they haven't improved. Like I would like why don't they have attention, don't tell them? I don't want them doing this. But it's crazy. They still -- literally, if you do a Mako case, your tug in on the need to assess the ligaments, it's crazy. If that is crazy when you have this sophisticated instrument to do the bone cuts and planning. That to me is nuts.

The other thing is I think they relied on their laurels [indiscernible] was an okay knee, but it's from 2006. Now they did improve with the noncement. That was an improvement. But that beamer literally is from 2006, and it was okay back then. But it's old. It does not incorporate the new technology. And that picture I showed you is real. That is just reality. It does not match natural anatomy. So if our current thinking, which is the current trend that's been on for over 5 years now is that matching an anatomy is good, and it makes sense. We're doing a resurfacing operation. So we want to reserve them, we realize that 20% or 15% of our patients are not happy. Well, some of them are probably not happy because we didn't restore their [indiscernible] properly. So that requires us to alter things to compromise in all sorts of ways. And like I said, but if you were selling all these robots and you sold your mediocre need them, they got buy. So I think the answer is having a robotic platform that is more forward thinking, that has more modern I think will, in fact, get people to convert.

And if you add that to a knee to the state-of-the-art, to me, that's a combo that really hasn't existed. So it's really, I think the synergy of the 2 is really what makes it. And that's why I think this is really exciting.

Dr. Haas, thank you so much. This is Veronika from Citi. Two questions for me. The first one is on Landmark. And obviously, the anatomical approach is unique. How receptive do you think your peers will be to that? And does it require a different surgical approach retraining? Is this something that folks are going to be super excited and want to use or they're going to say, "Oh, you know what, I've never done it this way. Maybe I'm just going to wait for a while.

And then my second question, I think I asked you this in New York, I'm going to ask again burr versus blade and how you think about CORI, how important the blade attachment is going forward in terms of driving better adoption?

Yes. Great question. The first one was the basically, they don't have to -- first of all, you don't have to modify the technique at all. Actually, interestingly enough, in many ways, it's actually easier. If you did it just the way if you did your knee, the way you did it before you worried about anatomic alignment, you'd match the anatomy perfectly in 40% of people because, again, it's based off average anatomy. So if you did nothing, you didn't even know it existed and just said, I'm going to do the old mechanically neutral way. you'll match in that mean 40% of people, which is -- get to halfway there, right?

And the way you actually -- if we incorporate this actually in CORI, you don't even know it exists. It's actually invisible. You just know that you're going to match -- we have the C packs on there. In other words, the alignment we have -- you have on the screen the alignment. And you'll see you match that line of 90% of the time, you don't know -- even have to know why you're doing it. You just say, "I want to match the anatomy and it dials it all in. So it's really seamless to do it. You don't even know what's happening. You just know -- and if you plugged in a symmetric me, like if you happen to put in, you went in and you said, "Well, I'm going to look at Legion, which is more traditional, right? You put a legion in UT weren't matching the name, right? So if you wanted to compare and someone to see it now if you ask it, there are screens that can tell you how you got there. But it's invisible. It's designed to be totally -- you don't know why it's happening, you just know you got there.

The burr [indiscernible]

Oh, the burr saw, yes. The burr,actually, that's another good question. I think the burr in fact, you are correct, I think this sign is the traditional way that people did it. I think burning for a limited amount of [indiscernible] so when you do a core, you have different options. The way I do it, CORI, because I like to saw the bone and when I do certain cuts. So I [indiscernible] right? That frankly, that the adoption of that would be pretty easy because that's really simple to do, and it's super fast.

Then I use a cutting block to cut the rest of the cuts. Because those cuts are really easy through a cutting block. The Tibia, you have the option of cutting the burn. I have to like to cut. So we recognize that there are people who like to cut. So you actually have a cut option for the tibia. And essentially, you use CORI to essentially guide you in how you make the cut. So I think we've resolved that objection to it for those who like to cut. We built a cutting option into it. In fact, that's the way I do it. And actually, the beauty is if you are not perfect, actually, we checked the cuts. And if you don't have to, but I do and you check the cuts. And sometimes our manual cuts can be a degree of -- and for that matter, if you look at it -- well, obviously, you'd have that with ROSA because you're just coming through a slot. And in Mako, if you look at the accuracy, you could be a degree or 2 of -- so in fact, I checked the cut and if it's a degree or too, which sometimes it is, I can take the burr when you use the bur,and this is kind of a new thing I call it the eraser because if you're just rubbing the wand on the tibia, it literally takes 30 seconds.

You rub the burr because it's going to come out and do it on its own. I just literally take it like an eraser and raise any little bit of bone away. It makes -- it literally is within a half degree accuracy. It's like incredibly accurate to do that. So I do that if I'm not -- if my cuts are not perfect, I sort of like that to be perfect. So I perfect as I can be. I'll take the bar and do that. And it's actually kind of need to watch it.

Okay. So I think there's more should be -- so I think we're running out of time. So maybe we'll have another opportunity to get Dr. Haas back on stage and ask the questions later. Thank you. Appreciate it.

Great session. Great questions as well. Thank you very much. Let's switch gears a little bit here now. So we heard from Dr. Haas his perspective on the evolution of both implant design and technology knee surgery. I trust it is clear to you how Smith & Nephew is working to build its differentiated value proposition for the future of knee surgery. The other significant trend we talked about was the shift in care from hospitals to ASCs. We talked about some of this, but understanding and serving the unique needs of this segment are paramount to future success. This is also an area where we have competitive advantage.

But before we get to that, let's review what makes the segment unique and so important. There are about over 4,000 ASCs in the U.S. performing some type of orthopedic or sports medicine procedures. Let's call them musculoskeletal procedures. These centers already have and will continue to see strong double-digit procedural growth as more surgeries move from multispecialty hospitals into dedicated outpatient settings. However, this ASC care setting is very different. The ORs are smaller with limited capacity for sterile reprocessing and storage. They usually operate with much leaner staffing models while opting for higher efficiency and throughput. Ongoing reimbursement changes, we know will continue to drive an even higher procedural uptake. With growing volumes and a focus on throughput, recent mandates also require these centers to maintain and report on their patient outcomes, a task that can be burdensome with these leaner operating models.

So as you can see, whether you're a surgeon or an ASC stakeholder, there is a fine balance across throughput, efficiency and outcomes that needs to be maintained constantly. At Smith & Nephew, we understand the business pressures and the ASC stakeholders face and have enhanced our commercial model to fully align with our customers' priorities. Smith & Nephew is partnering with ASCs to deliver value across the episode of care becoming far more than just an implant provider. Through procedural solutions across the full Smith & Nephew enterprise, robotic technology that's optimized for ASCs expanded strategic partnerships and access to unique insights and analytics, Smith & Nephew is positioned to be the partner of choice to help ASCs deliver their priorities of clinical, economic and patient outcomes. We maintain a higher procedural penetration across both hips and knees versus market and ASCs anyway.

But furthermore, in 2025, 40% of our cardio robotic units were deployed in ASCs in the U.S. This strong segment performance is really a function of our robotic form factor, which is aligned with ASC needs, our best-in-class tray configuration for efficiency and our unique ability to leverage in our sports medicine business, where we enjoy market-leading positions. Recently, we have revived our commercial model to serve our ASC customers even better and have forged some strategic partnerships that help ASCs unlock more value. I'll dive into each of these in a little more detail. Let's start with CORI. I said this earlier, and you heard this from Dr. Haas as well, CORI is the only robotic system handheld or otherwise that covers the knee procedural breadth all the way from partial total and revision knees. With the introduction of CORI shoulder earlier this year, and we'll hear from Dr. Clift about that. We expanded procedure coverage to include both REVERSE and anatomic shoulder arthroplasty. With CORI hip launching soon, CORI will become uniquely positioned to offer musculoskeletal-focused ASCs this flexibility to use the same robotic platform for multiple procedures.

And also remember that CORI is small footprint, it can be wheeled between ORs like Dr. Haas showed, with quick setup and turnaround time, something that ASCs really value. CORI's overall cost of ownership is also significantly lower than larger ARM-based robotics. All these factors combined, it's really no surprise that we deploy 40% of our cores in ASCs in the U.S. Given the recent CMS mandate, CMS is the center for Medicare and Medicaid services in the U.S. They've had a recent mandate for ASCs to report on patient outcomes for every case, and we have fought some unique partnerships to help enable this. Not only do our strategic partners facilitate patient outcome reporting, but they also drive improved patient engagement and compliance across the episode of care. We also offer ASC's actionable analytics and optimize performance with real-time metrics and connectivity across multiple reporting systems. Lastly and most importantly, these partnerships have generated clinical and health economic data across the patient journey, which will ultimately help us personalize these pathways for patients and ASE stakeholders.

Beyond the attractive form factor and procedural breadth of CORI, we -- I mentioned this earlier as well, we will have the best-in-class tray configuration for all our flagship brands across knees, hips and shoulders. So LANDMARK, Catalyst Tem and ATOS. This really matters in ASCs, but OR space sterile reprocessing space and staffing are all constrained and designed to maximize throughput and efficiency. Compared to the competition, our knee and hip platforms will offer up to a 50% reduction in OR trays, while our ATOS platform, and you'll hear more about this, will offer up to a 70% reduction. This is a result of deliberate design choices we have made to ensure we offer the leanest configurations without compromising on intra up surgical options. As I mentioned earlier, there are close to 4,000 ASCs in the U.S. that perform some sort of muscular skeletal procedures. Out of these 4,000, over 60% perform both sports medicine and orthopedic procedures. And this is where our combined portfolio really shines. Whether it's knee hip or shoulder arthroplasty or knee hip or shoulder soft tissue repair, we have unique and clinically differentiated offerings across both as you heard from Christine, Dr. Ranova on the sports side earlier. Our Sports Medicine business also carries capital with unique technologies like TESSA, which we will be able to offer to over 60% of these ASCs.

All the portfolio technology and partnership capabilities are underpinned by one thing, and that is our commercial model that drives relentless focus towards our ASC stakeholders. Over the last few months, we have reshaped our model with new leadership and a dedicated ACT. We are continuing to build flexible deployment models and other partnerships that will help us deliver enhanced turnkey solutions for musculoskeletal-focused ASCs. In summary, Smith & Nephew is uniquely positioned to meet the needs of this ASC segment through its enterprise portfolio strength, differentiated technology, strategic partnerships and a dedicated ASC organizational structure. I'm also really excited about our future in this space. With that, I would now like to introduce Dr. Mike Ast, who is also from HSS. Besides being the chief of knee service at HSS, Dr. Ast is also the Director of ASC strategy at the Hospital for Special Surgery and their Chief Medical Innovation Officer. Dr. Ast will share with us his perspective on the ASC segment and how he sees it evolving in the future. Dr. Ast please.

[indiscernible] In what we do, right? So it's always hard to know exactly how interesting the rest of the world finds what we do, but it's nice to see at least a few of you than its as cool as we do. So as Mike said, my name is Mike Ast. I'm a hip and knee replacement surgeon from HSS. And I'm not going to talk to you at all about hip replacements. Instead, what we're going to talk about is sort of way that health care systems are changing across the world. And I know that ASCs are an extremely United States-focused concept, but I would argue that our existence and the world of ASCs in the United States translates a lot to the global health care economy. And there are actually a lot of synergies and parallels between more nationalized health care systems and what we have seen successful in the U.S. and why there's a lot of lessons learned in the ASC that will translate to the global market.

I mean we're already seeing some of that as you move around. This is a picture of one of our ASCs, just that's the fun one because it's set sports medicine, and that's where all the famous athletes get their treatment. But I'm lucky enough that I work in actually 1 of our other ASCs and what makes me so lucky is that I get to partner with Dr. Renaat, which is why they're both -- they are so mad at us today because both of us are supposed to be there operating today, and instead we're here with you, great folks. So the world of outpatient arthroplasty the concept of having a hip or your replacement and going home on the same day has rapidly accelerated over the last couple of years. I started my personal journey on this in 2013. So I am one of the sort of people who've been in this the longest I've been doing same-day discharge from ambulatory surgery centers and hit an e replacement for about 13 years now. But in the United States, a variety of factors have caused us to move a lot of our hip and year replacements from the inpatient space to what we call the outpatient space.

That's either a same-day discharge from a hospital or from an ambulatory surgery center, for new replacements, you can see based on this graph, that happened just around 2021 for hip replacements, that happened about a year later, but more than half of the hip and knee replacements done in the United States are done in an outpatient setting, meaning in a setting where patients are staying for shorter amounts of times and oftentimes not even going to a hospital.

We saw a little bit of this, but this is the classic -- I don't need to explain a consultant McKinsey slide to a group of investors, but this is that understanding of how that market affects the health care system in the United States where ambulatory surgery centers are one of the fastest growing markets in health care with double-digit continued growth over the last couple of years and an over $12 billion market value.

This is an interesting map because as we heard from Mayank, about 4,000 ASCs in the United States to do things like musculoskeletal care. This is a map of the ASCs doing hip and knee replacements, right? So this is just general muscular skeleton care. This is in sports medicine. This is specifically those doing multiple types of joint replacement procedures in there, and it goes directly to the question that was asked earlier, is there ever a point at which the technology becomes so differentiated. It helps make the sale. And the answer is absolutely because when you are doing both hips and knees and potentially shoulders, you don't want to buy 7 different robots to accomplish that, and it becomes a very different conversation.

The really interesting part about this is, number one, it shows you the disparity of health care in the United States, where the middle of our country has a dramatically -- has dramatically less access than other parts of the country and an access issue expands beyond the United States to many global health care systems where access is more important than necessarily cost or outcomes, just trying to get more access with less resources.

I can also tell you that if I showed you this map 5 years ago, there would be maybe 11 dots. And if I showed you 10 years ago, there'd be 3 dots, right? There'd be one in Chicago, there'd be mine in New Jersey and there would be another one in New York. That be it, it'd be 3 dots 10 years ago. There's now 574 as of last May, I just looked it up just to try to be as up-to-date as it can. There's 603 ambulatory surgery centers in the United States doing multiple types of joint replacement procedures as of earlier this year.

This is the fastest-growing segment in the U.S. health care market and the lessons learned translate across the global markets because if you look in the global markets, we may not be using the term ambulatory surgery center or day surgery center, but we are still focusing on the same important topics. How do we do more with less, how do we become more efficient and how do we utilize our health care resources in a way to get more patients care sooner.

We heard it from Dr. [ Rana ] this morning that the challenge of meniscal repairs in some of the health care systems around the country is that the patient doesn't get surgery for 2 years and 2 years is too late. We know that health care systems around the world are working to decrease wait times, increase capacity and yet not spend more money. So if you look at the penetration of ASCs, it remains low to moderate in most of the health care systems around the world, but if you look at outpatient growth, the concept of simply trying to utilize fewer resources for the same thing, we're actually seeing moderate to even high growth in a lot of markets around the world.

And that's because what keeps global health care leaders up is no different than the things that drove us to ambulatory service centers in the United States. It's long waiting lists. It's workforce shortages, right? We need to do more with less -- it's bed shortages and it's an aging population utilizing more health care resources in a very different way than they did 20 or 30 years ago when we started doing joint replacements. And this is not, as I said, a uniquely American problem.

This is right out of the NHS where reforming elective care for patients is an absolute priority of the U.K. system where their goal is to get 92% of patients to the operating room within 18 weeks, a goal that we are not yet achieving in the United Kingdom. The National Audit Office put out this came out earlier last year that their surgical transformation goals are to create surgical centers that are more efficient and more focused so that they can provide more efficient care, more efficient utilization of resources.

What does that sound to you like? It sounds like an ambulatory surgery center, right? This sounds like the United States concept of an ambulator surgery center. So while we talk about ASCs as a uniquely American thing and some of the drivers of ASCs like the financial incentives we see surgeons partner with their ASCs to achieve the goals are a great lesson for the rest of the world and for the global market that Smith & Nephew addresses.

And we know that the wins we see in the ASC market in the United States will translate to larger global wins in the future. because when you're the NHS and you've got a fixed amount of money to spend and you do a traditional joint replacement with 100 arthroplasty beds, you can do 1,000 cases a year. If you can take that length of stay and transition to outpatient arthroplasty those same beds, those same resources can now do almost 3,600 arthroplasties.

So you can over triple your ability to care for patients and your access to care simply by modernizing the way we deliver care and learning the lessons of the ASCs. So again, those long wait lists can be addressed by more procedures per operating room, those capacity constraints because we have less dependence on inpatient beds workforce shortages are addressed with a significantly more efficient utilization of nursing resources and you get a scalable care delivery model that allows you to bring more care to patients as they age.

And so this is why the ASC market may feel unique in the U.S., but it's actually a global consideration. But in the U.S., the ASC has a variety of challenges, right, of variety, both headwinds and tailwinds and the tailwinds we've heard, right? More surgeries are being paid in an outpatient way, so it's helping us shift more to the ASC

There's this concept being discussed in Congress in the United States called site neutrality, where every single site is going to get paid exactly the same. Doesn't matter if you're in a hospital in ASC, therefore, a significantly more cost-efficient and cost-effective side of service like an ASC becomes a huge win. There was this introduction of something called the No Pain Act, which helped us pay for some of the resources we need to be able to get patients out a bit more quickly. And I think that was very helpful.

And then a variety of other considerations you see here on the screen that help us understand why ASCs have become so popular. But they've got headwinds to prompts reporting, as Mayank alluded to earlier, is a challenge in a resource-constrained situation like an ASC. We don't have a lot of extra people to do a lot of this extra work.

At HSS, we have entire departments of people just calling patients to get these patient-reported outcomes to achieve the mandatory reporting from the government, the ASC doesn't have any of that stuff, right? They don't have people to do that and so partnerships with our under partners really make that possible.

Push to value-based care in the United States has been talked about for a long time, but the mandates are now humming, right? A full country mandated bundle for hip and knee replacements on its way called CJRX. It will be next year. This will be a huge push to the surgery centers to try to control costs, right? Issues we have with our insurance companies always are a problem for anybody. But the more we restrain resources, the harder it is for us. And then platform consolidation, like the large consolidation of major health care systems in the United States has driven some pros and cons in the world of ASCs.

But I think the most important thing to understand whether you're talking about United States, ASC or the increased utilization of resources and trying to improve access to care around the world is to understand what makes that ASC different and nothing will ever explain the difference between an ASC in a hospital like this picture right here. You never think a picture is worth a thousand words. This picture is worth $10 million.

So this is my first ASC where I worked. This is a real photo -- it's a real surgical photo, I'm going to explain a few things about it. Number one, this is a wall-to-wall picture. So the average operating room in a hospital that does joint in place is about 600 square feet. This room 358 square feet, just barely half of it. right? This is the entire room. Also, you're looking at the entire staff. The nurse is taking the picture.

You see Ben in the back, his back is to us. He's our anesthesiologist on the right side, that's Dan, that's my PA on the left, that's at least my surgical tech. On the table, and the reason I'm allowed to show all of these, is that's my other PAs dad. So the patient is my other PAs father. So he's the one who lose to use this picture all around the world, and I use it all time.

But let's look at a couple of unique things. Number one, as I said, really, really tiny. Number two, not a lot of extra people. But the most important part of the picture, I want you to look at the lights on the surgical field. If you look, there are -- like in every operating like attached to the ceiling that we move around, does anyone notice where those lights are pointed? The back corner of the room, right, they're not even on the surgical bed -- why is that? Well, because they were broken. And in a surgery center, we just did the math. It was cheaper to rent this portable light sticking over the side of Dan's head than it wants to fix the lights in the ceiling.

In the hospital, if a single light bulb goes out between cases, I walk to the administrators and I tell them I'm canceling the rest of my day if that white bulk isn't changed by the time I next surgery starts. And by the way, it's still better not slow down my turnover. I don't want to wait for it. I just want to make sure it's done before I start.

In my surgery center, I say, lights, who needs lights? It's fine. We'll rent another more, I think over the side. I won't be able to see. I don't really care. It's a completely different way you think about utilizing resources when you start to constrain the resources and have a good reason to do so in this surgery centers because I owned it. So fixing those lights came out of my pocket, as I still do today.

In the NHS, it's because we're out of money. And so we need to spend less and do more and make decisions that way. And I think that's why you understand the unique patient population room size sterilization and cash flow, it is a different world when you transition to the world in ASCs. So what do ASCs need? They don't need a supplier, you can buy supplies from anywhere.

What ASCs need, ASCs need an enabler. They need someone who can help us achieve what we need to achieve using the right amount of resources at the right time for the right patient, right, an enabler. That's the key. So we need to limit variability because we don't have enough staff and so that staff needs to be very good because they need to move very efficiently. And our goal at our hospital is let's try to get 2 or maybe 3 surgeries done in this room this day.

In my surgery center, I want 10. I want 3x as much production from 1/3 as much staff. And guess what, we are very good at achieving it. We achieve it almost every time. And there are examples of -- surgery centers in the United States that are as efficient in a day as our hospitals are in a month using less resources and less time. We also need more unique things from our partners. As Mayank alluded to, we need help in getting these problems and being more efficient. These are just 2 examples of technology. Interestingly, these technologies aren't about patient reported outcomes. The one on the bottom left, this is a technology for operating room operational management.

How are we managing our block time. How many cases are we doing? How is our turnover going? Tracking patients throughout the day because we don't have someone to sit with them the whole time. So we can tag them electronically, and we can use technology to focus on that episode of care. On the top right, the one you never talk about when you're a surgeon at a hospital, what you really talk about when you're a surgeon at a surgery center, that's the financial performance of my surgery center yesterday, right? On a day-to-day basis, on a beat by beat basis, understanding your financial operational metrics are critical when you're trying to drive super high levels of efficiency.

And this is actually where Smith & Nephew leads, right? This is where Smith & Nephew has the absolute advantage. This is Corey as we've seen over and over again. But what is this? This is Cory in my operating room, so same operating room, this one's our bigger one. This owns 410 square feet. So this is our massive operating room still 2/3 the size of the one at the hospital. But I -- this is the same surgery. I took the entire robot, and I moved it around the surgical field for one side together, and you can see the back of my PA closing sort of the same position you saw them in the other case, right?

And so I can move it within the room while the surgery is going on without breaking sterile technique without worrying about the constraints of the size of the room, absolutely ideal for the ASC because of size, but mostly because of procedural breadth. By the time that hip is launched, we will be able to use this exact same appropriately sized robot for partial needs, total knees, revision needs, total hips and total shoulders, all of which we do at my ASC, all of which we do not have the space or capital capacity to buy a different robot for each one. And so in significant decisions are guided by that procedural breadth.

And then what's next, obviously, we've heard about Landmark implants and implant systems optimized for the fact that we just don't have as many sterilizers in the ASC as we do in the hospital. And as you start to specialize your care delivery centers, whether they're ASCs or specialized hospitals, you need to improve efficiency by improving consistency and minimizing waste and trays.

And like I said, the future of Cory with the introduction of hip and shoulder, which you can see in the product call next or it's actually the first time I've seen them show the hip in a product theater. So congratulations. I think you are group #1 to see that outside of the lab, very, very exciting technology and something I can't wait to use next year.

The right to win is very simple for Smith & Nephew actually, right? It's arguably the largest ASC footprint of any of the major orthopedic companies that are competing in this space because of their leading market position in sports. Because a meal is doing sports cases in the room right next door to where I'm doing joint cases, right? It's the same team, the same people, the best-in-class robotics for the ASC as we talked about the minimal trades associated with both Catalyst Stem and Landmark, all of the newest systems being tailored to higher efficiency with less resource utilization and then data management partnerships that can help me solve the problems I actually have, especially associated with new government mandates for our ASC. And that's why I say, put all those things together, you look at Smith & Nephew. When we look at Smith & Nephew certainly Dr. Rana and I, owners of our ASC who are making these decisions look to Smith & Nephew as our partner of choice. Thank you

Thank you of that. Maybe we can have again a shortened Q&A session. We'll have another opportunity to get Dr. Als, Dr. Hasback on the stage. So yes, please.

Maybe just on the shift from hospitals to ASCs. Ultimately, does it actually create any more in the hips or knees that need to be done? Because it just looks to me like unless there is some untapped supply and there's a massive backlog, are just moving one site to another, which is great for the system, but I'm just thinking in terms of total volumes because presumably over time with price, the ASCs are particularly chosen because Medicare pays a lower price. And I can imagine you over time, as they go up the patient curve in terms of severity, you might also, in turn, have additional costs and therefore, try and find a way to will lead those costs elsewhere. So I'm just trying to understand from a market perspective, does it actually untap a pool of patients that weren't already there?

Yes. I think it's really interesting. We always Think about it as a somewhat finite supply like eventually, you're just going to run out of patients. And when you think about sort of at the surface level, I agree with you, it's sort of we're just taking the patients that we would have done some are doing them somewhere else, maybe getting them in sooner, but eventually, you're going to run out.

The one interesting thing we learned about the ASC market, which I don't know how all that translates outside of the United States, but there is a significant -- there are a significant number of patients, especially since COVID, who are actually very afraid of the hospital. And especially in some markets like some of our smaller markets, the local hospital is where mom and dad went to die. And so nobody wants to go there for elective care. And we saw an enormous influx of patients who said, I was never going to get a hip or knee replacement because I will never go to the hospital unless I'm having a heart attack. I'm not going to that place. That's a bad place, right? Sick model of care.

And now you tell me I can come to this day center where I had my carpal tunnel done a few years ago, and it was like, no big deal, and I loved it. I can get a hip or knee replacement. And so I actually think there is -- now, I'm not saying this is a massive market, but there is an additional market opened up by moving out of the hospital that I think we didn't -- I certainly haven't planned it that way. I didn't recognize it early, but I have seen it pretty consistently over the last 10 years and much more consistently in the last 5 where these patients who simply did not want such a big surgery that it needed a hospital and are very, very comfortable now that it's not such a big surgery even though I'll tell you exactly the same thing.

More questions? Okay. If not, thank you very much, Dr. Als. Thank you.

All right. Good morning, everyone. Thank you for having me here in London. I'm Scott Gunn, Vice President of U.S. Commercial Marketing for Trauma, Extremities and shoulder at Smith & Nephew.

Today, I'm going to spend some time about 10 minutes on one simple idea, shoulder arthroplasty is transforming fast, and Smith & Nephew is building a platform designed to lead in the next phase of this growth. Over the past decade, shoulder arthroplasty has undergone a profound transformation.

Today, it's a $2 billion segment. and it's growing roughly 9% with strong momentum in the U.S. That growth is being driven by a few big forces: first, expanded clinical indications and aging populations. Second, the continued rise of reverse shoulder arthroplasty.

Reverse has grown from roughly 29% to over 70% in cases in recent years. And third, technology innovation, 3D imaging preplanning software and robotics are shaping how shoulder procedures are performed. What's important to understand is it's not just that the market is growing, but how value is being created. We're seeing an ecosystem shift towards software integration, workflow inefficiencies, workflow efficiencies and outpatient care models that enhance overall treatment value.

Let's anchor on that clinical landscape for a moment. Shoulder arthroplasty spans a broad range of pathology, so versatility matters. On the anatomic side, procedures commonly address [ glenohemorol ] arthritis, inflammatory arthritis, avascular necrosis and post-traumatic arthritis, where the rotator cuff is healthy.

On the reverse side, we're reversing the ball and socket mechanism in the absence of a healthy rotator cuff and treating more complex cases. Rotator cuff arthropathy, massive irreparable tears, complex proximal [ hemofrecsures ] and severe bone loss.

So the takeaway is straightforward. This is a market that demands increasingly demands precision options and the ability to perform across wide range of anatomies and indications. So here's how Smith & Nephew has approached this. Our shoulder journey has been deliberate, building step by step from acquisition of the Integra LifeSciences orthopedic business to implant designs to 3D planning to integrate enabling technology.

You see that evolution from Titan supported by total shoulder, reverse shoulder and fracture to planning tools like Atlas Plan and then to Atos, including stemless and expanded sizing. And now that innovation at culminates in a modern platform centered on 2 key pillars: the [ ato ] shoulder system and Corey Shoulder.

This is the foundation for how we compete, not only implants, but with integrated solutions that fit where the market is going. So what's changing in the OR and the site of care. We see 3 major trends. First, surgeons are increasingly focused on bone preservation, revision options and reducing risks like stress shielding, driving a shift towards short stem and stemless approaches.

Second, there's rising demand for efficiency in the OR, higher throughput, less storage and sterilization and a continued shift to ambulatory surgery centers. And third, we're seeing rapid adoption of technology in advanced materials, more pre-op planning, more personalized execution through robotics and mixed reality. And the common thread across all 3 is this. The market is moving towards a more personalized surgical approach with more intra-op data and a clearer link between execution and functional outcomes.

Let me bring that to life with Atos. Atos is designed around what we describe as elegant design and elevated experience. At the core is a design-driven bone engagement to load and preserve bone. The system uses a cruciform design intended to provide rotational stability advantages, particularly in osteoporotic bone, linking stability to engagement of higher-density bone.

Now performance is essential. But in today's environment, system efficiency is also a competitive weapon. Atos is a single shoulder platform supporting medistem, stemless, anatomic total shoulder and reverse total shoulder with a design that supports workflow consistency and practical intraoperative flexibility. And the operational benefits are meaningful.

Compared to other systems, Atos delivers a reported 67% reduction in implant inventory, 70% reduction in trays, along with a significant reduction -- and that matters because it directly impacts reprocessing, storage, staffing burden and the ability to scale in outpatient settings.

Now the second pillar is Corey Shoulder, our handheld robotic approach to shoulder orthoplasty. The concept is simple, data-driven decision-making through preop planning and precise intraoperative execution. On the front end, we support CT-based 3D shoulder planning. And in the OR, Corey shoulders intended to enable execution for both anatomic and reverse across humoral and glenoid preparation.

Importantly, this is not just about a single case. It's about building a learning system where surgeons can analyze insights and apply learnings from past cases to perform and refine over time. So the value proposition is simple. Precision, reproducibility and personalization at scale.

Now when we talk about robotics, access and practicality are important. One point of differentiation here is form factor. Corey Shoulder is positioned as handheld and portable in contrast to large robotic systems, supporting an ASC fit profile and a simpler footprint. Another differentiator is procedural coverage. This is positioned to -- tumors plus the glenoid execution in both anatomic plus reverse shoulder workflows. And finally, adoption matters, a robotics approach that keeps the workflow close to manual instrumentation can support a more manageable learning curve.

Let me close by stepping back to the full portfolio. What we're building is a simple and powerful shoulder portfolio. We're advanced biomechanics with tendency, proven biologics with [ REGENITIN ] and innovative technologies combined to improve outcomes. With arthroplasty and the launch of Atos in 2024, with anatomic and reverse and stemless option. This positions us for high-growth shoulder replacement segment, and Corey Shoulder extends our handhold robotics opportunity into shoulder replacement.

So the headline is Smith & Nephew is pursuing growth by offering a broad clinically relevant shoulder portfolio, spanning repair and replacement supported by enabling technology that aligns with where the market is going.

So to bring this to life through a clinical lens, it's my pleasure to introduce Dr. Christopher Klifto from Duke University. Dr. Klifto is an associate professor of Orthopedic Surgery at the University of Duke school of medicine and specialized in shoulder joint replacement surgeries, including reverse total shoulder, anatomic shoulder arthroplasty and hemishoulder autoplasty. Today, he'll speak about recent trends and advances in shoulder surgery, including the development of Smith & Nephew's Atos shoulder system and Corey Shoulder. His perspective will connect innovation to what matters most and how these advances support surgeons and improve outcomes for our patients. So please join me in welcoming Dr. Christopher Klifto.

All right. Awesome. Well, first of all, thank you for having me. This is actually the first time I've been in one really Mike and Scott were also first time we've been London. So we had a proper day together. We yesterday went to Buckham Palace, which was great. We did all the stuff that we thought we should do. We went to Chinatown, of course, why not.

Mike apparently doesn't have a tie, so we had to go shopping for him. This is his first tie ever, which is great. And then we went to a pub, which was awesome. And then we wanted to have a really great local dinner, so we want to submit the wonky. So I think we crushed it.

All right. Anyway, so I'm going to talk about Smith & Nephew shoulder landscape in changing innovation. And truthfully, this has totally changed my practice parting with Smith & Nephew because the investments that we've made, I feel like have really changed my patient's lives. I want to go over that. So quickly about me. I'm an orthopedic surgeon. I grow -- affiliate. I don't know any of you know what Philadelphia is like, but it's a blue colored gritty town, and this is actually our mascot gritty -- and this is how our fans get ready for games. And every single game, he essentially commits a felony. He beats up the opposing mass got and then frozen off the balcony. So it's fine.

Then, I've been at Duke for the last 9 years, and we're a rabid fan base there, too, but we have a little bit different way to cycle out our opponents. This is a guy named Speedo guy, and this is how he tries to get players on the opposite team to miss fall shot. So a little bit of a different way to do it, but so -- talking about.

And most importantly yes -- end of the presentation, I just stop there, right? So but most importantly, I'm a shoulder geek. And the reason why I love shoulders so much is, yes, I have the opportunity to care for a patient from their entire continuum of shoulder health. I see them from healthy shoulders, maybe throwing athletes all the way to rotary cuff repairs all the way to reversal -- plasties. -- it's extremely rewarding. But what keeps me up at night? I have a 5-year-old and I'm trying to figure out ways how to keep around the jail. She just walks around and shoots things all day. And she does it always in -- teather, which I can't figure out, but I got to keep route somehow. But also how to improve the outcomes of my patients with shore pathology.

And there are 2 main problems, at least when I think about it as far as how we're going to solve the shoulder world. One is to I'mprove rotary -- and Chris, you talked about a lot, their outcomes are just not good. There's not another procedure that we do in orthopedics that we're okay with a 30% failure rate, like, okay, we're just going to keep going. And then also, patients hate extended mobilization. So we have to solve that problem.

And then the other thing is how we're going to perfect shoulder arthroplasties because I'm going to have some data here. We're just not that good and very -- and low-volume surgeons do a lot of these, so we have to figure out ways to improve our outcomes. -- as Chris talked about, we have a 30% failure rate of retailers. This is after a large system at reviews. And we know that if their patients have a retair, they have worse patient reported outcomes, higher pain scores and reduced range of motion.

So these are things that we have to figure out how to solve on the front end. And there are 2 main types of retailers that we're trying to prevent. And this is going to make sense kind of at the end when we go over the products, but there's this type 1, which is a tariff of footprint. And this is when essentially the -- of the bone that we repaired. And then there's the type 2 tear, which is more medium. So this is where the stutters kind of come through and it tears at the muscle tendon interface. And we have to have different solutions for both of these. So this is a typical patient. I just did this guide 4 weeks ago. So he's tennis player, he has pain -- the x-ray show minimal arthritis here. But you can see on the bottom right side for -- this who are nonclinical. And that is a massive rotary cuff there I think a lot of people will say it is 77, may we show a shoulder placement on this person.

But he comes in and says, I don't want a shoulder replacement. I want to have my full-range motion for tennis, I want to have to deal with the complications of arthroplasties. So please try a rotator cuff repair. So probably why Dr. [ Radio ] has stopped doing shoulder very smart, by the way. That's -- but these used to be extremely hard repairs. We would do convergence cisions, which means we bring the kind of together more, we do 2 double row repairs, tie anterior posture, 8 sutures. You can see the sutures everywhere. It's extremely challenging. This would take over an hour to do. And this is why a lot of people stop doing shoulder and why a lot of failures occur because it's just so challenging.

So that was the current state. You have these multiple anchors, suture passers. But as Chris talked about -- now we have tendency. And the beautiful thing about tendency is that this is a repair that is potentially 2x stronger. And why is that important if it's 2x stronger, then there's a chance that patients don't have to have sling use because the repair is stronger than the active contraction of the rotary cuff. And that is a paradigm-shifting technology if that's true and the less procedural steps.

So this -- I did this case 4 weeks ago, I was look enough to get tendency on the earlier side. But -- this is, again, we do a small reduction with one anchor and you can see that brings us massive cuff over. And the beautiful thing about tendency is you have 1 portal so that apparatus comes in through a superior aspect of the cuff. And it's this link construct and it's amazingly fast and easy to use these multiple punches and instead of having suture everywhere. It's a very streamlined, easy procedure to do. And this procedure, which would normally take me over an hour to do, took me 20 minutes. And this is using REGENETEN.

So the beautiful thing about tenancy and REGENETEN is that the tendency is able to hopefully prevent these type 1 tariffs. And then you could use REGENETEN, which is a biologic that could actually prevent these type 2 tariffs. So there's a theory that we have, all the things that we need in our toolbox now to prevent retailers as a continuum. So this is just my early experience of tendency. It's unbelievable. These are my first 11 cases. My average time to fix a rotary cuff has been 14 minutes, which is just so fast compared to a pretty fast surging like admittedly.

My best time has been 7 minutes. That's essentially how long it takes to a carpal tunnel now. So like this is changing how we do rotary cuff repairs, which has been truly remarkable for my practice.

And then we also have REGENETEN, which is a bioinductive implant which could actually improve the tendon quality after we fix these with tenasene. So you can see at 5 weeks, 3 months, 6 months, you have a ton tendon that's pathologic. And with the augment here, it becomes almost a normal tendency even thicker, which is awesome. There's been plenty stating that this decreases retail rates. And with these massive cuff tears like this patient, it essentially has a 96% healing rate, which is just remarkable for patients that have over a 30% failure rate with standard cuff repairs.

But the next critical question is, some of these patients do develop arthritis, some of these patients do need arthroplasty. So how do we address this problem? And the things that I try and think about are scapulothoracic motion, so I'll talk about the second, surgical execution and how do we make this applicable to low-volume surgeons. I only 20 -- if people are doing less than 20 per year on average, we have to make this so they're able to be the person -- dose 400 per year. We have to have innovative techniques with improved efficiency and new approaches that I'll talk about in a second.

And Mike beautifully talked about the ASC transition, so I won't talk about that as much, but having trade reductions in smaller footprints are going to be a big deal for us. And what I use for this is the ATO system with Corey and Coreograph and it's been a game changer for my practice. The Ato system is a nice streamline system. And then you have coreograph, which, in my opinion, is one of the best plants out there. And then Corey, like we talked about for hip this is a for shoulder, I'm going to show you why.

So one of the issues that we have when we're counseling our patients is we don't know what to tell them what their post-operation -- motion is going to be. And the reason for this is most of the planners out there right now, only map [ glenohemrol ] motion, and that's only 2/3 of the motion of the shoulder. So patients who come in with a virtual arthroplasty, they want to know, can I do things like comb my hair? Can I put luggage up on a plane? And we don't know what the right answer is.

But with this technology, which is unique to Smith & Nephew, is that we don't have the ability to map with scalp for motion it does. And this has been a game changer for me because now I'm able to see where the impingement points are, when not only the glenohemo joint moves, but when the scapula moves. So I could change intraoperatively my execution to give them what they care about most. And we know from looking at all arthroplasties that one of the most, if not the most common reason for revisions is now positioned of components.

So if you look at this study right here -- position, humoral malposition is a huge reason why patients need revisions. So we had to come up with a solution that is not only good for reverses for anatomics, but had before the glenoid and the humorous. And this is unique to Smith & Nephew along the birth technology.

So this is how it works if you haven't seen it. And you asked a great question, like is the bird good for hips and knees maybe I can speak on that, but I'll tell you what it is, what has to happen for shoulders. You can see the shoulder is a very small space. You have only a little area and you can't get a solid there for the glenoid and the humorous. So this is -- I used this technique that Mike taught me where essentially we do with the tibia. We burn we then use salt for intraoperative speed. And then we use the end the bird to kind of refine make it accurate.

And then see how small that space is for the shoulder for the glen oil. Like if you had a big saw, you physically can't do it. And this is why it's such a great application for shoulders. And then we also have this post-opera assessment tool. So like Steve was talking about, there's a tension of the need, but now we have attention to the shoulder. So it's an awesome application that has totally changed my practice.

This is my second patient I ever did. I can't make an x-ray look better than that. And manually, that is just as good as I'm going to show it a glamor shot, is what it is. But this is her at 6 weeks. I mean these are outcomes that I haven't been able to get manually and she's so happy. And this was due to the technology that smith & Nephew has given me. So we're truly changing our patients' lives with this technology.

And I talked about anatomics, so for those of you who aren't familiar with the shoulder world, we're trending away from anatomics, because, frankly, we're just not very good at them. it has soft tissue balancing. If you overstuff the components and they fail quickly. So there's something called the perfect circle method. So if you draw a circle around the medial aspect of your implant it should hit the edge of humorous on the lateral metal side. And you can see that's spot on. This was just done with robotic application.

So I think that we actually meet change the landscape with this technology back to anatomics, and maybe the tennis player who wants more range of motion who won't get at arthroplasty because he doesn't want to give that up and Thomas may be able to give him that. So he may get the arthroplasty quicker.

And this is just another case. This is on the bottom left side, that's a glenoid that if I have my pin placement at all inaccurate, this is going to fail and the base plan won't be stable. But using robotics, as you get x-ray that looks like this, which again is awesome that I probably would have messed up if I didn't have a robotic application. So this is my learning curve, and this is data that we are assuming for publication.

I had no Corey experience whatsoever. I'm not a core user. I'm not a hip and knee user. So I started this. Mike taught me what to do in the lab. We're working on it. It took me 12 cases to almost get to where I was with manual. I'm still downtrending. So for someone who doesn't use Corey at all, the application, the usability is just so easy. So one of the other cool things that we did this was the first in the world the other day, we're trying to move to more MIS type approaches. And this is -- and in the shoulder world, that's subcap sparing.

So what that means is we go in between the super spatus and the subscapularus, and we work in a very small space. And it's extremely hard to do. But we have a robot that allows you to do this. We did the entire case working through that small interval just because CORI is made for shoulder arthroplasty. And you can see we're working through that small [indiscernible], and it's actually able to do the case with a robot subscap sparring sparing, which has been just unbelievable, and no sling need for these patients, which is great.

And then the question is Mike talked about intraoperative execution accuracy, how that decreases turnover time, how that increases efficiency. This is my data showing that we've been 12% more accurate predicting every single part of the arthroplasty, the stem, the glenoid, the screws. So my team essentially lays the implants on the back table, and I use them the majority of time, which has been unbelievable.

So how does this apply to the ASC? Well, if we're able to increase efficiency, we decrease cost. If we have, like Scott talked about, less trays and we have increased intraoperative efficiency, then we have more value to ASCs, which is why we're going to succeed there. But also our footprint is so small. Like Mike was showing, the CORI robot is, like I said, made for shoulders. You can move it around the shoulder, you could go from left to right, which is a little bit unique to shoulders and the footprint is so small, it's a small bur. And not only that, I run 2 rooms as well. We're able to move the robot back and forth, which other robots can't do, which has been awesome.

So my residents call me coach. I don't know why because I guess Coach K. So this is Coach K, who's the old coach for Duke. And I do yellow them like he is here, so maybe that's where it comes from. But these are my first 50 cases with CORI robotics. Objectively, the X-rays almost match the plan every single time. Each case is getting faster. I've done 12 -- were 12 cases to get proficient and I had downtrending times. And most importantly, there's been no major complications for someone who didn't know how to use CORI before.

So lastly, bringing this all together, this is a case I did a couple of weeks ago. CORI plus ATOS plus [indiscernible]. The theory is that if you potentially don't want to use a subscap sparing approach, but you don't want any sling use, you could use this accurate execution with CORI. You get ATOS which is efficient and a great implant, but then you get tendon, which has the ability to overcome a contraction of rotator cuff muscles. So potentially, you don't need any slings if you want to go that way. So we have the technology to go through the entire continuum of shoulders and treat patients well.

So in conclusion, I truly believe with the technology that Smith & Nephew has, we're going to become the leader in the shoulder space from rotator cuff all the way to shoulder arthroplasty. And most importantly, I truly believe we're improving patients' lives and outcomes, which allows surgeons to sleep at night. I think we are solving shoulders. But most importantly, I'm still trying to keep my 5-year-old out of jail who is still [indiscernible]. So thank you.

Okay. Any questions for Dr. [indiscernible]?

I'd love to get your perspective, I guess, before CORI and getting robotics, just how much that's changed your practice in terms of speed? You talked about, obviously, the outcomes, but just in terms of speed and procedure time. And then there was a bunch of new shoulder systems on the market. So just curious if you could compare and contrast and why [indiscernible] is the one that you settled on? Is that more because of CORI or because of everything else?

Yes. I answer the second part is because of CORI. I just -- Dr. Has talked about this. If you have a technology that makes you better, I'm going to do that every time because I want my family to have that. I want me to have that if I was on the operating table. So we started this process 4 or 5 years ago, and that's when I got involved with the ATO system. But ATO system has been great. It's streamlined. It's fast. My surgical techs like it because there's 2 trades. It's very streamlined. So I think the market is going to go to robotics because I don't think it's that much slower, to be honest with you. I wouldn't have the patience, I think, to do a slower system, and I'm almost time neutral already with very little experience. So it's been great.

I've got one question at the moment on the webcast, which is, can you talk about the potential cannibalization of REGENETEN with Tendon Seam?

Yes. It's a really good question, and I'm still working through that for some different indications like partial thickness rotary cuff tears. And one of the things that I think Smith & Nephew does so well is they do clinical data to support it. So I think as we learn more about Tendon Seam, we're going to have a very good guidance on that. But like I said, they treat 2 different things, which is great. We have 2 ways to solve type 1s and type 2s. And I think they serve different purposes. So there is some overlap, but they're also divergent enough that I don't feel like there's going to be a ton of cannibalization.

Okay. Awesome. All right. Thank you, Dr. [indiscernible].

So lastly, I just want to welcome up our executive leadership team and the surgeons that are still here for some final questions.

Seb Jantet, Panmure Liberum. Question for Dr. Has. You made a very compelling case for the landmark kind of Ane. I guess a couple of questions from that. Why are the competitors not doing the same thing? And what are the resistance points from other kind of consultants who aren't convinced about the approach?

I think it's an easy answer to why they have because they have to design a new system to do it. So there's cost involved in doing it. And so as I sort of think talked about with Stryker, I think they just simply relied on the fact that they had growth from the robot, and that worked pretty well. And so they're doing it. They don't feel that they have to at this point. But at some point, when something new becomes better, then they're forced to do it. So I think that at the end of the day, they haven't wanted to make the cost of invested so much into what they have, and it's good enough that it gets by. And it gets a little bit more complicated because as a good example, Persona, which tried to be personalized, but they were personalized for 2013, right? And so then they said, well, I'm going to make a new titanium knee, but they made that for a niche product, but they added on to their portfolio already. So they really can't change it without a major investment. So I think that they just don't want to make the major investment to update it, so they'll live with the adequate, but not best technology.

The other consideration is we've actually seen this happen, right? This is triple taper stems all over. This is -- we saw this in the hip market 7 years ago with [indiscernible]. It just -- you have to have someone do it first. And then when it was really successful, obviously, then we saw the market follow. So I would not be surprised if we don't see some development in this direction 5 years from now, but it's just nice to know that we're probably just on the forefront of the right answer.

Yes. I think there's no doubt that if you follow this forward, following the anatomy is going to be the way we go. Now might there be other approaches to do it? The answer is, well, you could. There's a couple of different approaches to it. But you're not going to take the same symmetric implants that we did that are only minor modification from the '70s going forward. That will ultimately change. It just requires an impetus to make the change.

Just to build on this, just from a business perspective, right? There's -- the path that we took to get to landmark runs through a gap that we had to fill, right? So in contrast to our 3 competitors, we run our business on 2 different platforms in the U.S. It's more than that when you go outside the U.S. You've got [indiscernible] and everything else. But -- so that which our competitors do once, we have a choice to do, whether we repeat that innovation across 2 platforms. And actually, we've got 2 material systems. We've got [indiscernible] and [indiscernible] chrome. So it's actually a more complex portfolio thing for us. Right now, we're challenged because as the market has shifted towards cementless, we've got it on LEGION. We don't have it on JOURNEY. So our choice we faced was to just bring cementless on to JOURNEY. So literally take JOURNEY as it is today and bring a cementless analog on it. Rather than just take that approach, it took an opportunity to take a step back and say, what are the clinical problems that yet need to be addressed. And this is where we had an opportunity to bring forward the type of innovations that Dr. Haas, and Dr. Haas just alluded to.

So it's -- it was fundamentally born out of necessity, but we're using this opportunity to actually try and, if not leap forward to at least make a significant dent into key unmet clinical needs.

And just one more question, if I can. This is for any of the surgeons. But just basically looking at the ASC model, I mean, you paint a picture of an environment where you have to be extremely efficient, right, in order to kind of make a decent economic return out of an ASC. Also at the same time, you've got a lot of volume going into the ASCs and you've got a lot of pressure on reimbursement and they're putting more kind of pressure on you in terms of outcome reporting. So I guess kind of trying to look at it perhaps from the other perspective, if I'm Smith & Nephew and I've got a strong position in that market, am I going to be seeing a lot of price pressure from you guys, a lot of pressure to get cheaper and cheaper because your margins are getting squeezed.

I think that the answer to that is, of course, but not just in the ASC. The markets are getting squeezed actually much harder in the hospitals. I think actually the ASCs, the implant pricing is critical to a certain level. But the beauty of ASCs, and I don't want to get overly technical in the way that we think about it. And I also don't want to try to take business to a bunch of really smart business people. But right, in ASCs, the biggest shift is the change from cost accounting to throughput accounting. So what that means is when we look at a hospital and you look at the finances of a hospital, every single question is, how do we make the care cheaper because we're looking simply at costs, right? We have a cost center, and this is our cost center, and we anticipate next year, the revenue will go down. So we need to decrease cost, which is why you see the continuous RFPs and downward price pressure on the simplest thing we can, right?

When you go back to the first joint replacement bundle called CJR, CJR accomplished absolutely nothing clinically. And the only thing it did was make us send less people to post-acute care to rehab centers and nursing homes and made implants cheaper. That was it. The entire success of the program considered today the most successful bundled care program in the history of medicine, right? It did nothing but decrease cost.

Surgery centers are much smarter than that and recognize spend money where it matters to do one more surgery. So I don't need a better margin on each surgery, I need more surgeries for a better margin overall. And when you transition to throughput accounting, you actually see a decrease in downward price pressure because what I'm actually going to go to the companies and ask is not can -- Deepak, can you sell me an implant cheaper, is can we work together to create a model where my entire episode of care is more efficient because I don't care about a cheaper implant, I want to do one more surgery because I have a very fixed overhead cost. I'm going to spend this much every day no matter what. That last margin is 100% profit. Hospitals don't have that because they've got very, very high overhead costs. They have very high fixed costs. And they always say, well, we're going to spend -- we're going to do one more case or we're going to spend a lot less money. They're not firing anybody. They're not saving anything, right?

At the surgery center because the lights go off at 6, it actually really makes a difference. And that's why we -- the entire way we count the it looks so different, which I think actually improves the ability to resist downward price pressure on implants.

One more thing I would add, which we have not talked about is this concept of a single vendor ASC, which is really how the market is going. And all the big dogs are trying to now -- Arthrex, right, bought an arthroplasty company. Everyone is trying to be enable to be a single vendor. Well, there's no single vendor that has a tower, that has a robot, that has a sports platform, has an arthroplastic platform, has a trauma platform and now a pretty frict ridiculous shoulder platform. There's nobody else. And everyone is trying to get that, but nobody has a shaver platform and a camera platform. So that's really, I would say, the positional power of Smith & Nephew to really take over soup to nuts.

Maybe a question for the surgeons, particularly on the ortho side in terms of just the stickiness of surgeons with implants. So obviously, the launch of landmarks should be a driver of share gains. And I know Deepak would be good to get an update on what you were saying before around you stopped losing accounts and started winning accounts back. How willing are in your experience, your peers to switch if they are using a Triathlon, I think they're looking -- how easy is to get?

It's a great question. And I think historically, it was a bit different than it is today. I think historically, people were less likely to switch, okay? They got pretty fixed. But interesting enough, even though orthroplasty is relatively mature science in many ways, a lot of these new concepts are very hot. So people -- and we're recognizing, especially on the knee side, that there is a need to make it better. It's just -- there's a general recognition. And these new approaches that we talk about are sort of really hot topics. So I think there is much more interest in pursuing these new concepts. And that was, I think, started with the robot, but really with the alignment strategies really changed it because a lot of people were saying, well, I'm doing it the way I did it along, and I know that, that's an issue, so how do I change to make it better?

And so I personally think this is going to make it easy for them to change because it's built to do exactly what we want to do as opposed to taking -- trying to overlay something that you wasn't designed that way. So I think this will make it easier, but I think that the ability to get people to change is easier now because of the new concepts that are really hot.

And I'll just add, I'll go right back to the hip market, right? If you're changing same for same, it's really hard. If you bring out another symmetric implant that looks like all the other implants, no one is going to change, right? But just like we saw with the triple taper stem, when it is differentiated, when it solves the clinical need and when it addresses a problem we actually know exists, then the change is actually pretty easy, and you saw that in the way that the entire hip market shifted with access.

On the -- specifically the sports med side in an ASC, do surgeons behave differently? So I spoke to a few ASCs who kind of -- they try and streamline things. They think about do we need to use those extra screws? Do we -- like are there things that we can do that maybe slightly reduce cost and speed of procedures? So is there a different behavior in your experience?

I mean 100%. I mean we -- if you do an ACL, sometimes you put a screw and you could do a backup fixation, maybe if you really don't think you need it, some people just say, I do it all the time. Why? Just because I do it all the time. No. Well, you should only do it when it's needed, right? So I think -- and also efficiency of how fast you can operate, how -- and so there are a lot of factors. And then ultimately, you get a report card of how expensive is your operation versus a cryo and I both a rotator cuff and like, well, you're consistently more expensive. So all these conversations happen in ASC. But you ultimately work together. And then the last thing that there's always a game of like, oh, I have a really expensive case. I'm doing on the main hospital. There's a lot of dairy laundry in ASCs. That's why we have Dr. Haas to make sure we're all clean.

It's Charles Weston from RBC. I was actually just following up really from Graham's point. And just, I guess, pushing back, you guys are key opinion leaders, implant designers, whereas a lot of surgeons in the U.S. and elsewhere would just be kind of more standard surgeons, if that's not insulting to them. And historically, there'd always be considered to be that kind of loyalty to an implant or loyalty to a relationship that you have with the salesperson. So I guess, distinguishing between some of the hip, knee, sports med devices because I suspect they're all quite different in terms of the attraction of innovation, are there any things in this kind of new and reinvigorated portfolio that you think would make somebody with that type relationship really reconsider what they're choosing?

It is an absolute truth that the surgeons develop a relationship with their reps. And so -- and that the sales force uniquely as opposed to pharma, which is not tied to reps. So we do rely on having great sales forces. And I actually -- having been around this industry for a long time, I think a vital role, which we have 2 of them I know that I'm involved with in August, is educating the sales force on what are the benefits. I mean, personally, if I'm going to talk to a surgeon, and I'm going to tell him why I think he ought to use Landmark, okay? It bit depends on what his interest. If he's interested in moving from a traditional alignment to a modern alignment strategy, well, that one is easy because it's just going to be easier to do that, right? But if he's just one just a regular surgeon, I would go after them and say, listen, do you have a lot of [indiscernible] pain? Is that a big problem in your issue? Because I think that the -- if I was looking at this, what I'm sort of excited in my life is to have -- I really believe we have, I won't say, solved the problem because I won't be that arrogant to think that we've solved a problem that was probably going on for centuries, even in non-total knees.

But knee campaign going up and downstairs after knee replacement, it's the pain of our existence. If you're a knee replacement surgeon, the patients come back and they say, "I love my knee. I'm glad you had it, but boy, I go up and downstairs and it hurts. I get out of the seat, I go to the movie, it hurts." And I think we know why that has been happening. If you look at where we -- how we were -- it was a forgotten part of the joint. We like cared about all the other stuff, but we forgot about the patella. And we just gave some cursory attention to it where we really focus on that. And I think by all the metrics and all the testing, we have -- this is going to be better. And so that's how I would go after it. So you look at where the issue is with the surgeon, and that's how I think you can and get traction.

I'll try not to make this take too long. But actually, I think what we have learned is that relationship that has always been critical gets very different as you shift from surgery from hospitals to surgery centers. I think the ASC and the strength of the ASC portfolio and the ASC play is the thing. I'll tell the story of John and Walt. So John was one of my first partners. Walt was his rep from company A, we'll call it. John and Walt were best friends. Walt was the best man at his wedding and the godfather of his oldest son. So talk about the relationship between a surgeon and their rep. For 30 years, John used nothing, but company A with Walt. The hospital could have said we're switching to one wouldn't have made any difference. John used company A 100% his entire career. We opened our surgery center. And in 2013, started going out to all the companies and said, "Hey, this is the structure we need, B, we need less trades. We need all the things that I talked about today. And company B, C and D, no problem, in, great. Company A had a hard time getting there. Their structure couldn't do. They couldn't figure it out. The next day, John switched from company A to company B. The next day.

When John owned the center, and it mattered which company he used, I love you, Walt. I'm going to company B, right? And 30 years of loyalty gone in 1 day of a bad contract. And so I think that as we see this site of service shift, this is a very uniquely American thing. But because of the financial state that surgeons have in surgery centers and the completely different way we look at the way accounting is done, those loyalties are great. They're not worth cash in my pocket. And so I think that is the biggest driver of the change we've seen in regards to brand loyalty at the implant level.

Actually, Walt retired.

Gentleman in the fourth row, at the end, and then I'll get to you, Veronika.

It's Ken again, Deutsche. Dr. Haas, you mentioned, I think you used the term truck referring to Mako and I think ROSA. Just wondering, are there any thoughts on some of the sort of smaller handheld options in the market? We obviously had Mako with the small handheld. We've got TeMini, which obviously is quite small and agnostic implant agnostic. So yes, any thoughts on how those 2 might relate to CORI?

Yes, I'm. I'm flattered and I shouldn't be because at least they're driving a handheld market. I think that the TMini is a nice concept. I actually think Zimmer probably made some sense to do it because the TMini, first of all, the software is very rudimentary. I actually served as a -- for TMini in the eye because I was the only person new enough about TMini to be it sort of rep for one of the courses. I'm not a rep, but I had to be the surgeon to show it. And I think it's intriguing in some ways, but it's very limited. The software -- literally, the software is sort of sad in a way probably reflects their lack of resources, but their software, even though they gave the CAT scan, doesn't show the patella group. I mean it's sort of crazy. It wasn't done that way, but it didn't. That can be improved because they can update it, but they haven't at this point. But all that it does is it puts a pin and then you have to cut and it doesn't have -- it has rudimentary soft tissue balancing. So it's a very limited platform of what it is.

But I think it frankly does everything ROSA does pretty much in a more compact. So if you were comparing to ROSA, I think it's a lot better, but it does what ROSA does. It just puts pins in to put a guide in. And I think that the Stryker hasn't been out to be used. And I think some of the limitations of that to the 2 biggest ones, first of all, are -- first of all, it doesn't tie into Mako. So the software, it doesn't tie into what is actually reasonably good software, right? So what is -- people like about Mako is in part the software, and it doesn't tie into Mako software. The second thing is that people -- surgeons are just -- while they like saws, nobody really is going to like to just freehand a saw, even if it's robotic. It's just an awkward -- I've used it. And it is awkward to put a saw and try to hold the saw and think you're going to get the planes right and get it right.

So I think having some assistance with the saw is good. So our concept is that you robotically do place a guide with the saw because at least you have a platform to rest the saw. You're holding with your hand, but you have a platform to hold it on. So I'm flattered.

Just maybe one quick one for Deepak and John. Just out of all the sort of innovation platforms today, which would you say might surprise you the most maybe over a sort of 3- to 5-year view? Would you love them sort of equally?

Look, I think -- I'll go first, John, you can pick favorite one of your children. So I'd say, look, each part of our portfolio has a role to play in our success. Each business has a role to play. I think we've called that out in the Capital Market Day in terms of the role that Orthopedics does in terms of improving returns, the role that ortho sports plays in terms of driving and accelerating our growth and likewise with Wound, right? So each portfolio. Within that, the role of innovation, which over the last 4-some-odd years has played a vital role in driving growth. More than half of our growth has come from products we've introduced in the previous 5 years. And that won't stay like that forever, but we're in a phase where we've invested in a stepped-up way in R&D, right?

We're continuing that within the [indiscernible] chapter. So it will account for a similar proportion of our growth. So within that framing, each one has a role to play. I talked about parts of our pipeline being front loaded, front-end loaded, and it's like that in orthopedics. Landmark is one vivid example that's come to light today. All the functionality in CORI, right, is another example of that. So we just recently released release shoulder capability on CORI. I mean Dr. Plitzer wasn't here, wasn't at the New York event, right, because we -- it was still too early, but we brought him here now because fast forward now 6 months, it is a reality. Fast forward 6 more months, it will have hip capability, maybe it's 7 months. Every time I talk to my team, I shave a month off and drives my team nuts. But 6, 7 months we'll have hip functionality on CORI.

And so those things are front-end loaded. On the sports side, the Big 4 that the team talked about, Christy talked about, each has a role to play. REGENETEN is now quite a mature story, right? We're in early innings with CartiHeal with Agility AGILI-C, but January of '27 should be a pivotal point because we'll have CPT1 code, right? And then Tendon Seam literally early innings, but you heard Dr. [indiscernible] talk about how he's already started to talk about that in his practice. So -- and we haven't talked a whole lot about Wound, but we've made references to next-gen PCO. We talked about [indiscernible], but that itself is an innovation story from 2025, where we brought forward LEA 3.0 and all the connectivity that went with it.

So what I'm trying to give you a sense for is there's quite a good balance in terms of level of innovation in terms of our R&D programs and how they kind of map out in terms of time line when they start to really drive top line and also risk. I mean there's some incremental things we're doing in our portfolio. There are some things that are really new to the world. I mean, TESSA, there is no other spatial surgery visualization platform on the market today.

So I think hopefully, you get a sense now of the level of innovation that's in our portfolio and how each one plays a role. So in all of this, I don't think I've picked the favorite. I said has a role to play. Perhaps, John, maybe you'll take sides.

And I think you've covered the broad ground there across the portfolio, but for me, the personal favorite is TESSA actually because I think that the potential breadth of application of our navigational surgery Obviously, initially, we're looking at it from an ACL perspective, but what really excites me is this could become -- it could be a game changer in terms of the way that surgery gets conducted. And I think the opportunity -- obviously, it's a long game. This is a 5-, 10-year game, but I think it's a huge opportunity in TESSA. I don't know, Scott, whether you talk about it much more knowledgeably than me. But to me, that's the most exciting development in our portfolio.

And I'd love to get Dr. Rinat's perspective on it as well. But I mean, we do see it as it's an opportunity to change the way arthroscopic surgery is practiced. And the vision is to have TESSA be a platform 10 years from now that surgeons can't imagine doing cases without. It is going to be a journey. We're starting with a single application on the platform, and we'll build from there. But it's -- and we believe it's the right place to start. But we've got we've led and created categories across sports medicine, and we've led in the innovation of the arthroscopic tower, and this is an opportunity for us to do that again. But Dr. Ranawat, you've probably as much as any surgeon that we work with had exposure to TESSA and see the potential of it. How would you regard it?

Yes. I mean I would regard it as, 10 years ago, I was very much involved -- actually '15 with Mako when it was in Florida. And I remember going to India, going to other countries and talking about a robotic partial knee and people thought that was all crazy. And then you went 10 years later, 15 years I was in India and the number of robots in India now, there's about 100 of them in every company. And that's India. And then if you look at the fourth of HSS, there were 0 robots when I was a resident, 0 anterior hip when I was a resident, and now it's all anterior hip and all robots. And so the way that navigator robotic technology changed arthroplasty is going to be the way that we still do 2D arthroscopy. That's very, very rudimentary. It's going to change the way in 10 years how all arthroscopy is done because the world doesn't live in 2D. Your body is a 3D thing. And that's the best way to improve surgical accuracy.

This is probably an unfair question, but I'm going to ask it anyhow, and it's for all the docs in the room. Obviously, you speak very passionately about Smith & Nephew technology and all the innovations and you're clearly big product users. But if we look at the performance, especially of the Orthopedics business at Smith & Nephew, it's been fairly poor. We've seen a fair amount of share losses and particularly in the U.S. I guess I'm just curious about your perspective of kind of how to reconcile your bullishness and enthusiasm with the sort of financial results that we see because that's what we on this side of the room care about?

And then maybe you can sort of talk through when you talk to your peers who maybe are not Smith & Nephew users, what are the frustrations that you hear from them?

That's a question which I think needs to be addressed. And to me, having, again, sort of seen the spectrum and seen this, the effect of -- there was, I think, holes that needed to get filled, okay? And there were decisions that were made long before the folks in this room were here. And those decisions left, I think, the holes that are being filled. So the problem dates farther dates 5 to 10 years back, okay? And the way it could have been addressed in a couple of ways. You could have just tried to patch a hole. The patching a hole is just continuing a problem that existed for a long time that you said, well, we're just going to add another part on to a complicated portfolio that had good parts, but some of them are dated and didn't modernize the technology, or you say, listen, we're going to take the innovation that we have, and we're going to look towards consolidating the portfolio into the newest technology that's forward thinking.

And I think that what the issue was appropriately -- and I would argue probably hard decisions to make because they financially required big commitments that I said some of these other companies are going to face. I mean I think they are facing. I mean it's not just Smith & Nephew, there are other companies that I think didn't face those issues and will be -- have to do. So I think management came on and said, we have the problem, they recognize it and then made the investment. And I think we're almost there. I mean so I think time is going to tell, but I think the issues were recognized and addressed in a really forward-thinking way.

Not an unfair question at all. There's 3 here. And I'll get to you, David and...

[indiscernible], Berenberg. I had a couple. Firstly, on Landmark, how does it stack up relative to compete to call kinematic alignment? And then secondly, on ASCs. You've noticed an above-market penetration in ASCs in both hips and knees. How much further do you expect this to be able to penetrate this market? And kind of directionally, how do you think about this gap relative to the market changing going forward?

I mean you've gotten the clinical parts of that now during the course of the day. Just let me address the business part of it. So as I said, what Landmark seeks to do is address the gap that we currently have on our JOURNEY platform, which doesn't have a porous component. And over the last couple of years, we've seen an acceleration in the proportion of knees in the market that are porous. And a lot of that is time driven, and I'll have our surgeons comment on that. But from where I sit, a lot of the acceleration is being driven by that. And roughly half of our customer base in the U.S. is on JOURNEY, right? So we have a need to kind of address that because taking a JOURNEY surgeon today and having them go and adopt LEGION, which is not kinematic alignment, right, is not -- I mean, it may be a short-term proposition, but it's not a longer-term proposition.

So as I said, the decision -- the business decision we face was either to plug a hole, as you just said, Dr. Haas, or take a step back and try to address some of the shortcomings. And what we've tried to do is blend the best of LEGION and JOURNEY. LEGION is a relatively easy knee to put in, maybe not the easiest knee and all surgeons can comment on it, but it is easier than JOURNEY to put in. JOURNEY, as you alluded to, has the alignment, the kinematic alignment and the natural feel, right, of a knee. And so what we tried to do is get the best of both walls. And we've tried to do this now with the imperatives of the market that we see today and where it's going to, which is all about the ASC, the efficiency to fit in a 300 square foot OR, right, where you can't have 10 trays, right?

And so what we've sought to do as we did with ATOS and as we did with CatalystTem is to make the implant tray efficient, right? The third thing we did is design the system to be put in with CORI, right? And so that offers a level of personalization as Dr. Haas kind of went through in his presentation that we think addresses an unmet need.

No one thing is kind of a slam dump to use an American expression, right? What we're betting on is that combination of the implant characteristics, the efficiency around capital. We obviously benefit when you put less capital in account, but surgeons and institutions benefit when you have trade efficiency built in, plus the robotic aspect of it. All of that as a proposition, we hope will carry the day, plus you've got our presence in sports that commercially, you've got to do things to make all of that count. So that's the bet that we're making around this.

Just briefly, you noticed that Dr. Haas didn't use the term kinematic alignment specifically because it has no definition. So like the idea of kinematic alignment is really best articulated saying, we used to say make the cuts straight. Kinematic alignment says make the cuts crooked, right? Because kinematic alignment's attempt was to take a symmetric implant and recreate an asymmetric anatomy, right? The joint of a knee is not flat. So to make a flat implant, not flat, you have to cut it croocked. The beauty of Landmark is biomechanically, cutting it flat is better. So having a flat cut, but a kinematic implant essentially takes kinematic alignment or that term and makes it way, way safer and way easier to do. You no longer have to figure out how crooked is crooked enough. Instead, you can simply cut straight and put it an appropriately designed implant. So it will eliminate the surgical kinematic alignment and simply create an anatomic alignment with the right implant.

Best way to say, it's designed for kinematic alignment. It's designed anatomically to match the -- that chart I showed with the 90-40. If you want to -- if you're a kinematic aligner, okay? And in CORI, by the way, as I said, this is Barry, you are recreating the kinematic alignment. That's what it will show the CPAC restores the kinematic alignment. And you will be able to be perfectly aligned kinematically in 90% of people without modifying the0 technique more than 3 degrees, which we all think is safe, which is really kind of pretty remarkable. You can be a kinematic surgeon without the compromise of saying I have to make a really cricken cut.

And this is where the role of robotics comes in, right? Because you've got CORI, because we've designed it in a way that makes it easy for a surgeon to do. And again, Dr. Haas brought it to life, right? You essentially go in and use it as an erasor, use it in that context. But having a plan that allows a surgeon to execute to what effectively is kinematic alignment in a -- without having to explicitly think about it, that's the design principle that we've used to make this come to life.

Again, it's not any one thing that's necessarily going to carry the day. It's the package of all of these things that we expect to make a difference.

Just one further comment. We actually -- in addition to CORI, which I think is the best way to do it, obviously, we have manual instruments that are kinematic alignment instruments that are simple. They just cut thickness of the implant, which is the philosophy of the original kinematic before robotics. We have those instruments, which will be doing really quite simply just like any kinematic surgeon would do. We have manual kinematic instruments for Landmark as well.

To bring it home to is, look, share moves in orthopedics is they don't happen kind of overnight. We don't expect that you launch Landmark and tomorrow, the whole world starts to embrace. I hope that's the case. But there is a pace at which we need to introduce this into the market. The real cost in orthopedics for putting capital out there. So we are being much more thoughtful in how we place capital, right? In other words, we want surgeons who want to give us their primary business, right? Because that's what makes the economics work for us.

And so the consequence of that is we're not going to put a whole bunch of capital out there for surgeons to go try this for a proportion -- for a small proportion of their cases, right? So those are things that pace the launch. So David, I think you were next, and then Julian will come to you.

Sorry, Charles, I need to point because you don't know...

David Adlington, JPMorgan. Bigger picture question for the panel. I just wondered if you're seeing any impact from the usage of GLP-1s in terms of either the type or pace of patients coming in and how is it impacting surgery?

I think I've talked about this before, maybe even with this group. I think GLP-1s are a fascinating medication in the way that they impact us, but I also think everyone is misreading some of the data, right? So there's now there's data, oh, take get GLP-1, no one's ever getting a new replacement and oh, it's going to -- and like there's actually absolutely no data that supports that even the papers put out saying that that's not what they're saying. What we've seen from GLP-1s is patients come in lighter, great, right? So that means we got a -- we had that initial bump where we all of a sudden had a whole new crop of patients who qualified for surgery in places that had BMI cutoffs or something else. Then there's the anti-inflammatory effect. And I think right now, we're actually seeing across the board a little bit of that lull as patients are a little happier, getting a little more active. But what I anticipate is we're actually going to see a big rise, right, because we're sort of saturated. Basically, everyone takes a GLP-1. It's no less than 100% of my patients. And not -- and that doesn't mean they tell us they do, and that doesn't mean they get it from a doctor, right?

But when push comes to shovel, we tell them, by the way, you might die from anesthesia, if you don't tell me you take it, all of a sudden, everyone right? So I think we've hit sort of a market saturation where we're going to see the weight loss people who lose enough weight and get enough anti-inflammatory effect that they're great and they're happy and they're going to avoid surgery in the short term. They'll get more active, they'll use it, but GLP-1s don't fix bone on bone arthritis. They may make a patient take a little longer to get to the level of symptoms in which they decide that surgery is the right answer. But as we heard from Aneel's talk like nothing grows fat cartilage and bone on bone arthritis hurts. And as the GLP-1 patients get more active, I actually think we're going to see it go in the other direction, and we're going to see them increase the number of joint replacements we do because patients are going to be happy they're so active. They're no longer willing to be obese and sedentary. They're no longer obese. They're no longer willing to be sedentary. And I think that will drive an increase in utilization in these surgeries, but not like this week. Like I think it's going to be a year or 2. We'll watch this kind of funny lull, and then I actually think we'll see a pretty big rise.

Okay. I think the last question from Julian unless David a follow-up.

it's Julien from Bank of America. I mean something that stood out to me is how much you use [indiscernible], not only for [indiscernible], but for a lot of different applications. I mean I know, Deepak, you spend time and money on, I mean, having some clinical studies. My understanding is that the penetration for [indiscernible] curve is still in the single digits right now. So my question is more, how do you see the penetration for [indiscernible] over time among all the applications? And do you think it's going to take many years again for all the applications to match like the rotor?

Yes. I mean the thing about -- and [indiscernible] can talk about it, too. Right now, the American Academy, which is really against anything that helps science, sorry, are saying that patch augmentation is indicated. That was a big, big deal when the academy said that. There's a lot of politics that went into that. So that's going to trickle down everywhere. And as I say, right now, every NBA athlete who cares Achilles gets REGENETEN. I can't tell you who the surgeon is, but it's -- and so if you're putting on our most elite athletes who probably have the best biology, God knows my when I care my Achilles. So it's impossible to say, but there's -- every day, there's another patch. Every -- it's just like how the robots came. It's going to go -- so -- and there's completely a patch war right now. If your patch better healing, your patch more bioreactive, is your patch a little stronger, it's all different, but we're first to market. It was kind of how ArthroCare was with the wan business. It was by far the best wan business. How Dyionics was with the Saver, it was the best Saver business. Now that's all standard of care and then everyone copied it. So I really think it will be.

Yes. So I mean, from what we see across the board, we see about roughly 10% is Dr. Ranawat, something like maybe a little under 10% of all shoulders have [indiscernible], right, in the market. For us, as Dr. Ranawat said, there's quite a bit of innovation, quite a bit of activity in the field, which is good. I mean, in the sense that all of that attention encourages trial, encourage use, encourages hopefully, over time, appropriate adoption. And it's that appropriate thing that we're indexing on. So REGENETEN is not just REGENETEN, and of course, it's a great product, but it's the clinical evidence that supports the use of it. The statistically significant reduction in retail rates.

First, we demonstrated the 1-year time point, now the 2-year time point. That just didn't happen, right? We funded the trials to do that. And we're doing that for the Achilles, we're doing that in the hip. And that's a very significant part of how we bring therapies to market. The engineering of it, the product development of it are important. So for example, REGENETEN I think it's a code name, maybe it is a trade name actually. So the next version of REGENETEN, it's an improved delivery system. But actually, it's so much more than that because we're going to invest actively behind how to use it for all the different applications. So that's equally as important as coming up with the next next-generation patch, right?

And if I could just comment on the REGENETEN journey. I mean we've learned a lot along the way. But I would say that rotator cuff was the natural first place to go. We identified it years ago as one of the largest unmet needs in all of sports medicine that Dr. Ranawat and Dr. [indiscernible] talked about that. It was the largest procedural area as well. So that was the first place that we wanted to go. We wanted to focus on that, build the body of evidence around that, put all of the market development effort behind that in terms of medical education, having the right channel that was kind of scientifically well versed that could tell the story and launch that in the right way. We know that there are other applications for other tendons that are also in need of help when it comes to healing. Those are logical next places to go, Achilles, hip as well. And then Deepak talked a bit too about the importance of the delivery system. I'd say if you think about what differentiates REGENETEN today from the other entrants into that category that we've effectively created, it is about the evidence. It is about being the first in that space to create it.

That's a huge advantage that REGENETEN will have, but it's also about the arthroscopic delivery of REGENETEN, which is really, really slick. It will get even better with the next generation of delivery systems that we'll introduce. But that makes a big difference, especially when you're talking to surgeons about the importance of efficiency in the operating room. So it's a good story, and it's also gives us some lessons in how do we begin to do it again with CartiHeal and other kind of category shaping types of technology. There's the innovation itself, the technology, but there are all the things that go on around that in order to shape the category and deliver on it commercially.

What I like about Smith & Nephew Sports, it isn't that we're just building another anchor always. There are a lot of other companies that want to build another anchor. And you have to still do that in sports. You have to another rot anchor, another [indiscernible] anchor. But all the things that we talked about today is truly looking at the next 5, 10, 15, 20 years. And [indiscernible] was the one we were like, yes, we called it 5 years ago, boom, done. Next 5 years will be cardio and 10 years will be TESSA. I mean that, to me, as a surgeon, that -- I'm not selling anything. I'm letting science tell itself and I'm saying, this is the future. This is an innovative concept. It's not looking at old schools. Same thing with Dr. Haas was saying. We're not looking at the old way of doing knee replacements. Let's look at the new way. That's what's intriguing, and that's what makes people become adopters.

Okay. I think we'll leave it at that. So as we close the session today, I hope what you've seen clearly is how the strength of our company, Smith & Nephew lies in the combination of a differentiated innovation program and real-world clinical validation. You've heard directly from our leading surgeons on how our technologies are improving outcomes in practice and why they choose to use our products every day. And that external perspective is critical, and we believe it's one of the most powerful indicators really of the value of our portfolio.

So stepping back, a few points to take away. First, innovation is a core driver of our growth with a strong and a sustained cadence of launches across all of our business units, Orthopedics, sports and wound management. And I hope you also saw the portfolio depth and breadth clearly displayed with differentiated solutions across all of our business units, addressing really significant and meaningful unmet needs. And I think that combination gives us the multiple growth drivers that we've talked about in various forms.

Surgeon advocacy is important. It reinforces our competitive positioning and supporting adoption and market share. Each of our surgeons here could work with any company. You could use any company's products. But you've hopefully chosen to work with us because you see the value of innovation, you see the value of the approach and the philosophy that we have here, and that's important to us. And all of this underpins our right strategy that gives us confidence in delivering our medium-term growth targets and returns ambitions. So ultimately, everything that we do comes back to the patient and improving patient outcomes. That's why those of us who are in the company show up to work every day. That's what drives our innovation and what drives our philosophy. And that's ultimately why we're confident on the opportunities ahead.

So I'll take a moment now to thank our surgeon panelists and those who have to leave to catch their flights. It's not a small thing for you to take a day, 2 days out of your practice, and these are your busy operative days, and it means a lot to us that you've done that to speak about your experience, speak about why you've chosen to work with us and the products that you use. So thank you very much on behalf of all of our colleagues for being here today. And to my colleagues, it's not a small thing to put together something like this, to our IR team, to our business unit teams and to my colleagues around [indiscernible]. Really appreciate you bringing our innovation to life in the way that you have in creating this opportunity.

So we look forward to continuing this dialogue with you. We've got some refreshments and light lunch outside and look forward to continuing this conversation there. So thank you very much.

Good morning. Thank you for attending today's Smith & Nephew Quarter 1 Trading Report. My name is Sarah, and I'll be your moderator today. [Operator Instructions]

I'd like to pass the conference over to our host, Deepak Nath, Chief Executive Officer. Please go ahead.

Thank you. Good morning, and welcome to our Smith & Nephew First Quarter 2026 Trading Update. As just mentioned, I'm Deepak Nath, I'm the Chief Executive Officer. I'm joined today by John Rogers, who is our Chief Financial Officer.

We've made a good start to the year. In the first quarter, we delivered 3.1% underlying growth or 4.7% on an adjusted daily basis, which was in line with our expectations. Performance across the group was positive overall with growth across all business units and regions. We saw strong growth in Sports Medicine and resilient results in Advanced Wound Management despite the headwind from CMS changes to skin substitute reimbursement.

As expected, U.S. knees were softer in the quarter, reflecting deliberate trade-offs and continued focus on disciplined execution. The rest of Orthopaedics delivered solid performance, and this underscores the strength of having a well-balanced diversified portfolio.

Innovation continues to be a key driver of our performance, accounting for more than half of our growth. We saw strong momentum across a broad range of products spanning all business units, including CATALYSTEM, AETOS, Q-FIX, REGENETEN, CARTIHEAL AGILI-C, FASTSEAL, OASIS and LEAF. Overall, our Q1 performance supports our confidence in the full year outlook, which remains unchanged.

We expect growth to strengthen over the remainder of the year, driven by the ramp-up of new product launches, stabilization in U.S. skin substitutes and improving trajectory in U.S. knees as well as an additional trading day in the fourth quarter.

Today, we are also announcing that after 7 years with the group, including the last 2 as the President of Orthopaedics, Craig Gaffin will be leaving Smith & Nephew to pursue a new opportunity. We have appointed a highly qualified successor, Nathan Folkert, who will join us later in the month, and I'll return to this later in the call.

Finally, I'm pleased to announce a $500 million share buyback. This reflects our strong balance sheet and confidence in our 2026 performance and demonstrates our continued commitment to a balanced approach to capital deployment, supporting future growth while returning incremental value to shareholders.

With that, I'll now hand over to John to take you through the financial performance in more detail.

Thank you, Deepak. Revenue for the quarter was $1.5 billion, representing plus 3.1% underlying growth and plus 6.6% reported, including a 350 basis points tailwind from foreign exchange. Those growth rates include the effect of one fewer trading day compared to the first quarter of 2025. And on an adjusted daily sales basis, underlying growth was 4.7%.

Geographically, the U.S. grew 2.1% and other established markets grew 1%. Emerging markets grew 10.5% and excluding China, growth was 2.9% on an underlying basis. And we expect China to be broadly neutral to growth for the full year, making it the first time since 2021 that it will not be a major headwind to revenue growth.

Let me now take you through the business units in more detail. So I'll start with Sports Medicine and ENT, which grew 6.7%. Within Sports Med, all regions contributed to growth. We saw double-digit growth in joint repair driven by Q-FIX KNOTLESS, REGENETEN, CARTIHEAL AGILI-C also grew very strongly, albeit off a small base. We continue to roll out these products in more geographies outside of the U.S., primarily across Europe. It's still very early for Tendon Seam, which we acquired with Integrity Orthopaedics earlier this year, but integration is progressing well.

AET growth was led by FASTSEAL and services. In China, we have intentionally restricted inventory in the channel at the end of last year. And with the implementation of VBP delayed by a few months, we saw strong demand for our products there during the quarter. We now expect VBP to be implemented at the beginning of the second half. As a result of this strong performance, our Sports Medicine revenue exceeded our recon and robotics revenue for the first time ever, and we expect that to continue to be the case going forward.

Turning to ENT. We saw particular strength in other established markets in Latin America as well as in our ARIS COBLATION Wand for turbinate reduction. In China, we continue to reduce inventory in the channel ahead of VBP implementation, which had a negative impact on our growth. And we still expect the profit headwind from China VBP in 2026 to be around $15 million to $20 million.

Let's now look at Advanced Wound Management, which grew plus 2.2% in the quarter. Within that, Advanced Wound Care grew 4.9% with good growth overall led by ALLEVYN LIFE and strength in emerging markets. Our ALLEVYN Complete Care launch in the U.S. is off to a strong start. It takes time to win new contracts, but we're pleased with what we're seeing so far, and we'll be expanding the launch into Europe in the second quarter.

Turning to bioactives, which were down 1.7% for the quarter. We saw strong growth in SANTYL, offset by a decline in skin substitutes. And as a reminder, our skin substitutes business is facing headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year. This is driving a decline in both volumes and pricing in nonsurgical settings, particularly in mobile, where we have limited exposure. We have also seen reduced billing efficiency and elevated inventory clearing in the system. The market is adapting slowly to these changes, but the impact we are seeing on our business is in line with our expectations.

We set out our full year outlook. We contemplated a range of outcomes, and we continue to expect the trading profit headwind for the full year to remain within the $20 million to $40 million range we previously guided to.

Looking ahead, we remain convinced of the long-term attractiveness of the skin substitute segment beyond this transition year. Advanced Wound Devices grew 1.9%, partly reflecting a strong prior year comparative. LEAF and PICO both performed well, reflecting good demand. PICO growth reflects our focused efforts to improve penetration in the surgical setting. Sales of RENASYS in the U.S. continue to be soft in the acute care channel, while performance in the post-acute channel remains strong, and we're continuing to expand into emerging markets.

Orthopaedics grew 0.8% on an underlying basis. In the U.S., hips grew above market for the fourth consecutive quarter, driven again by the strong uptake of CATALYSTEM, particularly in competitive accounts.

Trauma and Extremities also grew strongly driven by EVOS, shoulder and IM Nails. These results reflect sustained momentum in segments where we are benefiting from the combination of the strengthened commercial organization and a differentiated portfolio. Where our portfolio aligns with underlying market trends, we are able to perform well.

U.S. Knees were weak in the quarter, consistent with the softness we've previously guided to for Q1. This reflects our continuing and deliberate trade-offs to balance growth, profit and asset efficiency ahead of the launch of our new kinematic knee system LANDMARK. We are being disciplined about set placement and in managing our customer tail to improve the quality of our base. At the same time, the market continues to shift from cemented towards cementless knees, and our ability to compete effectively will increase when we launch the cementless version of LANDMARK, expected in Q3 of this year, which will be followed by the launch of the cemented version in Q2 of '27. Additionally, as mentioned earlier, we had a headwind from one fewer trading day in the quarter.

Looking ahead, we continue to expect softness in the US Knees performance relative to the market this year as a result of these actions, but we anticipate an improving trajectory from here. We are stepping up set deployment for LEGION MS, enhancing the competitiveness of LEGION, which accounts for around half of our installed base. MS is performing strongly in the market and only 6 months into the launch, 15% of procedures with LEGION implants now utilize MS inserts. This will, in turn, support incremental growth in LEGION CONCELOC, our cementless version of LEGION, which is currently growing double digits.

Outside of the U.S., both hips and knees grew above market. Knees were particularly strong in emerging markets and hips and trauma and extremities performed well overall with some isolated weakness in specific markets that we are addressing.

Finally, other recon grew 6%, reflecting a strong prior year comparator and contract mix. During the quarter, we signed our largest ever multisystem CORI deal with the U.S. Teaching Institute, and we continue to see encouraging trends in utilization and penetration.

I'll finish now with the outlook. We continue to expect around 6% organic revenue growth and around 8% organic trading profit growth for the year, translating into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity acquisition. We remain on track to deliver around $800 million of free cash flow and a return on invested capital above 10%. We continue to expect a stronger second half of the year compared to the first half for both revenue and profit growth, with phasing now expected to be further weighted to the second half, driven by some commercial deals moving to the second half from the first.

Acceleration will be driven by the ramp-up of product launches, stabilization in skin substitutes and an improving trajectory in the U.S. knee implants as well as an extra trading day in the fourth quarter. And as Deepak mentioned earlier, today, we announced a $500 million share buyback to be completed over the next 12 months. This underscores the strength of our balance sheet and cash generation as well as our confidence in the business while remaining fully consistent with our capital allocation framework. The program will be funded from free cash flow and existing cash balances and builds on the completion of our $500 million buyback in 2025.

And with that, I'll hand back to Deepak.

Thank you, John. We're now just 1 quarter into our new RISE strategy, which will accelerate growth and improve returns over the next 3 years. We're making good progress under each of the elements that will shape our performance in 2026 and beyond. To reach more patients, we continue to drive adoption of our differentiated portfolio by accessing more indications and geographies. This quarter, we launched shoulder execution on our latest generation of CORI and are receiving positive feedback on that.

We also launched CATALYSTEM in Japan and the next-generation LEAF 3.0, a cloud-based solution for our patient monitoring system. To innovate, to enhance the standard of care, I'm pleased to share recently published compelling clinical evidence that supports our patient-first approach to innovation, focused on areas with the greatest opportunity to improve outcomes.

First, the Orthopedic Journal of Sports Medicine published data that compared REGENETEN implant patients who had partial thickness rotator cuff tears, with those who received traditional suture anchor repair. It showed early recovery time was cut in half. This is the third randomized clinical trial to demonstrate the REGENETEN bioinductive implant improves outcome versus traditional rotator cuff repair techniques. Second, the American Journal of Sports Medicine published evidence showing that patients treated with CARTIHEAL AGILI-C reported significantly better knee pain relief and quality of life improvements over a 5-year period.

To scale through strategic investment, we're deploying capital into high-return, high-growth categories and channels. This includes the acquisition of Integrity Orthopedic, which we announced in January. The Tendon Seam's fundamentally novel biomechanical approach to rotator cuff repair, we're able to create one of the broadest, most advanced portfolios in shoulder pathology. We also continue to invest in growing PICO across wound segments, including to help prevent surgical site complications. And to execute efficiently, we're driving group-wide productivity by being disciplined around cost control as well as executing our Ortho360 program within Orthopaedics.

We're deploying AI and data analytics to drive improvements across the business. This quarter, we created a digital twin within our supply chain, which we're integrating into our end-to-end workflows to drive process optimization and enhance decision-making.

As I mentioned, we're pleased to announce that Nathan Folkert, who goes by Nate, will be joining us later this month to lead our Orthopaedics business. Nate brings with him more than 2 decades of global orthopedics leadership experience, spanning commercial and operational roles across large medical technology organizations. He's held senior leadership roles at Stryker, Conmed and Zimmer, including as the President of Zimmer's Trauma division, where he had end-to-end responsibility for large orthopedics businesses across multiple product lines and markets. More recently, Nate has served as CEO of Orchid Orthopedic Solutions, where he led a significant business turnaround, delivering both product and profit growth and sustainable improvements. With this depth of experience, he is well positioned to continue to execute on our strategic priorities, and we remain laser-focused on maintaining the good momentum we have across the majority of Orthopaedics and building on the progress we're making to improve our U.S. Knees business.

I want to take a moment here now to thank Craig for his contributions to Smith & Nephew over 7 years. He has made a real difference here, and I wish him nothing but the best in his next venture. I look forward to welcoming Nate to Smith & Nephew as we work together to deliver our RISE strategy.

In summary, we have delivered a good first quarter with performance in line with our expectations and keeping us on track to meet our full year guidance across all metrics. Strong execution in Sports Medicine and solid performance in Advanced Wound Management and the rest of Orthopaedics have offset the anticipated softness in U.S. knees, reflecting the resilience and balance of our portfolio. We're just 1 quarter into RISE, and we are already seeing progress across all 4 pillars from innovation and clinical evidence to disciplined capital deployment and operational execution. The announcement of a $500 million share buyback further reflects our confidence in the outlook, supported by strong cash generation and a balanced approach to capital allocation.

I look forward to seeing many of you at our Experts Surgeon Insights event on the 9th of June. This will feature leading surgeons from major U.S. health care institutions, discussing the innovation platforms expected to drive our next phase of growth, including REGENETEN, CARTIHEAL AGILI-C, TESSA, PICO, CORI, AETOS and LANDMARK.

With that, we're now ready for your questions.

[Operator Instructions] Our first question is from Veronika Dubajova with Citi.

I'm going to keep it to 2, please. One, I just want to understand a little bit your thoughts on the U.S. Ortho franchise. And look, I think you have been very honest in flagging a softer Q1 in knees in particular. I don't think any of us expected minus 10%. And so I kind of love to understand to what extent things might maybe haven't fully gone to plan in there? And it sounds like from the prepared remarks from John and you, Deepak, as well that may be you're having a slightly softer expectation now for U.S. Knees for the full year and maybe you sound a bit better on hips. So I'd love to kind of get some color and thoughts from you on that.

And then my second question is, look, I appreciate this is obviously a trading update, but inflation is becoming a big topic of conversation. It was a big headwind for Smith & Nephew back in 2022. Would love to get your thoughts, John, on how you're thinking about the pressure on margin from the higher oil price in some of the raw materials, and to what extent you see your ability to mitigate it in the current backdrop as protecting that $1.3 billion of trading profit for the year?

Thanks for the question, Veronika. On U.S. Ortho, just taking a step back, I just wanted to acknowledge the tremendous progress we've made in this franchise over the last 4 years compared to where we were in '22 or -- and each year beyond that. We're in a place where we are operating OUS at or above market, U.S. hips as you indicated in your question, we now know is leading the market, which 3 years ago, we could never imagine that we would be doing that in U.S. hips. So what that reflects is fundamental improvements in how we operate the business, commercial execution, supply, a product portfolio that's lined up with kind of where the market is today.

In U.S. knees, as we've acknowledged, we've got some ways to go to get our product portfolio to where the market is, particularly when it comes to cementless. And on this, ahead of the launch of LANDMARK, which we expect to not only address the gap that we've got on the JOURNEY platform with respect to cementless knees, actually, LANDMARK represents the first new knee platform on the market in the new robotics era. It features -- it's the first implant that's designed with robotics kind of integral to its design, in our case, CORI, and also a tray efficient design that's really well suited for a range of settings, especially to the ASC. So we've got high hopes for what the LANDMARK will do for us.

And ahead of that launch, we're making deliberate trade-off decisions on how much capital we want to deploy in which accounts and how we manage the tail of accounts. And that's the impact that you see in Q1. Is it a bit softer than we had thought originally? Yes, but we had flagged, as you acknowledged that Q1 was going to be soft. The reason we think it's going to get better from here on out is on the LEGION platform, we are launching LEGION MS, and we indicated that we're already seeing traction in the market. It enhances the competitiveness of LEGION. So not only are we seeing about 15% of our LEGION used with the MS inserts, actually LEGION is a way to convert competitive accounts and now have a stronger value proposition.

So we've got a good line of sight to the sets we're deploying, where we're deploying them in the balance of the year. And so this is the confidence that we have between now and ahead of the cementless launch of LANDMARK in Q3 that we'll have an improving trajectory. So hopefully, that gives you a bit of a color around not only U.S. knees, but also the context. And as you indicated, U.S. hips is actually ahead of the market. So the offset of slightly softer U.S. knees with slightly stronger U.S. hips, I think, puts us in a good position in terms of U.S. recon, overall. And hopefully, you see that being on balance, the improvement that we're seeing in the ortho franchise. And John, I'll let you take the...

Yes. Just to build a little bit on the ortho question as well. And -- the reason why we've got quite good visibility, Veronika, because we're seeing in the LEGION sets that we're deploying that they mature over time. So we're actually seeing the turn rates on the sets that we've already deployed increasing over time, which is what you naturally expect, and we're also deploying additional sets. And so we can take that data and extrapolate that data through the remainder of the year. And that's what gives us the visibility on seeing an improving performance on knees as we progress quarter by quarter through this year.

In relation to your question on inflation, look, obviously, we've got quite a lot of our costs hedged, so particularly our fuel and our energy costs are very much hedged forward 12 months or so. We've obviously got supply contracts in place on a fixed price basis. We've got a very extensive savings program that we talked about at the prelims, $150 million within this year that enables us to offset inflation, and we can turn the dial up a little bit on that as well. So we're very comfortable in confirming or reconfirming our guidance for the full year on both top line and the profit line for 2026.

Obviously, if the situation in the Middle East were to significantly worsen or indeed becomes more protracted, then that could change. But as we sit here today, we're comfortable. We've got good visibility of managing our cost base and comfortable with our guidance for the full year.

And just to build real quick, Veronika. Going back to kind of progress on the 12-point plan, as you also indicated, we had -- we faced significant inflation. But actually, as we recapped at the Capital Market Day, the headline is that we were actually able to offset the very significant headwinds from inflation and all the other macro factors to still deliver about 230 bps of trading margin expansion during the 12-point plan. So we feel very good about our ability to be agile, to be able to look for offsets to headwinds that may come. So I just want to put that into perspective as well.

Our next question is from Jon Unwin with Barclays.

My question is on competition actually. So we're at AAOS, and we saw 2 launches or 2 showcases of products, one a handheld robot from one of your competitors and then also some autonomous and semiautonomous robots from another competitor. How are you thinking about increased competition maybe in the ASC space from another handheld robot in the market? And on the autonomous sort side, do you see this is where the market is going anytime soon? That's my first question.

The second question is on nickel-free implants. We also saw a launch of nickel-free implants from one of your competitors at AAOS. And obviously, OXINIUM is already naturally nickel-free. So do you see any risk to U.S. growth this year from customer attrition from OXINIUM to the new competitor launch? And how are you thinking about that?

Great. Thanks for the great question, John. So just on the handheld robot, obviously, we are aware of the competitor launches there. But what I'll say is this, we see that as validation of an approach that we took early on. We could have followed in others footsteps when we launched our robotic platform with a fixed arm. We didn't do that. We took stock of market needs and unmet needs at the time, and we went down the paradigm of a handheld format, which, by the way, is not a solution just for the ASC, it's for a range of settings. And we are now quite a ways into our journey of fully featuring CORI across one platform for shoulder, for hips, for knees and through multiple iterations have really fleshed out kind of its capabilities across each of those joints. So we feel good about where we're positioned, the choice we made quite ways back in time around handheld format and the progress we've made.

So we welcome the competition, but we also are quite a ways down the journey here. In terms of autonomous, over time, perhaps there's a role for that. I don't think it's a near-term thing. And certainly, the way we are thinking about robotics is as an augment to what surgeons do. It's an enabler for surgeons to perform their procedures and achieve better outcomes through robotic enablement. So surgeons are at the center of the procedure still, and that's how we think the field is actually going to develop. And of course, we look forward to monitoring progress there.

In terms of nickel-free, of course, there's developments in the field, but there's quite a few nickel-free offerings already on the market. And so this is one more. But just to double-click on OXINIUM. In terms of utilization of OXINIUM, the vast majority -- vast, vast majority of OXINIUM usage is actually for primary knees. It's how surgeons use it for their daily practice. A relatively small proportion of our OXINIUM knee for usage is a secondary knees, whether it's for nickel-free or for some other applications.

So given that composition of OXINIUM today, and given the clear differentiation of OXINIUM versus other alternatives for nickel-free, they're largely coating based, we feel very good about kind of how we're positioned. We've got lots of data in everyday use of OXINIUM that really supports the appropriate use of OXINIUM in patients. So rich data sets supporting the benefits of OXINIUM long-term use and the clear technical differentiation that OXINIUM has relative to other coatings. We feel very good about how we're positioned there.

Our next question is from Jack Reynolds-Clark with RBC Capital Markets.

I had 2 as well, please. First on ortho and kind of knees. So I appreciate there's kind of some deliberate kind of management going on there. But could you talk directionally as to the impact of that decline on margins? Kind of have your efforts been successful in supporting orthopedic margins? Or actually, is there a risk that decline of double digits poses a risk to margin from kind of negative operating leverage. So if you could just talk, John, directionally as to how that's progressing? And then on CORI shoulder, has this started to come through in the numbers yet? And kind of if not, when would you expect it to? And what's been the feedback from the launch?

Let me tee this up real quick on both these points. I'll turn it over to John to take a deeper dive on margins. But just the headline level. First of all, we feel very good about margin coming through. And the fundamental reason for that is the softness of knees are offset by the strength in hips. So fundamentally, as I said in the Capital Market Day, we're fundamentally agnostic to whether the volumes come from hips or knees in terms of our margin progression. So even with the level of knees being where it was in Q1, in terms of how we set up for margin in the rest of the year, we feel very good about our ability to kind of drive margin improvements.

We've also at the Capital Market Day, given you a multiyear outlook as to how margin progression is going to actually happen. There's '26 and then, of course, heading into '27 with the inventory rebound turning into a tailwind for us in the back half of '27. All of that remains intact. And we feel really good about how we're positioned. And I'll let John kind of double click that.

In terms of CORI Shoulder, we're in the very, very early innings today, still in limited release in terms of launch. So look for that to become more material. I would say, in the back half of the year and starting into 2027. And there, we see clear synergies between not just our base ortho business, the recon side, but actually into our sports medicine as well because as you know, Jack, there are surgeons, particularly in the United States, who do both shoulder arthroplasty and arthroscopy. So we see real benefits there. We're bringing multiple elements of our portfolio together to have a real solid value proposition for shoulder surgeons. So with that, John, do you want to pick up further on that?

Yes, I'm not sure there's a great deal much to add further. I mean, as Deepak says, like within any portfolio and even looking just in the context of the ortho portfolio, the swings and roundabouts positives and negatives. And in the round, in the context of our ortho business, we're very comfortable with the margin trajectory for the year, notwithstanding the softness in knees that we've called out. So Deepak calls out the slight overperformance in hips that compensates from margin point of view. And of course, when you look at the group more broadly, you've seen outperformance in our sports business, which we also know is a very strong margin-driven business.

So all of this gives us confidence in our ability to hit the guidance that we set out. There's always going to be some gives and takes, but overall, both the margin at the business unit level for Ortho and the margin at the overall group level, we're comfortable with the guidance that we set out.

Our next question is from Aisyah Noor with Morgan Stanley.

My first one was on the share buyback. So just quickly, what drove the decision to deploy this soon in the year, given you just concluded the last program? And would this preclude any other buybacks for the remainder of the year? And then question was on Advanced Wound Care. So one of your peers had called out softer market dynamics in Europe, specifically pricing reform in Germany and Spain. So just wondering -- or France, sorry. And just wondering if this development resonates with your business? And if so, how exposed your wound business is to these countries currently?

So maybe I'll take the question on the share buyback. Look, I mean, as I said a few times, we've got a very clear capital allocation policy, and that policy is to, first and foremost, ensure that we're driving our top line growth through the right investment internally and of course, through M&A and we've got to pay a dividend. And then if we've got line of sight then of our leverage with respect to our target, which is 2x net debt to EBITDA, and we've got capacity, then we'll take that cash and use that for share buybacks. And the reality was we exited 2025 below our target.

We've continued to generate cash through Q1 -- at our Q1 cash position this year. And actually, all else being equal, we would end the year at significantly below our target leverage ratio, hence, why we were very comfortable in announcing a share buyback. That doesn't in any way, shape or form exclude the opportunity for bolt-on M&A. We still got capacity on the balance sheet. And in line with our capital allocation policy to do bolt-on M&A, it just felt comfortable given the trajectory of the cash flow through the year to announce the buyback at the moment. And it doesn't necessarily exclude doing further buybacks.

We'll always revert back to our capital allocation policy. We'll look at our future cash flows. And then we'll take a view depending on what opportunities we have available in front of us, but very comfortably announced the buyback today on the back of the $500 million that we also did last year, of course.

Great. Just to pick up your second question in terms of the AWC. Of course, the pricing kind of dynamic within Germany, especially, but also France, as you called out, it's not necessarily a new phenomenon. We have taken that into account in the guidance that we issued. And so based on what we are seeing, we don't see a reason to update our guidance based on that. So yes, we do have exposure to it, but it's contemplated within our guidance.

And maybe it would be worth sort of taking the opportunity to reemphasize the fact that we're also launching ALLEVYN Complete Care into the European market in the second quarter of this year. So that would support our performance.

Our next question is from Graham Doyle with UBS.

Just 2 hopefully quick questions. Just on the -- John, on the margins, could you give us some color just as we model the phasing for first half this year versus last year? I mean it kind of feels like it should be down a little bit margin year-over-year, but just good to get -- just to clarify that. And then maybe one for Deepak. When we're modeling LANDMARK, how we model the sort of ramp? So is it literally as that launches, we should expect knees to start doing better? Or is it like a 1-, 2-quarter lag? Just to understand that as well would be super helpful.

Graham, yes, just your comment just on the margins. I mean, just to be clear, we're reiterating our guidance for the full year, which is pre Integrity. We're expecting our top line to grow 6% and our profit -- trading profit organically to grow around 8%. So obviously, there's some margin expansion implicit within those numbers. If you then fully factor in the dilutive impact of Integrity, then we would broad -- I would say, broadly get to flat margin for the year. So that gives you a guidance for the full year.

In terms of the half on half, as we called out on the call, we expect the phasing on the top line to be a little bit more weighted in the second half of commercial contracts that we had forecast to land in our second quarter will now actually be just bumped into our third quarter, but we've got full visibility of those coming through. And so there'll be a little bit shift in weighting towards the second half. And we expect the profit to follow that. But overall, we are comfortable with the guidance that we've given. So it will be margin expansion on a pre acquisition basis and broadly flat if you take account for the diluted impact of Integrity.

Right. And Graham, on your LANDMARK question, just to anchor you on the time lines, just to recap from our CMD. Q3 of this year is when we launched our cementless and end of Q2 of '27 is when the cemented version gets launched, that's when we have the full offering. As with any orthopaedics launch, it's never a switch, right? If you do it right, with all the operational discipline we're driving with the organization, the discipline around capital, you've got to be thoughtful about how you deploy sets, and we'll bring that discipline into the LANDMARK launch as we've demonstrated with CATALYSTEM.

So if you look to what happened with CATALYSTEM, where it was a build over a few quarters, that's what you should expect in effect with LANDMARK. And competitive dynamics is a little bit different in knees or hips, but you should look to that as directionally the shape of how we would launch LANDMARK. So a couple of quarters after each of those kind of time lines that I gave you would be the way to think about it.

Our next question is from Seb Jantel from Panmure Liberum.

So just 2, if I may. One, I just want to dig a little bit deeper on the input costs. So obviously, you've talked about 2026. I'm kind of thinking if this goes on for a bit longer, and we see elevated oil prices into '27. I was wondering if you could help maybe give us a sense of what percentage of your COGS are exposed to kind of petrochemicals and how that might flow into '27? And then the other one is just to delve a little bit more to Graham's question on the phasing. So you've talked about perhaps a little bit more revenue phasing in the second half than the first half. Can you help us quantify that? Is that a kind of a couple of percentage point movements or something lower than that? Just to get a sense of what we're talking about.

I'll take both today. So look, on the input cost side, as I said earlier on, just to reiterate, we've got pretty good visibility for the '26 year. Things got a lot worse, more protracted, then it could have an impact, but we're pretty well hedged going in '26. Obviously, '27, things go on for longer, that could impact '27. But we're not overly exposed to the petrochemical side of our business. It's obviously, there's embedded within our products to a degree, but it's not a huge exposure. So it's relatively small in that regard.

And the point I would say about '27, there's -- like in any year, there's always puts and takes on the margin. And if we're looking -- I'm not going to sort of go about forecasting '27 margins, but we've always said that '26 was a tough year because there was a few headwinds. '27 ought to be a little bit easier because things like the revaluation reserve and tariffs and so on reverse out. So there may be some pressures coming through on the cost side. But again, there's some positive tailwinds to offset that. So -- but we'll obviously set our guidance out for '27 more clearly at the time.

In terms of the phasing, half 1, half 2, I don't want to call it out too specifically. I think I would say for half 1, we're probably looking at somewhere around 3.5 percentage growth and then probably in the second half, 8%, 8 or so plus, and that gets us to around 6%, full year. That might be broadly the way we would see it shaping up. And so it's a little bit more weighted in the second half, as we said. But we've got very good visibility on that. There's a couple of contracts that we know will shift from Q2 into Q3, so we're comfortable with the overall guidance we set out for the full year.

Our next question is from David Adlington from JPMorgan.

So firstly, I'm afraid back to U.S. knees. I just wondered how Q1 sort of stacked up versus your internal expectations and what particular elements surprised you? And then just to confirm that you do expect Q1 to be the trough for U.S. knee growth? And then secondly, just on skin substitutes. Just wondered how the performance there was relative to expectations with respect to both price and also volume?

Thanks, David, for the question. So U.S. knees as we acknowledged, a little bit softer than we had thought. And the primary driver for that is the timing of where we chose to deploy LEGION sets -- LEGION MS sets, and that had an impact of kind of the shape of it. But the broader kind of context for that is, as we've said, historically, we've not been very disciplined about how we've deployed capital into the business. And we've acknowledged that. And we've said during the whole 12-point plant journey, one of the things we've really worked on is being very, very intentional about how we do that going forward and the steps we would take to try and address some of the places where we have too much capital deployed relative to the business opportunity.

And we said there's a point in time, and we'll start to kind of address that, and we've been at this now for a little while. And the timing of that just depends on when the opportunity is to do this. And sometimes, it's hard to forecast that within a quarter, but it's the right thing to do to get the business reset and to be on more solid ground. So this is part of our efforts to do that. And there will be some quarterly shifts around when that actually occurs. But the broader thing in terms of software is just the timing of when we chose to deploy sets.

And also, as John indicated earlier on this call, because we've got line of sight to, a, the sets that we do have and where we plan to deploy them in the context of when LANDMARK is launching and the discipline with which we're doing it and the discipline with which we are ensuring that those sets turn gives us some good confidence in terms of how the rest of the year are going to play out. So that's kind of the U.S. knees part of it.

And in terms of skin subs, we had contemplated a range of outcomes knowing that we were going into a very uncertain kind of environment. So the guidance of $20 million to $40 million trading profit impact on skin subs had a range of possible scenarios that we've taken into account. What we're seeing play out is there's inventory in the channel. We had expected some level of that was going into it. It's maybe on the higher end of what we had expected. And then the system has taken some time to adapt in terms of how things get billed and how reimbursement actually occurs. The Wiser model that the CMS has deployed and how that gets implemented within physician offices and health care settings and also how physician offices, for example, bill for these services, a very different type of model in the current era compared to what they're used to. So that adaptation is taking a bit of time, right?

And so when you put -- when you add these things together and you look at what's actually happening in not only kind of how the quarter turned out, but also intra-quarter moves, what we see is contemplated within that range of $20 million to $40 million that we've set out. So bottom line, there are puts and takes within that, but we feel good about kind of falling within the expected outcomes we have modeled. Anything, you want to add to that, John?

Yes. No, I think you covered it. Basically, David, bang in line with our expectations for the quarter. So the market is pretty much performing as we expected. If you remember at the prelims, we gave the overarching yearly guidance of prices for us, it's been down 20% to 25% and volumes being flat to positive. Obviously, we wouldn't expect to see that in the first quarter because there's a degree of market is going to mature over time. So actually prices were actually down a little bit less than that 20% to 25% volumes were down a little bit. We would have seen positive return to volume. But the quarterly performance was actually bang in line with what we would expect to see as we see the market mature and transition through this state as we progress through the year. So very comfortable with where we are. And to Deepak's point, the $20 million to $40 million guidance that we gave is reaffirmed.

Perfect. And sorry, just to fully quantify the Q1 does represent the trough for U.S. knee growth.

Yes.

Sorry, yes, it does. Sorry, I didn't address that part of the question. Yes. .

Yes, we expect to see steady progression on U.S. knees as we progress through each quarter of this year.

Our next question is from Susannah Ludwig with Bernstein.

I guess, first, you guys had called out strong SANTYL growth on the back of distributor patterns. I'm just wondering how long that impact is expected to last. And then second, you noted in AET that the China VBP has been delayed until the second half of the year. So just any commentary on sort of how you expect that to impact phasing of AET throughout the year?

So SANTYL, as you know, just the way the business works, flows through distribution, and there is a kind of quarterly gyrations. Overall through the year on a year-on-year basis, a pretty consistent level of growth in SANTYL. So that's the way to anchor kind of how you think about SANTYL. So there's no fundamental change to underlying demand and the kind of growth that we see. So in Q1, the impact of distributor stocking patterns, the Q1 to Q1 comparator drove the numbers that we see. But in terms of underlying demand that seems steady.

There's some perturbation with the whole skin sub thing and how the channel is adapting to things. So there's some perturbation to that, but there's actually underlying strength in the demand. So that's SANTYL.

In terms of AET, just to reinforce what we said earlier, which is that we're seeing a shift in -- when AET is going to be implemented within the year because we've been through this now a number of times. We had basically worked on channel inventory ahead of the expected implementation at the end of last year, as John said. And with the delay that's come, there was a greater level of demand in Q1, which we catered to.

Overall, for the year, at the beginning of the first half -- second half, we expect AET to be implemented as follow signs. There's no change to the fundamental assumption other than the timing shift to that. But also want to reanchor you to China now, which is -- it's now a significantly smaller portion of our overall group, around about 2% or so of overall group sales is now China. So it is less material to the group. And as John said, while China was not a headwind for us for the first time in quite some time. Overall, for the year, we expect China to be neutral in terms of growth. Listen, do you have anything you want to cover there, John?

Well, just maybe a little bit detail on AET. So the upside that we saw in Q1 and Q2, we expect to reverse in Q3 and Q4. So actually, for the full year, in China on AET, we expect to be roughly flat, but that will largely play a draw. And actually, as Deepak just said, for the business overall in China for the year, we expect to be roughly flat again. So it's really neither dilutive not accretive to our overall top line performance.

And just on the SANTYL piece, I mean, to Deepak's point there, because of the distributor stocking patterns, we've had a strong Q1. I think the corollary of that is we might see a slightly weaker Q2, but to Deepak's overarching point, when you look at the year overall, in line with expectations.

[Operator Instructions] Our next question is from Oliver Metzger with ODDO BHF.

First one is also about skin substitutes in the U.S. So do you have any view that apart from the CMS price cuts that also some market share shifts might occur on the back of the reform? Second question about Advanced Wound Care. So some stronger growth for now the fourth consecutive quarter, which is, let's say, above historic levels. Often -- pretty often slower growth was initiated by some higher price pressure. Now we see the reforms in Germany and France. And in Europe, these countries have often been the first mover with some more reforms to come. So do you expect that the overall environment shifts now again more towards higher price pressure?

Yes. Thanks, Oliver. So in terms of CMS ask. So first off, post the '26 when clearly a year of transition, we believe this is fundamentally a great market, and we're very well positioned within that market. There's a significant medical unmet need for this in a variety of applications, where it's diabetic foot ulcers, venous leg ulcers. The clinical need for these products remains robust, and we've got a great portfolio backed up by strong clinical evidence, directing the appropriate use for these products.

What we expect to have happen is, over time, we believe utilization will shift to those products that are backed up by clinical evidence and have the quality profile that customers and patients expect. So there will be shifts that occur, and that will get played out during the course of '26 as we get into '27. So as Smith & Nephew, we feel very well positioned within this sector over the longer term. So that's kind of the skin subs answer.

In terms of AWC, as you know, we've had a higher level of growth based on historical levels. There are some comps within that. But fundamentally, we've got new products that we're launching into this category. So ALLEVYN AG has been a material driver of growth. We've got ACC or ALLEVYN Complete Care launching, is launched in the U.S. It's coming as John said, kind of middle part of the year within Europe. That we're expecting to take share within that category. Because it's got, from a product standpoint, unique features and benefits. It's a 5-layer product that offers great opportunities for exudate management, which ALLEVYN has always been known for. But together with the new silicon that ALLEVYN Complete Care features, and the fact that you've got 5 layers that are not bonded together that is great in shear, which means it can be used in a variety of applications, makes for a very compelling value proposition for that category.

So we believe that product is differentiated, and we are poised to take share within that. In terms of pricing pressure, you rightly note, Germany often is the Vanguard for something like this. But as you also know, Oliver, that what happens in Germany doesn't necessarily translate in a like-for-like fashion in other markets because each market is different. The reimbursement patterns are different. The clinical practice is different. So look, we're not -- we're quite attuned to the dynamics of the market. We've been in the space for a long time. Our long-term plans take into account a dynamic market, but we also have a great product, we believe that will carry the day in a market that's dynamic. So you put these pieces together, I think we're set up very nicely in an AWC category to actually be a challenger, which we haven't been in quite some time.

There are no questions waiting at this time. So I'll turn the conference back over to Deepak Nath for any closing remarks.

Great. Thank you for the great questions. So I just want to end with saying that we've delivered a great first quarter. This performance that was in line with our expectations, and we feel very good about our ability to meet our full year guidance across all the metrics. We look forward to coming back to you and updating you on progress at the half. So thank you again for your attention and engagement today.

Thank you. That concludes Smith & Nephew Quarter 1 Trading report. Thank you for your participation. You may now disconnect your lines.

Good morning. Welcome to the Smith & Nephew Q4 and Full Year '25 Results Presentation. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is John Rogers, our CFO.

I'm pleased to report a strong finish to 2025, delivering results at the high end of our guidance on revenue growth, margin and free cash flow. For the full year, underlying revenue growth of 5.3% and importantly, all three of our business units grew by over 5%.

Sports Medicine & ENT and in particular, Joint Repair within that had another strong year. And in Orthopaedics, we saw meaningful progress in our U.S. recon business, particularly Hips and in Trauma. When there's more work to do in U.S. Knees, our OUS business, Knees business has remained strong throughout the year. So we had a record year of CORI placements globally and saw continued growth in adoption and utilization of our robot.

Advanced Wound Management also had a good performance in 2025, driven by growth in AWD and Bioactives. Innovation remains central to our strategy with over 60% of our growth in 2025 came from products we've launched in the last 5 years. And innovations in all three business units delivered double-digit growth for the year, including Q-FIX, REGENETEN, FASTSEAL, LEGION CONCELOC, CATALYSTEM, EVOS, AETOS, PICO, and LEAF.

On profitability, we saw 160 basis points of margin expansion, driven by our enterprise-wide cost savings program and the benefits of all the work we've done in our Orthopedics business dropping through to our P&L. This includes optimizing our manufacturing network, improving productivity, introducing our new sales and operation planning processes and portfolio rationalization.

We expect to see further benefits from these initiatives, combined with our Ortho360 operating model and continued revenue growth that will drive us to more than 20% margin in Orthopaedics by 2030.

We've also shown greater discipline around working capital management, bringing down days of inventory, and we reduced restructuring charges. Alongside growth and higher profitability, this has lifted free cash flow to $840 million, a 52.5% increase year-on-year. This enabled us to complete a $500 million share buyback program in the second half of 2025. This is a great way to finish off 3 years of incredibly hard work and focus under the 12-point plan, during which we've delivered -- consistently delivered on our targets each year and sets us up well for further acceleration of growth and returns as we go into the first year of our new RISE strategy.

Turning now to 2026. We expect growth of 6% revenue and around 8% trading profit growth, both on an organic basis and consistent with what we laid out at our Capital Market Days in December, with trading profit growth ahead of our revenue growth. Since then, we've announced the acquisition of Integrity Orthopaedics, so we're also now guiding to trading profit of around $1.3 billion, including the impact of the deal.

John will cover guidance in more detail in his section. So let's now round out our financial performance over the last 3 years on the 12-point plan with actual numbers.

We've moved Smith & Nephew from a historically low single-digit revenue growth company to mid-single-digit growth, delivering 5.7% CAGR from 2022 to 2025. And we expanded trading margin by 240 bps from 17.3% in 2022 to 19.7% despite facing significant headwinds from VBP in China, FX volatility and higher inflation.

If we exclude the total impact of the Sports Med VBP over this period, our 2025 margin would have been 20.9%, 120 bps higher than we've reported. Our increased focus on cash and capital returns has yielded a 15-fold increase in free cash flow and ROIC has increased by 170 bps from 6.6% to 8.3% or by 330 bps, excluding the 160 bps headwind from the impact of portfolio rationalization.

I'm incredibly proud of what the whole team here has achieved over the life of the plan and excited about what we can deliver over the next 3 years under our new strategy, RISE.

I'll come back to talk about this next phase of our growth later. But for now, I'll pass you over to John to take you through the detail of our results. John?

Thank you, Deepak. Good morning, everyone. Revenue for Q4 was $1.7 billion, representing 6.2% underlying growth and 8.3% reported, including a 210 bps tailwind from foreign exchange. We had 1 extra trading day year-on-year. And on an average daily sales basis, growth was 4.5%.

Growth was broad-based across business units and regions. The U.S. grew 5.6%; other established markets, 7.2%; and emerging markets, 6.4%. Excluding China, underlying growth was 7.2%.

I'll now move on to the details by business unit, starting with Orthopaedics, which grew 7.9% on an underlying basis and delivered the strongest quarterly growth for more than 2 years. One extra trading day helped, but even if you normalize for that by looking at average daily sales, growth was still strong and accelerated nicely ahead of Q3.

In the U.S., we saw a third consecutive quarter of above-market growth in Hips, acceleration in Knee growth and continued strong Trauma & Extremities growth.

Hip performance continues to be driven by the uptake of CATALYSTEM, and we are seeing good competitive conversions, and we plan to increase our CATALYSTEM set deployments to support growth in 2026. U.S. Knee growth improved during the quarter following the launch of LEGION MS, which enables us to benefit from the market shift to media stabilized inserts. We are pleased with our competitive wins with the product and continue to receive positive feedback from existing and new users.

In OUS, Knees, Hips, Trauma & Extremities all delivered strong performance, except for some localized weakness in Hips in certain distributor-led markets.

Following the launch of CATALYSTEM in Japan, we see growth improving in our OUS Hips over the coming quarters. In Trauma & Extremities, we continue to see good growth from our TRIGEN MAX Tibia, EVOS Plating System, and AETOS Shoulder.

Other Recon grew 40.8%. We're pleased with increasing CORI placements in teaching institutes and with the percentage of CORIs deployed in competitive accounts. We also deployed 45% of CORIs in ASCs in the quarter. CORI deployment is important because Knee growth is 850 bps higher in accounts where CORI is established, underscoring the potential for further improvement in Knee growth as penetration and utilization of CORI continues to grow.

I'll take a moment to look more closely at U.S. Recon growth. In Hips, you can see consistent improvement in growth stand-alone and versus the market since the beginning of 2024, and we have grown above market for the last three quarters of 2025. This is driven by the changes we've made to our commercial engine, product availability and our portfolio with the launch of CATALYSTEM, which addresses the fast-growing direct anterior segment of the market.

In Knees, we have also been narrowing the gap versus the market. We had a good quarter in U.S. Knees in Q4, but we recognize quarterly performance has not been as consistent as we would like.

In 2026, we expect to continue to close the gap versus U.S. recon market growth. We expect U.S. Hips to track in line with or ahead of the market growth and expect U.S. Knees to start off with a softer first quarter, reflecting our continuing and deliberate trade-offs on balancing growth, profit and asset efficiency. We will then build towards market growth in Q4, supported by the launch of the Cementless version of our new Landmark Knee in the second half.

Landmark brings the proven clinical benefits of our Knee portfolio into a single platform that combines advanced kinematics with the next level of personalization, robotic enablement and ease of implantation, while unlocking capital efficiency by leveraging existing instrumentation. Landmark will also feature best-in-class tray efficiency, making it particularly suitable for ASCs.

Turning now to Sports Medicine & ENT, which grew 7.3%, driven by double-digit growth in Joint Repair as we annualize the impact of China VBP. We reached an important milestone this year with our Joint Repair business surpassing $1 billion in revenue for the first time.

Growth continues to be driven by REGENETEN and Q-FIX KNOTLESS, along with strong performance in small joint outside of China. We saw further acceleration of AGILI-C, albeit still off a small base.

AET delivered strong growth, led by FASTSEAL and patient positioning with strong growth in our U.S. markets ex China. Despite continued softness in the U.S. tonsil and adenoids market, ENT saw good growth with double-digit growth in those as well as strong international growth again ex China.

We have AET and ENT China VBPs ahead of us, but the headwinds in 2026 will be much smaller given the relative size of these businesses. We are already proactively managing our inventory ahead of implementation.

Advanced Wound Management grew 2.8% in the quarter. Within that, Advanced Wound Care grew 4.4%. We are very early in our launch of ALLEVYN COMPLETE CARE, but we're pleased with the performance so far, and we expect momentum to grow over the coming quarters as we roll out the product across the U.S.

Moving on to Bioactives and Devices. It's important to remember that both had very strong prior year comparators of over 20% growth. Bioactives declined by 0.5%. We saw softness as we lap the GRAFIX Plus launch in Q4 '24. And we also saw a slowdown in skin subs in the physician office and outpatient setting prior to the CMS reimbursement changes that came into effect at the start of this year.

Advanced Wound Devices grew 5.4%. LEAF and PICO both performed well, reflecting strong demand. PICO growth continues to demonstrate strong market demand and reflects our efforts to improve penetration in the surgical setting.

U.S. RENASYS continues to be impacted by softness in the acute care channel, while performance outside the U.S. remained strong.

Now I'll move on to the full year financials. For the full year, revenue was $6.2 billion, up 5.3% on an underlying basis, ahead of our guidance of around 5% and up 6.1% on a reported basis. Excluding the headwinds from China, growth would have been 7% on an underlying basis. Note also that '25 had 1 fewer trading day versus 2024.

Performance was broad-based with all three reporting segments delivering growth of above 5%. Orthopaedics grew 5.1%, Sports Medicine & ENT grew 5.2% and AWN grew 5.6%, all on an underlying basis. Overall, a good set of growth figures and particularly good to see that more than 60% of our growth comes from products launched in the last 5 years as Deepak covered, giving us confidence coming into 2026.

Let's now take a moment to look at our underlying revenue growth, excluding China over the last few years. You can see that growth ex China has been greater than 6% since 2023, and that China headwind peaked in 2025 at 170 bps. China was just over 2% of group sales in 2025. And although we still face VBP headwinds in '26, as I already mentioned, these headwinds will have a much smaller impact at the group level.

Moving on to the summary P&L. Underlying gross profit was $4.4 billion with a gross margin of 70.9%, an increase of 60 bps. We were able to more than offset raw material inflation with price increases across our portfolio and productivity measures in manufacturing and procurement.

Trading profit was $1.2 billion, an increase of $162 million, resulting in 160 bps of trading margin expansion to 19.7% for the full year, at the high end of our initial margin guidance. This was driven by positive operating leverage, our cost savings program and in particular, margin expansion in our Orthopaedics business unit.

Moving further down the P&L. Adjusted earnings per share grew by 21% to $1.02. That's above trading profit growth, primarily reflecting the $500 million buyback we completed in the second half, which more than offset a higher tax rate year-over-year. Our tax rate was 19.4%, in line with our guidance of 19% to 20%.

Basic earnings per share grew significantly faster, primarily driven due to the lower restructuring charges and lower acquisition and integration costs. Our restructuring charges were $47 million, down from the $123 million in 2024 and we had $32.7 million acquisition and integration costs compared to $94 million in 2024. The full year dividend is proposed to be $0.391 per share, an increase of 4.3% year-on-year.

This slide shows a more detailed trading margin bridge. We absorbed headwinds of 250 bps from cost inflation, China VBP and tariffs with FX impact being broadly neutral. These were more than offset by 180 bps of revenue leverage from price and volume and 240 bps of productivity improvements, delivering 160 basis points of margin improvement for the year.

Drilling down into the details of the efficiency savings, we remain on track to deliver on the 12-Point Plan and Zero-Based Budgeting savings we laid out at our interims in 2024 of $325 million to $375 million of savings by 2027.

We've achieved $280 million in cumulative savings to the end of 2025 with further savings to come through in '26 and '27. We continue to anticipate total savings of about $150 million in 2026, half from this 12-Point Plan Zero-Based Budgeting savings and half from other opportunities above and beyond this across procurement, manufacturing, sales and marketing and business support.

Our 2026 guidance is for 8% reported trading profit growth on an organic basis and for around $1.3 billion of trading profit, including some dilution from the Integrity acquisition.

We laid out some extraordinary headwinds to profit in 2026 at our London Capital Markets Day. These include inventory revaluation, tariffs, the impact of changes to reimbursement in our U.S. AWM business and ENT VBP in China. There are no changes to any of our assumptions regarding these headwinds. We still expect $60 million impact from tariffs compared to $17 million in 2025 and $20 million to $40 million incremental impact from changes to wound reimbursement. We expect revenue leverage and operational savings to more than offset these headwinds to drive trading profit growth ahead of revenue growth before the impact of any M&A.

Coming now to trading margin by business unit. We saw a 340 bps increase for Orthopaedics to 14.9%, and 20 bp decrease for Sports Medicine & ENT to 23.8% and 120 bp increase for Wound to 24.9%. Broadly speaking, expansion came from OpEx savings and leverage across all three business units.

Within Orthopaedics, the increase was driven by favorable price/mix, manufacturing savings from network optimization, ongoing productivity initiatives and disciplined cost control. We expect further margin expansion to 2028 and beyond in this business unit. This will be driven by continued growth in revenues, the impact of actions already taken to rightsize our manufacturing capacity and our Ortho360 operating model, our way of running the business to balance growth, profit and returns.

In Sports Medicine & ENT, the margin decrease was driven by the impact of China VBP, which more than offset revenue leverage, operational efficiencies and good cost management. Margin expansion in AWM was driven primarily by favorable product mix and productivity gains in operations.

As you know, inventory has been a key focus under the 12-Point Plan, and you can see here the development of DSI, day sales inventory, over the year, both for the group and for each of the business units. Group DSI fell by 21 days, excluding the impact of portfolio rationalization that we announced at the end of last year and by 51 days, including this. The biggest reduction came from Orthopaedics, reflecting continued efforts to reduce the number of units in inventory.

As covered at our Capital Markets Day, we expect inventory value to reduce further in 2026. We also saw a reduction in Sports Med DSI, including and excluding portfolio rationalization, albeit to a lesser extent than in Orthopaedics, and both Sports and Wound are already much closer to industry benchmark DSIs.

We made good progress in our ROIC, delivering a 90 bp increase in ROIC to 8.3% at a group level. The improvement is being driven by trading margin expansion, lower restructuring charges, inventory reduction and overall better asset utilization.

Excluding the impact of portfolio rationalization that we announced in December, ROIC was 9.9%, exceeding our cost of capital for the first time in several years. All business units contributed to ROIC improvement, including a more than doubling of Ortho ROIC in 2025, helped by trading margin expansion and lower inventory. We expect a further step-up in group ROIC in 2026, driven by a continuation of these trends.

Moving on to cash flow. Trading cash flow was $1.236 billion for the year, reflecting 102% conversion. The improvement came primarily from lower working capital costs, particularly from inventory and payables. Capital expenditure was $433 million. Working capital remains a focus for 2026.

Free cash flow also improved to $840 million, growing 52.5% year-on-year. This includes a $26 million one-off property transaction and a $58 million reduction in restructuring, acquisition, legal and other costs. The $840 million was well ahead of our initial guidance for over $600 million.

We expect free cash flow in 2026 of around $800 million. We expect the usual increase driven by profit growth, offset by a small temporary increase in restructuring costs, driven by further optimization of our manufacturing network with the closure of our Warwick site in sourcing more into Memphis and winding down manufacturing activities in Hull as we build our new Wound facility in Melton. Overall, our cash generation and returns profile is now in a much healthier position, and there is more improvement to come as we execute our RISE strategy.

Net debt increased slightly during the year to $2.76 billion, an increase of $50 million. We finished 2025 with a leverage ratio of 1.7x adjusted net debt -- adjusted EBITDA, which is within our target of around 2x.

In terms of capital allocation, we continue to prioritize organic reinvestment in our business and M&A execution in order to drive top line growth. We maintain our dividend ratio of 35% to 40%, and we'll then consider returns to shareholders in the form of buybacks, subject to our target 2x leverage ratio. Including the 2026 acquisition of Integrity Orthopaedics, our leverage still remains below 2x adjusted EBITDA.

Now I'll finish with our outlook for 2026. We continue to expect around 6% organic revenue growth. That includes continued good growth in Orthopaedics, Sports Medicine, excluding AET and ENT in China and Advanced Wound management, particularly in AWC and AWD. Whilst we expect headwinds in our skin substitutes business, we still expect AWD to grow, supported by the ongoing strength of SANTYL and growth in skin substitutes out of the physician office and mobile channel.

We expect around 8% trading profit growth before M&A. As I've already mentioned, we faced a number of extraordinary headwinds in 2026, but we still expect trading profit growth ahead of revenue growth, driven by revenue leverage and operational savings.

Since providing our provisional guidance, we've also completed the acquisition of Integrity Orthopaedics. This acquisition is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027 and accretive in 2028. Including this dilution, we expect trading profit to be around $1.3 billion. We thought it would be helpful to set out these two measures of trading profit so that you could see the performance of the business on an underlying basis as well as the total trading profit, including the impact of the acquisition.

Finally, we expect around $800 million in free cash flow and greater than 10% ROIC excluding Integrity. We expect a stronger second half compared to the first half for both sales and profit growth, in line with the typical phasing we see. We also expect ALLEVYN COMPLETE CARE to ramp up over the year and the launch of LANDMARK will benefit the second half. We have 1 fewer trading day in Q1 versus 2025 and 1 more in Q4. As a reminder, trading days have a more pronounced impact on our Orthopaedics business.

And with that, I'll hand back to Deepak.

Thank you, John. So the launch of RISE, our new strategy, which I laid out for you in the Capital Market Day in December, our ambition is to accelerate growth and improve returns. It's been great to see how well this new strategy has resonated internally with this focus on reaching more patients, driving innovation, scaling through investment and executing more efficiently. We're building on the behaviors embedded through the 12-Point Plan with our way to win. Our program to be better every day through a continuous improvement mindset and behaviors.

So let me now highlight the key drivers shaping our performance in the first year of RISE, and I'll start here with Sports Medicine.

First, the China Joint Repair VBP headwinds have now fully annualized, which means our underlying Joint Repair growth will improve this year. And importantly, we expect the upcoming AET and ENT VBP processes to be significantly less material given the relative size of those businesses.

Second, we're continuing to build on the strength of our Shoulder portfolio with our acquisition of Integrity Orthopaedics, and we look forward to driving adoption of TENDON SEAM across our customer base. So I'll come on to this in a moment.

Third, we're awaiting FDA approval of TESSA, our first-in-industry spatial surgery arthroscopic platform. This represents a major step forward in how surgeons visualize and execute procedures.

And finally, we're also seeing ongoing growth in REGENETEN. The recent AAOS guidelines support for the use of Bioinductive Implants in rotator cuff repairs is reinforcing clinical confidence and expanding usage.

I'd like to spend a few minutes on our acquisition of Integrity Orthopaedics, an asset we believe, has the potential to become a key growth driver for our sports medicine portfolio. We announced a deal earlier this year for a total consideration of up to $450 million, including performance-based payments.

Integrity Orthopaedics was co-founded in 2020 by Tom Westling, who also founded Rotation Medical, the company behind REGENETEN, which we acquired in 2017. REGENETEN's growth is evidence of our proven track record of successful commercial execution, scaling an innovative shoulder product with our dedicated sales force and building the clinical evidence to drive adoption.

Integrity has developed Tendon Seam, an innovative rotator cuff repair system that received FDA approval in 2023 and addresses the $875 million biomechanical repair market.

Rotator cuff repair is a large and growing category with around 500,000 procedures performed annually in the United States. Despite the scale, surgical techniques have seen little meaningful innovation in over 2 decades, leaving patients with retail rates of between 20% and 40% and long recovery times.

As a result, this remains a segment with significant unmet need and where meaningful innovation can shift share. Tendon Seam Introduces a fundamentally novel biomechanical approach designed to distribute load across the entire tendon rather than concentrating stress at fixation points, resulting in stronger, more stable repair. Early clinical data is promising, showing potential for lower retail rates and accelerated patient recovery, while offering a shortened and easier surgical procedure compared to the current standard of care.

The acquisition is fully aligned with our RISE strategy to accelerate growth through strategic investment by deploying capital into high-growth, high-value clinical segments where we already have a strong presence, and that's underpinned by our strong balance sheet.

The deal is expected to be dilutive to trading profit in '26, and as John mentioned, broadly neutral in '27 and accretive starting in 2028 as the product scales. While still early, integration is progressing as planned, and we're focused on executing the same disciplined playbook that drove REGENETEN success.

TENDON SEAM is highly complementary to Smith & Nephew's extensive shoulder portfolio. With this novel and disruptive technology, it strengthens the initial repair construct in rotator cuff tears and REGENETEN then builds on that strength by promoting biological healing over time. Together, they create a differentiated end-to-end solution that addresses both the mechanical and biological drivers of successful rotator cuff repair.

The total combined TAM for the two products is just under $1.2 billion. And today, we have about 25% share with opportunity to grow. Within fixation, we have the market-leading instability solutions, including our Q-FIX, All-Suture Anchor portfolio, which has 10 years of proven performance.

In shoulder arthroplasty, our AETOS Shoulder System launched in 2024 with anatomic, reverse and seemless options is positioned for the high-growth replacement segment with estimated $250,000 -- 250,000 procedures annually in the U.S. in 2025.

We will soon have a powerful new offering with the launch of CORI Shoulder that will enable our handheld robotics to be used in the preparation and execution of shoulder replacement with AETOS, building on what we already have with CORIOGRAPH Pre-Op Planning.

We now have one of the broadest, most advanced portfolio for managing shoulder pathology spanning replacement and repair by both mechanical and biological healing technologies across our Orthopedics and Sports Medicine businesses.

Turning to Advanced Wound Management. In Wound Bioactives, we have plans in place to navigate CMS reimbursement changes to skin subs in the physician office and mobile setting and to grow outside of those channels. As a reminder, CMS has introduced a pricing cap starting from the 1st of January 2026 with the aim of reducing historical distortions in the market that's incentivized a significant number of players often operating in the mobile setting to charge very high prices.

We expect a reduction in non-surgical volumes, particularly in mobile, now that incentives changed and certain skin sub offerings are economically less viable to many of these players and providers. So although this will drive a value reset short term, it also creates a more sustainable, patient-focused and evidence-based market going forward with a long runway for growth. We see opportunities to benefit as the market normalizes.

At the very end of last year, CMS also withdrew the skin subs local coverage determinations or LCDs. We always saw this as being broadly neutral to the business, and so this has no impact to our 2026 guidance. Even without the LCDs, we believe that clinical evidence will continue to be an important factor in this market.

Towards the end of 2025, we launched ALLEVYN COMPLETE CARE, our newest 5-layer foam dressing, which addresses both chronic wound healing and the pressure injury prevention market. It has 51% superior exited management and with the new silicone adhesives stays in place more frequently than competitive products, making it a superior product for chronic wound healing. It also has a 55% greater reduction in strain relative to competition, making it ideally suited for pressure injury prevention.

I'm confident that as we roll out ALLEVYN COMPLETE CARE to the market, we will capture market share in the largest and fastest-growing segment of wound dressings. We'll also continue to drive the portfolio in high-growth areas with unmet need like SANTYL in wound bed preparation and access new patient populations like those at the risk of surgical site complications or pressure injuries with PICO and LEAF.

Moving now to Orthopedics. We'll continue to drive procedure growth across all joints with our CORI platform, supported by the launch of our shoulder execution capability. CORI remains a core differentiator for us. Handheld robotics are increasingly popular and CORI's size, mobility, fast setup and low cost of ownership make it well suited to both hospitals and to ASCs.

In Knees, we'll continue to build out our portfolio in '26. We've already launched our Legion medial stabilized knee to meet the needs of a fast-growing segment, and we're pleased with the early momentum we've seen so far.

The next leap comes in the second half of the year when we launched LANDMARK, our most differentiating knee system yet that will be available first in cementless and in cemented versions and with the best-in-class tray efficiency that's particularly suitable for ASCs. As the ASC channel starts to grow or continues to grow, we're well positioned to expand further, supported by a suite of tray-efficient implants like AETOS, CATALYSTEM and LANDMARK together with CORI. In fact, 40% of all CORIs placed in 2025 were in the ASCs, underscoring the platform's fit for this high-growth setting.

We also capture further efficiencies with our Ortho360 program. This is our global operating model designed to eliminate past inefficiencies by replacing fragmented region-driven decisions with unified goals, integrated metrics and disciplined portfolio management.

By maturing our sales and operation planning processes into fully integrated business process or the IBP, simplifying the portfolio, reducing inventory and enhancing capital efficiency, this should drive profitability, improved ROIC and stronger cash generation in this business unit.

I'll now give an outlook for innovation over the life of RISE, given its importance to our growth, both historically and looking forward.

Looking ahead, we are stepping up our R&D investment in Sports and in Wound, while maintaining a robust front-loaded pipeline across all areas of the group from 2026 and to 2028. Over the last 3 years, we successfully launched 44 products, largely on time and within budget, and we plan to increase launch cadence going forward. We launched 14 new products in '24, 15 in '25, and we expect to launch 16 in 2026.

We're also building on our two major scalable technology platforms, M-TECH and Biologics. In M-TECH, we'll be launching TESSA and LUMOS in Sports Med and our next-generation LEAF monitors for pressure injury prevention in Wound. We also have a rapidly evolving robotic platform to drive procedure innovation across all joints in Orthopedics.

And in Biologics, we'll build on our existing products with launches like Next GENETIN, our next generation of REGENETEN.

So before I finish, I'd like to remind you of the midterm financial targets that our strategy will deliver. Through continued innovation and execution, we'll deliver organic revenue CAGR of 6% to 7% that's above our market. And our continued focus on productivity, further operational efficiencies and capital discipline will drive 9% to 10% trading profit CAGR, more than $1 billion in free cash flow in 2028 and 12% to 13% ROIC.

Coming back to the near term, we've delivered on 2025 in terms of revenue growth, margin, free cash flow and ROIC, and we're looking ahead to another good year. On revenue, we're accelerating growth, launching new products and driving leverage through our P&L. We'll continue to be disciplined on our cost base to drive trading profit growth ahead of revenue growth on an organic basis. And our free cash flow generation remains strong and will deliver another step-up in ROIC, significantly exceeding our WACC in 2026.

So with that, I'll now take your questions. So we'll now take your questions. Jack?

Jack Reynolds-Clark from RBC. The first is on revenue guidance in 2026. Could you kind of break down what your expectations are for market growth? How much launches contribute to that growth guidance? And what contingency is baked in to that guide? And then could you just run through the phasing through the quarters for revenue guide? And then could you remind us of your expectations for timing of the CORI shoulder -- sorry, shoulder ability in on CORI?

So with '26 and actually right through RISE, one of the benefits of the program we have is the multiple sources of growth. So we're not dependent on any one business unit or any one product to carry us through.

And to remind you, we've exited 2025 meaningfully above our historical levels of low single digits. So we've now navigated to above 5%. And when you take the impact of China VBP out of it, we were actually above 7%. So what we're driving to is 6% to 7% growth for the next 3 years. Within that, '26 will be at around 6%, which will be above our market. And each of our business units will contribute to that.

Innovation will be -- continue to be a key part of it. As I said, in '25, we were about 60% of our growth comes from new products. To remind you, in '24, we were above 50%. And in '23, we were still above 50%, around about 60%. So we've been consistently above the 50% mark in terms of new products driving growth.

In '26, as I indicated, we'll have 16 new products. I mean, you can measure that in different ways, but we expect that new products will continue to deliver above 50% growth into 2026. So '26, around 6% growth ahead of market. We'll see growth coming from each one of our business units, and we'll have innovation that continues to fuel our growth. So that's the overall kind of revenue story.

And in terms of our -- anything to add, John?

I can give a little bit of shape around the phasing.

Yes, phasing is great.

So as we said in the presentation, sort of weighted towards the second half. So Q1 will be softer. Obviously, it's 1 fewer trading day in Q1. We think U.S. Knees will be a little bit soft in Q1. We think that will build into Q2. So we're expecting the first half to outturn somewhere between, say, 4.5% to 5% top line growth.

Q3 and Q4 will be stronger as we obviously introduced LANDMARK and obviously, ALLEVYN COMPLETE CARE grows through the year. So Q3 and Q4 will be stronger. Q4 also has one more trading day. So that's a little bit of a boost. And so we'd expect the second half to deliver growth of somewhere between 7.5% to 8%. You combine that 4.5% to 5% in the first half with the 7.5% to 8% in the second half, that gets you to or around 6% for the full year. That gives you a little bit of shape on the top line.

And then I'll give you -- you didn't ask for it, but I'll give it to you any, because somebody will probably ask, in terms of shaping on the bottom line, again, we've got that 8% growth in our trading profit for the full year. Again, it's naturally going to be swayed to the second half given the revenue bias towards the second half. So I'd expect profit growth in the first half to be of the order of 5.5% to 6%, something of that nature, profit growth in the second half to be around 9% to 10%. The two combined gets you to your around 8%.

So I'm not going to break it out by quarter, but hopefully, that gives you a little bit of a shape. So effectively building through the year, partly driven by the fact we've got one fewer trading day in Q1 and one more trading day in Q4.

And your question on CORI Shoulder. The CORIOGRAPH, which is our planning platform launched, I think, middle of last year, the key unlock is, of course, execution, and we're starting the year now that's launched. So we've got a whole AETOS portfolio, stemless -- short stem and CORI Shoulder now planning and execution. So the ability to do both reverse and anatomic and the ability to do both adenoid and humoral and with CORI to do preoperative planning, intraoperative and postoperative kind of insight. So not only a complete solution, a highly differentiated solution.

Veronika next, David?

Veronika Dubajova from Citi. Two questions from me, please. The first one, I just want to go back to joint repair. Obviously, Deepak, you said that the China headwind has annualized out now, but we've had it basically for eight quarters. So I just want to confirm what's happening in Joint Repair China specifically and sort of what gives you the confidence this year that it's not going to be a drag to the overall Joint Repair number to the extent that we've seen. Obviously, the China improvement is a big part of the guide for the year. So if you can talk about that, please?

And then just kind of a big picture question around the margin and organic and inorganic development. Obviously, very exciting to see organic margin improvement this year, but it is being eaten away by Integra. (sic) [ Integrity ] So I don't know if you can maybe talk a little bit more broadly how you think about capital allocation and M&A sort of having an impact on the bottom line growth? And to what extent that's sort of a favorable trade-off that you're willing to take? And maybe if there is anything else in the pipeline beyond Integra that we should be kind of looking out for this year?

Integrity.

Integrity -- Sorry, Integrity. I'm so sorry. Clearly, my second cup of coffee hasn't kicked in.

Right. So let me talk about Joint Repair. So as we mentioned, Joint Repair has annualized at this point. So going forward, we'll have a clean kind of comp or rather Joint Repair growth alloyed by China VBP. And that is a key part of our growth story, as you highlighted.

And as we've called out a number of times, when you actually dissect our sports growth, it's been well balanced across geographies. You take China out of it, and we've actually grown high single-digit growth, not only across markets, but actually across categories, which is one of the key features of our Sports Medicine, which is a balanced portfolio selling that we've undertaken. So I feel very, very good about commercializing our portfolio and now that the impact of China VBP and Joint Repair is going away.

What is left, though, is AET. Right? The AET part started last year. I think it will be Q3, right, John, something like that, Q3 or early into Q4 by the time we fully lap AET. But the impact to the group is relatively small at this point, right?

And then the other part is we report ENT and Sports together. It's ENT that's not going through this. And it started kind of towards late last year. We'll fully annualize that towards the end of this year. But again, both of those while important to those business segments at a group level will now be a relatively small portion of the portfolio. So overall, like I said, I feel very, very good about the continued momentum that -- the momentum we've built and capitalizing on that momentum as we go into 2026.

In terms of margin, as we noted, we've driven 240 bps of margin improvement over the life of the 12-Point Plan program. That's a combination of leverage and cost improvement and all of the work that we've done over the 3 years of the program, not only deliver the 240 bps, but what's most impressive about that is the sheer scale of headwinds that we've overcome.

If you just take China Joint Repair VBP, that's just 120 bps on its own. And if you just add that to 19.7%, we would be at 20.9%. I'm absolutely proud of what we as an organization have delivered with focus not only on the top margin. As we've said, going forward, the focus will be on revenue growth and driving sustainable above-market revenue growth and profit growth. So that's kind of what we are orienting and guiding toward, recognizing that we'll continue to drive productivity. We'll continue to take costs out in order to, in effect, drive margin as well.

In terms of capital allocation, our focus remains on investments in organic, right, to drive top line growth above market and to further accelerate our growth. That remains a key feature or a key priority for us in terms of capital allocation. What we've also said, of course, is that's a mix of R&D and M&A.

And within our RISE strategy, what we've said is we will undertake M&A that allows us to scale in areas where we have strength. And that's within Sports and within Wound and areas where we see clear ability to build on what is a solid foundation.

And Integrity fits very squarely within that. As I've highlighted, the advantage of Integrity is within Sports Medicine, it allows us to be a clear leader in biomechanical repair, right? We were very, very positively impressed with TENDON SEAM and all that it has to offer in terms of an alternative to existing approaches. And together with what we have, I think it will be a great complement, right, in terms of mechanical repair. But what's most exciting is when you couple that with REGENETEN, where we clearly have market leadership in biologics, that's a fantastic portfolio. And we should expect us to act as the leaders that we are in Sports Medicine where we see an asset, unique technology that augments our position.

But actually, what's even more impressive is when you couple that with what we've got in arthroplasty with CORI and a full portfolio of AETOS, we are now very, very strongly positioned within Shoulder. And just to remind you, there's significant channel overlap in Shoulders. So surgeons who do arthroplasty also do soft tissue repair. So that's what's most exciting about this.

So Integrity fits very squarely as I said, in our RISE strategy, where we will make investments in order to shore up our position and to drive great growth. And as it turns out, within this particular asset, it's the group that gave us REGENETEN, and you've seen what we've done not only commercially, but actually investing clinically to develop the clinical evidence to drive adoption. So that's what's most exciting about it and hopefully gives you a little bit of color on capital allocation.

And maybe if I can just -- if I will just give you a little bit more on China as well. There's obviously a topic that comes up a lot in conversation.

Just to sort of set the scene, in 2024 in sort of Greater China, I think we said this number before, we were doing around $210 million, $220 million or so of sales. In 2025, we saw broadly a sort of a reduction of 1/3 as a consequence of all the impacts that we talked about. So roughly getting to about $160 million. Actually, when we look at 2026, it's actually a very similar number to 2025. So we're really not expecting to see much relative movement in our Greater China sales, '26 on '25.

Now actually, you need to unpack that a little bit because it's a combination of a couple of factors taking place, one of which is we're actually expecting to see Sports recover a little bit. Now the reason why that's the case is because we've done a really successful job of managing channel inventory in 2025. We've taken inventory where we've had to, we've taken inventory out of the channel. So we are confident, and we can start to come through in Q4 of last year, which is the reason that gives us confidence. So we expect to see a little bit of a bounce in our Sports business in China.

Of course, for the overall number to be flat, that means at least negative somewhere. And of course, the negative exists in the AET and in the ENT that we haven't really seen the impact of that in '25. It's going to really come through in '26. That's the negative. But overall, those two play a draw to be neutral on the top line.

When you look at the bottom line, profit again for '25 was let's sort of call it around $50 million to $60 million. We will expect to see a $15 million to $20 million reduction in that profit year-on-year into '26, and that's being driven again by the VBP on AET and ENT. So again, we've done a really good job of managing the channel inventory on ENT. So again, we can be reasonably comfortable with that number. So as we've very clearly stated, China will not be in 2026, a drag on the top line in the way that it has been historically. And it will be a drag on the bottom line, but to a much more limited extent, call it, $15 million to $20 million, which is what we set out at the Capital Markets Day in December and what we're reiterating today in terms of the impact of VBP, AET and ENT for '26.

So that's absolute clarity. And that's the thing that gives us confidence. When you look at our growth ex China for '25, we were 7% growth. Because we're no longer seeing that drag come through in '26, that's what gives us confidence with regards to our around 6% growth at the top line of our business, notwithstanding some of the headwinds we've clearly talked about.

David.

David Adlington, JPMorgan. You've seen two or three of your competitors in skin substitutes, downgrade their -- downgrade the expectations in the last few weeks that you've maintained yours that you had before Christmas. Just wondered if you could talk about what you're seeing in the market and your assumptions around price and volumes for this year?

And then secondly, one more for John. The inventory write-down, $159 million, is that all coming from the portfolio rationalization? Or is there anything more underlying in there? And is that now complete? Or should we expect more changes coming through?

Yes. So in terms of skin subs, we are seeing the channel adapt to the changes that are coming. So just to remind everyone, it's really in the physician office and the mobile channels where we're seeing most of the impact. And within that mobile is more impacted than physician office or the hospital outpatient segment, right?

So -- but in the Surgical segment, we're continuing to see growth. So in terms of parsing what different players have said, it really has to do with the mix of our business is how much of our business is in each of those channels. The other factor within that is the type of products you have within each segment, right? You've got products that you can segment both from a customer standpoint and from a price standpoint.

So put all these pieces together, what we're seeing is definitely impact in terms of price that has hit. To remind everyone, typically within the physician office segment and mobile segment, the payment terms or reimbursement levels or cycles are between 40 and 45 -- 30 and 45 days. So we're now heading into a period with the first tranche of reimbursements have gone in and physician offices are starting to see just what comes through from CMS around that.

So there's still a fair amount of uncertainty in the channel in terms of not only utilization, but how these products get reimbursed and the mechanism under which the CMS is actually reimbursing those products. So what we've said is the guidance we've provided for our business in terms of how we're impacted hasn't fundamentally changed from last year.

But longer term, David, I'm very, very bullish on the segment. Once we get through this period of adaptation, we believe that the clinical unmet need is there. There will be a drive towards using products that have clinical evidence -- and as you know, we've invested considerably over the years to develop not only products, but clinical evidence to drive the appropriate use of those products. And that combined with the growing unmet need based on demographics, right, makes us an attractive channel.

And inventory, do you want to take that?

Well, I was going to say just maybe give a little bit of color around the -- how do you get to our 20% to 40% impact on the bottom line. I mean we've said before that our skin subs business is around a couple of hundred million.

If you look at the -- we think that from a pricing perspective, we think for our portfolio, we'll see a sort of price reduction of around sort of 20%, 25% or so. Now that's a lot lower than the overall industry will see, because we haven't necessarily participated in quite the same high price points as the inventory average. So we will expect prices to come down a little bit.

At the same time, we would expect our volumes to be broadly neutral, maybe even a little bit positive as we grab a little bit more share from the channel. So overall, a sort of 15% to 20% reduction in our revenues. If you work out that on the 200 and drop that through as a margin, that gives you your 20% to 40% impact on our bottom line that we put in our margin bridge.

So there's lots of assumptions that build into that, lots of uncertainty around that, but that's just the basis on which we give the guidance. And we haven't seen anything in the market to date that would want to take that guidance and that's a broad -- a reasonably broad range of about $20 million to $40 million.

In terms of the inventory and the portfolio rationalization, that we see this as being really positive thing. This is -- we've taken this opportunity to accelerate the rationalization of our product portfolio. It means circa 2/3 reduction in our Ortho SKU count, a circa 10% reduction in our Sports SKU count. And these only represent in '26, probably about 7% of our sales. So it's a huge number of SKUs representing a very small percentage of our sales, which we will expect to -- over the next 2, 3 years to roll off.

And this is an opportunity for us to simplify the portfolio, offer our customers our latest products. And it's very much building on the work. There was a portfolio rationalization work that was kicked off at the very beginning of the 12-Point Plan. This is the second wave of that a little bit more focused on Trauma. The initial plan was more focused on Knees and Hips. But we see this as being a really positive thing. And we don't -- by the way, we don't anticipate any further changes.

And for the avoidance of doubt, the $159 million charge is just the portfolio rationalization. We haven't hidden anything else in there. It's simply what it is, but it's a very -- we think it's a very positive thing for the business.

Just to reinforce something here, which is we've called out Ortho360 a couple of times today. We've mentioned that actually in our Capital Market Day. It's really important to emphasize how we're running this business better than we have historically. So balancing capital deployment, growth and margin, so we achieve a better balance across those things that we've historically done, is an important part of how we operate this business.

It's not chasing growth at all costs, but rather drive the right kind of balance. So they've historically been not as disciplined around deploying capital in this business, which has led to some of the challenges around ROIC and inventory that we've seen. So it's really important to emphasize where we're operating this business better in a more disciplined rate than we historically ever have done.

Question here, the last question in the room and then we go to questions. We go to the phone.

Richard Felton from Goldman Sachs. Two questions, please, both on Shoulders. I think it's 13 or 14 consecutive quarters where REGENETEN has been called out as a strong contributor to growth. Could you help us with roughly how much that product contributes to your Sports Medicine business today?

And then on the AAOS guidance, what does that change in practice? Is it because of that guidance, that shifts reimbursement conversations? Does that guidance have a material impact on surgeon behavior? Anything you can help us with to frame how material that shift in guidance is to be really helpful.

And the second one also on Shoulders. Deepak, I think you referenced REGENETEN Integrity addresses a TAM of $1.2 billion. How do you get to that $1.2 billion? Is that all rotated cuffs? Is it a subset of rotated cuffs done with Bioinductive Implants today? Any parameters to provide color around that and how fast it's growing?

So REGENETEN, I think -- we haven't called out REGENETEN, have we previously? Sorry, I need to confirm what you've actually...

I think we've given some rough guidance, I think you can give a -- at least range.

So think multiple hundred million, okay. So I've got to be careful on what I say. So it's a key driver of growth. As you rightly note, we've -- it's been a fantastic story for us. And as we've said, we took a relatively small -- when it was launched when we acquired it, kind of like Integrity, right, early stages. And what we've done is put it into our channel, our commercial sales organization. And we've done more, right?

We've invested in developing clinical evidence. We've, in previous earnings calls, called out the wonderful data that have come out right, at different time points, 1 year initially and then 2-year time points in terms of statistically significant reduction in retail rates that we've seen with REGENETEN, right? So that's been a great story. So it's not only the commercial channel strength, but also the evidence investment that leads to the kind of utilization that we've seen.

What the guidance does is actually help surgeons determine the appropriate use. So there's different levels of clinical evidence, right? So this doesn't -- over time, we'll have this be reimbursed, right? But today, it's part of the DRG. There's not a specific reimbursement for REGENETEN.

What it helps surgeons do is, take all the clinical data they've seen in papers. Now that the society has now come up with guidance and appropriate use of it, it's a way to further increase adoption, is the way to think about it. The $1.2 billion market is about $875 million of it is mechanical, biomechanical repair, right? It's the sutures and anchors and everything else that goes into repairing rotator cuff. And that's all rotator cuff, Richard.

And the remaining bit of it is biologics. And within that, we are a large part of that. I mean, there's some other collagen-based implants, but we are the -- essentially the largest player within that space. So you add the two together, $875 million, the balance, you get $1.2 billion. And that's the market in which we participate.

And as I mentioned, when you combine the two together, we're about 1/4 of the market. And the potential we see now with TENDON SEAM is the ability to actually have a full solution, actually now with TENDON SEAM, a very unique solution biomechanical repair, right? So that allows us to treat even more cases. But what is important, as I highlighted, is now to include biological healing, right, on top of when the repair is initially done. That's the real helpful part.

And what we see with TENDON SEAM is at time 0, right, after the procedure, the anchors actually leave the tendon with twice the amount of strength that the traditional repair has. So there's some intriguing possibility of faster recovery time for patients coming out of a sling quicker. There's some great early experience around that, that makes us think that this would be a very nice complement to what's out there, right? So that's the Sports Medicine part of it.

The other exciting thing, just as I reinforce within Shoulder is with AETOS, right? We are a relatively small player in arthroplasty today within Shoulder. But with AETOS, we now have a full solution that's stemless, short stem, anatomic -- reverse anatomic. So we've got a full range of implants. And in the Shoulder anatomy, a handheld form factor is particularly well suited for that anatomy, so robotics is.

And CORI with its handheld form factor is super well suited for that. And just to remind everyone, the adoption of robotics in Shoulder is very, very early stages today, right? So we see an opportunity now CORI plus AETOS where we start to take share within the arthroplasty market. And together with the robust portfolio we've got in soft tissue repair within shoulder, we now have what we think is a very, very compelling offering in a fast-growing part of Orthopedics. So that's all of these different pieces to come together, Richard.

Questions over the phone I'm told.

[Operator Instructions] Our first question comes from Graham Doyle from UBS.

Just one on skin subs and then on LANDMARK. On skin subs, the flat volumes assumption, it's quite a benign assumption versus what we're seeing in the market over the past sort of 1.5 months. How would you expect that to sort of flow in H1? Would you expect maybe down 50 plus 50 in H2?

And then just on LANDMARK Knee, could you just talk us through how you imagine the ramp would be? So is there -- are there things you need to do on inventory or getting people ready for that launch? And do the old factors sort of slow down to launch? Do you then ramp up quite quickly? Just to get a sense when we're modeling that, that would be really helpful.

Sure thing. Let me start off with skin substance, and John, maybe you can take the phasing of it, right? So in terms of flat volume, and John kind of alluded to it in his remarks earlier, fundamentally, when you double-click, it has to do with parts of our portfolio we're actually seeing growth. And OASIS, for example, in our portfolio, we're seeing very significant uptick in volumes and usage and utilization of that product and price impacts that impact one or the other part of the portfolio.

So in terms of volumes, it's both channels, as I said earlier, right, where the volumes are quite stable in the surgical channel. And then when you look at hospital outpatient, physician office and in mobile, the greatest impact actually is in mobile and physician office, right?

And in terms of our mix of business, what we're seeing is gains in one area offsetting declines in another, right, as the channel depth. So the net impact of which will be a draw.

As I said, it's still early going yet. So in terms of how the channel is responding to it, we're now in the first early stages of physician offices billing right, from the utilization they've had in the early part of the year and now in a position to see how CMS is responding in terms of reimbursement. And that will help inform how the balance of the half goes and how H2 is kind of set up.

Anything you want to color to that, John?

Not really. I mean, Graham, I actually thought we were being quite detailed in the guidance that we were giving for the year as a whole. So in terms of the volume impact and the pricing impact, I don't think I want to get drawn into specifically quarter-by-quarter other than to say, to Deepak's point, it's still working its way through as we speak. I'd expect half 1 to be a little bit softer, half 2 to be a little bit stronger as the market starts to normalize. But I don't think we're going to get drawn on very specific guidance quarter-by-quarter on skin subs.

Okay. Good. In terms of LANDMARK, this will come in stages. So in the second half, I think end of Q3, Q4, we'll launch LANDMARK first on cementless and then we'll bring forward cemented in the first half of 2027. The focus there is one platform that combines the best of essentially our existing platforms in terms of degree of personalization, ease of implantation, and preserving some of the benefits of kinematics and the other benefits that we have within our existing portfolio.

The other important kind of design considerations around LANDMARK is trade efficiency. We've brought this thinking in CATALYSTEM and with AETOS, because what we're looking ahead to is ASC, where space matters and trade efficiency is super important. So we've built that thinking now into LANDMARK, not only is it about the designs of the implant itself but also making the procedure more efficient. More efficient, not only in terms of ease of implantation, but also the mechanics of getting to a case, less capital intensive, right? So those are the features of LANDMARK.

And it also is comes in cementless and cemented and with the medial stabilized kind of paradigm, which is where the market is going. And keep in mind today, we've got cementless on the LEGION platform, and we don't have this on the JOURNEY platform.

So LANDMARK allows us to fill kind of the gap that we've got for JOURNEY today, right? And so the way we expect to launch as you know, this will be a build over time. So we'll in the back half of the year with the cementless launch will have kind of the initial kind of foray into this. And then, as we go into the first half of '27, we'll have both cemented and cementless. It will be the same instruments for cemented and cementless, right? So again, keeping that trade efficiency paradigm front and center in what we do. So hopefully, that addresses your question, Graham.

And just to -- sorry, just to build on a comment that we also made in the presentation that we're also mindful -- we're very mindful as to how we're deploying capital on our existing platforms in the buildup to the launch of LANDMARK in the second half. Because we want to make sure that we maintain our capital efficiency. We've continued to build over the last couple of years.

And for that reason, we do expect the first half to be a little bit softer, therefore, on U.S. Knees as we grow. So Q1 will be a little bit softer, because of the fewer trading day. We'll expect to see that grow a little bit in Q2, but then it's really Q3 and Q4 upon the launch of LANDMARK where we expect to see U.S. Knees grow in line with the market by the end of the year. So that's the sort of trajectory we're expecting U.S. Knees.

And this type of capital discipline, again, as part of Ortho360, we've actually -- 360 we've displayed in how we've launched CATALYSTEM. It's very different to how we've done it. You've seen all the growth numbers, right? We are above market now. Again, in Q4, we exceeded the market in U.S. Hips, right? So as important as that growth is how we've achieved that is, in many ways, even more important because we brought a high level of capital discipline in terms of how we approach that launch the market. And you should expect the same with LANDMARK.

It's a bit more complicated because we've got to straddle -- we've got multiple elements of our portfolio and needs that we have to navigate through, but we will strike a better balance in terms of growth, capital deployment and margin. It's not just growth for the sake of growth, right? Super important to keep in mind.

So we'll take one more question online, and then we'll turn come back to the room if there aren't any.

Our next question comes from Kane Slutzkin from Deutsche Bank. ahead.

Just on CORI, could you just talk a little bit on the competition you're seeing in the sort of smaller handheld space. We obviously recently had Mako announced a limited market release of the handheld. So just wondering what you're seeing there are presumably they're going to be targeting the same sort of ASC space.

And then just on J&J spinning out of its Ortho business. I assume, are we expecting sort of a bit of disruption in the market over the next sort of year or so due to that split out? And if so, what are the sort of challenges and opportunity you're seeing there?

And just finally, I did notice there was a shortage of bone cement in the U.K. I mean, I appreciate U.K. is probably small in your life nowadays, do you have any comments around that?

Yes. So first, CORI, it's important to keep in mind that when we talk about CORI ASCs and we said something like excess of 40% of our placements in '25 have been into ASC, it's important to remember that CORI isn't just for the ASC. And while it is a handheld robot, fundamentally, it's a robot across a whole range of settings, hospitals, ASCs. We've got quite a bit of focus on teaching institutions, and we've got great traction over the last couple of years in terms of the adoption of CORI and teaching institutions. So it's important to keep in mind that CORI isn't just a handheld. It's a robotic system that happens to be handheld, right? And it has resonance across a range of settings.

So therefore, in terms of competition, we feel very, very good about what CORI is, the features and benefits that it's got. It's one platform that can do Knees, Hips and Shoulders. And the type of kind of features and benefits we've brought on board over the last 3 years is absolutely impressive in terms of how quickly we've done it. So that's the short answer to this. It's a robotic platform that happens to be handheld rather than us competing in one segment.

In terms of J&J, look, we've got a very good set of priorities we're executing towards. We feel very good about how competitive we've been in Hips and how we've gone from basically lagging the market to when we've got a product, we've launched. We've launched it in a very disciplined way. And now you see the benefits of that flowing through, not only in terms of growth, but the leverage that we're coming through with that.

Pharma, that whole process started earlier on supply improving and us executing commercially with a great product portfolio with EVOS and now with TRIGEN MAX. We're starting to -- we're not starting to -- we've had multiple quarters now where we've surpassed the market in our Trauma and Extremities.

And so we expect to do the same with Knees, right, on the launch of LANDMARK in the back half of the year. LEGION MS now that we recently brought to market and of course, continued adoption of CORI, where we -- as we've said, we are pleased with the kind of uptake we've had in competitive accounts with CORI, right? And not to mention the traction in ASC. You put all this together, we've got a set of priorities. We're executing to those priorities.

In terms of J&J, we don't underestimate any competitor. And no matter what kind of they're going through, I believe with continued focus on what we're doing, we will be competitive and increasingly competitive within the market.

In terms of shortage of bone cement in the U.S., as you highlighted, in the U.K. rather, U.K. is a relatively small proportion of our market. It doesn't fundamentally impact any of our guidance or financially. I do believe now there's a solution in the market in the U.K. And so the market should see some relief from that shortage in bone cement. It doesn't fundamentally impact any of our financials or guidance as a result of it. Thank you.

I think that's the time. Absolutely, Graham. I think that's all the time we have today. So I just wanted to close by saying thank you for being here. Thank you for your time and attention.

Just to recap now, 2025 was a very strong year for us of delivery. It marked the successful completion of the 3-year 12-Point Plan. We've built momentum across the group. And as we enter 2026, we do so from a position of strength and we're well aligned with our ambition to deliver the 2028 RISE targets.

So looking ahead, what I'm really pleased about is the multiple growth drivers that we have over the next 3 years, including 2026 and the fact that innovation, just like it's been over the last 3 years, will continue to be a key to us delivering our targets.

The investments we've made in R&D so far is starting to bear fruit, will continue to bear fruit, and we're now pivoting to stepping up our investments in Sports and in Wound. And that, combined with sharper commercial execution, positions us to accelerate revenue growth as we progress to market leadership in both Sports and in Wound.

So in parallel, the positive actions that we've taken in Orthopedics, together with our focus on group-wide productivity and operational efficiency, we will make sure that our top line growth actually translates into sustained trading profit growth as well.

The strong cash generation underpins this progress and gives us the flexibility to pursue value-accretive strategic M&A, and that will be further reinforcement of our success. So we are confident in the year ahead, and we look forward to updating you on progress as we -- through Q1 and beyond.

So thank you very much for your time and attention today.

Good morning to all of you here today, and welcome to everyone joining on the webcast. My name is Craig Bijou, and I recently joined Smith & Nephew as the Head of U.S. Investor Relations after more than a decade as a sell-side research analyst covering med tech. Very excited to welcome you to Smith & Nephew's New York Capital Markets Day, the second of 2 events which we hosted this week.

We have another full agenda today, but we have a couple of coffee breaks. And during those breaks, I would encourage you to visit our product fair, which is to the right of me.

And with that, let me please introduce Deepak Nath, Chief Executive Officer.

Thank you, Craig. Thank you, and let me add my welcome to all of you. I'm absolutely thrilled to get everybody together here in New York for the second of our two capital market events. And so today, what we're going to do is bring to life the innovation behind several of our key technologies. So you'll have an opportunity to hear from experts within each of the business units that demonstrates the strength and depth of the bench that we have.

Importantly, you'll hear directly from key thought leaders who use our products every day and understand what our differentiated portfolio means to them. So I'll start with the high-level recap of the key messages from our event a couple of days ago in London.

First, our actions under the 12-Point Plan have created a fundamentally stronger business today than we were 3 years ago. And that's set up a springboard for future growth. You'll have heard our new strategy and 3-year ambition at our London Capital Markets event, our new strategy, which we call RISE will elevate Smith & Nephew to the next level, accelerating growth and improving returns.

So we expect to deliver 6% to 7% in organic growth and 9% to 10% in trading profit over the next 3 years. And through continued strong cash generation, we expect to reach $1 billion in free cash flow by 2028. And that will be combined with 12% to 13% ROIC, which is significantly above our cost of capital. But let's start with the video that showcases our 170-year heritage from our foundation in the north of England to the global med tech company that we are today.

[Presentation]

So rightly proud of our heritage and how we've developed our business to reach category-leading positions across key markets. with a strong and diversified portfolio. Our combination of business units is unique with each focusing on improving treatment outcomes and each of them exposed to favorable underlying demographics, as people live longer and have greater expectation of quality of life and activity levels in their later years. And the technological advances meeting needs that were previously unmet.

So we operate in a total global market -- addressable market of $50 billion that's today growing at about 6%. We're the second largest player in the fast-growth global sports medicine market that's worth $7 billion with leading positions in a number of categories, including meniscus repair, hip repair, ablation and mechanical resection. We're the second largest player in the fragmented global wound market that's worth $13 billion, and we have leading positions in biologics and single-use negative pressure wound therapy.

While we have a smaller position in the much larger orthopedics market, we have differentiated technology that allows us to remain relevant and provides avenues for future growth ahead of market in certain categories. On Monday, I told you that we have one of the best management teams in the industry, a combination of homegrown talent and external hires that are ready to push our strategy forward.

I highlighted that our Executive Committee possesses deep hands-on experience in their respective areas. So this is a team of industry and functional leaders that have built, scaled and transformed businesses at every stage of growth. Some members of the Executive Committee are here in the room. The business unit presidents presented their strategies on Monday. But today, you will hear from their senior leaders.

This will give you an opportunity to experience firsthand how our Executive Committee has built and developed their own teams and clearly demonstrates the bench strength that we have to feed our strong succession talent pipeline. So this is what positions us to elevate our growth trajectory. We've got the right leaders with the right expertise, aligned around a clear strategy committed to disciplined execution.

Since I arrived as CEO in April of '22, my priority has been executing the 12-Point Plan. This plan had 3 pillars: designed to fix orthopedics, improve productivity across the enterprise and accelerate our leading positions in Sports and in Wound. Within Orthopedics, we've addressed product availability issues, tackled high inventory and rightsized capacity, closing 5 manufacturing facilities to better match demand.

We improved our Memphis site to industry standards and rewired our operations for greater efficiency. At the same time, we strengthened our commercial engine by streamlining its structure, appointing the right leadership, shifting to more growth-oriented incentives and tightening management of the business overall. And we've built out the hip, trauma and the robotics portfolio. So these actions together have returned trauma and hip growth to market levels or higher.

And I'm proud that we've accelerated the underlying Orthopedics business from about 1.9% in 2022 to about 5% in 2025. While we fixed Orthopedics, we nurtured our Sports and Wound businesses and accelerated them or their growth to above market. While we made strong progress overall, there are some areas where we did not meet our ambitions. In Knees, our product gap widened as U.S. market trends shifted.

This remains a priority, and we are accelerating development to close the gap with a strong pipeline of new product introductions over the next 18 months, each of which will benefit from our more efficient commercial engine that we've built. On inventory, we've taken positive steps to improve alignment between supply and demand and have laid the groundwork for continued inventory reductions, but are about a year behind where we thought we would be at this stage.

We anticipate further margin improvement as a result of these positive actions. Finally, in Wound, we've made significant progress in single-use negative pressure therapy, which Cathy will talk you through later today. And we are refining our approach to traditional negative pressure in the U.S. to be more competitive in the long run.

So RISE is our bold new strategy to elevate Smith & Nephew. It is ambitious, yet achievable, positioning us for success over the next 3 years. We have 4 clear aims. First, we'll reach more patients by driving adoption of our differentiated portfolio and taking share across more indications, new settings and geographies. We'll reach more patients moving from our 15 million that we treat today to 20 million in 2028.

We're sharpening our focus to maximize the reach of our most highly differentiated products through new market entry and expanded indications. So you'll hear examples today. Second, we'll innovate to enhance the standard of care through accelerating new product launches and rapidly scaling our existing innovation platforms. We'll maintain our industry-leading cadence of new product introductions with more than 75 new product launches over the last 5 years.

So later, you'll hear more about how exciting orthopedics launches over the next 18 months, including our new landmark Knee and solutions like TESSA, the first spatial surgery arthroscopic platform will change the landscape. So third, we'll scale through strategic investment, allocating capital to high-growth and high-return opportunities aligned with our portfolio priorities. We see an opportunity for M&A to support our strategy and build on our areas of strength.

We will remain disciplined only pursuing those opportunities that fit our strategic objectives. We have a strong track record of M&A, such as in 2023, we acquired CARTIHEAL, which brought us AGILI-C, which Hadi will talk about later today. And finally, we'll execute efficiently, driving group-wide productivity and asset efficiency, particularly in Orthopaedics to both expand margins and improve our returns overall.

So we'll build on the behaviors that we've embedded in our organization through the 12-Point Plan with our way to win, which is our program to be better every day through continuous improvement, the behaviors and the mindset that comes along with it. So finally, I want to leave you all with some key messages. First, that the 12-Point Plan has delivered, and we are now a much stronger business with a solid foundation to deliver the next phase of growth.

We have an ambitious but achievable new strategy, which will enable us to reach 5 million more patients by 2028. So through increased investment, innovation and execution, we will drive share gains in sports and wound moving from category leader to market leader in each of these businesses. We'll continue to gain share in our core ENT market and expect to maintain share in Orthopedics. Our positive actions to normalize supply and rightsize capacity in Orthopaedics and our new Ortho 360 model -- operational model will set us on a clear path to achieving a 20% margin in this business unit by 2030.

And in that process, we will double ROIC in that business. So our continued focus on group-wide productivity and further operational efficiencies will drive trading profit growth. And finally, our strong cash generation provides optionality for strategic M&A to reinforce our success. But today is all about innovation, the second pillar of RISE. We're going to explore some of our most exciting growth opportunities in more detail. So let's first start with Cathy Dalene, who will speak about unlocking value in Advanced Wound Management.

So Cathy, would you come up here?

Thank you very much, Deepak. So good morning, everyone. My name is Cathy Dalene, and I lead Global Strategic Marketing for the Wound business. I'm pleased to be here today to talk about 2 exciting opportunities that we have in wound that will unlock further value for our business. In London, Rohit Kashyap, our President, spoke about five large market opportunities that we focus on.

I'm excited to share in greater detail two of these opportunities and to share our innovative solutions for those. Both opportunities create new markets by penetrating wounds from occurring -- preventing -- sorry, preventing wounds from occurring and reducing the risk of pressure injuries and surgical site complications.

Today, pressure injuries are one of the most burdensome conditions in wound care. It's impacting about 2.5 million patients in the U.S. alone every year. These injuries prolong the length of stay by up to 9 days, and they take over 40% of the nurse time. And that leads to a $27 billion financial burden just here in the United States alone. We have two products to help prevent pressure injuries.

The first one is LEAF. It is a unique fast-growing patient monitoring system that is incorporated into -- it is a patient monitoring system that basically you put on the patient's chest. And by doing so, the nurses are reminded how and when to turn the patient. We also have our ALLEVYN dressing that we've just launched here in the U.S. that can prevent pressure injuries by up to 94% -- and ALLEVYN Complete Care is a dressing that can both be used for pressure injuries and for chronic wounds.

For chronic wounds, it does have 51% better exudate management than the market leader. And it is also 4x more flexible, and it has a unique share defense mode of action because it is the only dressing on the market that has nonbonded layers. This feature means it has 55% greater ability to absorb share and friction.

And so we are really excited about the opportunity to accelerate with the growth here in the U.S. and around the globe with ALLEVYN Complete Care. Moving now on to another key opportunity in wound care is surgical site complications, where we are uniquely positioned to set a new standard of care that will drive improved patient outcomes. Surgical site complications are a significant underserved problem and complications can be devastating for patients, loved ones and a huge financial burden for the health care systems.

There are 2 known factors that increase the risk of surgical site complications. The first is patient factors like BMI or other comorbidities. The second is related to the procedure. So how long do they spend in the OR, or is the procedure an emergency procedure or not. Surgical site infections are the most common complications of surgery with an incidence rate of over 5%. One infection alone can cost more than $20,000. We have 2 main solutions to help reduce surgical site complications.

The first one is ALLEVYN Ag+ surgical, and this is addressing we launched earlier this year here in the United States. And the second one is PICO, our single-use negative pressure wound device. We launched ALLEVYN Ag+ surgical earlier this year, featuring faster and more sustained antimicrobial action more than our leading competitors. And it has a superior reduction of reducing the bioburden and superior pad extensibility.

Finally, the dressing can manage over 2.5x more liquid than the leading product on the market, which is Mepilex Border Post Op Ag. With PICO, we are committed to transforming the standard of care for surgical site complications across key specialties like orthopedics, OB/GYN, cardiothoracic, general surgery and plastics. These high-volume procedures represent significant underpenetrated opportunity to reduce complications and improve the outcomes.

Today, single-use negative pressure wound therapy only represents about 20% penetration of a potential market sitting at about $1.7 billion. PICO is the first ever portable single-use negative pressure wound therapy device. PICO protects the incisional wound by stimulating the biological healing process in the surrounding tissue and increases the lymphatic drainage, reducing the incidence of infections or other complications.

It was launched in 2011, and we have continued to evolve the product since. In 2014, we launched PICO 7Y, and we also launched PICO 14. So we're continuously investing in the innovation pipeline for PICO. In 2018, Professor Kirsner at the University of Miami published a key study for us, proving that the efficacy of PICO in open wounds by extending the indication range.

So that means you can use PICO in both to prevent pressure -- both to prevent surgical site complications and in open wounds. In 2020, we reached an impressive milestone of having accumulated sales of 1 million PICO units sold since the launch. It is one of the fastest-growing brands in Smith & Nephew and has consistently delivered double-digit growth over the last decade. I firmly believe we can maintain and if not, accelerate the growth with further investment and focused execution. With PICO, we can reduce the incidence of surgical site complications by up to 63%, and we can reduce the average length of stay by up to 1.7 days.

In short, the benefit of patient outcomes and financial savings for the systems is really significant. Through our consistent investment in PICO, we have secured over 200 patents, both on the pump and the dressing design, which together deliver a unique mode of action to stimulate the biological healing process. We have over 310 studies, 60 are Level 1 RCT studies, the highest quality and the most reliable evidence that you can get.

The ultimate proof is the meta-analysis published in the Lancet, one of the world's most respected medical journals, which confirms the effectiveness of PICO. Last but not least, we have guidance from the National Institute of Clinical Excellence, NICE, which recommends PICO to reduce surgical site infections. NICE is a U.K. government body that validates both the clinical and the cost effectiveness of medical technologies, and it provides a strong endorsement for our product.

In conclusion, we will rise with PICO and our strategy is set. We will significantly expand the number of patients we can reach. We will accelerate the innovation pipeline for PICO, and we will build on our leadership in single-use negative pressure wound therapy, and we will scale even further. At the same time, we're investing in top talent to strengthen our selling capabilities in the OR to drive more effective execution.

The unmet need and the market opportunity is clear. Our strategy is set, and I am confident that we have the right product and the right team to accelerate and to deliver on our ambition. So it is now my pleasure to introduce our next speaker today. So Dr. Ravi Bashyal is the Director of Outpatient Hip and Knee Replacement Surgery at Endeavor Health in Chicago.

He is the Medical Director and Chief Hip and Knee Replacement Consultant for the National Basketball Retired Players Association. He holds an academic appointment of Clinical Associate Professor of Orthopedic Surgery at the University of Chicago School of Medicine. In his practice, he specializes in robotic minimal invasive hip and knee replacement, performing approximately 500 ultra-minimally invasive total hip and knee replacements every year. While actively participating in clinical research and education. He has published extensively on reducing surgical site infections and complications.

So please join me in welcoming Dr. Bashyal to the stage.

Thank you. Thank you, Cathy, for that introduction. Thank you, Deepak and the team for having me here, and thank you all for being here. I'd like to take some time to speak to you about something that's been really passionate, a big passion of mine over the past 15 years. PICO and I happened to launch in the same year 2011. That's when I started practice, and that's when PICO was launched.

I've sort of built my thought process around this on something that I call Destination Zero or a journey to Destination Zero. And my goal is to eliminate high-cost and high-consequence surgical site complications, the most devastating of which is, of course, surgical site infection. But I've been driven in this as a clinician who takes care of patients and has seen the devastating outcomes that occur when patients have these terrible complications.

As a researcher who wants to continue to push and drive innovation in our field of orthopedics. And then finally, as an administrator, I have administrative roles in our system and understanding that cost is something that we must contain and that we must continue to deliver high-efficiency, high-quality care. And regardless of what I want or how I want things to go, we continue to be constrained in those things, and we continue to be under pressure to deliver high-quality care with lower financial cost.

And so when all of those things come together, the journey to Destination Zero has been really the passion of my career. As Cathy alluded to, a surgical site complication essentially is when the incision you make doesn't do what it wants to do, okay? Anytime you do an operation, you're going to have an incision. And the outcome of that incision, how it does is really sort of the first step of how the rest of the operation is going to do. That incision is the window or the door to whatever you've done underneath.

Whether you're in orthopedics, OB/GYN, general surgery, whatever elegant surgery that you've done underneath that incision, it's all dependent on that incision healing well and that patient not developing an infection. So my practice, I do about 600 hips and knees every year, a little bit more than Cathy said, we bumped it up in the past couple of years. And I use PICO on 100% of those. The question really is how did I get there?

And it wasn't because they said, you can be here and talk today if you do that. PICO has fit and has been a huge partner in this journey that I've been taking to Destination Zero. And it's an innovative product that has fit what I have tried to do as opposed to me trying to fit it into something that I'm trying to talk about. As a practicing orthopedic surgeon, especially within hip and knee replacement surgery, my #1 fear is infection.

And we'll get into why I'm so fearful of that, but infection is a devastating outcome, especially for hip and knee replacement patients. It's a devastating outcome for any surgery, but if you have a hip and knee replacement and it gets infected, the outcomes are not good.

They are costly. And I use that word very intentionally. When I say costly, of course, the first thing that comes into mind is finance. And of course, they are very expensive to treat, and we will go into detail on that. But there's a cost to the surgeon and the patient that I think is sometimes underrecognized or underrepresented. We all know as the people taking care of these patients, how tough it is to take care of them.

Most of us care very deeply about our patients and are in this for the right reason. And when they hurt, we hurt. And infection is probably the thing that I'm scared of the most. My # 2 fear, persistent infection. And what that means is that somebody gets an infection, I've tried to cure it, but it doesn't work. And we'll talk about the rates of how much that happens.

But if you do develop an infection, you can have a 10% or 20% chance of that infection not being cleared or turning chronic and the outcomes there are even worse and even more devastating and even more costly. My #3 fear is a surgical site complication that's not infected yet. It's a race against time. bacteria are everywhere, okay? And the longer that, that wound doesn't heal, even if it's not infected yet, the longer it drains, the longer it's not doing what we want it to do, it's just a race.

Who's going to win? Are we going to get this thing to heal? Or is it going to become infected? So those are the 3 things that weigh on my mind the most as a hip and knee replacement surgeon. And I would venture to say for most surgeons, the thing that's at the top of their mind. Why? Why is infection so devastating? Why is it so detrimental? It's because infection in surgery and especially in hip and knee replacement is not an ear infection, okay?

It's not treated simply by taking some medications and going home and you're better in a few days. It can be truly a life-costing event. The data that I show here is a mortality curve. And you may say, I thought that's for cancer. It is, but it also applies to periprosthetic joint infection, which we've abbreviated as PJI. You have a better chance at 5 years of surviving prostate cancer, melanoma or breast cancer than you do a deep periprosthetic joint infection.

And that really puts things in perspective. And by no means does everybody with an infection die, okay? That's kind of the worst-case outcome. But there's a lot of things in the middle that are not pleasant, okay? Around 10% of patients will experience some sort of surgical site complication. And depending on the specialty, you can have up to a 1% to 2% infection rate. I always tell people that when a patient comes in to see me, they're coming in to see Dr. Bashyal, I'll do my outpatient total joint.

Let's go home the same day. I saw your video with this basketball guy. I want you to do this. I want to play golf in 3 weeks. And as part of it, they have to sign that consent form, right? And that consent form says, you can have a heart attack, you can have a stroke, you can die, you can lose your limb, but that's not actually what they're signing up for.

The consequence of that person getting an infection, me having to sit with that person and saying, Sir, ma'am, I'm really sorry. You have an MRSA infection that's like the worst kind. It's chronic. I'm going to have to go in. I'm going to have to take your knee replacement out. I'm going to put in this thing we call a spacer. You're going to go home. You're going to have IV antibiotics for 6 or 12 weeks. Your life is disrupted. You got a pick line. Someone's going to come to your house every day and put antibiotics into your body. And if we're lucky, in 3 or 4 months, we're going to recheck you. And if everything is cleared, I'm going to go back in, do now your third operation, and I'm going to put in a revision knee.

And all that stuff we were talking about before, go home the same day, play golf in 3. No, no. If you can walk around the block and you can do most of your daily living activities without too much pain, we're going to say home run, we saved your leg. That is not what these people are signing up for. And that's what keeps me up at night. It's also costly from a financial standpoint. So you can see sort of an ascending risk ladder here. But when it gets to infection, they are not cheap to treat.

You can see the average cost of treating a hip replacement infection and a knee replacement infection, and they are not insignificant. If you think about that in the context of how many of these procedures are being done and how they're going to continue to grow, it's simply unsustainable, okay? And that's really where this has merged for me in that for a long time, I've been passionate about preventing infection for patients because we all care about our patients, but it takes time to develop data.

Like I said, PICO and I launched at the same time. Before orthopedic surgeons will really latch on to something, they want data as rightly they should. We practice evidence-based medicine. So it takes time to do that. And I'm really proud that in the past few years, we really now have that incontrovertible evidence that negative pressure allows wounds to heal more safely, more quickly and with lower rates of complications.

That is without doubt. If you believe in evidence-based medicine, you have to believe that. The issue becomes cost. How do we fit that into that ladder? And if we look at the cost to treat infection by 2030, a $5.6 billion load is not something that any of our systems can sustain. So I'm understanding now that with this driver, it's inevitable that the adoption of negative pressure to prophylactically treat high-risk wounds is coming.

It has to because we care about the patients. We're constrained financially, and there's no way that we can afford to keep doing this. Why are these infections so expensive? I've alluded to it a little bit. You cannot treat a joint infection with antibiotics alone. you need to do an operation, at least one, if you're lucky, if you catch it quickly and you can do an acute washout, when you do that, at minimum, you're still changing out a component.

And those components are not inexpensive. And this, again, if you're lucky. By the way, even if you do that, there's a cost outside of the hospital when that patient goes home, getting IV antibiotics for 6 to 12 weeks, a huge cost to the system. And again, if you do develop an acute infection, even though we're going to do everything we can to try to cure that with a single modular component exchange, the success rates on those operations are not great.

And you have a 10% to 20% chance of becoming chronically infected where we go down the other path of taking everything out, putting in an antibiotic spacer and coming back months later to put in a revision joint. These things are very, very expensive. So that's why those costs are so high. We didn't sort of pull data just and put everything together to make the cost seem higher. Those costs actually seem relatively low if you think about all these things that go into that.

Whenever I come to a conference, and I'm a big believer in Smith & Nephew Recon products. I use them all and I love them. But if you come to a meeting, the focus has always been on advancing technology, implants, innovation, robotics. And those things are critically important. We've always recognized that we can build a better knee replacement, build a better hip replacement, build a better way to put them into our patients.

But the wound has kind of remained secondary. If you think about wounds and infections, in the civil war, mortality was 60% from an operation. You had basically a coin flip of if the operation succeeded or you died, okay? In the late 1800s, Lister, Halsted, they come up with sterile technique, things get better. And then we get to this point where we say, okay, we've got 10% surgical site complications, 1% to 2% infection rates. That's the cost of doing business, guys. We can't do any better.

We're not perfect. 1% to 2% is the best we can do. And for a while, I think that was the best we could do. So yes, let's spend our time and energy getting the implants better because those weren't doing so great in the 1960s and '70s. Let's spend time putting the implants in the right place. Let's build a robot. Let's build a better way to do the joint. But we kind of forgot about the wound. We said we're doing as well as we can.

And I'm here to challenge that status quo. I think that single-use negative pressure is that technological leap that allows us to do better than the status quo when it comes to the wound. As I said, for decades, we've just assumed that we can do no better. And what I've learned is that if we say 1% or 2% is good enough, once we get a little bit better than that, we're not going to try anymore. e, I'm doing pretty good, I'm better than average.

If we aim for 0, we will do better. because now we have the technology to be able to do that, okay? You can have an aspiration, but if you don't have a vehicle to achieve it, it's not going to work. But with single-use negative pressure, we now have that vehicle, and we need to reset our target. PICO has very clearly demonstrated that we can do better. This is the innovation that's going to allow us to bring those rates down.

The thing that truly keeps me up at night is that 60% of surgical site complications, if you look at the data, are preventable with prophylactic use of negative pressure. You identify the patient that's likely going to have a problem, you use it at the time of surgery and they don't have a problem. It's a problem that we've figured out. And systems, again, can no longer afford from a financial standpoint, a 9% SSC rate or a 1% to 2% SSI rate.

It's not sustainable, guys. It's just not going to happen. So something is going to drive this innovation. My own journey, as I mentioned, when I started out, I thought I was doing pretty good. The American Association of Hip and Knee Surgeons on their patient-facing website says that you have about a 1% to 2% chance of getting an infection if you have a hip and knee replacement. It's the cost of doing business. My rate is 0.5%. I'm doing great.

I don't need to change. I'm ahead of the curve. I'm doing awesome. What I've learned is that we can do better and that the current state of mind for me is that I can get to 0 or I should at least target 0. And my colleagues are saying, why are you putting this up? You're going to get an infection tomorrow if you say this, but I'm going to say it because they've heard me say it for the past few years now. I have not had a single infection for the past 4 years. And we've published that. I'm going to show that to you.

We can do better than the status quo. Our target has to be 0. We have to be on a journey to destination 0, not on a journey to destination 1%. That's never going to work. Or all we'll do is keep doing the same. And we must do all that we can to manage outcomes and costs. And yes, there is a cost to the dressing. But if you look at -- and we've published this recently, if you look at the cost analysis, you will actually save spend across the entire episode of care.

And that's going to catch up with everybody. If you're only looking at the actual surgical episode, I understand you might say, wow, why am I paying for this? But if you look at the entire episode of care, it's going to come. How does this work and what's the evidence? Cathy has gone over that in some detail. We have a pyramid of evidence, 60 randomized controlled trials, more and more coming out now. And that's why I think now is the time. We are now in a position to say, this is evidence-based medicine from a clinical standpoint, an economic standpoint and a patient satisfaction standpoint. There's very few things that win on all. It's also really simple. You're going to hear about our great products. I love CORI. I love JOURNEY. I love all of our hip products, okay? But you have to learn how to use them. And if for some reason, I wasn't using those, there's a hill that the guys have to climb to get me to use it. This is a dressing guys. You put it on the incision, and that's it.

We don't actually even put them on, our PAs, our residents and our fellows are putting it on. It's not complicated. There is no learning curve. You just have to put it on and push a button. And we won't go into detail about that. Cathy has talked about the mechanism of action. It's simple but elegant. The mechanism of action, it's not just a suction device. It is doing things deep to help these wounds heal better, faster and with a lower rate of complication.

As I said, we have a big, big pyramid of evidence, and it's no longer sustainable to say, I don't believe it works. Everybody knows that it works. The question is how and where do we implement it. There's some arthroplasty-specific data. This is a single randomized trial that looked at hip and knee replacements and showed better outcome. And again, this is just one example. There are literally tens and tens of randomized controlled trials.

This is my own work where we looked at our protocols, and I said, how does PICO fit into this? And we found that within our protocol, which relies heavily on PICO and a special irrigant that we went from that 0.6 where I thought was doing pretty well to 0, okay, literally 0. And our reoperations went from 1.1% to 0.5%. Those are those SSCs that were not infected yet. That rate went down as well. As of December 1, I guess a little animation thing here, okay, just a few days before I came here, that's our 4-year anniversary.

We started this whole innovative protocol on December 4, 2021, 4 years, about 2,400 primary joint replacements, 0 infections. If we don't target 0, we're never going to get there. I know that I'm due. It's going to happen, but I'm going to go from 0.6 to 0.01. And if I wasn't aiming for 0, I would have never gotten there. So at the end of the day, I don't think that every single surgical patient needs negative pressure.

But I do think that every single surgical practice, orthopedics, OB/GYN, general surgery, every single practice has at least some patients that would benefit from negative pressure. So if you're not using it at all, you're missing an opportunity to treat a surgical site complication that is preventable. To wrap this up, surgical site complications, especially surgical site infection are costly, and I mean that in all senses of the word to patients, providers and systems.

There are many SSCs that are preventable and that we're not doing a good job of treating them prophylactically at this stage, and the data is clear. And that last piece is why this hasn't been widely adopted yet, but we are at that sort of confluence of these rivers now where it is time to change this. Thank you for your time, greetings from Chicago, come in the summer where it looks like that, not in the winter when it looks like that. Thank you for your time. Happy to take questions.

We're going to see if we have any questions. Let us start first with -- if there's questions here in the room.

Veronika Dubajova from Citi. Just curious sort of when you give these talks to your peers across the ortho space, how receptive they are to the idea of using PICO and just the feedback that you get from them?

Yes. Thank you for the question. Excellent question. There's been a shift. I would say that when I gave this talk 10 years ago, they said, yes, where's the evidence? And now that shifted from, yes, we know there's evidence, but how much does it cost? And there's a lot of information that we need to get out on that sense. I think people do understand that negative pressure works.

Orthopedic surgeons, we kind of pride ourselves on not always knowing the nuances of all the little science that's there. They don't necessarily know the mechanism of action of how this is working, and we're delivering that through education now. We're working on really getting that out. But they're very receptive. And when we show this data, they understand.

That paper that I just showed you was literally just published about 2 weeks ago. When you can go out and say 0, that raises their ears a little bit. So they're very receptive to hearing about this, and then they want to learn more about how it works and how it fits into a cost structure. And again, in the past few months, we've really had the opportunity to publish across all of those.

That's impressive data I commend you on it. And you've got me pretty convinced and maybe I should be used on everybody. Is there a group that you think that you -- it just should be standard of care? I mean it's not everybody, is it the obese, the diabetic? Who would you think that you're just wrong, simply wrong not to use it on?

Yes, that's a great question. And it's that 60% that have the preventable SSC. And if we look at who that is, it's patients with risk factors. So you can risk stratify. And if somebody has 1 or 2 or 3 risk factors, you decide how many before you put on an advanced dressing, things like BMI, diabetes, other comorbidities that are obvious to all of us. What I found in my practice is that I can risk stratify, which is who is most likely to develop an SSC or I can consequence stratify, which is regardless of their risk profile, how devastating is the complication. And that is going to be different.

If you're a trauma surgeon, you have to deal with what comes in the door. You don't have a choice. As an arthroplasty surgeon, I've already supposed to have self-selected out the patients that I don't think are good candidates, right? Number two, the consequence of developing an infection is massive. So I don't push for people to use it on everybody. I say use it on the -- if you're using it on 0, you're missing something.

Use it where you think the highest risk is and you're going to find your happy space. I will tell you that amongst my colleagues in my hospital seeing this protocol, utilization has gotten to about 80%. So I think for their easiest cases, they don't do that. What's interesting is when I think about my outpatient program that we started about 7 years ago, initially, I was using negative pressure on my highest risk patients, okay? But then when I started doing outpatients, I can't afford for one of these guys to get an infection early on this, let's use it there.

And they were technically my lowest risk patients, right? They're the healthiest, and then it met in the middle. I said, -- it doesn't matter if Mrs. Smith's BMI is 35 and not 40. If she gets an infection, it's just as terrible as if she had high risk or no risk. So that's how I've gotten there. But I wouldn't advocate going to 100% right off the bat. -- find the space. You need to be thinking about the incision is the point of all this, and it will organically grow.

Caitlin Roberts, Canaccord. Just thoughts on the other emergent technologies addressing joint infections such as implant material science and if these technologies are really more complementary and additive to the whole goal of 0 infection and using PICO rather than necessarily competing against PICO, which seems like that way to me.

Yes. So I think it is a protocol. It is not any single thing that's going to change it. But out of all of the things, -- this is the single most powerful in my opinion. We will do research to show that. We have to have sort of it broken down by different variable. The other difference is PICO can go on every single incision.

It doesn't matter if you've used a competitive company, silver impregnated knee or OXINIUM Knee, the Smith & Nephew's OXINIUM Knee, whatever might be. And that's the beauty of the product is that it doesn't require new training, learning a new implant or being tied down to a single company. A PICO dressing can be put on a Zimmer knee, okay?

Any other questions here in the room? If not, I think maybe, Emily, do we have any questions from the...

We've got no questions from the webcast.

Okay. Well, thank you so much, Dr. Bashyal. Thank you. So it's my great pleasure to introduce our next speaker. So Hadi, welcome.

Okay. Thank you, Cathy. Thank you, Dr. Bashyal. Great speaker. Hello, everyone. My name is Hadi El Heneidi, and I am Senior Director of Global Marketing, celebrating my 10th anniversary with Smith & Nephew this year. It's my pleasure to be presenting to you on behalf of the Sports Medicine business, where we treat injuries in the shoulder, knee, hip and extremities.

Today's focus is on what we call our big 3, which are all category-defining technologies at various stages in their journey. The REGENETEN biooinductive implant has been available for over 10 years and is the established leader in biological healing. The CARTIHEAL AGILI-C implant is earlier in its journey and offers a new treatment option to address damaged cartilage for underserved patients, including those with mild to moderate osteoarthritis. Lastly, TESSA, our tracking-enabled spatial surgery assistant. This is pioneering dynamic real-time arthroscopic video-based navigation.

It's currently under review with the FDA and pending commercial launch. These 3 platforms are revolutionizing the world of sports medicine due to our focus on innovation and our strong commitment to market development. Developing a market is truly a team sport, investing in clinical evidence, medical education and commercial execution. Together, we expect these 3 technologies to deliver around $400 million in revenue in 2028.

All right. Let's dive into REGENETEN and its use in rotator cuff repair. First, let me orient you. This is an image of a shoulder. The rotator cuff consists of this group of muscles and tendons that come together to drive stability and move the arm around. Rotator cuff tears are extremely common with an estimated 1.2 million tears surgically treated per year globally. Most often, the tendons tear as patients age. It's very painful.

And unfortunately, about 25% of rotator cuff surgeries fail. Now they fail due to poor tissue quality and the tendons inability to heal to the bone. The traditional standard of care is to use suture anchors to treat the tear. Now this approach addresses the biomechanical side of the pathology, but not biology, enter REGENETEN.

The REGENETEN bioinductive implant is a novel way to address biological healing of tendons. It is a scaffold made of type 1 collagen placed over the tear. Postoperatively, it aids healing and thickens the native tendon. It has been shown to reduce retear rates by 3x at the 1-year follow-up mark in a randomized controlled trial. And a unique element to the REGENETEN implant that drives adoption is its well-designed insertion device, which makes the surgical technique very simple.

It goes in, it unfurls and it then is fixed to the tendon and bone. The implant is replaced by tissue, which promotes tendon healing within 6 months. I have video. So you can see this in action. So it unfurls, staples go in down to the tendon and then additional anchors down to the bone. You can now see that tissue grows in and at 6 months, your rotator cuff is doing great. Now REGENETEN has been used in over 200,000 patients globally.

It's actually available in over 30-plus countries, and it's delivered fantastic patient outcomes. However, having great technology in is not enough. You also must prove its value to get it reimbursed by health care systems. Now Smith & Nephew has been committed to a 10-year market development journey to generate a wealth of evidence. Our evidence, it's unmatched in high quality, including 2 randomized controlled trials with over 30 publications from multiple sites published in high-tier journals, all highlighting consistent findings of positive outcomes.

Now all this evidence has changed the clinical practice guideline, which surgeons rely on in their clinical decision-making. We're actually very proud that earlier this year, the American Academy of Orthopedic Surgeons issued a strong recommendation to use biooinductive implants in rotator cuff repair based on that available evidence. And guess what? That's solely REGENETEN evidence, our evidence. This is a huge deal that will support adoption by opening market access doors and insurance payers and convince more surgeons to embed REGENETEN into their clinical practice. Now REGENETEN is indicated for tendon healing, and we see significant opportunity to expand its use beyond the rotator cuff. It's already being used in hip tendons and in the foot and ankle on things like Achilles tear, which we see a lot of those. Now most recently, we received clearance to use REGENETEN for the repair of ligaments, which can be leveraged in the hip for capsule closure, which Dr. Ranawat will touch on later.

All right. Let's now turn to CARTIHEAL AGILI-C and its use in cartilage repair. The knee is primarily made up of 3 core tissue types: ligaments, meniscus and cartilage. Now since cartilage is avascular, it doesn't heal well on its own and can cause significant pain. Cartilage damage also has various forms involving, let's say, just cartilage or cartilage with bone known as osteochondral defects and cartilage can be damaged in the presence of osteoarthritis.

So current methods of repair include microfracture, which is very durable beyond 2 years, cell-based therapy that requires 2 surgeries; and finally, osteochondral allograft transplants, which are limited by donor tissue availability in the U.S. and even more so globally. So all those current alternatives, they have their limitations. Enter the AGILI-C implant, a new treatment option designed to help the body regrow healthy cartilage and heal damaged bone in the knee.

It's highly effective with twice the pain reduction relative to the current standard of care, which is microfracture. It's versatile since it can be used across a variety of sizes. And uniquely, it is the only cartilage repair technology that can be used in the presence of mild to moderate osteoarthritis. It's also convenient because it can be implanted in one surgery without any donor tissue.

Finally, earlier this year, a new Category 1 CPT code was created that we can leverage starting in 2027. This code is essential for future revenue growth. It gives us the opportunity to work with U.S. payers towards broader coverage, and it underlines the technology's widespread use, strong clinical data and surgeons championing for it. They want it. All right. Here, you can see -- I like this graph. Here, you can see AGILI-C's mechanism of action.

On the left is cartilage regeneration, where mesenchymal stem cells differentiate into chondrocytes, cartilage cells. And that happens in the drill holes of the implant. And cartilage cells also migrate from healthy tissue from along the periphery of the implant. Now while on the bony side on the right, the bone remodels because CARTIHEAL at its microscopic level, it's almost the same as bone.

All right. Let's now talk about the last of the big 3, TESSA. Anterior cruciate ligament or ACL reconstruction surgery is all about visualization. And when you can't see, it can really be challenging to get good results. In fact, 34% of ACL reconstruction failures are caused by technical error. Now going all the way back to early 1919, surgeons would take a manual view looking through a keyhole. Then in the early '70s, video visualization was introduced, creating the field of arthroscopic surgery.

That's where a surgeon would see what they're doing via an arthroscope and then by looking up at a monitor. Since then, arthroscopy has barely changed, Enter TESSA. This is the first of its kind arthroscopic video-based navigation system, which represents the next generation of arthroscopy by providing guided visualization and advanced imaging here in 2025. Everyone remembers using a map or printing out MapQuest directions back in the day.

But now we all use Google Maps because we live in the future, which is digital, dynamic and has real-time updates. TESSA applies that to arthroscopic surgery. So if the surgery is the journey and the surgeon is driving the car, TESSA gives the surgeon real-time assistance to stick to the surgical plan that he or she created at the beginning of the surgery, making sure that, that surgery is completed as planned.

TESSA takes surgeons away from that status quo that's analog with basic imaging and provides digital dynamic augmented reality that is personalized to that patient. The first application is femoral tunnel drilling, but the technology is purpose-built for any surgical application that leverages a camera where the surgeon is looking up at a monitor. We could go from here to tibia to applications in the shoulder, hip and beyond.

Well, I hope you've enjoyed learning more about Sports' Big 3 and how we're committed to accelerating innovative technologies. We have high ambitions with our expertise in market development, meaning dedication to building evidence, getting reimbursement and delivering medical education, as you can see from REGENETEN, CARTIHEAL and TESSA, all at different points on their journey. But in summary, I want to underline that our purpose is to help people live a life unlimited and that patients are truly at the center of everything we do.

These are 2 patient stories where we helped Chris get back to walking his dog and running to work after being treated with AGILI-C. And Nick, he was treated with REGENETEN, so he could get back to what he loves doing, which is being a coach and a great dad to his kids. That's what gets me up and excited every morning and working here on T Orange, I get to impact millions of lives every day globally. With that, I'd like to take a moment to introduce Dr. Anil Ranawat, who is an orthopedic surgeon at HSS focusing on sports injuries of the hip, knee and shoulder.

He is constantly pushing state-of-the-art advancements in joint restoration, including both nonoperative and operative management of these conditions. He serves on numerous orthopedic boards, including AOSSM and EOA. And lastly, -- he's the orthopedic surgeon from the New York Rangers. So Dr. Ranawat will share with us his perspective on these sports big 3 technologies in terms of how they're used in his practice today and their potential in the future.

Dr. Ranawat, it's a delight to welcome you here. Please join me on stage.

So thank you very much. It's an honor to be here. I really want to thank Deepak and the whole Smith & Nephew team. I've been doing this for a long time. And every talk I give is a different challenge. Although I am the Rangers doctor and Ravi is from Chicago, we lost the Blackhawks 3 nothing last night. So I'm a little upset about that.

So I'll quickly talk about my background, my patient demographics, why I think Smith & Nephew is really in the right position to innovate in the sports medicine field. And I'm not going to talk about anybody losing a leg, okay? I'm just going to be talking about people getting back in the game, okay? That was a little shout out to Ravi. So I went to Duke, I went to Cornell.

I was trained at HSS. HSS is up the road. I'm sure some of you guys have heard about it. It is probably the most famous, highest volume orthopedic hospital. We have a couple of colleagues here who know a thing or 2. I'm a professor of orthopedic surgery, and I'm a sports medicine doctor, and I carry a lot of titles I worked with the Mets for 15 years, and now I've been with the Rangers for the last 10 years, and I work on a lot of boards and a lot of stuff like that. But sports medicine innovation is my passion.

My real disclosure is this, that my last name is Ranawat. My father was -- who just passed away, was probably one of the most famous orthopedic surgeons in the world. My brother is my partner, is another very famous orthopedic surgeon. My uncle in the U.K. was a famous orthopedic surgeon and my nephew in the U.K. is -- he's close, but he's an orthopedic surgeon. So orthopedics is in my blood, and I don't do this for any other reasons, except for, as Ravi was saying, helping patients.

We really do care. There's a lot of ways I can make money. I'm a kind of a smart guy, but I want to help people, and this is an avenue how we can help people. And it's a classic story. When I was 17, I tore my ACL. I had surgery at HSS. 6 months later, I was playing soccer again. And those central moments, and I've trained now hundreds of doctors. We have multiple conferences. So it's really passion of helping people is why we do this.

So who are the people I help? Well, mostly young patients, not old patients. It goes from professional athletes to weekend warriors. Actually, I think I see a patient of mine in the room right now. There you go. I didn't know she was going to be here. And I focus mostly on hip and knee, but also shoulder. And really, even though my name is synonymous with arthroplasty or joint replacement, I had to show some uniqueness that I was focusing on joint preservation and how can we maintain a healthy joint to get people doing all the crazy stuff they want to do.

And that's really what is my passion and always has been. And I came upon Smith & Nephew about 25 years ago, but really, I started working with them in the last 10 years because I really saw innovation. There are a lot of companies that can make a different anchor or a different screw, but that's not innovative, right? That's just kind of disruptive technology, meaning that it's just disrupting the market. It's not doing anything. We want to do progressive technology, progressive innovation.

How do we really step forward? And my father always taught me one thing. You don't innovate based off another widget. You innovate based off a clinical problem, such as infection, clinical problem. Here's a solution. Well, I'm going to show you multiple clinical problems and multiple solutions that Smith & Nephew is pioneering. Problem number one, tendon to bone healing doesn't work. Bone-to-bone healing works. You break your leg, you put a plate on the bone, it will heal.

If you are a fracture surgeon and your nonunion rate is 25%, as Hadi pointed out, with tendon to bone, you get fired, you would get sued and they would throw you out of this New York City. But it happens all the time. And some patients actually do okay with non-tendon to bone healing, but it's clearly a clinical problem. And we always used to call it retear rate. It's actually a terrible term. It's not retear rate. We're blaming the patient.

As surgeons we always blame the patient. We're always perfect. It's actually failure of healing rate. So we have something that doesn't want to heal because it's dead dying tissue. An older person's rotator cuff is avascular, and we want to revascularize it. Traditional methods just don't work as well. So clinical problem one. Clinical problem 2, no cartilage repair works. Professor Robert Hunter from the U.K. in 1765. There's no good way to heal cartilage.

And we've tried everything. Hadi went through the gamut. I've tried every little implant. None of it really works. Then we have this new thing. It's a coral-based implant. So you're putting coral, like you get in the ocean into the knee. And really what it does, its mechanism of action that's so profound is it takes away the dead bone, the subchondral bone edema, which is a driver of arthroplasty and it revascularize the bone and then it grows new cartilage.

So it's really interesting, and we have an RCT and it's really a game changer. And the most important thing we'll talk about later, it's really simple to do. Let's talk about knee replacements. Let's talk about all these robots here. We have all these fancy robots in navigation for knee replacement and hip replacement to fix grandma who's 75 to 85 years old. with a surgery success rate of about 90%. ACL surgery in your 14-year-old daughter has a 25% failure rate in her, and she has the rest of her life to live.

So why are we focusing on operation that's really, really good. When we have an operation that's not so good, and they have the whole runway. So let's take some of these awesome technologies and bring it to the patients that need the most, clinical problem. And that's why ACL surgery needs advanced science. So let's go to tendon healing. How I use REGENETEN? It's pretty simple. You put a tendon back to bone with suture anchors, whatever you want to do, and you lay it on top and you suture it together with various devices.

This is what it looks like of the hip. I am mostly a hip surgeon. I do it in the shoulder as well. I kind of led this charge of bringing it to the hip. This is actually a really underdiagnosed problem, trochanteric bursitis, a lot of people have it. If you get over 50, 60 years old and one day you just wake up like, God, the outside of my hip is freaking killing me, I'd do anything. And they always say it's bursitis. It's not bursitis your tendon is feeling, and this is a way to make your tendon come alive again.

That's really what it is. It's -- I always used to call it. It's like crack for your tendon. It will make it come alive again. And really, with the impact here, again, it's not lowering the retail rate, it's improving the healing rate. It's a matter of perspective, but it's really a critical difference. And the ability to do it on multiple levels, which is now foot and ankle, hip and even also now capsule will talk about.

So as we talked about, I use this now on the hip, I use it in the quad, I use it on the patellar tendon. I use it anywhere I have a tendon that's failing. And my foot and ankle in college is using a lot more in Achilles. This is another application that I've been talking about that we do this arthroscopically. Realize we can put this implant open, you can make an incision and put it on or you can do an arthroscopic.

There's a very nice arthroscopic application. So it's highly versatile about where you can use it and it's highly versatile of how you put it in. So here's a case, a 63-year-old female. She's had multiple cortisone shot for that outside hip pain. See some people when I mentioned the outside hip pain, like 3 people move their hip because I know they have it. And she went to the famous Greek surgeon, Dr. Iatro, I'm just joking.

That's called Dr. Iatrogenic, who gave her 5 cortisone shots in tendon, popped the tendon off. And she could -- she went from a tennis player, squash, like a super athlete, she couldn't walk 3 blocks. And I'm like, wow, this is like a devascularized tendon. So I repaired the tendon. I made a decision multiple sutures and all that stuff and then that blue trimmed patch goes on top.

And 6 months later, on a study that I performed with actually -- with Smith & Nephew, we did MRI data and all the MRI data. So this is objective data. It's not patient-reported outcome data. Patient-reported outcome data is good. We want to see how they're feeling, but objective evidence is objective evidence. And we have objective evidence in the shoulder and in the hip, showing the tendon heals, heels thicker and in a wider base.

And that's what she said, and she's back to playing everything she wants to do. So let's talk about the cartilage. The fascinating thing about this, it was an Israeli company that I was involved also with the RCT that they tried to do it on all gamuts of cartilage disease, really young people, middle age and even some arthritis. Our golden rule is that you don't really do cartilage repair and arthritis. And this paper actually showed that it can, it has a role.

And there are a lot of patients that my joint colleagues can tell you they're like they have a joint space on an x-ray. I don't want to do a replacement, but the patient can't move. We call them the tweeners. It's a huge market, right? You don't do a knee replacement too early. So there is another avenue to help these patients. And what do we normally do for those patients? We inject them forever and go, oh, my cortisone is going to work.

No, that's not the case. So there's really an expanded level of indications. How I use this? It's pretty simple. The technique is a press fit, you make a little hole. Another technique I do a lot is osteochondral allograft. What is that? That's a dead person. that they put in a refrigerator for 2 weeks, give it to you and then I have to fashion a hole and another hole and I have to make it. And it's -- I'm a glorified carpenter, I don't mind, but it's hard to do.

It takes me 35 minutes. This takes me 6 minutes to do. And it's been shown to be maybe more effective because allograft after 5 years fail, these are not. And there's no issues of rejection and no issues of viral transmission. There's a whole host of issues. And I go to India a lot. I go to all over different countries. There are a lot of countries you can't even get allograft. So this is a global company with a global product.

So I really think this product will really be a game changer in our tool because we're fighting a really tough battle of early arthritis. And it's really something that's simple to do and the data is really good. This is what it looks like. You see a cartilage defect, you fill into a hole. And at 9 weeks, you could see that cartilage mature, and it's really impressive.

And we have MRI data to show this. This was the New York City firefighter. He's 35. He had a crooked knee and arthritis, and they wanted to board him. Board means that they say, you're done. And he was told to get a knee replacement. He's 35. That's a long time that even these guys in the front row could even sweat a little bit about. So what did I do? Well, I broke his leg, realigned his leg, put in some plugs and he came back to being on fireman.

That's a game changing. And I'm going to have this guy have his own knee for 20 more years.

I'm not saying he may not ever have a knee replacement, but that's really a game-changing approach. What I really love about this implant is that it really completes the portfolio. It completes the deck. As Deepak said, Smith & Nephew is the leader in meniscus repair. It's a leader in ligament. It has all the other things that a lot of other companies have, but it didn't have this part of the bench, right? To win a game, to win a hockey game, you need to have every kind of play, you need to great goalie, you need this.

And once a while, you need an enforcer. This is our enforcer. You don't know what enforcer, I'll tell you later. So let's talk about surgical accuracy. So as I was saying before, ACL surgery is actually quite hard and very rudimentary with techniques. It's similar to doing a total knee with just a jig, right? We use a manual guide. And the thing that's even harder is that we're not actually touching the bone, we're indirectly touching it.

And we're indirectly looking from a 3D structure to a 2D picture. And based off the knees flexion angle, all of my landmarks can dramatically change. You wonder why there's a 25% failure rate and you wonder why tunnel malpositions where we drill our holes are routinely off. And this is what I've always been saying, we -- many companies have tried to jump into the space and say, let's do navigated pins and arrays ACLs, and it's always failed.

This is a new approach because this is what I normally do. I use manual stuff, like a manual guide. This is the same way an ACL was done 45 years ago. And I always would be like, God, or look at all these toys they got. And I got a little piece of metal here. It's like give me something better. And that's what TESSA is. So TESSA what you really want to think it is. It's your arthroscopic viewer is reading off an image, a CAT scan or an MRI and overlaps that image on the bone while I'm doing it real time.

So it's actually better than robotics and navigation where I'm looking at a screen and at the patient here, that screen of navigation is on top of the patient. It is truly mind-blowing, this technology. And it's all based off QR codes. Like when you go to LaGuardia, like you want to get -- you're waiting 45 minutes just to get a glass of water because you can't do that. But this QR code picks up immediately, and it's all -- creates a 3D meshwork.

I can do my operation virtually based off the patient's anatomy and then I can reproduce it in seconds. Real time. And I will tell you this, ACL femur is the tip of the iceberg. This is going to completely change arthroscopic surgery. And the other platforms for this are also profound, but we'll talk offline. So I really think this little black box is analogous to my father's generation when they said, we're going to make total knees, we're going to give you jigs where they used to do everything freehand.

It's going to be that much of a revolution. So as with any robotic navigation technology, TESSA, if you do compare something with Tesla versus manual, -- the computer AI-enabling technology will beat a manual hand, even an expert hand every single time, and it's not even close. And we've shown that already with a couple of papers that we're publishing right now. So in conclusion, as I learned when I was a young medical student, you define clinical problems, tendon healing, cartilage repair strategies and how do I do an ACL on a 16-year-old young woman who has her whole life ahead of her properly.

I really believe, and we've really shown that REGENETEN works. I mean there's science. It's done. We have pretty good evidence now that AGILI-C will really change how we do cartilage repair. And TESSA to me, wow, that's like we are on the precipice of another generation really going forward. And that's really an exciting time. So this is my father and his last line would always be the eyes only see what the mine knows. I know where this company is going. I know they're moral compass, and they have an innovative product line to take us there. Thank you.

All right. Thank you, Dr. Ranawat. All right, everyone. We're going to take some questions for Dr. Ranawat. We'll start perhaps in the room. Any questions from the room, please?

Veronika from Citi. And thank you, Dr. Ranawat. The presentation was amazing. A couple of questions for me. First, on TESSA. Can you talk about how much time it adds to the surgery and just kind of how you think about the cost benefit? Obviously, it's been a big debate with robotics. So maybe help us understand that. And then I have a couple of other things, but maybe.

Yes, yes. So I mean everything is about registration, right? Whenever you have -- even though this is not robotics, this is more AI-generated spatial temporal onlay, say that 10 times. But the registration is the most important thing, and it has to be accurate. And I've been involved for -- with the development for a long, long time. And now for ACL femur, it takes us under 2 minutes. So that is very negligible. And it's -- the likelihood that you have to redo that is also meaning like, oh, it was a bad registration is also very low.

And I guess, I mean, when I look at the failure rate, it seems like a no-brainer not to use it. When you have discussions with your peers, what are the reasons that you think they might say, look, TESSA is just not worth it.

Because they're lazy, right? And they don't care about their patients. But I'll ask the room, who in this room has known somebody who has return their ACL, a young person. Yes. Talk about -- we're talking about devastating -- this is devastating for these kids. It takes 1 to 2 years of their life. It's profound. So I love Ravi's talk about cost. Yes, when I get someone who retears their graft and I see her crying in my office, moms crying, dad wants to punch me, I'm like, we got to get better. This can make us better.

Okay. That's really helpful. And then I wanted to ask about REGENETEN. Are you using it in all of your...

Every glute, I do, every patellar tendon, which is another rupture that's based off a vascularity. -- really -- so what happens when you get old? Sorry, but your tendons get avascular, hypocellular and then they slowly tear. These are not tears from a healthy 40-old who went skiing and pops rotator cuff. And you can actually tell when you do the surgery and you push your probe on the cuff, not 40-year-old, the blood vessels, you see the blood vessels.

And when you push a probe on a 70-year-old, there's nothing there. And so what this gives you a way to revascularize. And that's really what PRP is trying to do. Everything that we're trying to do in tendonopathy. And if you can fix tendonopathy, I don't know -- there's no way that Hadi can give you an estimate of the global market of tendinopathy. It is -- it's like, okay, we're going to go after aging. That sounds good.

Other questions?

[ McMahon ], BTIG. Thanks for the talk today. I was curious how you're thinking about positioning of AGILI-C for Grade 3 and 4 lesions compared to some of the other products that are in the market today?

Yes. I mean the -- well, Grade 3 and 4 lesions are the ones you kind of want to do it for. You're saying -- you're saying you're seeing almost bone, right? And so -- and I'm saying that, that's the ideal person to do it on. And the thing that I would -- I did for many years is osteochondral allografts. We thought we solved the problem, right? We can only really get them in the U.S. It's really hard to get them outside. And ostochondral allografts to AGILI-C is much more costly.

And we see at 5 years, our allograft data because we take a lot of data at HSS are falling off the rails. So the same thing that we thought with microfracture. Microfracture sound great, until 5-year data off the rails. So -- and then also the other things that -- what about autograft? Well, it's one of those things that, yes, we should tell my dad or my brother or Mike and Steve and like, well, you're going to move one piece of cartilage, 1 centimeter over to another thing.

Like that sounds like only a sports medicine doctor would do that. They're like, so to me, you tell me right now, besides just see one cartilage product that works really well because there isn't. And there's a huge market for it.

And then just one more follow-up. What percentage of your cases are you seeing both bone and cartilage damage?

I mean, if you have a 3 or 4, you almost always have bone damage. And what -- bone loss is something different. Bone loss, you may want to replace the bone, right? And if it's a little bone loss, you could still use this implant. But bone marrow edema, which is really early bone damage, is what really hurts the patient. And that's why this is great because you're corning out that dead bone and putting in a new implant that then can revascularize and grow with new healthy bone.

That is almost more important to get rid of that bad bone than whatever cartilage you get on top. That -- and if you look at the drivers of arthroplasty, there are 3 drivers of arthroplasty, and it's never Kellgren and Lawrence, which means your amount of arthritis on x-ray. The drivers of arthroplasty are BMI, malalignment, whether your legs are cricket and bone marrow edema. So I'm giving you a way to fix bone marrow edema.

Other questions in the room?

She has to ask a question.

Yes, please.

Dr. Ranawat, thank you so much. You saved me in January. I came to you and had double hamstring tendon repair. I can say your bedside manner is second to none, and you made sure I made a full recovery. So thank you so much. And it's because he scared me into doing very little to let it recover.

How do you teach and talk to the other doctors in your profession around adhering to the recovery protocol that you instill? And how do you think some of these products are going to help with that, making sure that your patients make full recoveries?

As we started off, and I think -- and Ravi touched on it, is that we do this because we really care for the patients. And a huge part of that is your connection and how you have to be honest with them and saying, yes, it's going to be annoying for a month or so. I tell my rotary cup patients, you will not like me in 2 weeks and in 6 weeks, you're going to cook me dinner. You have to be honest with patients. And then you have to understand what's your fixation construct, right?

There are certain things I know if I put a lot of heavy middle screws and things like that, I can move them fast. And there are certain things I got to move them slow. So the thing about AGILI-C is that it's -- I can move those much faster than my OC allografts because it's -- their protocol is weight bearing as tolerated, which means you can put full weight on right away versus most other cartilage repair strategies is like very limited weight bearing.

Right then that in itself A lot of patients, put me on that one. So same thing with REGENETEN. We are -- one of the advantages of REGENETEN is that it's a faster rehab protocol because -- especially for partial cuffs, the fixation is -- it's an onlay. So that's a really important part of the process is understanding your device, understand if you can move it fast because of your fixation construct. And REGENETEN and AGILI-C are both constructs where I can move them fast.

Emily, anything from the webcast?

What impact could AGILI-C have on the rate of knee replacements?

I mean I think it's a different market, right? We're talking -- knee replacement is designed for bone-on-bone arthritis on an x-ray. AGILI-C is designed for people with cartilage wear that have a preserved joint space. If you go to arthroplasty conference and have a preserved joint space and you put it up and you have to present that at your boards, you may not pass.

So it's a different thing. We're going after that huge market in the middle where it's injections, braces, PT, and these patients don't really have a great solution. And I can tell you, our arthroplasty colleagues don't want to see them because they're too early for arthroplasty. We traditionally didn't want to see them because we didn't really have a great solution. So if anything, we're expanding the pie, not stealing from the pie.

Okay. All right. I think that will wrap up our Q&A section. Thank you again, Dr. Ranawat. So now we're going to transition to a well-deserved coffee break. Please enjoy some coffee and treats and come learn about some of the products with our experts. We'd like you back here at 10:45, please. Okay. Thank you.

[Break]

Well, welcome back, everyone. I hope you enjoyed the little break and hopefully got to see some of our innovative products at the product fair as well. My name is Mayank Shandil, and I lead our global marketing function across orthopedics and robotics. Over the next 10 minutes, I will take you through how we are going to build our competitive advantage across knees and robotics. We have a strong track record of innovation across both robotics and enabling technology as well as implant design.

With the acquisition of Blue Belt Robotics (sic) [ Technologies ] in 2016, we have pioneered the use of handheld robotics for total knee arthroplasty. In fact, Smith & Nephew remains the only company with FDA-approved robotic indications for partial, total and revision knees. The digital tensioner that we launched in 2023 was yet another unique solution that helps make the procedure more precise and reproducible. I will speak to this in the subsequent sections.

On the implant side, we were the first to bring to market the asymmetric joint line with JOURNEY, which helps match the patients or the average patient's anatomy more accurately. Across our LEGION and JOURNEY platforms, we offer surgeons distinct choices on both implant geometry and materials to help personalize the procedure for every patient. Finally, I want to reiterate that when we speak of innovation with knees, we always mean procedural innovation that spans the robotics and tech, but also implant design.

While the robot is critical in the OR, it's the implant that the patient goes back home with and its design must accommodate wearing needs in the future. So let's talk about those needs. The expectations from our stakeholders, starting with the patient, but across surgeons, OR staff, administrators, even payers are evolving rapidly. Our key objective will always remain the same, make patients happier and improve their satisfaction from knee replacement procedures.

And what we are seeing is personalization of the implant position makes patients more satisfied with their outcome. So future implant designs must accommodate this. Now while implant geometry plays an important role, it's really the technology, the robot that helps position the implants accurately, precisely and reproducibly every single time. The purpose of technology fundamentally has to be to make complex surgery easy and to make easy surgery more reproducible.

And finally, the shift from hospitals to ambulatory surgery centers here in the U.S. is driving a distinct need for streamlined workflows and efficiency. Cost of technology, its footprint and procedural breadth, even the number of instrument trades can all contribute to inefficiencies. So any solution we build for the future must address these needs. So always starting with the patient, making sure technology is doing what it's supposed to do, i.e., making complex surgery easy, making easy surgery more reproducible while improving outcomes and doing all this while driving leaner workflows and higher efficiency.

Now while we clearly understand what these needs are, as Smith & Nephew, we are also aware that our current knee portfolio is complex with as many as 4 knee brands. Any solution we create for the future must ensure that we are not only evolving our knee procedural offerings, that's implant design and workflows, but also actively streamlining our knee portfolio so that we manage significantly fewer SKUs across our value chain.

As Craig Gaffin mentioned in London, we have created a comprehensive global operating model called Ortho 360 that will help us plan for country-level portfolio mix while not only ensuring business continuity with customers, but also providing granular data on things like stranded inventory and OpEx, which will help us drive our business more predictably. Making these strategic portfolio choices, we will reduce our overall SKU burden by nearly 40%, while at the same time, adding an innovative new femur design and more on that soon.

But before I get to that, -- let's dive a little bit deeper about how we are looking at the future of knee surgery. We have 3 key design priorities. First and foremost, it's the ability, like I said, to personalize the position of the implant for each patient's anatomy. And the implant design must accommodate for this personalization. Second, the implant and robotic solutions need to work together to unlock better outcomes.

And lastly, going back to that point I was making around efficiency, the solution must offer all of these benefits without adding significant cost or complexity in the OR, especially in the ASCs. So think of these 3 pillars as personalization, performance and efficiency. So let's start with personalization. And without getting into too much technical detail, we know that satisfaction in a knee replacement procedure is driven significantly by the balance of soft tissue around it.

These are all the ligaments that support the knee, especially on the inner and outer sites. Till the invention of this device on your screens, most surgeons were using subjective ways to assess tension in these ligaments. We have since learned that this subjectivity can create variation in assessment, not just across different surgeons, but also for the same surgeon between their first and last cases on the same day.

Our unique digital tensioner is a first step towards an objective assessment of each individual patient's soft tissue that will eventually help us personalize soft tissue tension for every type of patient. Sticking with personalization, here's another great example of how our robotics and implant systems can help personalize the surgical process even in complex surgical settings. In a revision situation where there is bone loss and there's limited reliance on anatomical landmarks, our CORI revision workflow simplifies the procedure through accurate implant placement and the ability to automatically plan for bone defects.

We can even use the digital tensioner typically used for more straightforward primary cases to dial in the right soft tissue tension for each patient, eventually improving functional outcomes even in these complex revision scenarios. With this simplified workflow, we have data that shows that this approach reduces the mental and physical strain on surgeons and their OR staff by 19% versus conventional procedures.

Okay. So now I'm going to switch from personalization to performance. But before I do, this is Landmark. Now I can't give too much away today, but there are 3 things that I want you to remember about our new knee. First, LANDMARK will incorporate the differentiated kinematics of our JOURNEY platform, along with the simplicity of use of our LEGION platform. What that also means is that it's compatible with existing instruments and will allow us to retain our customers while being able -- while being offensive with conversions across fully cemented and cementless offerings.

Second, LANDMARK will be our most robotically enabled knee ever, period. Think simplified workflows, advanced patellofemoral planning and execution and industry-leading soft tissue optimization and more. And lastly, and perhaps most importantly, LANDMARK will have industry-leading and leanest tray configurations, including for robotic cases without compromising on intra-op options for the surgeon. So let's see how this translates into improved performance.

The ability to dial in patient-specific alignment with pre-op planning without compromising on other functionality or survivorship is one of the holy grails of knee replacement today. Typically, plus/minus 3 degrees on alignment is considered safe, although some surgeons can go beyond that. But within those 3 degrees, the landmark design actually covers 90% of the patient population out there. So think of it as for 90% of patients, LANDMARK requires little to no deviation in the cuts to perfectly match the patient's anatomy compared to only 40% with other knee designs.

This equates to easier workflows and less compromise on the position of the patellofemoral joint. This is the LANDMARK advantage with alignment. Another area where LANDMARK has differentiation is the design of the patellofemoral joint. Landmark is designed to allow for the patella to find its natural position by changes made to the patella groove, along with the ability to prevent rotational compromise. I'd mentioned LANDMARK will be our most robotically enabled knee implant ever.

This is another area where you will see this come to life. I can't disclose too much at this stage here today, but please know that CORI's unique capabilities lend themselves really well to planning and executing the patellofemoral joint in a total knee. Besides improving function, this can also help reduce the incidence of anterior knee pain, which remains a common problem with knees even today. All of our new platforms across knees, hips and shoulder will have best-in-class tray configuration that drives efficiency.

For LANDMARK, we will be able to support a robotic total knee replacement with only 3 trays, offering multiple implant options as well as cemented and cementless fixation. This is significant since it not only reduces sterilization costs, but also the burden on OR staff. Remember, the ASCs are typically leaner on staff compared to hospital ORs. And finally, while we continue to innovate with our robotic platforms and implant systems, we also continue to generate valuable data across the episode of care.

Starting with our choreograph pre-op planning, all the way into intra-op and post-op data with outcomes and function, we have the ability to create this connected ecosystem that will eventually help us build algorithms, algorithms that could one day drive clinical decision-making in line with different patients with different anatomies, disease progression and even functional expectations.

Our exclusive partnerships, and I'll speak more to them when I talk about ASCs, enable us not only to capture this clinical data, but also critical health economic data that can unlock value for hospitals and ASCs and even payers and policymakers in the future. I'm very confident about our direction on robotics and knee surgery, and I'm convinced that this will create competitive advantage for Smith & Nephew in the coming years.

With that, it is now my pleasure to introduce Dr. Steve Haas from the Hospital of Special Surgery here in New York. Dr. Haas, besides being an accomplished surgeon and a global thought leader, has also been the Chief of Knee Service at HSS for the last 18 years. He's the current President of the American Knee Society, and he will talk to us about the evolution of implant design and enabling technology from his unique vantage point. Dr. Haas.

Mayank, thanks very much, and thanks, Deepak, and thank you, everybody, for coming. This is actually exciting time to come and present to you. A, I heard amazing things, like some of the stuff that Anil was saying is incredibly exciting, and I'm going to get rid of all my infections now because PICO is going to be on all my patients. So I'm excited for a lot of reasons, but the most exciting for me actually is I'm going to talk about LANDMARK and CORI.

And I think I hopefully can share why I think these are the next evolution of knee replacement. I really think some game-changing things that are being done, okay? The expectations and demands of what we see in patients are -- they're not all older people. There are -- some of them are older, but it's many younger people now in their 40s and 50s having knee replacements. And even the older patients are much more active and they want to do things, as I said, ski, mountain climbing, racket sports, bungee jumping and even whatever that patient of mine is doing there.

I don't know what that patient is doing, but she wanted to do that. And if she couldn't do it, she wouldn't have been happy. So that's the goal that we should be trying to achieve, right? So I'm going to try to share a little time line and history of knee replacement to give you an idea of what was great and some things that maybe aren't so great, then they may not know. Knee replacement started in the '60s as a knee replacement. That's where the term came from.

You lock the knee out, you put a big hinge in, and they didn't work too well, as you might imagine. Knee replacement as its current form was actually invented in the '70s and '80s at Hospital for Special Surgery by Anil's dad. C.S. Ranawat and in conjunction with John Insall, who is also -- both of them are my mentors. And John Insall was a breath, so he'd be very pleased to see Smith & Nephew taking the lead in this. So -- but importantly, what they did is they turned knee replacement to a resurfacing operation.

It's a terrible term. I'd outlaw it if I could, because we don't really replace the knee. What we do is place a cap over the end of the bone that's about 1/3 of an inch thick, a cap over the thigh bone, a cap over the shin bone, right? And that was the 70s, 80s that worked very well. It relieved pain. The function was pretty good. It certainly improved the patients over the time. But they were no lefts and rights. They were symmetric devices all over and they only came with 1 or 2 sizes.

So at that time, you fit the patient to the implant rather than the implant to the patient. Over the '90s, there were a bunch of refinements to that and a lot -- there were some increased sizes and a lot of improvements in technique and as far as the instruments that you were using to put it in. But the symmetric nature of them, in other words, no lefts and rights actually were maintained in most of the parts and a small amount of asymmetry was added to them.

But basically, they were pretty symmetric. If I put them next to you, you might not notice a difference between the ones in the '70s. And that brings us to the early 2000s. And actually, believe it or not, that most of the knees, as a matter of fact, all the knees being put in by the major manufacturers, including Stryker, Zimmer and DePuy were designed and started in 2006 to 2013. And the biggest changes those have from those original designs from the '70s through the '90s were a lot more sizes.

They said, well, let's make a lot more sizes because that might have a better fit. but the shapes really weren't changed. The shapes are basically similar with only a little bit of asymmetry. They're basically symmetric devices. There were a lot of improvements in plastics. So the plastic processing got a lot better to improve longevity, and that was a good thing. And then we go into where we're going from there to now. Well, for most of the companies, what was done is they added polyethylene inserts.

So the inserts were changed and the inserts were changed to add some more sizes and some functionality. So I think some good changes, but no changes in the femur or the basic design. So let's see if -- there we go. And so what ends up doing is there's a lot of limitations in that. The limitations really occur because you're working on an architecture that's 10 to 20 years old that won't accommodate what we're doing in the current concepts that I'll share with you later.

In addition, 3D printed porous technology came about, and that was a big sort of game changer because it was applied to the tibia and the patella, wasn't applied to the femur. The femurs are the old femurs, but the tibia and patella, which I'll share with you later, had much better results. Okay. Well, why do we care to make the changes? What's -- Anil said they're doing 90%, 100% great. They're not. The reality is if you look at knee replacement as opposed to hip replacement, I think hip replacement is there.

But knee replacement, unfortunately, many of the patients do not achieve the goal of getting this great satisfaction. 10% to 20% of patients are not satisfied. And if you look at younger patients under 55, and we published on this, 15% are not satisfied with their operation and about 20% to 25% are only moderately satisfied. So we can do better, right? We should do better. And these new concepts have evolved to try to make that better.

And I'm going to share what those new concepts are. And they're actually -- and some of them are so simple, why weren't you doing this? The first is restoration of normal anatomy, normal anatomy of the femur and the tibia, a personalized alignment strategy. What we had done for years is we said everybody gets a straight leg. It didn't make a difference if you started off, you were born and developed a little bowlegged like a lot of men are or a little knock kneed like a lot of women are.

We just said everybody gets a straight leg. And that was the goal, straight leg. And what we find now that if we personalize it, if we say, well, you started off before you got arthritis a little boat, that's where we want to get you back to or knock kneed a little bit knock kneed, Well, that's where we want to get back to. And if you do that on the femur, tibia and overall alignment, the results seem to be better, which makes sense. That's the way you were born. That's the way you developed. That's the way your body wants to be. All the soft tissues want to be happy that way.

Restoration of normal motion and knee motion is more complex than just bending. It actually -- there's a rotational motion and not just rotation, but rotation in a very specific pattern that the knee likes to rotate. And restoration of that motion is also an important aspect of it. 3D printed technology, as I've already mentioned, because we'd like to get bony integration rather than using cement for long-term fixation and robotics, which facilitates the first 3 and makes us, frankly, more accurate, more precise and allows us to do the top 3 things that we talked about.

And LANDMARK, you'll see is the first implant that incorporates all these concepts into the design. The other ones do not, in many ways, done them. And I'm going to try to share this, and I hope I can explain this. I think it's -- you'll understand this pretty readily. This, you're looking at the end of the thigh bone, the end of the femur bone. This is a cross-section showing the back there, and that's the front.

What you'd like to do is match the anatomy on the back of the front. But you can see it's very asymmetric. It's just not asymmetric we left some rights. You wear a different shoe on the left and right shoe, right? So your knees are the same way. They're asymmetric. But traditional knees aren't like that. Traditional knee replacements were meant to match in the front or the back. So if you match, as I did here at the back, the front is not matching.

They were actually designed to match the front and then they don't match the back. And the front is important because the front is where your knee cap is going. So if that's not right, the knee cap is going to have more pressure on hurt. If the backs off, you're not going to move, you're not going to rotate, you're going to have instability. So having both is what you really want to do. And just to show you, this is real life. This is a robotic picture.

The purple and gray is actually the bone, okay? That's a cross-section of the bone on a robotic screen that I'm doing a case. The green is a cross-section of the implant. And as you can see, I've matched the back. I said, Oh, I want to match the back, but that's the natural groove where the knee cap is going to sit, and that's the natural groove where it is in the implant. So I've got a decision to make. If I'm using that implant, I've got to say, well, I'm going to match -- I probably would match the front and say not match the back, but then I'm going to compromise that motion.

Remember, I talked about that rotational motion and the stability. So I'm going to make a compromise, and that's not ideal. That's not what you want to do, but that's what you had to do. And they had to do that because they're designed as essentially modifications of the knees that Dr. Ranawat did in the 1970s. LANDMARK was designed asymmetric and anatomic throughout the whole knee. So you match the back and the front at the same time, and it's designed to do that so that you can do that in a very reproducible way in most patients, back and front match.

This is, again, another aspect of personalized alignment is, again, some people are bow, some people are knock kneed. This is a diagram showing normal patients. The green dots are all the normal patients on the left, they're bow legs on the right, they're knock kneed legs and straight in the middle, okay? It's a stick diagram. Okay? Most people are in the top category. They're mostly in that top category of alignment of the thigh bone, tibia bone and overall alignment, okay?

And LANDMARK is actually designed that because it has that anatomic shape, it can match 90% of people when it's just implanted the way we like and we know is safe and good to implant it. So the generally accepted way, 90% simple to do. Conversely, if you take current implants, all the other current implants that were designed from 2006 to 2013, -- you match many fewer, less than 40%, okay? Are you going to match their anatomy. So you're left with a compromise.

You either say, well, I'm not going to match their native anatomy. That's just the way it is or you say, I'll match the anatomy, but I'm going to have to put the knee in a position that we're not sure is going to be safe. So you have to compromise -- make these compromise that I think you just don't have to do. It doesn't make sense to do. The restoration of normal motion is actually a simpler one for Landmark because it builds on the legacy.

We have multiple published articles, including ones by me and many others, showing that the natural motion pattern of JOURNEY had the most -- it had the most natural rotational pattern of motion and stability than any other knee. We built on that, okay, and then added the ease and flexibility of Legion. So it's a merger of those 2 so you can get the nice and normal rotation of a journey and combine that with ease of implantation and actually incorporate the most current technology into that.

It has, as Mayank talked about, this optimized patella group because one of the reasons why people aren't as happy with their knees is because they feel pain in their knee cap. So if we can solve the knee cap issue, we've solved 10% of that 20% unhappy patient, okay? So all the other knee systems, essentially because they work off this old architecture that wasn't really designed for natural rotational motion. What they've done is they said, well, we know this is -- we need to do it.

So they add an insert to do it. But they weren't designed from the beginning from the ground up with this. And so I think that is, again, a compromise. 3D porous technology. This was a game changer in a way because for years, we started back, frankly, in the '90s to try to do non-cemented or porousing growth knees, and it didn't work. It didn't work that well. It didn't work as well as the gold standard at the time, which was cementing.

So we moved away from it. But 3D printed technology has brought it back into the realm of possibility and commonly and growing use. And this, I think, will show pretty well why? Because if you look at what you can do with 3D technology, on the left hand, you're looking at the architecture of bone in electron microscope. On the right is of the 3D printed technology. You can see that the architecture is very similar, and that similarity is promotes bone growth into it.

And fewer -- there have been published fewer failures with this 3D printed technology compared to the older technology. and all the porous tibia. Literally, every manufacturer has moved to porous -- the 3D printed technology for their tibias. And frankly, the patella, it's really the gold standard for that. And LANDMARK is the only -- it's only major manufacturer that is going to have a 3D printed femur. It's actually the technology that they use for their porous technology.

While they upgraded the tibias and patellas, they're using that 2006 to 2013 technology. They're using old stuff to do it, and that's clearly not the future. That's clearly not the future. It will be 3D technology. Okay. We'll go a little bit into robotics because that's really an important aspect of why a differentiator for Smith & Nephew. History. Navigation was -- started navigation, which was very limited, didn't do any bone prep.

Navio, which ultimately came Mako, will give them credit. They were the first robotic system that was successful. Now what Mako, just so you know what it is, is that arrow shows that it's a big robot. So you have a large sort of truck that you have to bring into the operating room and bring into the surgical field, you have a haptic arm, which means I hold the arm in my hand and move that arm. So it's quite disruptive.

You can imagine that big arm in the surgical field in front of me, it hurts my visualization, the help around the table for various things that are difficult. Plus you have 2 screens in the OR, to plan, one to track the leg. The other thing is you have to have a CT scan. It's only CT-based, and it requires you to manually test ligaments. This is actually, I think, shocking to people who aren't in surgery. The way we assess ligaments, even with the robot, the robot is great. It measures precisely what things are.

But literally, I tug on like. I pull on it one way and pull on the other. Now if I drink a lot of coffee, I pull harder. If I got a lot of sleep, I pull harder. If I do it and Mike does it, Mike is probably stronger than me, so he's going to be -- he works out a lot, he's going to be pulling harder. It's just so variable, and we've shown that. And it's kind of crazy, but that's how it's done, right? And that -- the robotic system requires that.

The Navio was the first image-free and handheld robotics and Smith & Nephew, as you know, acquired that and then updated it to a much more advanced system by miniaturizing all the electronics and CPU and making a much more handheld robotic piece. And I'll explain about the handheld robotics a little bit more as we go forward. Other robots came around 2000 also and including ROSA, Velys, the ones that I'm sure you're aware of.

They shared a lot of similarities in some ways with the Mako, only they tended to do less. A good example is the ROSA there, which is a big truck that you're pulling in the operative field, but that doesn't even cut anything. It doesn't -- all the ROSA does is it puts a guide in front of you that you have to then take a saw and cut through. So it doesn't do it. It's just an arm that goes in front of the leg. It doesn't actually do anything.

And so you have that whole device just to put a guide in front of you. So that's unfortunately not building the way it should. But this is going to show essentially the handheld robot. And I've got it in my hand, I'm showing you what the handheld robot looks like, okay? That's a robot. That robot has a burr that comes out. And that burr goes out a specific distance and will remove the bone so that the implant is placed in the exact position because you essentially remove the bone, the thickness of the implant minus what you've already removed.

So the goal is to do it in a very specific manner, exact angle, exact depth. That device will I just put it against the bone. I soon have a video showing this that goes in and out. And so I'm looking at the screen. I just hold it and wave it up in front of the bone. And when I wave in front of the bone, the burr comes out just at the exact depth it should. It won't go further. It won't go different. It won't go in an area where it's not supposed to remove bone.

So it removes bone in the exact place it's supposed to, just like that big arm did. But instead of a big arm, I'm waving this burn in front of the bone and it essentially removes that bone in that area, okay? So -- the other thing you heard a little bit about is that a huge advantage here with CORI is it is image-free and image-based. So if you're doing a Velys, it's image-free.

So you have none of the advantages of image-based. You can't do pre-op planning with it. Frankly, some of the models that it creates are not as precise, whereas the image-free in CORI has been shown to have incredibly precise images that are created. In addition, CORI has image-based. So conversely, if you're doing a Mako and you're in Europe where it's very expensive and they don't want to get a pre-op CET or in a country that can't frankly afford it or your insurance company doesn't want to approve an extra test. Well, then you can do an image free.

You can't do Mako. You're stuck. You've got to get a CT scan. It's the only way you do it. Here, you have the ability to do MRI, CT, image-free, -- those options are incredibly valuable. And I do both. There are some patients who can't get a scan. It's inconvenient. I like the scans in some patients because I like that pre-op planning, especially in complex cases. I think it's very helpful. So having both is really the holy grail. You want to have both.

If you only have one, you're very much limiting both in this country and certainly worldwide. That's a huge, huge disadvantage, okay? Robotic tension, you've talked a bit about that. The idea that you just tug on the leg, and that's the right way to do it is crazy. It's crazy to think about we manually do things like Anil talked about sticking to rod up the ACL and do it the way they did it 30 years ago. Well, that's how his dad did he tugged on it.

Now it is a bit more accurate because I got to see some data on the screen, but I still have all the variability of me just pulling on the leg. That's just kind of crazy. And this is the only FDA approval for revision, which obviously is an advantage. I thought this picture is a good display to kind of get this across. This is a Mako in the room and the rows would be the same.

So if you're looking for efficiency in ambulatory surgery, you're going to hear from Mike about ambulatory surgery, but either efficiency in the OR and especially in AMSURG, the idea that what you have to do, you finish the case, they take the robot, that robot has to go into the room, then you have to drape the robot. Then you have to attach those black -- those little arrays on it, you have to attach them, then you have to register it.

That takes time. As opposed to CORI, CORI for each cart, you get 3 or 4 handheld pieces. So I nicknamed them CORI, RORI, LORI and DORI. So I have -- LORI is waiting or CORI is waiting for me in the room. And essentially my OR tech, that's Angie. She's smiling there as she walks the cart into the room. One of them on the table already is the robot. I walk in, I plug it in. I mean that's efficiency. The idea that I've got to sit there and wait for them to drape a truck is just not the future.

So in conclusion, I hope I've shared with you why I think that this is really the next evolution. The anatomic implant is just, I think, the way that if you were starting today to make a knee, you would never make it the symmetric designs and just build on what was done 30 years ago. It's optimized for these high-level activities that I think our patients and frankly, I know our patients want to do.

It has the natural rotational motion, 3D porous technology, wave of the future, why all femurs don't have it, it's kind of crazy, but Smith & Nephew will be the first major company to have it. And CORI, as I've said, mobile platform, image-free, image-based robotic tensioner and more indications. So that's my presentation. Thank you.

Dr. Haas. I think we can now take some questions for Dr. Haas, starting with maybe some in the room.

Dr. Haas Veronika from Citi. Can I ask you 3 things about CORI? I think we speak to a lot of surgeons and they have different opinions on the technology versus Mako, I think, predominantly. But I'm just curious how you feel about, obviously, the lack of haptic feedback. Is that a concern for you?

Yes. Actually, I have to say that -- and I don't want to criticize the haptic feedback from Mako because I think that's good. But I think there's a misunderstanding maybe because Smith & Nephew doesn't emphasize much. Haptics -- what haptic refers to is that when you go to use the saw, you feel and it stops. It's in a sense, almost like -- it's not haptics like your front of the -- they jiggle or make vibration.

It stops. The CORI robot stops. We don't call it haptic. But if I went to burr, good example. If I have the burr and I'm waving it in front of the bone, it's removing the bone. If I take it out of the defined surgical field, it stops. It pulls back. So it's not called haptics, but it automatically shuts off.

So I think that if I was to say that what that needs to be presented to the people that they understand that because it's not like a burr that's just on all the time. It actually knows where it is and it will stop. So you don't feel it, it doesn't do anything that you feel in your hand, it just goes off or pulls back. So the haptics, I think, are probably a misunderstood of the technology.

That's very helpful. And then burr versus saw, I think there are different schools of thought. You're clearly in the birth school of thought, but how do you think about it?

Well, I'm actually a bit of a mix, and I'll explain how that is. With CORI, okay, you have -- you burr the distal part of the bone, which is pretty quick. It's literally or 1 minute. It is -- and then the rest of it is cut because you -- then it positions a guide that you cut through and which is as fast as taking the robotic arm and doing it. So you do cut, you can burn the whole thing, but I don't because we have that cutting ability.

Additionally, for the tibia, that's a great example. The tibia, we have a guide, which essentially is hooked up to CORI and will allow me to cut. And if the cut isn't perfect, it's actually interesting because when we cut saws when they cut deflect oftentimes. Like if they're very dense hard bone, when you're cutting with the saw, it can deflect -- and frankly, people don't check that.

But if they checked it and actually, Mako says you can be 1 or 2 millimeters off, which is actually a few degrees. So I actually make a check of that. And if I'm not exact because the burr is more precise. The burr, when you burr it, you're within a half. Now you could just cut it and that's with the saw with the CORI and it would probably get the right alignment.

But I check it and if it's not perfect, I make it perfect. And the CORI will make it perfect. And lastly, for revision, so for revision, there's no doubt that bur is better. The bone is very fragile and the bur is like saw is not the right way.

That's super helpful. And then I was going to ask you, in your practice, what proportion of your knees are robotic? And then how much time does going robotic add to your standard procedure time?

Great questions. It's about 85% to 90% of robotic. And as far as time-wise, if I'm doing the CORI, the easiest case I can do, the simplest case, I can do faster because I can -- it's a half hour to do -- like if you do a lot of knees, you can do manual knee in about a half hour. I probably can't do it in a half hour. But frankly, the vast majority have some level of complexity. For the average case, it's about the same.

So the average time is 45 to 50 minutes to do -- I'm talking opening the procedure, doing it and then closures after that, okay? And if it's a complex procedure, the robot's faster. So -- and the reason why they're faster, you have a couple of extra steps in that you have to place pins, right? And you have to registration, especially with CORI graph registration, I'm actually hoping I win a competition here. There's a meeting ongoing down in Orlando called CCJR, and they asked to have our fellow submit who registered the robot the fastest.

And I had -- we recorded him doing a registration on the case he was doing. And he was -- he registered for the whole registration was 1 minute, 29 seconds, which is really fast. So we're going to see if he wins the competition. But anyway, so that adds a little bit of time, but you save the time because when you do things manually, if you check what you're doing, you're often a little off. So I may recut things or have to redo things.

The beauty of the robotics are and the tensioner is that I can make assessments of the soft tissue to make really long story short. What we try to do is match the anatomy perfectly. And then we modify the alignment a little bit to match the soft tissues perfectly. And because the robotic tension allows me to assess those soft tissues before I made any cuts, no cuts, I can then fine-tune that. So my cuts are almost always right from the start. Whereas when you do it manually, you're making some guesses. I' using judgment and saying, well, that's how I want it. And sometimes you need to change that once you make all the cuts.

Any other questions in the room? Emily, do we have any on the webcast? All right. Okay. Thank you. Thank you, Dr. Haas. That was fantastic. All right. So we are going to change gears a little bit. Thank you, Dr. Haas, once again. Let's start talking about ASC. So before we get there, we've already heard from Dr. Haas his perspective on the evolution of both implant design and technology.

And I trust it is clear to you how Smith & Nephew is working to build its differentiated value proposition for knee surgery. The other significant trend we talked about was the shift in care from hospitals to ASCs. We talked about some of this, but understanding and serving the unique needs of this segment is going to be paramount to future success.

This is honestly also an area where we think we have a competitive advantage. But before we get to that, let's review what makes this segment unique and important. So there are about 4,000 ASCs in the U.S. performing some type of orthopedic or sports medicine procedure, let's call them musculoskeletal procedures. These centers already have and will continue to see strong double-digit growth as more surgeries move from multi-specialty hospitals into dedicated outpatient settings.

However, the ASC care setting is very different from hospitals. The ORs are smaller with limited capacity for sterile reprocessing and storage. They usually operate with leaner staffing models while opting for higher efficiency and throughput. Ongoing reimbursement changes, we know will continue to drive an even higher procedural uptake. And with growing volumes and a focus on throughput, recent mandates also require these centers to maintain and report on their patient outcomes, a task that can be burdensome with these leaner operating models.

So as you can see, whether you're a surgeon or any ASC stakeholder, there is a fine balance across throughput, efficiency and outcomes that needs to be maintained constantly. At Smith & Nephew, we maintain a higher procedural penetration across both hips and knees versus market in our ASCs. Around 25% of our total CORIs in the U.S. are installed in ASCs, and this trend is accelerating with 35% of CORIs this year being placed in ASCs.

This strong segment performance is really a function of our robotic form factor, which is well aligned to ASC needs, our best-in-class tray efficiency solutions and our unique ability to leverage on our sports medicine business where we enjoy market-leading positions. Recently, we have rewired our commercial model to serve our ASC customers even better and have also forged some exclusive partnerships that help ASCs unlock more value.

I'll dive into each of these in a little more detail. Let's start with CORI. CORI is the only robotic system handheld or otherwise that covers the knee procedural breadth all the way from partials to totals and revision knees. As of last week and a full quarter ahead of schedule, CORI can now also support reverse and anatomic shoulder procedures.

Very soon, we will have CORI-enabled hip replacement, giving musculoskeletal-focused ASCs this unique flexibility to use the same robotic platform for multiple procedures. Also, remember that CORI is small footprint and can be wheeled between ORs with quick setup and turnaround time, something that ASCs really value. CORI's overall cost of ownership is also significantly lower than larger arm-based robotics. All these factors combined, it's really no surprise that we deploy 35% of our CORIs in ASCs in the U.S.

Our AETOS platform on shoulders will offer a 70% reduction. This is a result of deliberate design choices we are making to ensure we offer the leanest configurations without compromising on intra-op surgical options for the surgeon. Like I said earlier, there are close to 4,000 ASCs in the U.S. that perform musculoskeletal-focused procedures. Out of these 4,000, nearly 60% perform both sports medicine and orthopedic procedures. And this is where our combined procedural portfolio shines. Whether it's the knee, hip and shoulder arthroplasty procedure or knee, hip and shoulder soft tissue repair, we have unique and clinically differentiated offerings across both.

Our Sports Medicine business also carries capital with unique technologies like TESSA that we will be able to offer to over 60% of these ASCs. Given the recent CMS mandate that asks for ASCs to report on patient outcomes for every case, we have improved patient engagement and compliance across the episode of care. We also offer ASCs actionable analytics that optimize performance with real-time metrics and connectivity across multiple reporting systems.

Lastly, and most importantly, these partnerships help generate clinical and health economic data across the patient journey, which will ultimately help us personalize these pathways for patients as well as ASCs. All the portfolio and technology and partnership capabilities are underpinned by one thing, and that is our commercial model that drives relentless focus towards our ASC stakeholders. We have a dedicated ASC selling team that is a single calling point for all our ASC customers, and we continue to strengthen it. We are continuing to build flexible financing models and other partnerships that will enable us to deliver turnkey solutions for musculoskeletal-focused ASCs.

In summary, Smith & Nephew is uniquely positioned to meet the needs of the ASC segment through its enterprise portfolio strength, differentiated technology, strategic partnerships and a dedicated ASC organization structure. I'm really excited about our future in this space.

With that, I would like to introduce Dr. Mike Ast, who is also from the Hospital of Special Surgery in New York. Besides being the Chief of Knee Service, Dr. Ast is also the Director of ASC Strategy at HSS and their Chief Medical Innovation Officer. Dr. Ast will share with us his perspective on how the ASC segment is evolving and where he sees it going in the future.

Dr. Ast, pleasure to have you here, and welcome to the stage.

Thank you very much. Thanks, everybody. Thanks for being here today. Thanks for having me and allowing me to speak for a minute. If it's okay with everybody, I'm not going to stand behind a podium. It's very difficult for me to stand still for more than about 14 seconds. So I think we've heard a lot from some of my colleagues, actually some of my mentors and closest friends on the clinical side of everything that we do, and I am an orthopedic hip and knee replacement surgeon with similar volumes to Dr. Bashyal, like we heard earlier, but a lot of my focus is actually on the economic side because nowadays, you cannot be a physician, you cannot be a provider of care unless you understand the world we live in, unless you understand the impacts of a lot of the changes that are happening around us.

And in my eyes, unless you're actually sitting in the driver's seat trying to help make all of that right because when we allow the external world to drive health care, generally, the dollars are affected, but the patients are affected. And that's generally in a way that's not what we're looking for. So as people who care for patients, we really want to make sure that we are the drivers and we understand. And the biggest driver that we've seen of changes in economics over the last couple of years are the trends of ASCs and specifically in orthopedics. The shift from inpatient care to outpatient care is undeniable. 10 years ago, people said, "Oh, it's never going to happen. We're not going to see it.

And then COVID happened and all of a sudden, it became very, very real. And I've spent the last decade of my career continuing to care for patients, but really focusing on the shift in the site of service that we see in orthopedics and how we can impact it, how we can help it and what the implications are for everything that we do. So this is a slide you'll see over and over again. It's a very interesting point because the inflection is right here in the middle, right around 2021, where the majority of hip and knee replacement being done in America were done as an inpatient, meaning an inpatient hospital with a stay in the hospital of 2 or more nights to outpatient, where it's either being done in a hospital or an ambulatory surgery center with a length of stay of less than 24 hours.

If you look today where we are just at the end of 2025, we're sitting right around the 80-20, right? So 80% of hip and knee replacements done in the United States today are done as an outpatient with a length of stay of less than 24 hours and close to 40% are done completely in ambulatory surgery centers. And you notice that those trend lines have not started leveling off.

And on the Hip side, they look exactly the same. And again, these trends are likely to continue dramatically into the future because this doesn't look like it's slowing down. It is better for patients. It is better for providers. It is much better for the health care system to optimize the set of service for a variety of reasons, including clinical outcomes, operational outcomes, efficiency outcomes and economic outcomes. And so the question then becomes, is there a particular driver for it? How does this change the way that industry investment and health care spending view orthopedics, sports medicine and the hip and knee replacement world? And then is there a position in which some companies are simply better suited and better placed to be doing the right thing?

And also, how are hospitals and health care systems going to look at this long term. HSS, as you heard, 160-year-old, the oldest and #1 specialty hospital in the world, the #1 orthopedic center in the world and the #1 in the United States for the last 16 years. 2 months ago, launched our first nationwide ambulatory surgery center platform to partner with hospital systems and surgeons around the country to help drive and control this shift from inpatient outpatient from hospitals to ASCs. We would not have done that had we not known this is what's necessary to move care into the future.

So in a room of investors, of people much smarter than me on the economic side, it's interesting to think, well, if the entire model is shifting, if all of health care is moving from the hospital to the ASC, at least in the orthopedics and sports medicine space, is the right thing to do to focus on legacy companies that have done really well in hospitals and health systems? Or is it really important to understand how are these companies positioned moving forward into a very, very different market, into a very, very different place to provide this type of care and what does that customer look like? And I think that's really the fun part because this isn't isolated to the United States, and we hear it all the time, ASCs, that's only America. ASCs, that's the American market.

Now we're here at the American half of this investor meeting. So I think it's fine to talk about the American market, but this is not going to stay in the United States for very long. My travels to Europe, my travels to Asia are often about help us get our length of stay down. And in Germany, that was 3 weeks to 1 week. But guess what, they're down to 2 days. In Southeast Asia, it was 6 weeks to 3 weeks to 1 week to same day. And throughout Canada and South and Latin America, we're seeing the same trends.

So while you may see on this chart that some of the penetration in these areas are low today, as we look forward over the next 10 years, every one of them looks exactly like the United States did in 2014. Every one of them, there were a couple of places, somewhat outliers, surgeons being called crazy like I was in 2013 when I sent my first hip replacement patient home on the same day of surgery, all of them look like that today, which means any forward-facing person involved in health care, whether it's on the investing side, the clinical care side or the leadership side is going to say, 10 years from now, it is very likely they look like the United States.

And the growth is obvious. No one in a group of -- amongst a group of investors needs to tell you that the ambulatory surgery center market is one of the largest profit center markets in all of health care. This is your standard consulting company slide that they come when they bring to our hospital and they say, "Hey, you should probably focus on surgery centers." yes, we already knew that. Thank you very much. However, it's still got to have the -- you can't convince the Board unless the consultants said it even if the surgeons have been screening it for 15 years. And there's tailwinds and headwinds to all of these markets. And I think it's critical to understand, the tailwinds in the ASC are massive. They're massive, right? The regulatory environment that Mayank alluded to a few minutes ago, the elimination of the inpatient-only list, which occurs as of January 1, the massive increase, 285 musculoskeletal codes being added to the ASC covered procedure list starting January 1, including revisions is going to be a huge opportunity and a huge tailwind, right?

Site neutrality, the one thing in Congress that currently has complete bipartisan support, but won't pass is site neutrality because site neutrality brings to life the idea that what matters is the care of the patient, not the address of the building. And it's really hard to argue against that even though hospitals really want to because it's really, really bad for hospitals. And if you are like a true economist, you start to worry about the local economic environment, in the markets where the hospitals were out of business, right, it gets very complicated.

But in the world of simple regulatory understanding, site neutrality is very, very popular. And if that ever happened, surgery centers would not be able to handle the massive influx of what happens. The NOPAIN Act, right, an act specifically meant to get the use of certain pharmaceuticals into ambulatory surgery centers to drive the continued shift of higher acuity cases into surgery centers. Case mix, right? Surgery centers in 2010 were all about hand and foot and ankle surgery and we'll explain how that leads to a lot of the issues we see today versus today, a lot of spine, a lot of joints.

On Tuesday, Dr. Ranawat and I were in our surgery center. In one room, he was doing hip arthroscopies and in another room, I was doing hip and knee replacements. It's only 2 rooms, and we did nothing, but cases that would never have been done in a surgery center 10 years ago. The day before that, my colleague did 5 spine surgeries and my other colleague did 5 joint replacements in 2 rooms. right? Again, surgeries you never would have seen, and that was just Monday and Tuesday of this week. So that shift is real and the tailwinds are real.

The headwinds are real as well. The mandatory reporting is a big thing. The vast majority of surgery centers in the United States of America don't have electronic medical records because it's not required in surgery centers. So until they partner with somebody, until they bring in experts or until they partner with the right groups to try to help them do that, things like patient-reported outcome measure reporting, things like being able to get into value-based care by controlling their finances and understanding their costs a little better, working on their operational efficiencies. These are things that surgery centers have long been limited because they never needed it. But now they do and those headwinds are real because these things are expensive, right? They cost money and most surgery centers are pass-through entities at the end of the year, they distribute every dollar to their surgeon owners and guess how much capital they have to invest in the next year. That's the number, right, 0. That's because surgeons are terrible business people, but we can talk about that another time, right?

Medicare Advantage, prior authorization, these are problems across all of health care, but even bigger in surgy centers where you simply don't have people to manage the problem. And then margin compression and specifically anesthesia are the biggest problems we see across the country in surgery centers, and this is going to be a complex problem that's going to take a long time to figure out. What does that lead to? It leads to platform consolidation, health care partnerships and a lot of things that might be good, they might be bad, but they can be very unpredictable. And this is why we go around the country.

We joke all the time in the world of surgery centers, you say when you've seen one ambulatory surgery center, you've seen one ambulatory surgery center. Every one of them are a little bit different. They have a lot of variations to them. And even how an industry needs to partner with them, it looks very, very different on each point. So flexibility, so experience in that center, so relationships with the people who are there become critical as you start to partner with surgery centers because they're just different places.

So why are they different places? This is my favorite slide I ever show and I show it in every single talk I give about surgery centers because it's a little wacky. So let me explain the difference between a hospital and surgery center in one picture. So this is my first ambulatory surgery center I had. It's in Lawrenceville, New Jersey. This is Alice that you see here on the left, that's Dan on the right. Dan is my PA. I had another PA at the time, his name is Steve, the patient on the table is Steve's dad. So we're operating on my PA's father, we did this surgery. And so a couple of things you're going to notice about this room really interesting.

This is a full wall-to-wall picture. So while at HSS, the average OR size is about 600 square feet, similar to the average size of a studio apartment in New York City. This room is 385 square feet, almost half that size, which means not a lot of room for stuff, right? Not a lot of room for X-ray machines, not a lot of room for large console robots for navigation, not a lot of room for stuff. But that's not the most interesting part. You also notice what's missing are people. Who do you see here? You see a single tech, that's Ben, the anesthesiologist, who is back to us, a single anesthesiologist, a single PA and I'm taking the picture. That's it. That's the whole room.

At HSS, when I operated yesterday, I have 14 people in my room. There were students, I didn't even know who they were. There are like 3 nurses. There are tons of people, right, because hospitals are wildly overstaffed. And because of that, their costs are super high. Surgery centers keep those costs low, manage people much more -- much differently. But then the last and most interesting part of the picture that most people miss until you point it out, take a look on the ceiling of the room, see the lights. So these are surgical lights, you can see right here, right? Where are they pointing because they're not anywhere near the surgery, right? They're pointing to the back left corner of the room because they're broken. They don't work. The surgical lights in the facility were broken and they had been broken for a long time.

You'll notice over the top of Dan's shoulder comes this little weird looking side light. That's the portable light we rented because it was cheaper to pay for a portable light that we could rent than to fix the OR lights. Let me give you a little counter distinction to the world of HSS. Yesterday, in room 3, I was operating room 3 and 4. In room 3, a light bulb went out during the case. I looked up and said, oh my gosh, the light bulb is out. So I called the director of our operating room, his name is Lenny, into my operating room during the procedure. I said Lenny, the light bulb is out. It better be fixed before my next case and it better not slow down my turnover time or I'm canceling every case for the rest of the day. And you guys can figure out how to make up the money yourself for a light bulb because surgeons act very differently when they don't own the place. I don't care how much it costs to fix that light. I want every single light working.

When I owned the building, when I owned the center, I don't care if I have lights. Somebody light a candle and bring it to the cell, I'll be fine. So you realize you're dealing with a completely different set of customers, right? It's a completely different relationship you have, and nothing explains it better than those of you who've studied the implant world for a long time know that one of the biggest keys to successfully keeping a surgeon happy is their rep, right? That relationship between a surgeon and their implant representative was forever the most important thing in the world.

How do I know? When I joined this -- my first practice, I had a partner named, John. John had the same implant rep forever. His implant rep was the best man at his wedding and the godfather of his oldest daughter. And guess what, company John used. So when he switched from one company to the other, John switched, but he had never done a case in his 25 years in practice without Walt in the room. It's never going to happen. Then we opened our surgery center. And our surgery center couldn't agree to a good contract with Walt's company.

And the next day, John switched companies. Again, traditional methods of how companies interact with surgeons and their partners just don't work when you bring them to an ASC where the surgeons are owners. The patient population is different. The room size is different, sterilization is different. Cash flow is different. So what do ASCs want? ASCs want a bunch of different things that often look very different than hospital partners did. They need significantly less variability because variability needs staff education. We've got space constraints and very much we need supply chain efficiency. When you go to Dr. Ranwat and my surgery center in Mahwah, New Jersey next week, find a closet that exist. We don't have any.

Last week, we negotiated with the real estate -- with the owner of the building, and thank you because he's a personal friend of Dr. Ranawat's for an extra 25 square feet in the basement just because we had a bunch of boxes we couldn't figure out where to put, right? So space constraints are real. And then we need a single point of contact because we don't have 65 administrators to talk to 65 different people across 65 different business units. We have Jeff and Jeff has to talk to everybody every day all the time.

So having a business model where Jeff just has to call one person is absolutely critical to the function because when Jeff isn't calling that person, she's cleaning a room. She's scrubbing on Dr. Ranawat's case, and you see and he has the partnerships that bring us opportunities. So these are 2 things I love. And Mayank mentioned, I'm the Chief of Innovation at our hospital and innovation is what I've done for most of my career. But a lot of it is on the non-sexy side, right? Anil does innovation, makes the outcome of surgeries different. My mentor, my former boss, now I'm his boss.

Dr. Haas that you just heard from, does innovation on the implant side. When I do innovation, it looks like this, so most people think it's really boring. But you know what that screen down there in the bottom is, that tells me what's happening in every single operating room, every single day for every single center that we own. So I can look across the country and say, what's happening in OR 3 in Dallas, Texas right now. And I know what they're doing, what cases are happening, what -- how long the OR was empty and not generating revenue and what was the reason that the case got canceled. And I can see it like this.

If any of you visited a hospital, the way that we used to run ORs was like a magnetic board, people drawn with a whiteboard marker on things. That's absurd in 2026, right? That's crazy. This is how we run our ORs now, but this is the access to technology that ASCs need to understand what efficiency looks like. And how about this giant eye chart up here, right? We call this to the surgeons in the room. This is called finance. This is how we pay you guys, right? The idea here is that we can finally track financial metrics in a way that allow us to understand just because the surgeon is happy, are they actually making any money? Are we actually driving efficiencies? Are we driving revenue to where it needs to be so we can care for more patients? And New York is one of the few states where your certificate of need, your ability to open an operating room is directly related to the care for uninsured and underinsured patients. I think that's wonderful.

But how do I even know if I've done that, if I'm not tracking all my patients, then I don't understand what my margins are, how do I -- how am I able to provide care to Medicaid patients and uninsured patients if I don't even have a handle on my finances. And so these are the types of partnerships that I look for now. This is the type of innovation that I need so that I can simply go to work, do my knee replacements and hip replacements every day and send my patients home in a few hours. So again, for me, a lot of this -- we'll talk a little bit about Smith & Nephew. I think Mayank did a good job.

For me, this is more about understanding if I'm looking at from an investor's perspective, I have to realize that Smith & Nephew just locked out, right? This is not that Mayank is actually as smart as he looks, and he didn't even let you know he's actually an orthopedic surgeon. It didn't say on his title, which I thought was weired, but Mayank is actually a fellowship trained foot and ankle orthopedic surgeon. It is just that they made the right investments at the right times, and now you're seeing where it ends. And the reason is CORI is ideal, right? Now CORI was purchased very early in the world of ASCs.

So whether they think that I'm not really sure when -- with the acquisition of Blue Belt, but this is our ORs. This is actually OR 1. Dr. Ranawat recognized it, Dr. Haas recognized it. And I thought it would be funny. So I took the CORI at the end of the case, this is the surgery I did on Tuesday. And just for fun, I took it from one side of the room all the way to the other without getting in anyone's way, right? I showed you how small these rooms are. There's not a lot of space to do stuff like that.

Yet in this room, I can go from the left side of the room around the bottom of the patient. You see this tray is the other side of this table right around to the other side, all within the same case. I challenge anyone to find a large console robot that can do that or that can even fit in this room. But certainly, that can do that at the end of the case.

Was that intentional by Smith & Nephew? I don't know, not really part of that group. But what I can tell you is it really worked out because as you see from the numbers, this is the robot that wins in ASCs. And by the way, there is no such thing as orthopedics, not in ASCs. Anybody who thinks that the traditional model of hip and knee replacement surgery being done in hospitals is going to continue into the future is misguided. We know that this is where we're going to be, and we just need to see -- all of our partners see that as well and understand the unique situations.

So what's next? I think the modern and slim inventory are critical. I think as we heard from Dr. Haas, we're really talking about taking robotics at the next level, but also taking it to a place where it works in the site of service where we actually provide this care. And the biggest growth opportunity, and again, this for better or for worse, I think Smith & Nephew just tripped and fell into this huge advantage. But all of the manufacturers of the devices that we use are going to have to have relationships in these surgery centers. They got to know how to deal with a surgery center. And of all of the manufacturers who make what I do, hip and knee replacements, there's no one with a bigger presence already in the ASC.

And I think you see that when you start to see how we are able to interact with each of these partners. Smith & Nephew is not the exclusive partner we have in our surgery center. They're just the easiest to talk to. And for surgery centers moving forward and especially as they expand, that's going to be critically, critically important. So the future of CORI will allow us to do all of the surgeries we do in our surgery center.

This week, we did every one of these surgeries in our surgery center. We did hip scopes, we did total knees, we did total hips, we did partial knees and we did total shoulders, all in this week in our surgery center, right? So this is where it's going to be and having a singular robot that I can move from side to side in the room is going to be really helpful for me. So again, I think Smith & Nephew is really pointing in the right direction. And luckily, maybe just because of really good planning or maybe because of really good luck, really skating to where the puck is going, which I think is going to be a good thing for them in the future.

So again, I'm not here to sell anything about Smith & Nephew, but I do think that they've made a good partner for us. They're arguably the largest ASC footprint of any of the major manufacturers of the work that I do. And I think that's a huge advantage for them. The robotic system that you can see right here, is the only one that really is made for surgery centers. The rest will try to squeeze in or fit. But over time, I think we'll watch our other manufacturing partners shift more towards this, in which case, there's a huge strategic advantage to have been there first and have been doing it for a long time.

The implants we're using now, the CATALYSTEM, the landmark knee, these are ASC-driven and robotic-driven implants. And that's good for me. I like that. That's the kind of work that I do to preempt the question that Steve got, I do 100% of all of my procedures with robots, but I like robots, I think they're fun to play with. But really, for me, it's data management, it's understanding the unique personality of ASCs and altogether figuring out that if you want to be in this business and see high single-digit, double-digit growth, you better be where the double-digit growth is happening. And that's the importance of the ASC to any of the companies that all of you are taking a look at.

So with that, I like to show this slide, I think, because it's kind of funny. For 160 years, HSS has ended every one of their slides with the -- everyone that talks with the slide you saw Dr. Haas put up with a picture of our giant hospital on the upper side of Manhattan. I'd like to introduce you to the 2025 version of how we ended, and these are our 5 surgery centers all over the country. Thank you.

That's fantastic. Thank you, Mike. Again, questions for Dr. Mike asked from the floor.

Thank you so much for your presentation and some great stats in there. Obviously, all of Smith & Nephew's competitors also talk about why they have the right to win in ASCs. And they talk about different advantages that they have, access to capital, maybe businesses that span that are outside of orthopedics, ability to provide financing, they can get you a bed. How important is that for you? And I guess you talked about having a single point of contact for the implant business is important. But what about having a single point of contact for everything that an ASC buys? Is that an area of differentiation that would sway you one way or another?

It's really interesting. To start, I actually launched the ASC group for Stryker. So I've heard that line before. But it's actually fascinating, in that much of those things happen really well if your only concentration is on new surgery centers. And so if you think that the only thing I'm going to do is work with new surgery centers, and I'm going to spend the next 20 years helping build out new surgery centers, there may be some real value in that. And I think the reality is when we came up with that tagline, there was a reason for it.

But what we've actually seen is there's not that many new surgery centers. There are 3,800 -- right around 4,000, what Mayank was saying, Medicare-certified surgery centers in the United States doing orthopedics. About 25% to 30% of them, it's probably closer to 40% at this point, currently do what we call high acuity orthopedics, spine and joint replacements. That's the number. That's the market. Because of certificate of need laws, because of how expensive it is to do anything right now, right?

It's about $11 million to $20 million to build a new center. And by the way, it takes 3 years and you've got tons of supply chain issues to do it. The real growth in surgery centers is not in new surgery centers. New surgery centers are great and when we can get them, that's awesome. The real growth in surgery centers are in the existing surgery centers transitioning to high acuity surgery. And that is the misconception when you think about the importance of buying beds, they already own beds.

And by the way, at our surgery center, I love to tell stories about because I think it is a perfect microcosm in the world. Do you know how we upgraded our previous stretchers to be able to accommodate the longer length of stay of joints and spine patients? Because that's what you'll hear a lot of times from other companies, we went to Bed Bath & Beyond and bought egg crates. And we put egg crates on our stretchers that made them comfortable enough to sit on for 3 hours. And that was it. That was the upgrade we did to be able to do higher acuity cases at our surgery center.

So I don't see a lot of existing surgery centers really spending a lot of money on new beds and new lights and things like that. They're very helpful. And if you're doing a de novo, that's a nice to have. The other thing to think about, though, is most de novos are going to be done with someone else. Very few surgeons are going to take 100% surgeon-owned de novo because none of them have $19 million to put up, right? So you're going to see a lot of management companies, health care system partnerships.

In 2013, when I started doing outpatient joint replacements, there were literally a handful of health systems in America talking about surgery centers and maybe 6 that were any good at it, right? As of 2 weeks ago, 95% of health systems in America are either actively developing or already own surgery centers. So once you get into health care system partnership, the beds, the lights, all that stuff goes away because they probably have a contract with Stryker or STERIS or something already. That doesn't get you to the product. And the product is still going to come down to that single point of contact for sports, orthopedics, joints, wound, and that's where I think the advantage really lies.

And then maybe a second question. Obviously, sometimes you'll be part of a hospital group that has a supply contract and you have to use supplier X, then you move to an ASC and the pricing terms from supplier Y are better. How often do surgeons switch when they make that transition? And how common is that?

I think they switch a lot. It just depends on how -- if you've got your -- so if you're talking about a surgeon who happens to work at a hospital and happens to work at ASC is different than if the hospital also owns the ASC. I think when you talk about surgeons at the hospital versus surgeons at the ASC, they work very differently. They might as well be different people, like you might as well just be a completely different person, because every decision you make is going to be driven by convenience, driven by finance because ultimately, a lot of the other stuff washes away.

If you're talking about a health system that also owns a surgery center, remember, most of the surgery centers are different companies. Most even nonprofit health care systems, the ASCs are for-profit and separate LLCs, in which case, when they drag contracts over, they do it sometimes, but not always. And one of the things you hear and one of the big misconceptions, especially when it comes to industry relationships is the price of the implants. So we hear, "Oh, my gosh, you're going to an ASC, I guess you're going to be paying $800 for that implant." Do you know how much -- so average in the United States that you pay for implant is about $4,500, right?

Do you know how much I paid for implants back at that center that had no lights? An average price we paid for implants was $11,000. Have you -- I thought surgery centers pay less for money. That guy is just flying. No. At that center, we had, what we call, pass-through implant pricing or cost plus pricing, where the implant cost us nothing. It went straight to the insurer. And by the way, they gave us 3% markup on it for storing the implant, which we didn't actually do, right? So the more expensive the implant, actually the more money we made. And those are very region-specific, very state specific.

But if you hear someone say something like, "Oh, ASCs," that just means the implants are going to be cheaper. All that tells you about the person you have the conversation with is they don't understand surgery centers. Sometimes surgery centers need cheaper implants, sometimes they need more expensive implants. Surgery centers can be very, very unique in that. And it's important not to get caught up in the -- well, it's got to be like this because actually, they can be really, really different and unique and interesting ways.

Thank you. Any other questions? Emily, any on the webcast?

Just one asking about replacement cycle of ASCs. I think it must be related to you talking about not being more -- not that many de novos. So if an ASC already has, for example, a MAKO, how easy would it be to convert them? And how often are they thinking about the replacement cycle?

So I think that's fascinating because a lot of it will depend on how they got it. Very few ASCs are going to have spent a significant amount of upfront capital to acquire any of this technology. Most of them are on financing platforms of some kind where there's a rebate on implants or something like that, in which case, that cycle is literally as long as that contract lasted. And if they find a year later that they weren't able to offset that cost and that they actually end up with a bill at the end of the year, that thing is gone. That thing is gone the next day.

And so unlike hospitals who have often purchased these large capital equipment needs where they've spent $1 million and now they're sort of stuck with it for 10 years, and they're unwilling to change because they've got to pay off that investment. On the surgery center side, since very few of these are capital outlays, they're much quicker actually to get rid of anything that didn't positively affect their bottom line. So if something was dragging on their finances or they didn't meet something or they're simply sitting with this lease liability on their P&L while they're trying to get investors, forget it. That thing is gone. And so the turnover cycle is going to be a lot faster.

Excellent. Thank you, Mike. That was fantastic. Appreciate it. All right. I think we can head into a quick break now. And when we come back, we'll have Deepak come back on stage with his closing comments, and then we'll have some Q&A with our BU presidents. So 15-minute break, and I'll be back here in 15 minutes. Thank you.

[Break]

Okay. Welcome back. So hopefully, you found the sessions as energizing as I did. A lot of passion all around from surgeons, who use our products to our own internal team. So on stage with me now, you've got our CFO, John Rogers. We've got Rohit Kashyap, our President of Wound business; Scott Schaffner, who is the President of our Sports division; and of course, Craig Gaffin, who leads our Orthopedics business. So we're up here. So fire away your questions and then turn into the -- on to our phone. So fire away.

And a lot of what we're doing now in the U.S. in terms of establishing commercial presence has been really about how do we build the story around market access. And so establishing some critical mass, so some level of use as well as collecting the evidence that we needed to support the process of getting that CPT code. That's really been the focus. It's all been about market access. And then, of course, building advocacy with some of the early users, surgeons who can help us articulate the story. So that's really been the focus.

So commercial presence has been pretty limited to let's build the market access story. Knowing that when the CPT code comes in 2027, we'll have a stronger story from a reimbursement perspective. But it is still part of a process, but it does give us the ability to engage more closely with all the commercial payers that will be a part of -- important stakeholders to this and a part of the overall CartiHeal story.

So in the meantime, it really is sort of a journey that we'll be on. There isn't sort of one magic inflection point. That will be an important step in the right process to get to -- the code is a critical piece of it, to establish the right payment levels and then ensure coverage and that will be kind of a dialogue and steps that we take with all the different payers that will be involved. So it will be a process. But the potential, as we've talked about, we think, is huge just because of the degree of the unmet need and the fact there are no great solutions out there today for what's a significant problem.

I mean two points to build on that. I mean, in terms of where it sits organizationally, it's currently with our biologics sales force within the Sports division. So the organization that largely has been taking REGENETEN and representing that product. So that's the team that this will sit in. And in terms of where we are relative to our expectations at the time that we made the acquisition, we're essentially bang in line with where we expect it to be, so just to give you a little bit of that color. We previously said in terms of what's material. In terms of revenues, it's really back-end loaded. It's more really close at this point, '28 through '30 period is when you start to see this become a more material part of our business. So just to ground you on those two data points.

I feel like I've asked all the questions. I feel bad going downtown south. But maybe just on wounds. Obviously, you articulated this ambition to grow high single digits on Monday. If I look at the business over the last couple of years, I think the growth rate has been trending around 5% to 6%. So I know you talk about 5 areas of focus that you have, but maybe just help us understand what you think is the biggest needle mover that moves you from that 5% to 6% growth rate that we've been at into the high single digits.

Thank you for your question. Yes, you're right, as we've mentioned, for the last 3 years, as we've been fixing the foundation of the business, our growth has been about 6% or so, which is slightly above market, but in that area. And our ambition is to get this growth, and I'm confident that we'll get it to the high single digits. There is not one single driver which has a disproportionate portion of that growth. It actually is a couple of areas that we have talked about, which are principal drivers of that growth story.

Looking at the market and both of those were touched upon today, but pressure injury prevention is a big component of it. And how we have featured and talked a lot about ALLEVYN Complete Care, but also how LEAF plays into that is a big component of it. I think just for time constraint, obviously, there's only so many things you can talk about. But those two things together make a really nice bundle, if I can call it that, of offering for the customers to manage those patients. So that is a big market opportunity and a big part of our growth story as we go towards.

The other part is SSCs that we talked about today with -- and a perfect example from Dr. Bashyal talking about that $1.7 billion opportunity, which is only 20% or less of penetration. So even though we are averaging double-digit growth, we believe we can accelerate that growth. And just for clarity, that $1.7 billion does not assume that all the procedures will ever be treated with PICO, for example, because you saw that interchange with Dr. Haas and Dr. Bashyal, where he's using 100% and then what is the right -- so we've applied that. So we really believe there's a lot of potential within that area.

And what we are doing is investing kind of what Scott already touched about is continue to strengthen the evidence because we have to go indication by indication or procedure by procedure to strengthen that evidence as well and continue to build on both the KOL aspects of it with who are going to be the champions just like Dr. Bashyal was today in order to drive and get the penetration of that within the biologics space, and we have accounted for that. But we think longer term, it might not be a '26, but as we look beyond that time horizon, we think that's an important part of our growth story as well as we move into that.

Just a quick follow-up on the Biologics space. Obviously, I think you outlined your assumptions on Monday and one of the assumptions that you've made is that the LCD is going ahead. I guess, if the LCD does not go ahead, does that change the magnitude of the headwind that you'd anticipate next year? And how are you thinking about that? Because I mean, my perception is there's still some uncertainty about whether we end up with the LCD or not. And I just would like to understand your degree of confidence around that.

It's hard to predict my confidence on whether the LCDs will go ahead or not. But I think we have planned across all of those scenarios in terms of what it is and where we would press. So we've taken a balanced view across the different set of scenarios and coming up with what our projections are in that regard.

I mean just to add to Rohit's point, Veronika, what I like about the stack up within Wound growth is there's share capture opportunity clearly within AWC. I mean there's ALLEVYN Complete Care on its own and in combination with Leaf for pressure injury. I like the fact that we're set up for share capture because we have essentially not been doing that up to this point. And so that's one thing.

And then there's, of course, with single-use, what Rohit is alluding to is market growth opportunity, right? And then, of course, there's Biologics. So you add these things up, it's a very nice mix of share capture, market growth, and it's actually multiple products across our diversified portfolio. So that's the nice thing about. We're not reliant on any one product. We're not reliant on any one geography, and we're not reliant on any one category.

And taking a step back, one of the most beautiful things about our plan is going from 5% plus to 6% to 7% is we're not reliant on any one business unit, any one product or any one category. That is the most beautiful part of how we accelerate growth. And the other beautiful part of this program -- of this plan is that you get growth and you have profit growth on top, right? And that is because the source of profit growth of the margin expansion is different from where we're getting the growth from, right? So that complementarity and that richness is what gives us the confidence of achieving this plan. So I just want to kind of add that.

We've got lots of questions on the webcast, if no more in the room. So the first on the webcast is, on CORI, you spoke about the competition from the likes of MAKO and ROSA and the advantages CORI may have in the ASC setting. Can you provide a bit of color on the competitive landscape in the smaller handheld area, EG, THINK Surgical?

We're already innovators. And I think it's, again, a testament to where the market -- Mike was talking about maybe being lucky, but I wasn't there at the time, but I think we made some strategic plays knowing where it was going in the footprint in the space. So I think with THINK again, it's both open-open and they have, obviously, a partnership with Zimmer. But ultimately, it's about the procedural innovation as a whole. And I think that, that's where the combination of CORI with the handheld robotic is going to be key because it's going to be able to go, again, across all procedures. And so when you think about ASCs, it's not just about knees. It's about hips, the workflow and ultimately providing the value and the benefit from a patient outcome is key.

Do you want to add anything...

THINK is handheld. And I actually THINK was probably okay for Zimmer to try that because they needed something. But THINK actually all it does is it places a pin. So it doesn't -- it has very limited functionality. It's just a guide to place a pin. And then you have to cut the saw -- use your saw to cut this. So it's really a navigation lead, really all it is. And so I might as well use a device like Orthomen, why not do something like that if it's -- if all it is doing -- it's nothing doing robotic as much as it just places a pin, okay?

And then the big issue is actually, which is quite surprising because I've explored it is their software, which is key to robotics, is having sophisticated software. And if you look at the software landscape, MAKO has reasonably good software, Smith & Nephew has great software. So those 2 more comparable. The other ones are all really -- the software itself is relatively poor.

And there's software that goes with it. In other words, a great example is, they get a CT ahead of time, so it's only image-based. And then it doesn't model the whole bone. You look at it and go, what did they forget when they did it. So maybe with future improvements, it could be better, but it has limited capability navigationally more than a robotic system.

Just to further build on these points, we've seen patent filings and things that in the world, in the sphere of handheld robotics. So it's not for us a complete surprise that others who are active in this area, right? And on the bucket if imitation being the best form of flattery, we feel very confident about the path that we've forged here. And to Dr. Haas's point, maybe over time, their subsequent generations get better. But at this point in time, we feel super confident about what we've got in CORI, the years of development that we've put into it and the fact that the type of functionality we've added, we've really set the pace here, plus you've got an installed base and other competitors that they've got to attend to. It's not an easy thing to just convert these things over.

So I feel good about where we're positioned. I don't underestimate any competitor. I certainly don't underestimate some of our larger competitors. But what we have is an organization that's got all of the components, whether it's the form factor and the functionality of CORI, the whole implant portfolio that's now redesigned with the needs of the ASC in mind that Dr. Ast so passionately talked about. That's a powerful value proposition and all the rewiring work we've done together with the commercial organization that's -- I mean how do I put it that transcribes well. It's found its mojo. I think it's a powerful combination for us in the next 3 to 5 years.

And then 2 questions that I'll combine. The first is, are there potential sales synergies between ortho and negative pressure wound therapy? And the second is, there seems to be some leverage across sports bed and ortho in the ASC channel. Can you explain the benefit of having both businesses?

So maybe I'll take the negative pressure one to you, Rohit. And then maybe Craig and Scott, you can take turns answering the complementary question for.

Sure. It's the same. So there's a leverage from point of view of the procedure itself. And we continue to collaborate, especially in how we deliver education and how do we reach our customers. And there's still more potential in order to drive those -- I wouldn't even call them synergies, like present the full portfolio and a full solution for the best outcome for the patient, as Dr. Bashyal talked about. So we'll continue to collaborate and partner with our ortho team on that.

As I think about on the negative pressure side, our universe is, but however, not limited by just ortho. We have, as Kathy mentioned, specialties across OB/GYN, across -- procedures across OB/GYN, cardiothoracics, plastics and so on. So our focus is also to continue to expand the orthopedic side, continue to work by ourselves, but also with the team on the ortho side to continue to drive the penetration.

What we've got actually -- both of you now have recently strengthened your corporate accounts function and team. And some of this is kind of an air game and some of it is a ground game. But actually, what we've got is strengthened capabilities particularly around contracting corporate accounts that allows for these types of combination deals to happen, keeping in mind that the playing field for you, Rohit, is broader than just the ortho. Do you guys flip a coin and figure out who's going to go through.

I will go. I think I won the coin toss on that. But I think it makes sense to kind of start with sports as well because that's in many ways where the ASC journey begins as Dr. Ast and Mayank talked about. We have a very strong presence in the ASC today with our sports business being among the first procedures to really go that direction. And as I look at it, we have the strongest sports portfolio among any of our largest competitors on the total joint side. And then as we look at our largest competitor in sports, they don't have a meaningful presence in orthopedics nor do they have in robot.

So we're really well positioned in that space to leverage the relationships, the experience that we have, the presence that we have in the ASCs. And so it's kind of, I think, a natural evolution of Smith & Nephew as a partner with the ASCs. And kind of selfishly speaking, from the sports perspective, it certainly reinforces our strong presence in the ASCs that we're in today, knowing that we also have such a compelling story on the total joint side. So a really strong combination.

I think the first part I'll start is people, right? So hopefully, you can tell with us up here that we all get along and we're good friends. Scott has been an incredible partner first off. So there's a tremendous amount of trust and confidence from a leadership standpoint. He was so kind that he allowed me to take his leader at the time from sports as well and bring him over to orthopedics. So you now have that level of partnership one layer below.

And ultimately, how we look at these things is how 1 plus 1 equals 3, right? And sometimes, again, I might have to bend a little bit for him to win, but ultimately, it's a Smith & Nephew win, and that's what we look at. And I think we see this, I think Dr. Ast did point out, that's the target in these retrofits. De novos are important by all means, but it's how do you take something that's in the transition. And we're really fortunate, again, to have sports who's been the leader on that front.

And we can point to a number of examples, I mean, a lot of examples here this year where we've been able to combine as business units to win and a number of CORI deals, a number of pull-through deals that happen on the ortho and the sports. And they're absolutely a valuable and vital partnership for us. And I think it's why Smith & Nephew as a business unit and the 3 business units are so key.

I probably would say, lastly, it just doesn't expand -- just not the recon, the joint recon part of it, too, is -- sorry, on total shoulders. They've got tremendous relationships with a lot of these sports specialists who are doing total shoulders as well. And we've had programs in place where we're driving funnel activity, conversions through those partnerships with the relationships they have because naturally, they do want to paint that ASC orange as much as possible, and there's real good reasons and they've been, again, tremendously valuable in those cases as well.

Just to add to what my colleagues, in fact, will have observed that we were generally tracking okay and observed in various settings that perhaps we set the bar too low in terms of the targets because that was one of the areas of the 12-Point Plan that look green all the way through, which basically means maybe you're not reaching high enough. But the reality is, as an organization, we've gotten stronger and stronger. It's an evolving landscape. Again, Dr. Ast, you eloquently put just what all the considerations are and how no two ASCs are like, right? So we, as an organization, have had to evolve to kind of be mindful of and also keep pace with those dynamics.

And we've made some not only organizational moves in terms of where we've housed this capability, but also how we come across as a single point of contact for these things, recognizing what's important, but also strengthen the capabilities of people who are able to bring a combined offering together. So we've been evolving ways to drive our performance at the group level as well as the BU here.

I've still got more so I'll keep going. What do you expect the revenue model for TESSA to look like? Is the majority of the value from direct sales consumables or from getting surgeons on to the Smith & Nephew ecosystem?

Great question. If you want me to start to kick off with that one. There are a lot of different sort of components to the model, like a lot of enabling technologies that we have. Today at Smith & Nephew, the arthroscopic tower is an important kind of foundation in any account. And I think TESSA and technologies like it, they strengthen that proposition tremendously. And so there's certainly advantage to having that footprint in a particular account. In terms of revenue, there's the capital piece of it that's a portion of it. There are kind of consumables associated directly with TESSA.

For those of you who are in the room and had a chance to get your hands on it, you see the QR-coded instruments and markers, there's an element of that. There's an element of software and the capabilities within that. But I think the bigger component of all of it is what is the question about the ecosystem and what is that opens the door and it facilitates all the procedures that we do. All the joint repair procedures starting with ACL and expanding from there. So I think we can measure the impact in a lot of different ways. Some of those directly from revenue from TESSA. Others will be how TESSA helps us drive the entire sports portfolio and beyond.

Well, one of the things, Scott, you put in place now for a number of years where you do push your organization for a balanced selling, right? So you're making sure that your sales organization is representing and actually making the whole portfolio count. And that's one of the things that you kind of drove 5, 6 years ago kind of in your role. So that's one commercially part of the organization that's actually working very well, is that balanced portfolio selling, and we expect, as Scott said, to bring that approach to TESSA as well.

Just check.

I'll monitor, Emily.

Would it be possible to break out your high single-digit wound target into the 3 subsegments, Wound Care, Bioactors and devices, specifically thinking about Advanced Wound Care, which has been growing around 2% in recent years?

I don't think we -- again, I'll go back to the answer I gave before. Obviously, our focus is growing with ALLEVYN Complete Care that will further accelerate with the market share that we plan on capturing in the pressure injury prevention that would contribute to the AWC growth, and our AWC growth plans are to get back in that category where we have trailed the market to market growth or above.

And then in several years and with the continued growth in PICO as well as the contribution of LEAF, which is helping pressure injury prevention, but it actually is a device, it will help continue to accelerate that growth and mix. In the biologics space, again, there's going to be some volatility in the growth just because of the dynamics of what we have discussed with the changes in reimbursement and all coming through. But those are the things that will drive as we see those different components of growth accelerating over.

But bottom line, we're not going to give targets at the subsegment level.

Yes.

And then I think this is one for the docs. Can we expect 100% of major joint replacements to ever be performed robotically at some point in the future? How many years will it take to get to that point?

I think virtually 100% eventually. Now the time, whether that's a 10-year horizon, the problem is going to be -- it's going to be standard of care. At some point in time, as I believe the results will get better and as we get more personalized in doing this, and there's documented evidence of it being better, and I believe that -- there's some of it now and it will come out. And lastly, the robots just make it easier. And I think that the people trained on the robot, they are used to the robot. Like I said, I do 15%, so I trained surgeons on how to not do it just in case it wasn't there, but they like it. And so the next generation is only going to be knowing how to do it with the robot.

The only thing I would add to that is the way I look at robotics, if you want to just take a step back and see what the real value is, the value of robotics is the democratization of access to high-quality care, right? So every single surgery is done as if Dr. Haas did it. You know what I mean, no matter who does it, no matter where it happens. So the timing question is hard because the answer really is going to be when does every market have access to it based on their health care system, based on the way that they work, based on the opportunity to get that. So the answer is yes, eventually, much like we don't ride horse and buggies anymore anywhere, like now there's cars everywhere. There will eventually be robotics everywhere. The timing is going to be very dependent on the variety of factors that influence health care spending in multiple markets around the world.

Thank you. That's all the questions on the webcast for now.

There's one from Veronika.

Just maybe one, in terms of LEGION MS versus LANDMARK, kind of how do you think about the impact of that, one versus the other? I guess, how much of a step-up in growth in U.S. knees should we already expect now versus once we get to third quarter and LANDMARK's out there?

I'll get back to market growth. And so I think that's going to be, as I mentioned before, kind of a 2-step phase, right? So MS plays a critical role right now in getting into the segment that was cementless, CR, MS stabilized knees. So we believe that, that will be kind of the first phase to get there. And again, I'm really encouraged by what we see.

One of the things we talk about the strength in commercial engine and our launch process. This is something that we have a pretty robust pipeline of people that we've balanced this kind of converting people, but also a good, long list of competitive targets that will start that progression to get back to market growth. And then I think as LANDMARK, as Dr. Haas laid out really well, the exciting piece about that for us is, one, that conversion over.

So if you are a JOURNEY customer, it's going to be a really easy conversion. So maintaining those customers because we're going to -- the design and the upgrade will give them what they wanted as well. And then it's just going to be this balance of going after competitive targets, which, again, we'll be proactively starting to identify and we'll have in the queue. And upon launch, we'll just be -- again, this balance between putting to existing and then going after complications to go above that as well, hopefully.

Anything else, Veronika, are you done with? Okay. Well, so with that, I just wanted to take a moment now to thank you all for joining us today and for your engagement throughout this session and actually a special shout out to Dr. Haas, Dr. Ast, Dr. Ranawat and also Dr. Bashyal, who is not here, for taking the time out of your busy practices to be with us today. It made a big difference, and we really appreciate it all of my colleagues here.

So hopefully, to the audience, you can feel the excitement that runs through all of us at Smith & Nephew, and you now have a deeper understanding about how we provide innovative and differentiated solutions across a broad range of indications. So with these and the confidence that we have not only in the foundation but also the focus to deliver.

So our message is simple. Our bold new strategy will elevate Smith & Nephew. It will accelerate growth and improve returns. So we've built a strong foundation through the 12-Point Plan. And now we are ready to move to the next phase, delivering 6% to 7% organic growth, 9% to 10% profit growth and driving our ROIC to well above our cost of capital.

And each business unit has a distinctive role to play. Sports and Wound will lead innovation and execution to deliver above-market growth and Ortho will expand margin. We'll continue to prioritize productivity and operational efficiencies across the group, unlocking 300 to 400 bps of margin expansion. This is in Ortho by 2028 and actually on a path to deliver a 20% Ortho margin by 2030. And strong free cash flow generation is an important part of our plans and will give us the optionality to make strategic moves where I'll reinforce our success and create further value.

So RISE is ambitious, but importantly, it is achievable, and it's about reaching 5 million more patients in 2028, driving share gains and elevating Smith & Nephew to the next level. So we are confident in our ability to deliver, and we're excited about what lies ahead. So thank you again for your time, for your partnership, and we look forward to working together to bring the strategy to life. So thank you very much.

Good afternoon, everyone, and good morning to those joining from the U.S. on the webcast. For those of you who don't know me, I'm Emily Heaven. And just a few months ago, I would have been sitting amongst you in the audience as an investor myself.

Today, I'm excited to be standing here on the other side as Head of Investor Relations. And I'm delighted to welcome you to Smith & Nephew's London Capital Markets Day 2025, the first of 2 events taking place this week.

Before we get started, just some logistics. If there were to be a fire alarm to go off, you follow the green signs and staff will lead you to the exits. We've got a full agenda for you all today. Don't worry. We've also included 2 coffee breaks. So please do check out our product fairs across the hall then.

And with that, please welcome to the stage, Deepak Nath, our Chief Executive Officer.

Thank you, Emily. Let me add my warm welcome to you also. Thank you for taking the time to be here today. I'm absolutely thrilled to bring you all together to launch our exciting new strategy, which we call RISE. This strategy is ambitious but achievable that delivers acceleration in both revenue -- organic revenue and trading profit, along with a step-up in return on invested capital.

Over the next 3 years, you'll see a company that's firing on all cylinders with each business unit playing its role in value creation. Through innovation and disciplined execution, Sports, Wound and ENT will deliver above-market growth, while Ortho grows at market to drive margin expansion and improve ROIC.

All this will come with strong free cash flow generation that give us optionality for strategic inorganic moves. Over the next 4 hours, we'll bring all of this to life. So with that, let's dive in.

So our actions under the 12-Point Plan have created a fundamentally stronger business today than it was 3 years ago with a springboard for future growth. You'll have seen a summary of our new strategy and 3-year ambition in this morning's release. Today, I will take you through each component in detail and explain why we believe it will elevate Smith & Nephew to the next level, delivering 6% to 7% organic growth, 9% to 10% trading profit growth through continued strong cash generation, we expect free cash flow to reach $1 billion by 2028, and we'll get ROIC to 12% to 13%, which is significantly above our cost of capital.

Before we go into it, let's start with the video that showcases our rich, 170-year heritage from our foundation in the North of England to the global MedTech company that we are today.

So with that, if we can queue up the video.

[Presenation]

We are rightly proud of our heritage and how we've developed the business to reach category-leading positions across our key markets with a strong diversified portfolio. Our combination of business units is unique with each focusing on improving treatment outcomes and each exposed to favorable underlying demographics as people live longer with greater expectation of quality of life and activity levels in their later years and with technological advances that meet previously unmet needs.

So we operate in a total market -- addressable market of over $50 billion that's growing at about 6%. We are the second largest player in the fast-growth global sports medicine market that's worth $7 billion, with leading positions in a number of categories, including meniscus repair, hip repair, coblation and mechanical resection. We're the second largest player in the fragmented global wound market, that's worth $13 billion with leading positions in biologics and single-use negative pressure therapy.

Well, we have a smaller position in the much larger orthopedic market we have a differentiated -- we have differentiated technology that allows us to remain relevant and provides avenues for growth ahead of the market in certain categories. We also have 9% share in the fragmented ENT market where we have introduced game-changing innovation.

Our revenues are well diversified across our business units, providing a balanced portfolio from which to better withstand volatility in any particular category and that provides multiple avenues for growth. We also have a strong geographic diversification across key markets with more than 50% of revenues in the U.S. and nearly 1/3 in developed international markets.

Since our inception in 1856, we've delivered leading innovation that's transformed patient care from the first experimental bandage Elastoplast that was introduced in 1928 to our DYONICS system, which introduced orthoscopic visualization in the 1980s. We followed that up by launching an innovative technology for soft tissue resection called COBLATION and more recently, OXINIUM, a unique material for joint replacements, which we introduced in 2001.

In trauma, we've revolutionized hip fracture repair with our INTERTAN locking nail. And we've pioneered a portable single-use device for negative pressure wound therapy that we call PICO.

Let me take a moment now to highlight the outstanding team that will be leading the strategy forward. I believe we've built one of the best management teams in the industry through a combination of homegrown talent and talent that we brought in from the outside. You can find their bios in the appendix of this presentation.

Our executive committee, many of whom will speak today brings deep hands-on experience in their respective areas. This is a team of industry and functional leaders that have built, scale and transform businesses at every stage of growth. What truly differentiates them is not just tenure. They are subject matter experts, recognized not only for the strategic impact and technical expertise, but also importantly, in the manner in which they lead.

Together, they bring decades of proven leadership in navigating complex transformations, driving operational excellence, and accelerating innovation. As important, they developed their own teams to provide the bench strength to feed our strong succession talent pipeline. This experience is exactly what positions us to elevate our growth trajectory.

We have the right leaders with the right expertise that are aligned around a clear strategy and committed to disciplined execution. In short, this is a team that's working together towards the clear strategy that we will lay out for you today. This team will take us from where we are to where we intend to be faster, stronger and more confident. So what we've outlined is our heritage as a business.

Let's now turn our focus to more recent times. Since I arrived as CEO on April Fool's day in 2022, my priority has been executing the 12-Point Plan. This plan had 3 pillars: design to fix orthopedics; improve productivity; and nurture our leading sports and wound businesses.

Within Orthopaedics, we've addressed product availability issues, tackled high inventory and rightsize capacity, closing 5 manufacturing facilities to better match demand. We improved our Memphis site to industry standards and rewired our operations for greater efficiency. At the same time, we strengthened our commercial engine by streamlining its structure, appointing the right leadership, shifting to more growth-oriented incentive schemes and tightening the management of business. And we built out our hip, trauma and robotics portfolio. These actions have returned trauma and hip to market levels or higher. And I'm proud that we've accelerated underlying orthopedics growth from 1.9% in 2022 to about 5% this year.

While we fixed orthopedics, we accelerated our sports and wound businesses to above market in both of those segments. While we made progress overall, there are some areas where we did not meet our ambitions. In these our product gap widened as market trends shifted. This remains a priority, and we are accelerating development to close that gap with a strong pipeline of product introductions over the next 18 months, each of which will benefit from our more efficient commercial engine starting from launch.

On inventory, we've taken positive steps to improve alignment between supply and demand and have laid the groundwork for continued inventory reductions, but are about a year behind where we expected to be at this stage. We do anticipate further margin improvement as a result of these positive actions, which Craig, our President of Orthopedics will take you through later.

Finally, in wound, we've made significant progress in single-use negative pressure wound therapy and are refining our approach to traditional negative pressure therapy in the U.S. in order to be more competitive. The 12-Point Plan was designed not only to deliver specific actions in the near term, but also to embed fundamental lasting changes in our behaviors, operations, and performance and elevate how we deliver for each of our stakeholders, our patients, our customers and, of course, you, the shareholders.

I'm pleased to confirm that we've successfully embedded these changes, thanks to the collective efforts of every single Smith & Nephew employee. We put in new processes to transform how we work, bringing greater focus, rigor and consistency to everything that we do.

In 2023, we've moved our commercial operations from a complex matrix model that split across franchises and regions to a simpler business unit structure with vertical teams for each of orthopedics, sports medicine, ENT separated out and wound management. This is, in fact, driving greater accountability, faster decision-making and execution and has allowed us to increase customer focus in every area of our portfolio.

We now have a single point of leadership for upstream and downstream marketing and sales, better alignment across regions and countries and dedicated Presidents with full global P&L responsibility. We've embedded our new way of working and aligned performance metrics to strategic priorities to reward the right behaviors. We are now set up to win striving to be better every day through our continuous improvement mindset and behaviors. Elga Lohler, our Chief HR Officer, will talk you through this in more detail.

Perhaps more important, we sharpened our focus on cash and capital returns through a number of initiatives and aggressively tackling our cost base. The move to our new vertical model has led to an 8% reduction in central costs following the reallocation of those costs to business units.

In addition, we started an initial program of $200 million of savings at the beginning of the 12-Point Plan. In 2024, after John started with us, we built on that by applying a zero-based budgeting approach to identify further opportunities. We're well on track to deliver the $325 million to $375 million of gross cost benefits, of which the largest chunk is from manufacturing and procurement. But there are savings across all parts of our businesses as well. And we'll step up these savings further in 2026. And John, you'll take us through the details later.

So we've introduced much greater rigor and discipline in capital allocation, improving set turns and by deploying these sets to more productive accounts. In IT, we deploy less CapEx and cost because we made the business units more accountable for their IT spend. So they no longer viewed it as a free resource.

So the resulted increase in free cash flow allowed us to step up our focus on innovation and launch a number of new products during these transformation years. It would have been easy to cut back on R&D to protect margin. But that would not have been the right thing to do for the business in the long term. The result of this is a robust pipeline and a higher cadence of launches, which Vasant will take you through shortly.

Finally, we completed a $500 million share buyback in Q3 of this year. So the numbers speak for themselves. We moved Smith & Nephew from a low single-digit revenue grower to a mid-single-digit growth company. We've expanded trading margin by over 200 bps from 17.3% in 2022 to at least 19.5% this year. What is impressive about this expansion is that we overcame some thousand bps of macro challenges from VBP in China and higher inflation. So John will cover these in more detail in his section.

Our increased focus on cash and capital returns has yielded an impressive 14-fold increase in free cash flow from $56 million in 2022 to an anticipated $800 million this year. And finally, ROIC has improved by 300 bps from 6.6% to 9.5% this year, which is above our cost of capital. I'm incredibly proud of this achievement. We have proven that we are capable on executing on multiple high-priority initiatives at the same time.

We emerged as a stronger organization as a result. But as I've always said, this is just the beginning, and this isn't the limit of our ambition. So as we now come to the end of 2025 and the successful completion of our 12-Point Plan, we're now excited to be looking ahead to the next chapter of our growth story, a strategy that launches just as we prepare to celebrate our 170th year as a company in 2026. RISE is that strategy. It's a bold strategy that elevates Smith & Nephew. But as ambitious as it is, it is achievable. And it positions us for success over the next 3 years.

We have 4 clear aims: To reach more patients, by driving adoption of our differentiated portfolio and taking share across more indications, new settings and geographies; to innovate, to enhance the standard of care through accelerating new product launches and rapidly scaling existing innovation platforms; and to scale through strategic investment, allocating capital to high-returning high-growth opportunities that are aligned with our portfolio priorities; and importantly, to execute efficiently, driving group-wide productivity and asset efficiency, particularly in orthopedics to expand our margins and our returns.

We'll build on the behaviors that we embedded through the 12-Point Plan with our way to win. And that's our program to simply to be better every day through our continuous improvement mindset and the behaviors that come with it. So let me now dive into the elements of this new strategy in more detail.

So first, building on the strong foundation and momentum of the 12-Point Plan, this strategy will allow us to reach more patients, where we expect to go from serving 15 million patients per year to about 20 million patients in 2028. Our rich portfolio contains several key product launches already launched and each with significant growth potential.

We're sharpening our focus on these to maximize the reach of our most highly differentiated products through our new market entry and expanded indications. We'll access new patient populations driving growth globally or adoption globally and to enter high-growth channels and new care settings.

These products include REGENETEN. We're redefining tendon and ligament repair with our bioinductive implant, CARTIHEAL/AGILI-C, which is addressing unmet needs in cartilage repair. PICO which transforms negative pressure wound therapy from an -- from therapy in the outpatient to home settings and beyond. And ALLEVYN Complete Care, our unique 5-layer dressing and CORI, our differentiated approach, robot-assisted orthopedic surgery.

Each of these products is a growth in its own right. And together, they represent a powerful portfolio that expand the market and take share. Through these products, we can reduce recovery times and readmissions, and we can get people back to their daily lives and return to work more quickly, all of which is good for patients, their families, for health care systems and overall economies.

We're well positioned to take full advantage of market shifts such as the transition of joint replacement from hospitals to ambulatory service centers. And that's with our CORI system, which provides a solution for all major joints on one platform. We'll transform the standard of care with disruptive products like TULA and increase adoption in high-growth emerging markets. Through these actions, we'll achieve our clear ambition to move from category leadership to market leadership in sports and in wound.

So in addition to these key products, we will maintain our industry-leading cadence of new product introductions with more than 75 launches over the next -- last 5 years. We're excited about the pipeline of products we have coming in Orthopedics over the next 18 months, including the launch of our new LANDMARK Knee, which will not only close a product gap we have, but it will also leapfrog ahead of the competition in its differentiating features.

We have a significant opportunity to enhance the standard of care with our scalable biologics platform, which we can accelerate to deliver more highly differentiated solutions across our group and along the full continuum of care. And with solutions like Tessa, our first-in-industry spatial surgery arthroscopic platform. We will remain on the cutting edge of care through procedural advances to improve surgical outcomes. Through our patient-first approach, we're focusing innovation where there is the greatest unmet need, such as our next-generation cloud-based LEAF sensor to prevent pressure injuries.

We'll explore our innovation platforms in depth, both here and in New York later this week. So we've demonstrated our ability to generate significant cash through our strengthened business. And going forward, we look to allocate this capital to higher growth segments. These initiatives will focus primarily on our sports and wound businesses where we leverage our capabilities and market access to develop compelling health economic outcomes while investing productivity gains to further strengthen our commercial execution and innovation.

For example, we'll accelerate our M-TECH platform capabilities to scale up solutions that we can deploy across the group through targeted inorganic partnerships. M-TECH is our term to define innovation across musculoskeletal technologies, to enhance care and healing. Within our mature Orthopedics business, we'll be focused on allocating capital and deploying inventory to these platforms, which have proven returns, and these include robotics.

We'll deploy increased free cash flow into our high-growth high-return businesses and see opportunity for M&A to support strategy to build on our areas of strength. We recently appointed Ajay Dhankhar as Chief Corporate Strategy and Development Officer, Ajay has significant experience in health care strategy and M&A, having held leadership roles, including Global Head of Strategy at McKinsey across all the industries. And more recently, having served as a Managing Director and Global Head of Medical Technology, Diagnostics and Tools at Lazard, where he led multiple high-impact transactions.

So while there are many M&A opportunities in MedTech, we remain laser focused on pursuing only those that fit our strategy. We have a strong track record of successful M&A particularly where we've been able to add value by deploying significant expertise in coding and reimbursement and medical education to accelerate new product routes to market.

And a great example of this of success actually is CARTIHEAL, which is an acquisition we made in 2023. And with AGILI-C, we have recently secured a new Category 1 or CPT 1 code, which will be a game changer for us.

We've embedded new ways of working in orthopedics through our Ortho360 program, which is our way to operate this business better than we have in the past, intentionally balancing growth, margin and asset deployment. Craig will take you through detail of this in a little bit.

We'll continue to reduce the complexity of our entire portfolio by exiting low-return categories across sports, wound and ortho and improve inventory health by shifting towards higher-turning SKUs and away from the slow movers. This will enable better service levels and ultimately, lower working capital.

We'll adopt a single global ERP platform and to leverage analytics and AI to drive performance and productivity across the group. A single ERP system will drive simplification, standardization of processes and sharper execution through tighter controls. We'll employ AI, machine learning and data analytics to drive improvements in critical processes such as supply chain, manufacturing, inventory management and pricing. This will reduce our cost to serve and improve accuracy of our supply inventory and operations planning down to the SKU level.

In commercial functions, we'll employ digital platforms to strengthen our customer engagement, expand virtual training and service and generate evidence of value for our providers.

Finally, we'll continue to drive group-wide productivity improvements and reinvest these gains back into innovation and our commercial capabilities. But actions can only take us so far. Our purpose and culture will ensure successful delivery of our strategy. Everyone at Smith & Nephew is united by our purpose to allow patients to live life unlimited. This is supported by a strong culture, which is developed by our colleagues and characterized by 3 pillars of care, courage and collaboration. We're well prepared for the years ahead as we focus on our way to win by being better every day through the continuous improvement mindset that I referred to earlier.

I want to leave you all with some key messages. The 12-Point Plan has delivered, and we are now a much stronger business with a solid foundation to deliver the next phase of growth. We have an ambitious yet achievable new strategy RISE, which will enable us to reach 5 million more patients by 2028.

Through increased investments in innovation and execution, we will drive share gains in sports, wound and move from category leadership to market leadership in these areas. We'll continue to gain share in our core ENT market, while maintaining our share in orthopedics. Our positive actions under Ortho 360 to normalize supply and rightsize capacity sets us on a clear path to get to 20% margin in orthopedics by 2030.

Our continued focus on group-wide productivity and further operational efficiencies will drive profit growth. And we aim to drive some 300 to 400 bps of ortho margin expansion by 2028 and expect to exceed the 20% by 2030. And in the process, doubling our ROIC in that business.

Finally, our strong cash generation provides optionality for strategic M&A to reinforce our success.

So before I conclude my introduction, I want to reiterate the financial targets that our RISE strategy will deliver, through continued innovation and execution will drive organic growth to 6% to 7% above -- which will be above the market. And our continued focus on productivity, operational efficiencies and capital discipline will drive 9% to 10% trading profit growth and get us to $1 billion in free cash flow by 2028. And that will all result in 12% to 13% ROIC by 2028.

As I've mentioned, innovation is a key tenet of our strategy. So I'm now going to hand over to Vasant Padmanabhan, who is our President of R&D, but also wears multiple hats and leads our ENT business and our emerging markets business, and he'll go into this in more detail.

But while Vasant takes his place at the podium, I'd like to play a video that showcases our innovation strategy.

So Vasant, would you come up?

[Presentation]

Thank you, Deepak. I am absolutely delighted to talk about the role of innovation at Smith & Nephew and how it supports our strategy.

I'd like to start by building on the comments Deepak made about our track record and rich history of disruptive innovation. Starting with sports medicine. We launched the DYONICS system that introduced arthroscopic visualization and mechanical resection for the first time ever in the 1980s. We followed that up by launching an innovative technology for soft tissue resection called COBLATION.

Similarly, in Orthopaedics, we brought OXINIUM to the market, which is currently available in our LEGION and JOURNEY knee systems that Craig will cover later. OXINIUM is a unique patented material that has the hardness and wear-resistance of the ceramic, but the strength and durability of a metal. This is in contrast to standard coatings used by many of our peers that do not have the same wear-resistance and can therefore, peel or delaminate.

Also in Orthopaedics, our TRIGEN INTERTAN nail revolutionized hip fracture repair. And as Craig will discuss later, we'll be launching the next-generation nail in the coming few quarters.

And finally, as Deepak mentioned, in Wound Management, we launched the first ever portable single-use negative pressure wound therapy system PICO in 2012. This level of innovation has been made possible through a consistent increase in investment in R&D. And I'm proud that we've maintained this investment through COVID and the 12-Point Plan. In fact, we'll be increasing R&D investment in 2026 and we'll continue to maintain investment at about 5% of revenue. For this investment, we have delivered an impressive cadence of new products, launching more than 75 products in the last 5 years and have been punching above our weight.

Looking ahead, we expect to maintain this cadence and add to our intellectual property with increased investment and new models of development with external partnerships.

Finally, our innovation portfolio has contributed and will continue to contribute to group growth in a meaningful way. Over the last 4 years, more than 50% of our revenue growth has come from new products launched within the last 5 years, and we will continue to deliver to this level in 2025 and beyond.

Here are some of the more recent major product launches that have driven growth and will continue to drive growth for the coming years. There are 3 key messages I want you to take away.

First, we have a broad portfolio with product launches spanning the breadth of every business unit, segment and subsegment. Second, these launches comprise both incremental and transformative innovation. The former is very important to MedTech to maintain competitive differentiation, such as our TRIGEN nail. And the latter, like AGILI-C and REGENETEN will enhance the standard of care or create new categories entirely.

Third, looking at 2026 and beyond, we'll round out our knee portfolio with the launch of the LANDMARK Knee that Craig will talk about later. And most importantly, we have 2 major scalable technology platforms that we call M-TECH and Biologics. I'm really excited to discuss these 2 platforms, which will deliver new products across multiple business units.

M-TECH is comprised of several technologies, visualization, navigation, robotics, sensors, augmented reality and artificial intelligence to name a few. With the help of these technologies, we're able to provide our surgeons with the ability to see the unseen. And we do this by leveraging advanced AI and deep learning to uncover critical insights and patterns that are not always visible to the human eye.

And in order to provide M-TECH solutions that address the various unmet needs in surgery, we have built robust competencies in surgical robotics, deep learning algorithms and advanced image processing. These competencies will enable us to develop and deploy solutions. We have several product platforms including our handheld robotics platform, CORI, our spatial surgery platform for arthroscopy TESSA, our visualization platform, INTELLIO and LUMOS and our patient manitoring platform, LEAF. I'll be going into details of these shortly.

The second key innovation platform is Biologics, which like M-TECH, is built to enhance quality of life through improved surgical outcomes. Biologics is an emerging fast growth segment in the wider MedTech space. And I believe that Smith & Nephew is unique in having a scaled platform with almost $800 million of revenue across multiple business units through products like REGENETEN, AGILI-C, SANTYL and amniotic skin substitutes. These products continue to gain adoption in new areas and indications. And we have a pipeline of more new technologies that will further strengthen this platform.

CORI, when we embarked on our robotics journey, we noted that most competitive offerings comprised of large saw-based fixed arm systems, which essentially replicated how the procedure was already being done manually.

Based on our assessment of the user needs and working with our surgeon customers, we decided to take a different approach. CORI was intentionally designed to make robotics scalable, flexible and image agnostic. We are now developing the third generation of CORI, which is called CORI XT. And I'm absolutely thrilled to say that we just were -- we just got clearance -- FDA clearance of CORI XT almost a quarter ahead of schedule. This upgraded system will offer several unique advantages over the competition.

Number one, it is flexible and scalable. As Deepak pointed out, it's able to work across multiple applications: knee, hip and shoulder with a range of hardware and software options to suit a wide range of surgeon preferences and settings, including the ASC. It is also the only system with an FDA-approved revision indication. So our robot covers Uni knees, total knees, revision knees and then hips and shoulder as well, a truly comprehensive offering.

Second, CORI provides handheld robotic position. And unlike competing systems with fixed robotic arms, CORI gives surgeons more control.

Finally, CORI is image agnostic. It supports image free planning that can streamline workflows, reduce costs and reduce patient exposure to radiation, but also supports image-based planning using both MRI and CT.

Ultimately, with the CORI platform, we're well positioned to compete well because we have well-designed and clinically backed implants, with a rapidly evolving robotic platform to drive procedure innovation across all major joints. We acquired CORI through the Blue Belt Technologies in 2016, which was a start-up out of Carnegie Mellon University. And as this page shows, we've launched since then almost 20 new functions or upgrades. And as Craig will cover more detail in the next section, we are thrilled that CORI XT, our third-generation will lead to shoulders and hips in 2026 and 2027, respectively.

TESSA. TESSA stands for tracking-enabled spatial surgery assistant. It uses real-time tracking, augmented reality and advanced imaging to help guide surgeons through arthroscopic procedures such as ACL reconstruction. And I'd like to use a car navigation analogy to explain the transformative power of TESSA. If the surgery is the journey and the surgeon is driving the car, then basic surgical planning is like reading a physical map and plotting the journey in advance. With TESSA's capabilities, the surgeon gets real-time assistance to stick to the surgical plan he or she created at the beginning of the surgery, just like Google Maps, making sure that the surgery is completed exactly as planned.

So how do we do this? Preoperatively, TESSA uses sophisticated deep learning algorithms for segmenting image scans to create a 3D model of the patient's need as an example. This model can then be used by the surgeon to create the surgical plan. Then intraoperatively using augmented reality and real-time video image processing, TESSA registers and overlays the 3D model in the live surgical field, thus enabling the surgeon to implement the surgical plan with precision and accuracy exactly as planned. In doing so, TESSA eliminates guesswork, reduces technical errors and ensure surgeons stay on the most accurate path to optimal outcomes.

We acquired TESSA as a technology from P3D a start-up company from Portugal, which has strong partnerships with University of Coimbra. Like CORI, TESSA is a scalable platform for multiple arthroscopic procedures. We'll start with ACL reconstruction, adding features and functionality over time and Scott will discuss TESSA in a lot more detail as well.

And finally, in wound, our M-TECH platform relates to the incorporation of sensors to enhance patient care. LEAF is the first of this product from this platform acquired in 2019 and designed to monitor and prevent pressure injuries. We're now developing our next-generation LEAF system which will be cloud-based to drive more efficient installation and updates. By investing in digital capabilities, we will unlock faster innovation cycles and deliver enhanced value and service to our customers. Rohit will cover LEAF in his section as well. So with CORI, TESSA and LEAF, we have 3 scalable M-TECH platforms that will deliver products for the coming years.

Turning to biologics. We see the opportunity to deliver solutions that address the full continuum of care. And we will do this via Prevent, Prepare and Promote framework across musculoskeletal and wound care.

Prevent is focused on disease modification. And our goal is not just to treat symptoms, but to change disease trajectory, slowing, halting or reversing progression. As an example, with AGILI-C, we're redefining early intervention, helping patients avoid joint replacement and restoring function sooner.

Prepare refers to tissue optimization. Before any surgical intervention, we focus on optimizing the biological environment, ensuring the wound or surgical site is primed for healing. With SANTYL, for example, we enzymatically remove nonviable tissue, while preserving healthy tissue, creating an ideal foundation for healing.

And finally, Promote is our approach to accelerate healing. REGENETEN is a great example of how bioinductive scaffolds can do this, restoring function faster and reducing reinjury risk. Together, this Prevent, Prepare and Promote model demonstrates how Smith & Nephew is building a scalable, high-margin biologics platform, anchored in proven technologies with the potential to expand further through strategic partnerships and M&A.

Innovation by itself is not enough to drive growth. And I'm so happy to talk about our track record of delivering compelling evidence through our Centers of Excellence and clinical affairs, market access, health economics and operations research. Through these Centers of Excellence, we're driving market access, reimbursement and market adoption of our differentiated technologies, a few examples.

In sports, as Deepak pointed out, we recently were able to establish a new Category 1 CPT code for our AGILI-C cartilage repair implant. This new code will streamline reimbursement processes for providers and payers and support the integration of AGILI-C into standard clinical practice.

Another example, in wound, a recent study demonstrated the use of PICO post C-section significantly reduced the likelihood of surgical site infection and complications compared to competition, leading to cost savings.

And finally, we recently published Level 1 RCT data that showed that handheld robotic-assisted total knee arthoplasty, also known as TKA, significantly improved patient outcomes at 2 years compared to conventional TKA. I'm particularly proud of our recent progress with TULA, where we successfully navigated the U.S. coding coverage payment journey in order to drive practice change. And in late October, the Center for Medicare and Medicaid Services officially set a formal payment rate for TULA, which is an important step to a reimbursement by private insurance and more widespread adoption.

Innovation is not only about what we do, but how we do it. First, from a structural perspective, our innovation and new product development teams are business unit and customer-focused. Our innovation road maps and projects are driven by our business units and delivered by our cross-functional and multidisciplinary project teams.

At the same time, our Centers of Excellence, whether it's in robotics or industrial design or human factors or clinical operations, they work together across the enterprise to ensure efficient and consistent new product development. We are collectively focused on 3 imperatives, innovation that matters. Our engineers, scientists and marketers work in partnership with our customers to identify solutions to meet unmet needs and to turn those into products.

Flawless NPD execution, led by the business units and supported by our project management office, we follow a prioritization process to work with agility. And we also work with development partners across the world to drive new products to market.

Compelling evidence of clinical and economic value. Finally, as Deepak has described, we create compelling evidence of both clinical and economic value to enable market access and drive adoption.

In closing, I'd like you to keep in mind these 3 messages, these key messages. We have a history of driving rich innovations that truly matter and punch above our weight in terms of the impact they've had on clinical practice.

Our innovation strategy is led by our business units and supported by our enterprise-wide Centers of Excellence and clinical evidence capabilities. We have 2 key scalable enterprise-wide innovation platforms, M-TECH and Biologics. We will continue to deliver both incremental and transformative innovation and maintain a strong cadence of product launches across all business units.

I am just so excited and confident that our R&D model, our people, our technology, and our capabilities will help our innovation engine deliver on our midterm ambitions.

I'll now hand over to the Business Unit Presidents, starting with Scott Schaffner for Sports Medicine.

But before Scott comes up, let's bring the focus back to our patients. They are the reason we do what we do. Thank you.

[Presentation]

I never get tired of hearing patients talk about the kind of impact that we can have on their lives. It's very, very powerful.

Thank you, Deepak, and Vasant.

Now let me talk to you about our Sports Medicine business. I am pleased to report that our sports medicine business commands a strong position in a very attractive market worth some $6.6 billion and growing at around 5%. Now this market serves a broad patient population, not just elite athletes, the people of all ages, are more active than ever before, and they expect a rapid full recovery when they get injured. Their doctors want to achieve the best possible outcomes while treating them as efficiently and minimally invasively as possible.

At Smith & Nephew, we want to help our patients live life unlimited. And today, our sports medicine business is in a very good place to do just that. We occupy the #1 or #2 position in almost every subsegment in which we compete and consistently generate above-market growth across product categories. We're executing well commercially through our dedicated global sports medicine sales channel, and performance is well balanced geographically with our major regions and markets consistently delivering high single to low double-digit growth today.

Now our roots run deep in sports medicine. We have truly been a pioneer, delivering innovations that have created whole new technological and procedural categories and have advanced the practice of arthroscopic surgery globally. Here are just a few examples.

Last year, we celebrated 30 years of saving the meniscus at Smith & Nephew. And in 2026, we will honor the 30th anniversary of COBLATION. Many of our innovations remain the industry gold standard today. And throughout our history, Smith & Nephew has played a pivotal role in shaping the world of sports medicine.

As a business, we've been building tremendous momentum in sports over the last 12 years, delivering 5% revenue CAGR despite headwinds from COVID, global supply shortages and China VBP policies. This has resulted in 7 percentage points of market share gains over that period. We've successfully integrated several acquisitions, significantly strengthened our product portfolio and dramatically improved commercial execution and actively invested in market development.

Now as we embark on the next strategy as a group, our positive momentum will continue, and we are confident we can accelerate growth further through RISE. And as you might expect, our customers and the patients we serve must remain the center of our attention. We will reach more of them by growing our product portfolio across core segments and expanding indications for REGENETEN and AGILI-C driving wider adoption globally.

Innovation, as Vasant has outlined, will remain at the heart of what we do. We will launch our revolutionary first-in-class TESSA platform, which combined with extended indications for REGENETEN and AGILI-C will help us achieve our ambition to be the #1 sports medicine company in the world. Now bringing innovation to life involves more than just products and technology. We will continue to invest in market development. We'll open market access with compelling clinical evidence and strong advocacy to drive coverage and reimbursement of our products. We will scale our platform by amplifying our digital marketing and medical education efforts. And of course, as our portfolio grows in terms of size and complexity, our commercial teams must have the right scale, structure and support.

We will also continue to monitor and act on inorganic opportunities that support our strategy. We will ensure that our teams across all functions are well equipped with the proper tools, capabilities to execute consistently and efficiently. We will strive to be better every day through our continuous improvement mindset, and we will reinvest productivity gains to fuel future growth.

Now I'd like to provide a little more detail on the strategic priorities that I've just outlined. Let's start with how we will reach more patients with our core portfolio. Now the core sports medicine categories in which we compete, represent 85% of our business today with the remainder driven by newer technologies like REGENETEN and AGILI-C. But our core represents our strong business foundation. Knee, shoulder, hip and foot and ankle are the major procedural categories in sports medicine joint repair, collectively worth over $4 billion. And within this, the largest subsegments, ligament reconstruction and rotator cuff repair represent 1 million procedures annually or $1 billion in value.

AET, which includes capital platforms and consumables required to perform these arthroscopic procedures represents another $2.4 billion. So underlying market growth and our continued success in these segments will remain critical drivers for us in our long-range plans. We have a robust R&D pipeline plan and new product road map in place to support the present and future health of our business.

Now beyond our core, we own 3 highly differentiated and innovative platforms that have the potential to significantly advance arthroscopy and sports medicine surgery. Most companies would like to have one, and we have 3. We have REGENETEN, AGILI-C and TESSA.

I'm now going to take you through each platform in a little more detail. When we acquired REGENETEN -- or excuse me, when we acquired Rotation Medical and REGENETEN technology, we knew tendon healing was one of the most significant unmet needs in sports medicine. Since that time, we have fully invested in the development of REGENETEN. We have improved the lives of more than 200,000 patients and shape how tendon tears are treated by sports medicine surgeons. The clinical data we've generated with the help of the medical and scientific community is compelling.

A recently published Level 1 study, a multicenter randomized controlled trial shows a 65% reduction in re-tear rates when REGENETEN is used to enhance the repair of full thickness rotator cuff tears. And of course, lower re-tear rates linked directly with better patient outcomes, faster return to activity and lower overall burden on health care costs.

Based on this study and others we conducted, the American Academy of Orthopedic Surgeons just updated its clinical practice guidelines, which will be published in 2026 to include a strong recommendation for the use of bioinductive implants to augment rotator cuff repairs. And we will build on the success we've had with REGENETEN to date and continued funding studies, education and awareness to support significant growth in the years ahead. And we have room to expand the use of REGENETEN for rotator cuff and other tendon repairs, including hip and Achilles and see opportunities to further penetrate markets all over the world.

Now cartilage repair has long been another of the holy grails of sports medicine, a significant problem in need of an effective solution. And after many years of scanning the landscape, we believe that AGILI-C has the potential to revolutionize cartilage repair in the same way that REGENETEN is meeting unmet needs in tendon and ligament repair today.

And we are earlier in our journey with the AGILI-C, particularly when it comes to market access, but we love the AGILI-C technology. It is a simple, single-stage, off-the-shelf solution for treating cartilage and osteochondral lesions in the knee, with or without mild to moderate osteoarthritis. And AGILI-C is the only FDA-approved device for this indication having received breakthrough device designation from the U.S. Food and Drug Administration.

Since the acquisition of CartiHeal, we have worked to generate further evidence and establish widespread use of the AGILI-C implant. As a result, in October, we announced that the American Medical Association established a Category 1 CPT code for procedures involving the AGILI-C cartilage repair implant, which will go into effect January 1, 2027. The new code recognizes the clinical significance and the growing adoption of AGILI-C. This will streamline reimbursement processes for providers and for payers, support the integration of the implant and the standard clinical practice and unlock the enormous potential of the U.S. market.

And we are right on track with our plan for this product, and we are excited about the next steps. We will continue to build the body of clinical and health economic outcomes evidence to support wider adoption and global market expansion for AGILI-C.

The TESSA concept began with our recognition of the role AI and advanced technology could potentially play in the future of arthroscopy. In 2020, we acquired a cutting-edge company called P3D, as Vasant mentioned earlier, and integrated their expertise into Smith & Nephew. And after 5 years of investment and commitment to the program, spatial surgery is now poised to be the next opportunity for Smith & Nephew to advance the way arthroscopic surgery is practiced.

Powered by AI and an NVIDIA GPU, TESSA will combine personalized preoperative planning, with real-time intraoperative tracking, guidance and assisted arthroscopic navigation. And as Vasant described, TESSA brings the navigation and safety systems we have in our cars today to arthroscopic surgery. And TESSA will connect with the Smith & Nephew arthroscopic tower and visualization systems, including our next-generation LUMOS platform.

Over time, we anticipate TESSA supporting applications across the broad spectrum of arthroscopic procedure, starting with ACL reconstruction, where tunnel placement and trajectory remains significant clinical challenges. That's just the beginning for the TESSA platform. TESSA is currently under review by FDA through a de novo 510(k) regulatory pathway, and we anticipate clearance in 2026.

We are excited about our innovation pipeline, especially the big 3, which collectively are expected to contribute around $400 million in revenue in 2028. They fit perfectly with our sports medicine business and align well with our enterprise innovation strategy on M-TECH and Biologics.

Now to maximize the full potential of our portfolio, which will continue to increase in scale and complexity and to support our growth aspirations, we will need to maintain the global commercial footprint, sales force capabilities and channel strategy to match. Therefore, we plan to reinvest productivity gains into commercial capacity, skills and tools, including AI sales force enablement to equip our sales teams for success.

Our salespeople focus every day on serving the needs of our customers. And that level of customer centricity applies to all of us. We will elevate our customer experience at all touch points, including through a comprehensive continuum of medical education. Our medical education is one of the most significant ways in which we engage and interact with our surgeons. MedEd allows us to reinforce our priorities and drive innovation. And for many of these programs, we utilize Smith & Nephew Academies, our world-class medical education facilities throughout the U.S., in London, Munich, and in Singapore.

We have also been amplifying our volume in the market through a greater digital and marketing presence. You may have noticed our ongoing partnership with UFC and sponsorship of players at Wimbledon over the last couple of years. And our association with these highly recognized global sporting organizations has given us a unique platform. We are able to showcase our latest innovations in treating sports injuries and highlight how Smith & Nephew technology can serve the needs of both the world's most demanding athletes and thankfully for the rest of us everyday people, too. Because in truth, our purpose of Life Unlimited applies to everyone.

Now finally, we'll step up our investment in R&D to ensure we remain the pioneer in sports medicine, leading the development of next generation of cutting-edge products, technologies and categories. We are proud of our history in sports medicine. And as we look ahead, we believe the best is still to come. Our ambition is crystal clear. We will generate high single-digit revenue growth to become the market leader and drive modest margin expansion over the next 3 years.

I'd like to finish with just some key messages. First, we are very well positioned in sports today with a strong portfolio and tremendous momentum. Combined with our robust R&D pipeline and our core fast-growth categories we will move from category to market leadership. We will invest in our big 3 platforms to expand the market and reach more patients. We have a proven track record of developing early-stage assets to create new categories.

Our ability to reinvest productivity gains to fuel our growth will enable us to achieve our midterm growth aspirations. I'm confident in our plan for sports medicine and trust in our team to deliver it.

I'll now pass it back to Vasant to talk you through our ENT business.

It is absolutely my privilege to be back and present our ENT business unit strategy on behalf of our Global ENT team, and the patients we serve, mostly children.

To begin with, I'd like to spend a few minutes on the ENT market. ENT is a fragmented market. In fact, there isn't a widely accepted definition for what it is. We've categorized the market into 3 areas. The first is core ENT, represented by the red section of the pie, and this is where we play today. And we have category leadership positions in tonsils, adenoids, turbinates and laryngeal segments.

The second is what we call the addressable market that we don't play in at this point in time. They are the pink sections and that includes fast balloon sinuplasty and eustachian tubes. When you put the core and addressable segments together, it represents more than $2.3 billion in total, growing around 2%.

And then you have the third category, the dark blue sections are ENT adjacencies, including the much larger cochlear implants and sleep segments. Our ENT business, though smaller in scale than the other 3 businesses, with $210 million in revenue in 2024, has delivered strong above-market growth and a high trading profit margin, which is accretive to the group.

More recently, we've been growing at high single digits, 2 to 3x faster than the market despite the fact that procedure volumes have remained flat since they began to stabilize post-COVID at the end of 2023. This high growth has been possible due to market share gains and premium pricing for our innovative proprietary technology called COBLATION.

Within COBLATION, one of the standout growth drivers has been COBLATION intracapsular tonsillectomy, CIT, and I'll discuss this procedure in a little more detail later.

The group strategy of RISE is a great framework for ENT as we continue to drive sustained above-market growth in our core markets. Expanding CIT and TULA to standard of care is the first step in our strategy to help us reach more of our pediatric patients. We believe every child should benefit from the fewer complications and faster return to normal life that CIT enables. With our TULA product, we wish to make an in-office tubes an option for every child that needs it. We already have a strong portfolio that represents the foundation of our business, and we will continue to drive it forward through innovation.

Our next-generation COBLATION platform called PHOENIX is a great example of this. We will continue to invest in market development efforts, including medical education, value-generating clinical evidence and market access to expand market penetration.

And finally, we'll invest to make our commercial execution even more efficient. This includes strategic pricing, channel optimization, ensuring the right go-to-market model to deliver productivity improvements and best-in-class service. We'll also invest in analytics and funnel management with the specialty sales team to support TULA.

Let's go through the strategy in a little bit more detail, Tonsillectomy. We will reach more patients with CIT, which is now established as the standard of care for Tonsillectomies and adenoidectomies. The biggest advantage of CIT is that it allows for the precise ablation of the tonsil tissue and minimal damage to the surrounding tissue so that the tonsillar capsule is preserved. The postoperative patient benefit of this include a 64% reduction in the risk of post-tonsillectomy hemorrhage and being pain-free 4.2 days sooner.

Worldwide, there are about 3 million of these procedures performed annually, and we'll grow market share to more than 20% globally. In some markets like the U.K., CIT already accounts for more than 40% of procedures.

TULA. TULA is an innovative approach for ear tubes or tympanostomy procedures. Around 650,000 of these are performed in the U.S. every year, predominantly in children. A tube is placed in the ear to alleviate the buildup of the fluid that's quite common in children, but can lead to prolonged ear infection. With TULA, we have the potential to transform these procedures by eliminating the need for general anaesthesia. This means the procedure can be moved from the operating room to ENT physician offices, which not only lowers the cost significantly, but also allows the child to stay with their parent, sat on their laps in most cases throughout the procedure.

In order to increase market adoption of TULA, we're continuing to navigate the U.S. market access coding coverage payment journey to help drive practice change. And I'm very proud to report, as I said earlier, that we made some great progress. And in October, the U.S. Centers for Medicare and Medicad services set a national payment rate for TULA procedures with effect from January 1, 2026. This outcome is a critical step as we continue the market access journey because the CMS rate serves as a benchmark for commercial insurers to set their own physician reimbursement rates and will ultimately drive greater adoption of TULA in ENT offices.

Our differentiated innovation portfolio, when combined with clinical evidence, medical education and commercial execution is a key enabler. I've already described how solutions in throat and engine drive game-changing benefits for patients and in nose, we have solutions for turbinates and septoplasty, which improve procedure efficiency and can minimize recurrent bleeding for those who suffer with severe nose bleeds with epistaxis.

I'd like to share our excitement about the future of our pipeline. Next year, we'll launch our new laryngeal wand, LYNX. This wand will allow us to expand into new indications in the laryngeal segment.

Starting 2027, we have plans to launch a next-generation comprehensive COBLATION platform called PHOENIX, followed by wands that will unlock new capabilities, reduce COGS and provide IP protection. PHOENIX will also support a new CIT-specific wand called AURA, which will leverage proprietary COBLATION technology and clog-resistant internal components to address unmet needs and drive further adoption of CIT.

Our ambition is clear. It's for ENT to deliver revenue growth above market, continue to expand the market with our new products, alongside modest margin expansion and reinvest productivity gains back into R&D.

In summary, we have a strong category leadership position within the fragmented $5.4 billion global ENT market, and we have significantly outpaced market growth in recent years and will continue to do so. We will reach more patients and transform the standard of care with our disruptive new products like CIT and TULA. We have a full pipeline of new products on Phoenix, our new comprehensive ENT platform, and we will invest productivity gains in R&D, market development and our commercial teams.

Thanks. We will now take a 20-minute coffee break.

I'd encourage you all to wander around the product fair to learn more about our exciting innovation. And please be back in your seats by 2:40 p.m. to hear from Rohit on our wound business. Thank you.

[Break]

All right. Welcome back, everyone. And thank you, Vasant. I really do think and hope TULA was around 11 years ago when my daughter was having the same procedure, that would have been awesome.

Well, I am Rohit Kashyap, President of AWM and I'm delighted to take you through our business unit strategy, which as you will remember from the opening video is when the -- where the company started back in the 1800s.

But we'll jump ahead to today. We operate in a large global market with $13 billion, and we are the second largest player with 13% market share. This excludes $6 billion of revenue associated with skin sub products, where, as you all know, reimbursement changes will come into effect January of 2026.

The market is made up of 3 segments, mainly distinguished by their mode of action. Advanced Wound Care consists of dressings that passively create an optimized environment for healing. Advanced wound devices, activate healing pathways in the body and then advanced wound biologics that include biologically active components like growth factors to support healing. Smith & Nephew is the only major player that competes in all 3 segments and has a #1 or #2 position in each.

The total wound care market is very fragmented with the top 4 players collectively making up 43% of the market. Excluding the rapid expansion of biologics, we still anticipate sustained mid single-digit growth over the next 3 years, driven by an aging population and the rising incidence of both chronic disease and complex procedures.

In AWC, we are the second largest player competing in the largest category of wound dressings with ALLEVYN. In AWD, we are the second largest player with RENASYS in traditional negative wound therapy and PICO in single-use negative pressure wound therapy.

In AWB, we are the largest player amongst the established companies in a highly fragmented segment. And our major products here are SANTYL Collagenase for debridement of wounds and allograft or xenograft tissue products used for wound repair and regeneration. We are strongly positioned to participate with our #1 or 2 position in both the U.S. and OUS and in each of the 3 segments that make up the wound market.

We have one of the broadest portfolios of differentiated products, an experienced leadership team and following the 12-Point Plan initiatives and invigorated business which has delivered nearly 6% revenue growth ex China with continued margin expansion over the past 3 years. This performance has been achieved by focusing on key segments of the market, with our strong culture of engagement and execution.

We have improved our commercial rigor, build capabilities in key account management and improved our go-to-market strategy in negative pressure wound therapy and emerging markets. Consequently, we believe we are now well positioned to deliver our new RISE strategy. And that would accelerate growth to become the global leader of wound management.

We will reach more patients by taking our portfolio into high-growth segments, offering solutions across the full continuum of care from prevention to treatment and expanding our global reach in emerging markets. We will step up our R&D investment to focus in areas like pressure injury prevention, chronic wounds and surgical site complications. We will support innovation by increasing investment in compelling clinical evidence to shift adoption of these advanced therapies by demonstrating lower cost of care and better patient outcomes.

In Wound, we will scale by expanding our reach and deploying capital into high-growth segments where we can lead by adding channels and products. We will execute efficiently as we improve further our commercial engine to deliver sustainable growth above market. We will leverage digital tools to improve our productivity and effectiveness and strengthen capabilities in pricing and national accounts. We will build on our foundational pillars of continuous improvement and customer focus.

We win in wound with our patient-first approach to navigate what is a complex market with unique treatment pathways and channels. As Vasant has already covered, everything starts with our commitment to provide compelling evidence for the products that we have. We have more than 1,000 publications, and we partnered with societies and thought leaders to develop both real-world clinical and economic data. We have the broadest portfolio and continue to strengthen it with innovation. We have launched 20 new products in the last 5 years and have a full pipeline of products for the future.

We build awareness by educating about 50,000 professionals each year. And have teams around the globe that provide clinical and reimbursement support. We have strong reach with 1,700 sales professionals globally. All of which means we have scale and category leadership positions with several brands that are delivering more than $100 million in annual revenue, helping patients to live their life unlimited.

Over the next 3 years, we will focus our resources on the 5 key market opportunities listed here. The breadth of our portfolio is well positioned to serve each of these opportunities by using products from across the categories of AWC, AWD and AWB, thereby increasing our participation in the highest growing segments of the market. These are all large market opportunities, offering mid-single or double-digit growth. And our key products pictured here are well positioned in all 5 segments. With this portfolio, we will expand the market and drive share gains, moving from category leadership to overall market leadership.

I will now take you through each opportunity in more detail, starting with pressure injury prevention. Pressure injuries create a huge burden on both the patient's quality of life and the health care system. It is well known that turning the patient every 2 hours and using tools to redistribute pressure over bony prominences, can prevent pressure injuries, yet the rate of injury has not reduced over the last couple of decades.

Our data for LEAF and ALLEVYN clearly demonstrate that pressure ulcers are preventable in significant numbers. We are introducing new innovation in both monitor and prevent the pressure injury from occurring with the launch of our next-generation LEAF and our new ALLEVYN Complete Care dressing. I will talk about this in more detail later and invite you to learn more about these products in the displays outside.

Chronic wound represents a huge market worth about $5 billion growing in the mid-single digits due to an aging population with increasing comorbidities, a staggering 1 in 5 patients with chronic wounds are readmitted to the hospital after 30 days. This is not only bad for the individual, but it also plays a financial strain on the health care systems. Healing chronic wounds is complex, along the continuum of care requiring a significant amount of resource in both the acute and the community setting.

We are uniquely positioned with the breadth of our portfolio and that of our reach to meet these needs along the way from prevention to treatment. Our primary aim is to capture share in 2 large segments, foam dressings and traditional NPWT. We will do this through solid commercial execution, in combination with our enhanced portfolio, with the launch of ALLEVYN Complete Care and the next-generation NPWT systems. We see further opportunity for market expansion and share gain in emerging markets across our portfolio as well.

As I have mentioned, ALLEVYN Complete Care multiple times, I would like to highlight why we are excited about the launch of this product, which addresses both the chronic wound healing market and the pressure injury prevention market. Our newest 5-layer foam dressing has 51% superior exudate management. And with the new silicone adhesive, 95% stayed in place compared to 91% for competitive products, making it a superior product for chronic wound healing.

Also, the dressing is the only 5-layer dressing, where the bonded layer -- where the layers are not bonded. So prevent shearing of the skin, a feature we call ShearDEFENSE. This is in addition to the 95% -- sorry, 55% greater reduction in strain relative to competition, making it ideally suited for pressure injury prevention market.

I'm confident that as we introduce ALLEVYN Complete Care to the market over the next few years, we will capture share in the largest and fastest-growing segment of wound dressing.

Surgical site complication is a $2 billion market with double-digit growth. Products in this category support the recovery of soft tissue injuries post surgery. In patients with underlying conditions like diabetes, obesity and smoking, postsurgical recovery can be compromised. Leading to wound complications, the solution is to prevent these complications from occurring in the first place.

Our PICO system has the most clinical evidence and the broadest set of claims and has demonstrated cost savings from -- that have been endorsed by the recognized assessment firms. This gives us the ability to position our product for maximum success. In the near term, we are investing in further clinical and health economic evidence to continue to drive penetration and establish PICO as the standard of care for select procedures.

We are partnering with both leading KOLs to generate the evidence and to educate the market, and you will have a chance to learn more about all -- about this at the New York event in a few days' time.

The wound bed preparation market is worth more than $1.5 billion with mid-single-digit growth. It is critical to remove dead tissue from the wound bed, if the wound has to have any chance of healing. The most common approach is to surgically remove the dead issue, but this has obvious limitations related to site of care and skill.

Our portfolio compromises SANTYL, the market leader in enzymatic debridement and VERSAJET, a sub debridement solution using hydro surgery. We have a really strong, compelling body of evidence showing the effectiveness of our products in burn patients and in chronic wounds. With more than 60% of the chronic wounds currently receiving inadequate debridement, we will remain focused on optimizing our go-to-market approach to best serve our customers and to remove the friction that exists in getting the right product with the right dosage at the pharmacy.

Wound repair and regeneration is a market worth more than $5 billion and growing in double digits. This segment comprises products for both surgical and chronic wounds, where there's a significant loss of soft tissue. Healing is often complicated and requires a user of synthetic or biologic material to provide matrix to support and promote cell proliferation. In some cases, the matrices also incorporate growth factors that simulate healing.

As I've already mentioned, there is a change to the reimbursement of skin substitutes in the non-hospital setting coming in January. We feel we have a strong portfolio with GRAFIX and OASIS backed by our clinical evidence that allows us to compete effectively and gain share.

We also recently launched CENTRIO which will be used in combination with skin substitutes or on a stand-alone basis and carries additional reimbursement in both the hospital outpatient and physician office channel.

Our strategy is focused on developing products and strengthening the channel, whilst monitoring appropriate inorganic opportunities to support the growth in this attractive market. Our ambition is clear. It is to deliver reliable, high single-digit organic revenue growth as we move from category leadership to market leadership. Through our ongoing efficiency actions, we anticipate further modest margin expansion and a step-up in ROIC. We will reinvest further productivity gains back into commercial execution, innovation and market development to help fuel the overall top line growth.

In summary, we are the only player with leading positions in the 3 segments of AWC, AWD and AWB. We will move from category to market leadership by focusing on high-growth segments and in emerging markets. Our broad portfolio and robust pipeline position us to capture share and expand the market with highly differentiated products such as ALLEVYN Complete Care, LEAF and PICO.

We will continue to strengthen our commercial engine through pricing excellence, key account management and digital tools. And we will reinvest productivity gains in innovation, clinical evidence generation and market development. My team is confident about delivering the commitments outlined here.

With that, I will hand over to Craig to talk you through the Orthopedics business. Craig?

All right. Thanks, Rohit. It is my pleasure to present our orthopedic business to you today. The global orthopedic business that we play in is worth $33 billion, which represents the largest market that Smith & Nephew operates in today.

As you know, the market is made up of a number of large players, and we have been able to maintain our #4 position with a portfolio of highly differentiated products. Our sales are well balanced across our segments with knees being the largest.

Recently, we have accelerated growth in the hip segment, driven in part by the recent launch of CATALYSTEM, but we're also building a strong position in the faster growth markets of shoulder and robotics.

We have pioneered handheld surgery, robotic surgery, which has led to strong adoption in both penetration and utilization in the hospital and the ASC setting, in particular, which I will talk about later in greater detail in this presentation.

I am really proud of the progress we have made as a business over the last 3 years. Fix orthopedics was one of the 3 pillars of the 12-Point Plan, and we are in a much stronger position today as a result of the actions we have taken.

A crucial first step was the reorganization of the business into a vertical business unit structure with global alignment driving far greater accountability. This action allowed us to completely transform operations and revamp our commercial engine.

We have strengthened our leadership team, restructured our sales territories and sales incentive structures and have tightened performance management processes. As a result, we are in a great place today with a strong platform and a springboard for future growth. Signs of progress are showing in our top line. We have reinvigorated revenue growth in OUS ortho, U.S. trauma and U.S. hips, increasing orthopedic growth from just under 2% in 2022 to an anticipated 5% in 2025.

Fix Orthopedics was also about margin expansion. We have rightsized production, removing overhead and driven productivity across all areas of operations. At the same time, we've reduced inventory volumes, we've improved inventory health and improved cash flow. We've become more disciplined with our deployment of capital, restructuring our approach to innovation by prioritizing key projects. Combining this with an improved launch excellence process allows us to maximize commercial impact. These actions have driven a significant step up in trading margin of around 300 bps since 2022, with nearly 500 bps increase in ROIC to around 7% this year.

Importantly, though, none of these actions have kept us from launching new innovation -- new innovative products like CATALYSTEM, AETOS and LEGION MS.

And we have a great pipeline to come over the next 18 months that I will discuss in a few minutes. So yes, there is still work to do, but the hard yards are behind us. And we will continue to operate in a better way to drive further growth, margin expansion and an increase in ROIC. And I am really, really excited about the next 3 years. So we will reach more patients through a strengthened commercial organization that will fuel growth by capitalizing on our differentiated technologies through targeted global expansion.

We will continue to innovate across our portfolio with specific call outs in knees with the introduction of our new knee, and we will continue to develop CORI, our unique procedurally scaled platform offering even greater value to our customers. We will scale through disciplined capital allocation, precise inventory placement and deliberate market-by-market strategies that we will execute with intent. With the continued shift of procedures to the ambulatory surgery centers, we are well positioned to drive growth in this channel.

Finally, Orthopedics will execute efficiently as we drive Ortho 360. Our enhanced operational model which is now firmly embedded into our organization. This model will drive clear choices in portfolio mix and go-to-market strategies, leading to continued improvement in inventory and portfolio optimization.

So let's dive into those aims in more detail. Our goal to reach more patients starts with our strengthened commercial engine. When I became Business President nearly 2 years ago, I revamped the leadership team, consolidated geographic regions from 5 to 3, and rightsized our sales teams. We are laser-focused on having great talent at the field level management team, which I believe is the key differentiator. We changed our compensation program from one that was driven by retention to one that rewards growth and excellence.

Performance management is in my DNA. I set specific KPIs that flow through every layer of sales management. Everyone in the sales organization knows what is expected of them. Sales leadership uses these metrics in their monthly reviews that play an integral role in the management of low performance. I am really proud, too, of how we have streamlined the product launch process as demonstrated by the successful launch of CATALYSTEM Stem.

The old product launch strategy saw new sets distributed evenly across regions. So leveraging my experience in trauma, launch sets are now sent to the top surgeon targets. We also now have key requirements before an asset is deployed. The sales force knows this, and it raises the bar on execution right out of the gate. Simply stated, the best targets get the sets. It's why just 1 month after the launch of LEGION MS in September, turn rates are more than twice our target. And it's not all about new deployment of sets though. We closely monitor asset turns and surgeon productivity. This oversight allows us to quickly redeploy sets where the need is greatest.

This redeployment strategy helps us manage our CapEx with great support from my operations team, we can now reduce -- we can reduce yearly CapEx, which helps our margin and our inventory levels. Just to be clear, this isn't just a U.S. thing though. I am equally proud of my OUS team. Candidly, the OUS organization was in better shape than the U.S. when I started, but the shift to the BU model has given the OUS team line of sight to the full P&L. Now the team has better visibility to balance the growth opportunity with the inventory and asset requirements in each market.

Finally, with all that we have done, I do want to add that the Gallup engagement scores were the highest since COVID, which I believe is a clear reflection of people wanting to be a part of a high-performance culture.

Bottom line, I am really pleased with how we have progressed over the last 2 years. We are now much stronger as an organization. As Vasant has already mentioned, we believe our unique robotic solution, CORI and its associated procedural applications is the key to reach more patients as we unlock increased procedural growth across reconstruction. We have pioneered the handheld robotics market, deliberately choosing a path different from competing systems that offered fixed robotics arms. With over 10 years of innovation we have placed control in the hands of the surgeons.

CORI has the largest geographical footprint of any robotic system and is currently available in 50 countries. In the U.S., in accounts where CORI is established, over 65% of knee implants are performed with robotic assistance. And our U.S. knee growth is more than 850 bps higher in CORI accounts than in our non-CORI accounts. We believe we have a unique value proposition with one robotic platform for all large joints.

Our platform offers a low cost of ownership, a clinically differentiated digital tensioner and in an ideal size for space-constrained settings. Our hip performance proves that our revamped commercial organization is delivering tangible improvements with 6% growth in hips versus the market rate of 4% since the launch of CATALYSTEM. This is a product that is special to me because I am not only the ortho President, but I'm also a CATALYSTEM patient, having had both my hips replaced in the last year.

In late 2024, I was one of the first 100 patients to receive this and was the world's first CORIOGRAPH hip patient, but don't worry. I don't test all our new products on me before launch. I also will be -- I wouldn't get through it -- I wouldn't be able to travel.

Over 40% of U.S. hip procedures are performed using the direct anterior approach. CATALYSTEM was designed to make this type of surgery easier to perform and the system features a single modular tray to reduce sterilization costs. This product is also a great example of our new launch excellence program in practice. Our optimized launch process ensured over 50% competitive conversions, we continue to remain -- we continue maintain a strong funnel, which leaves plenty more room for growth.

We anticipate further adoption as we build out CORI functionality. We already have preoperative planning with simulated patient movements to optimize outcomes and we'll soon launch a robotic reamer and an automatic hip impactor. The planned launch of our RI.HIP interoperative execution solution, will complete our hip portfolio and make it probably the strongest hip portfolio in the industry.

So as you know, our knee performance has lagged the market driven by a mix of delivered decisions we made and a shift in market dynamics. We have a strong portfolio, but it is complex with 4 knee families. ANTHEM, GENESIS II, LEGION and JOURNEY, which historically contributed to our excess inventory. So in 2025, as core product availability was resolved through the 12-Point Plan, we began transitioning surgeons from GENESIS to LEGION and JOURNEY to simplify our offering and improve efficiency.

While this involves some trade-offs, it was the correct decision to make to drive margin improvement, and we continue to review our portfolio with the same disciplined approach. You can also see in this slide that the market has seen significant shift in surgeon preferences in recent years with a growing number of surgeons who wanted the cruciate retaining knee, that offered cementless and medial-stabilized options.

Our complexity made it harder for us to respond to this shift as quickly as we would have liked, and as some of our peers did. And noticeably, the shift towards cementless and medial-stabilized.

Coming into the role in 2024, I knew we had to address this to get back on offense, but do so in a way that was capital efficient, and we continue to streamline the portfolio.

As I said, we have great products, but we also have a clear plan to build out the portfolio to leap ahead of the competition. We have already delivered our first step of this plan in Q3 2025 when we launched our LEGION Medial Stabilized Knee. This meets the needs of a fast-growing segment, and we are really pleased with our early momentum.

The next leap comes in 2026. By this time next year, we will have our most differentiated knee system yet, one that leverages the history of both our LEGION and JOURNEY systems. And this new knee is called LANDMARK. LANDMARK has been built off of JOURNEY's advanced kinematics and will offer the next level of personalization with enhanced robotic workflows and easier implantation. Available in both porous and cement, LANDMARK will leverage existing instrumentation, thereby mitigating the need for upfront capital investment, leading to a more simplified accelerated launch for both existing customers and new conversions.

It will have best-in-class tray configuration for maximum efficiency, making it particularly attractive in the ASC segment. We will launch and scale up LANDMARK, while continuing to drive a SKU reduction of over 30% in our femur portfolio. Again, this is an outcome of deliberate choices we have made both through the design process and target portfolio mix. We will share more details on LANDMARK in the coming months. But as you can see, we are set up for success in the near term with the launch of LEGION MS, our differentiated CORI platform, which provides personalized solutions and our digital tensioner for optimized ligament balancing.

OXINIUM remains a key differentiator for us. Our clinical results of over 2 million patients and a 10-year survival rate of almost 98% are a testament to OXINIUM's properties and its place for a range of patients, including those with nickel sensitivity. Coated implants are nothing new. In fact, we have seen several launched over the last 2 decades, yet none have come close to OXINIUM's adoption and clinical success.

All this, in addition to the upcoming release of our LANDMARK Knee system, means Smith & Nephew is poised to accelerate its performance in the knee segment just as we have done in CATALYSTEM and hips. I cannot tell you how excited my leadership team is about the potential for this new product. While a smaller segment of orthopedics with a global market value of $2 billion, the shoulder market is growing at 12% and presents an attractive opportunity for us.

We are uniquely positioned for success as we leverage our existing relationships with shoulder specialists throughout our sports medicine business. Our shoulder business has grown double digits every quarter since the launch of AETOS in 2024. The system meets surgeons' needs across total shoulder, reverse shoulder and short stem procedures with market-leading tray efficiency.

The recent launch of our preoperative CORIOGRAPH software creates a key point of differentiation versus other shoulder systems as it provides surgeons with valuable information to help personalize the procedure in line with the patient's specific active daily living needs. The differentiation will be further enhanced by the launch of our RI shoulder execution solution, which I am really proud to announce that I got to call late Friday night, that we got that approval. And as Vasant mentioned earlier, it was a quarter earlier than expected. So a great job by your team. This will leverage CORI's handpiece design and function to support preparation of both the glenoid and the humerus for reverse and anatomic procedures. We are taking the lead in robotics for shoulder.

While we have delivered recent innovations in our trauma business, most of our actions over the last 3 years have been focused on efficient execution. You will be well aware of the unique nature of the trauma market, leading to high levels of slow-moving inventory. And a lot of the focus of the 12-Point Plan was to rightsize this business to profitable growth.

I previously led the trauma business here before assuming responsibility for orthopedics. So I am particularly pleased by our performance to date, driving growth above the market rate with a deliberate focus on certain key subsegments where we have truly innovative products.

The core trauma segment in our key markets is worth $6.3 billion, where we now have 8% share. We will continue to invest strategically in new product development as evidenced by the recent launch of Tibia MAX nail to strengthen our new portfolio. And core trauma has been a key driver of ortho margin expansion over the last 3 years. Over the next 3 years, we will continue to further reduce trauma inventory, working in close partnership with our operations team to ensure our set deployment hits our key turn metrics.

The reason why I'm so excited about the future is that we have a front-loaded pipeline that will deliver a robust cadence of new launches over the next 18 months. As I've covered, this pipeline will, one, build out our knee portfolio with the introduction of a brand-new differentiated knee combined with more streamlined and enhanced CORI workflow. We'll launch a new CORI XT console and increased CORI functionality, creating even more differentiation across every major joint.

Finally, core trauma continues its innovation cycle with the launch of INTERTAN MAX and EVOS Pelvic. Now while I'm really excited about getting these new products to market, there is one channel that will really support our scale ambition, the ASCs.

As we all know, COVID was the accelerator and the site of care shift from inpatient to outpatient. And that is a trend that we expect will continue for many years. There are currently over 4,000 ASCs in the U.S. And while there are many similarities to a hospital's requirements, there are also some critical differences in needs due to constraints such as space, and sterilization that will position us well to win.

First, let me start by saying I'm pleased with our performance to date in the ASCs. We have above market share in knee and hip implants and high installed base of CORI's. In fact, 25% of all our CORI systems are in ASCs and the rate is accelerating with 35% of our total units sold in ASCs this year. The unique features of our robot are clearly resonating with our ASC customers.

We deliver a comprehensive and effective solution to ASCs. It starts with our strong implant portfolio across knees, hips and shoulders where, as you know, procedural growth is really accelerating with the recent changes to CMS. Yet while the strength of our implant portfolio is important, tray implant efficiency is equally important, perhaps even more so due to the sterilization challenges and leaner staffing.

All our new platforms have been deliberately streamlined, which is why both our CATALYSTEM and AETOS systems with 1 to 2 trays each have been so well received. You then follow this up with enabling tech tailored to an ASC. Why?

Well, let's look at CORI with its differentiated procedural breadth covering all large joints. It's small, portable footprint is optimal for space constraints and its portability allows the center to give better utilization, which only adds to our favorable cost of ownership. This is really important as ASCs encounter different financial challenges from hospitals.

And then finally, we can leverage the strength of our sports medicine business with their leading footprint and ASCs. They have been an incredible partner to our orthopedic business, allowing us to benefit from their relationships and their scale. So as Deepak laid out earlier, a critical intent of the 12-Point Plan was to fix orthopedics, building off that momentum and the new ways of working, I have already described.

I then implemented Ortho 360 at the start of this year. Our Ortho 360 model is designed to unlock value and eliminate past inefficiencies. Previously, under the matrix structure, coordination was low, goals misaligned and incentives conflicted. Regions held decision rights that often optimize local trading margin at the expense of global performance. This led to an inaccurate demand signals, poor portfolio execution and SKU proliferation as regional teams acquired products that only had local relevance without global coordination. This drove excess inventory, increased operational complexity and eroded returns. Ortho 360 changed this with globally aligned decisions and clear focus on returns, efficiency and disciplined portfolio management.

It is steered by my global leaders across commercial, supply chain, manufacturing and finance. Objectives and metrics are integrated cross-functionally. We have defined market parameters that drive deliberate choices in our portfolio simplification, efficient use of capital, and an optimal cost of serve.

Finally, we will continue to strengthen our sales, inventory and operations planning process, which I probably will refer to SIOP moving forward, if that's all right. It's mouthful.

But that will further mature to an integrated business process in 2026. This will deliver continued inventory and DSI reductions, unlock E&O savings and ensure all ortho teams worldwide operate under one set of numbers. Ortho 360 is our powerhouse and the driving force behind our trading margin expansion, ROIC improvement and cash flow generation.

As we announced this morning, our Ortho 360 model has identified opportunities to simplify our product range. This work builds on the portfolio rationalization that started with the 12-Point Plan. We had 128 major product families across the orthopedic business before the 12-Point Plan. Under the first wave of rationalization, we identified 19 families to phase out in a gradual process to protect revenue. The majority of those families were in knees and hips. And today, we are about 50% through that process.

Today, we have commenced Wave 2, identifying a further 50 families to phase out predominantly in trauma. We expect to complete this process over the next 3 to 5 years by which time we will have just 59 product families, a reduction of 54% since the beginning. We anticipate that Wave 2 will reduce gross inventory by about $500 million.

To achieve this significant and ongoing reductions in the capital requirements of the business, we will take a noncash provision in our 2025 accounts, which we currently estimate to be around $200 million. Combined with the expansion and redesign of our life cycle management process, this will leave our portfolio simpler, easier for customers to understand and puts the company in a stronger position to drive growth, improve margins and improve capital returns.

So we've strengthened our portfolio, developed a pipeline of exciting products that we'll launch over the next 18 months and transformed our commercial manufacturing processes. The hard work is behind us, and that's thanks to the outstanding efforts of our operations and supply chain team over the last 3 years.

I now want to lay out how we will get back to 20%-plus margins and 13% ROIC. So from 2017 to 2021, overproduction drove excess inventory, okay? In 2022, we deliberately reduced production below demand to correct this, which temporarily pressured margins because of lower cost absorption and increased inventory value. The introduction of our SIOP process aligns supply and demand at the SKU level, which has improved product availability and overall inventory health. To further optimize operations we've rightsized capacity by closing 5 sites and reducing both overhead and headcount.

Ongoing productivity initiatives are now helping to offset inflation and the combined impact of these actions is a reduction of standard costs. As a result, inventory will be revalued downward, creating short-term margin pressure but this sets the stage for margin expansion moving forward. Portfolio rationalization remains a key focus, ensuring that resources are allocated efficiently. And when combined with the Ortho 360 operating model, we will balance growth, profitability and asset efficiency as the organization moves forward.

I am confident that continued growth in revenues, combined with the impact of actions already taken and our Ortho 360 operating model, it will deliver significant margin and ROIC expansion.

Now let me walk through this in a little bit more detail. Here, you can clearly see the level of overproduction we inherited. From 2017 to 2021, production exceeded demand, inflating inventory and complexity. In 2022, we corrected the demand signal and scaled back output, a bold move given product availability concerns at the time. We also reduced overhead to match demand, carrying some unabsorbed costs initially.

But now as volumes grow into remaining capacity, we're improving leverage and lowering standard costs, further strengthening margins. Now you can clearly see how we cut back production versus capacity, creating short-term margin pressure. We reduced our manufacturing footprint by 33%, closing 5 of 8 sites and cutting headcount by 30%.

We saw 0 disruption during this period and in fact, saw an overall improvement in both product availability and employee engagement. This was a fundamental reset to drive productivity and lower cost sourcing, while preserving enough capacity to meet demand through 2030 without major investment. Memphis is transforming through operational excellence and automation, while Malaysia, our purpose-built site provides low-cost capacity to support the majority of our OUS needs. Together, these 2 sites deliver over 80% of production, doubling revenue per square feet and reducing overhead.

Our positive actions to correct for the overproduction of the past have had a profound impact on inventory and our cash generation. But to date, these impacts have been masked by the associated inventory revaluation. You can see that we have significantly reduced our inventory volumes since the peak in 2022, which was exacerbated by the acquisition of Integra and the launch of EVOS SMALL plates. While we rapidly reduced our manufacturing overhead burden, we went even faster with our production cuts. This preserved cash and drove down raw material purchases, but left us with stranded overhead burden. So while we reduced the absolute number of units in inventory, the value of those units increases, as you can see on the right side -- right-hand side. As our cost reductions have now caught up with our volume reduction, we will see inventory revalue downwards from 2026.

The chart below clearly shows how our standard cost has moved over the past few years through high inflation and unabsorbed overhead. The rate of increase has slowed since 2024 and in 2026 as a result of the footprint and productivity actions I mentioned earlier, we see standard costs start to reduce and continue to reduce throughout the next 5 years.

Most of the actions and costs required to deliver this improvement are already complete. As the manufacturing variances unwind through the P&L, we can see the net margin impact shown here on the left-hand side. In 2023, reduced absorption and inflation have a negative impact on net productivity and net margin.

As costs are reduced through network optimization and the benefits of lean manufacturing and improved SIOP planning, this leads to a positive net margin impact in 2024 and beyond.

On the right-hand chart, you can see the impact of the inventory revaluation unwind on the P&L. This has had a negative impact on margin in 2024 and beyond and has masked the operational improvements shown on the left-hand chart. We expect to see a continued headwind to margins in 2026 from this inventory reval unwind, which should start to reduce in 2027 and beyond when the full operational benefits flow through to the P&L. The Orthopaedic business has a clear path to more than 20% margin over the next 5 years with some 300 to 400 bps of expansion by 2028.

The primary drivers for margin expansion are continued revenue growth and disciplined P&L spend. The impact of decisions made on manufacturing footprint, country and portfolio mix will also support margin expansion, helping to offset the impact of inflation and tariffs. As I've just described, inventory revaluation is pressuring margins through 2028 with a significant impact in 2026. But our actions will provide sustainable long-term reductions in the cost of production. Beyond 2028, revenue growth will continue to drive margin accretion and disciplined P&L management will drive further margin expansion while absorbing all inflation impacts.

As cost to produce target level off at future target rates, the impact to revaluation will provide a tailwind toward the 2030 margin ambition. ROIC improvement will come from improved profitability and our diligent use of capital. Our ambition is clear with a steady cadence of new product launches over the next 18 months and a uniquely positioned robotic solution, we expect to return to market growth in knees while maintaining growth at or above the market in hips, shoulders and trauma. We anticipate further margin expansion with a 300 to 400 bps step-up between 2025 and '28 and continued expansion in ROIC.

So I've covered a lot today. So I want to leave you with six things to remember. We have strengthened and upgraded our commercial engine and significantly improved growth. Our differentiated portfolio, exciting pipeline and launch excellence process will help us reach more patients. Our unique CORI platform will fuel procedural growth, offering solutions across all large joints. We will transform knee growth with our LANDMARK system, replicating the success we have seen in hips and in trauma.

We will win in ASCs with tailored efficient solutions, which complement our CORI platform. And finally, our Ortho 360 operational model is the powerhouse to drive further operational efficiencies. I want to close by saying we have the people, products and plan and are poised to deliver on our commitments.

With that, I'll hand over to Elga to talk you through our culture and way to win.

Thanks, Craig. I'm Elga Lohler, Chief Human Resource Officer here at Smith & Nephew. I'm excited to have this opportunity to share with you how Smith & Nephew's unique purpose of Life Unlimited and our culture of care, collaboration and courage have been both -- have contributed both to our performance over the last couple of years as well as positioned us to execute our RISE strategy. But first, let's hear what our colleagues feel about working at Smith & Nephew.

[Presentation]

At Smith & Nephew, our purpose of Life Unlimited serves as our North Star. It resonates deeply with our employees and guides everything we do, our strategy, our culture, our engagement and our performance. It aligns our employees with shared objectives informs our decision-making processes and supports long-term success by imparting that purpose to all our work. This approach establishes a direct and significant link between the actions and the value delivered to our key stakeholders, our customers and their patients.

However, Life Unlimited does not stand on its own. It's activated through our culture, a culture that was co-created and -- co-created with our employees to promote global ownership and ensure sustained alignment on the what and the how through all strategic decisions and daily activities, and it fosters a workplace that is productive and highly engaged. Hearing this in the direct words of our employees in the video you just saw is more powerful than any presentation. It's a clear important differentiator that our culture is at Smith & Nephew.

And I can say this because I'm not just the Chief HR Officer here at Smith & Nephew, I'm also a 20-year employee, and I can tell you with great, great confidence that I've seen more progress both operationally and culturally over the past 3 years here at Smith & Nephew than in the 17 years before combined. I have seen how this integrated framework of our purpose and our culture has provided the clarity and motivation during our transformation. Even during times of intense, intense change, this framework has anchored us in why this transformation is necessary.

And it's enabled us to give tangible examples of how the behaviors we are driving are connected. So for example, the KPI mindset and the high levels of accountability we built are tied directly to our culture of courage. The commercial and operational partnership that was necessary to address the supply chain challenges was a clear example of improved collaboration. And even those most difficult people decisions, restructuring to a business unit verticalization, which impacted people and roles was handled and carried out with respect and fairness, a clear link to our culture of care.

As I mentioned, these cultural pillars are not just corporate phrases that were developed by a marketing company. No, they were co-created with our employees through focus groups that were centered on the kind of organization we wanted to be for ourselves and for our stakeholders. Seeing these phrases echoed back is the most powerful way and creates this unique natural way for our employees to connect, live and breathe them every single day. And the impact is quite evident.

I see it in our employee referrals, our inclusion and belonging events, our employee and inclusion groups at Smith & Nephew, our wellness activities, our flexible working arrangements and the operational impact we have seen in the 12-Point Plan delivery. So over the 3 years, the 12-Point Plan has significantly strengthened both discipline and accountability. We've strengthened these behaviors by moving to a BU verticalized structure, where there are clear points of accountability, and we ensure that every single people leader has KPIs that are aligned to that strategy.

KPI delivery is a nonnegotiable, and we believe that what gets measured gets done. Objectives and those expected behaviors are cascaded from our executive leadership team, and they are cascaded to every single employee. Why is this important? Because it ensures that we have alignment and connection, which in turn results in that higher level of engagement and performance. Clear objectives cascaded to the organization with KPIs have built the rigor and the discipline, and we are now instilling continuous improvement mindsets, which will further strengthen and operationalize with our way to win as an enabler of our RISE strategy.

Just as we measure and continuously improve our business performance, the same is true for culture and engagement. We prioritize measurement of our employee engagement and our culture as our operational heartbeat. Our annual global employee survey using the Gallup Q12 measures how well care, courage and collaboration are embedded by asking employees about experiences that reflect these values. So for example, feeling supported and recognized directly linked to care, having opportunities to take initiative and share their opinions directly linked to courage and working effectively towards common goals directly linked to collaboration.

And high engagement scores indicate that these culture behaviors are consistently lived. And as this slide illustrates, our engagement scores measured by Gallup have consistently improved. This stability achieved despite internal and external changes confirms our culture's resiliency. And as a result of this consistent focus on culture and engagement, we continue to make good progress even as we've executed some operational and organizational transformations.

In fact, we've received Gallup's Exceptional Workplace Award for 2 years running. And in fact, I've just been invited to participate for a third year. Not only have our engagement scores improved, but so have our participation rates, reaching 95% in this year's administration of the survey. We don't incentivize our employees to participate. We simply ask them letting them know that their views matter. Increasing participation rates tell us that our employees see the value in participating in a survey because their feedback will result in positive change.

Part of this reason for this trust is the rigor that we have embedded in the way we do engagement at Smith & Nephew. It's not a nice to do. It's part of the way we do things, our operational rhythm. And it's personal for our employees. It's personal to me and it's personal to our leadership team. Following our annual employee survey, our Executive Committee has a full review of those results, including any areas of strength and areas of opportunity. And we look at it through multiple dimensions to identify any of those big themes that may need to be targeted for an intervention or reinforcement.

By strategically managing our culture, measuring engagement and fostering the environment where employees thrive, we are not only creating a workplace. We are, in essence, doubling down on our odds of success across every critical business measure. We know that when employees feel connected to our cultural pillars, they are more motivated, they are more productive and they are more emotionally connected. This means that our culture is not just stated but experienced daily. So as our business evolves, so does our culture.

And this next evolution of this is our way to win. Our purpose and our cultural pillars will remain unchanged. But through our way to win, we will build and strengthen those behaviors we've developed over the 12-Point Plan, clearly aligned with those cultural pillars. Our way to win is a programmatic continuous improvement framework, which will include tools, behaviors and mindsets that will allow us to be better, better every day for our customers, their patients and each other.

Giving you a few examples of the areas that we will focus on, we're going to strength -- continue to strengthen accountability by focusing on clear leadership expectations, dedicate time to thorough strategic workforce planning and shift intentionally from performance management to performance enablement. To strengthen continuous improvement, we are hardwiring consistent, repeatable, Lean Six Sigma processes to ensure behaviors of accountability are systemic and not episodic.

And to continue on our path to higher engagement and thus higher performance, we are upgrading programs such as our recognition program, offering rewards for differentiated performance and refreshing our employee value proposition. So in closing, our culture has enabled us to navigate market volatility, drive operational efficiency and deliver on our commitments to our investors.

And as I look to 2028, our vision is clear: to be a future-ready organization that is high performing, delivering Life Unlimited for our patients, our customers, our employees and our shareholders. And our culture will continue to be the multiplier of our strategy, enabling us to adapt, innovate and grow and sustainably rise to new heights of performance.

Thank you. I'll now hand over to John to talk you through the financials.

Thank you, Elga, and good afternoon, everyone. As Deepak has already covered, the 12-Point Plan delivered a very strong turnaround in financial performance with revenue growth acceleration, margin expansion and a step-up in both free cash flow and ROIC. I'm not going to drain this slide as I think the numbers speak for themselves, but I would like to go off script a little here and just say a big thank you to Deepak for his leadership over his life of the 12-Point Plan. And also a big thank you to the team for the results that have been delivered.

I'm particularly pleased with the margin expansion over the period 2022 to 2025, given the significant unforeseen headwinds we experienced, not just higher cost inflation for longer, but VBP in China and to a lesser extent, FX. Collectively, these represent around 1,000 bps of impact. But through revenue leverage, our disciplined focus on operational improvements, we were able to more than offset this and are on track to deliver around 220 bps of margin expansion. This includes over $280 million of savings delivered through our 12-Point Plan and zero-based budgeting programs with more savings to come in 2026 and beyond, which I'll take you through in a later slide.

Craig has already taken you through the impact of the actions we took to optimize our Orthopaedic manufacturing network and our focus on lean manufacturing, but I wanted to demonstrate the progress we've made to reduce DSI day sales inventory across the group. Inventory volumes have fallen, albeit absolute inventory values have remained relatively flat due to the impact of the inventory revaluation. As Craig covered earlier, inventory health has also improved. There's also been a significant reduction in DSI by each business unit.

By the end of 2025, enterprise DSI is expected to be down around 10% from 2022 with Ortho improving by around 20%. Looking ahead, we see further structural gains. By 2028, we project best-in-class DSI in Sports and ENT and Wound and performance well within industry norms in Ortho, driving a 35% plus enterprise DSI reduction versus 2022. Now given that we are nearly at the end of the year, I thought you'd all appreciate an update on trading to date. As we said at the Q3 results in November, we remain on track to meet our 2025 guidance of around 5% revenue growth and are now confident of delivering a trading margin of at least 19.5%.

We now expect free cash flow to be around $800 million versus the around $750 million we guided to at our Q3 trading statement and significantly ahead of our original $600 million expectation at the start of the year. This improvement has been driven by continued operational cost savings and discipline in working capital, particularly a reduction in inventory. We also expect a step-up in our ROIC to over 9%, exceeding our cost of capital for the first time in a few years, primarily driven by a doubling of our Ortho ROIC year-on-year, all of which sets us up nicely for 2026.

Now we wouldn't normally give guidance for 2026 until the prelim results are presented in March, but we feel it would be helpful to lay out some of the key drivers to support your understanding of the trajectory of the new strategy. As I've already said, we anticipate sequential improvement in revenue growth to around 6%, with profit growth ahead of revenue growth. We expect continued strong cash generation leading to free cash flow around $800 million.

And finally, ROIC will step up again to revenue growth. Let me walk you through the margin bridge for 2026 set out on this page. Firstly, there was the usual impact of cost inflation. Then we have specifically called out those areas where we're investing for growth. These are the investments necessary in our business to drive our sales CAGR from around 5% to 6% to 7% over the next 3 years.

These include investments in areas such as medical education, clinical evidence generation and strengthening our commercial execution as called out by the business unit presidents earlier in their presentations. Then we have the impact of the inventory revaluation that Craig took you through earlier. As he said, this will start to reduce in 2027, but we have a year or so to work through where it has a meaningful impact.

Then, of course, the impact of tariffs and changes to wound reimbursement, where we called out the 25 to 50 bps of headwind at our Q3 trading statement. And lastly, the small impact, the small impact of VBP in China, which continues to be a drag, albeit a much smaller one than historically as China overall becomes a much smaller percentage. So we anticipate operational savings of circa $150 million in 2026, roughly half from our 12-Point Plan and zero-based budgeting savings and half from other opportunities above and beyond this.

If you remember, we set out and this gives us confidence that trading profit will grow ahead of sales in 2026. And I'll provide a little more detail on these operational savings when we come to our prelims next March. As I set out earlier, we made great progress through the 12-Point Plan to build a much stronger business and are now poised to elevate the company through our new RISE strategy. As you've seen laid out by the BU presidents, we have a clear path to revenue growth acceleration through improved commercial execution and new product development.

By expanding the reach of our existing portfolio, delivering innovation at scale and disciplined strategic investment, we are targeting 6% to 7% revenue CAGR over the '25 to '28 period, a step-up from our 5% growth trajectory over the last few years. And through efficient execution, commercial excellence and our culture of continuous improvement, we expect to see continuous margin improvement. We've demonstrated an ability to deliver significant operational savings across the business, spanning manufacturing, procurement, warehouse and distribution, business support, sales and marketing and have now embedded this culture of continuous improvement in our day-to-day operations.

We are targeting a 9% to 10% profit CAGR over the 2025 to 2028 period. You've heard from Deepak earlier how we will remain laser-focused on cash generation through delivery of higher group revenue growth and efficient execution. We will continue to reduce inventory, as I covered earlier, and expect to see continued low restructuring charges in the coming years. Consequently, we expect to deliver over $1 billion of free cash flow in [ 2028 Orthopaedics ].

You've also heard Deepak mention that we expect to scale through strategic investment with disciplined capital allocation to the higher-growth Wound and Sports businesses, which deliver overall high returns on capital. Consequently, we expect to increase ROIC to 12% to 13% by 2028, all of which will unlock significant shareholder value. This slide summarizes the financial role now played by each business unit in contributing towards our RISE strategy. You'll notice that the majority of revenue growth will come from our Sports and Wound businesses, which are exposed to faster underlying market growth and where we see greater opportunity for innovation and high returns.

That said, we also expect the Orthopaedic business to grow as we build out the knee portfolio and invest in CORI, taking advantage of the expansion of the ASC channel in particular. Trading profit is expected to grow faster than revenue through greater growth in higher-margin Sports and Wound businesses and group-wide efficiency improvements. But the greatest driver of group margin expansion in this next 3-year period is the Orthopaedics business as we build on our 12-Point Plan initiatives and drive a step-up in margin to over 20% by 2030, as Craig set out in detail earlier. In line with the above, while we anticipate continued improvement in ROIC in each of our business units, the greatest increase again will come through Orthopaedics, where we target not only a step-up in margin improvement, but also a greater focus on set turns and inventory reduction, both of which contribute to a significant step-up in our ROIC. We aim to double our Ortho ROIC by 2030.

Coming on now to our capital allocation framework. As before, we will prioritize investment to drive organic growth and then inorganic growth to expand into high-growth segments. We'll deploy our increased free cash flow into high-growth and high-return businesses and see opportunity for M&A to support our strategy and build on our areas of strength while being disciplined about only pursuing those opportunities that fit our strategic objectives.

We are willing to increase our leverage beyond our target for acquisitions with a deleveraging profile back to target within the following 18 to 24 months. And of course, any surplus capital will be returned to shareholders. As an example, we just completed our $500 million share buyback earlier this year.

Right. Now it's time for a well-earned coffee break, after which we'll move to our panel Q&A session with all the speakers you've heard from today. Please be back in your seats by 10 possible. Thank you.

[Break]

Welcome back. So we're saving the best for last. So this is the Q&A. So we'll spend 45 minutes, so we'll just make sure we're all on time. So far, we've been doing all right. We ran over about 5 minutes in the last session. So we'll take 30 minutes in terms of questions in the room and then the balance over the webcast, if we don't have any, we'll come back here in the room.

And then we'll just have some closing remarks from me, and then we'll have some more time out in the foyer, so you have the opportunity to interact with us and the extended team. Does sound like a plan. Okay. So with that, fire away.

Hassan, I guess, you're right in my line of sight, so I'll go with you.

It's Hassan Al-Wakeel from Barclays. Three, if I can. So firstly, can you talk about your growth ambition and what to your mind is driving the acceleration not only from this year, but also into 2027? What is being assumed for price and volume in Ortho over the period? And how much of a buffer have you built in for the potential for slowing hospital utilization in the U.S. or indeed anything else such as further share losses?

Secondly, on 2026, could you provide a bit more in terms of the headwinds and tailwinds and the extent of margin expansion that you expect? And why should this accelerate meaningfully in 2027? And how significant is Ortho to this improvement? And then finally, scale through strategic improvement is a key element of your new strategy. Where do you see the key white space or investment opportunities across your business segments? And should we expect a meaningful step-up in M&A over the coming period? And will it more likely be in Sports Medicine and wounds versus Ortho?

So, Hassan, thanks for the questions. So I'll maybe take the first and the third. And John, do you want to take the margin? Yes. And then, Craig, you can color, if you like, on the Ortho profit piece -- margin piece.

So first off, the nice thing about how the growth stacks up, the acceleration stacks up is it is multifactorial. So there's very nice levers of growth across each of our businesses, and you saw that laid out to rich detail in each of our business unit presidents talk about the business. So that's number one. It's across all the businesses. The second thing actually is across geographies as well. And that you have to interpolate to get to that. But there's continued growth and actually getting to market growth in the U.S. with Orthopaedics.

So that's a net delta. It's an acceleration. And then what you picked up in Rohit's comments is actually where we see opportunities for growth in emerging markets in Wound, and there's some variations of HIMC across those two ends of the spectrum. So both in terms of businesses and across how they're laid out geographically, you've got multiple sources of growth. And that's one of the key features actually of this program.

And what's also one more point around this is the temporal component to this, right? What we see -- or this is not a back-end loaded plan. What you see is actually nice acceleration. You saw John kind of put in the '26. Some of that is the unwind from China, but there's actually continued growth on top of that, right? So temporarily as well, this is not wait until '28 and then you see the revenue, you will see that build over time as well.

What we've also done is build in contingencies here. This is not an all green light kind of plan. Everything has got to go 100% in order for us to deliver. What we've done is actually build in some contingencies to take into account we're in a fairly uncertain macro environment. We have a reasonable handle of the known unknowns. Obviously, unknown unknowns are a little bit more hard to telegraph, right?

But we've got a plan that's got some headroom to it. So we feel very, very comfortable with how this stacks up temporarily across businesses, geographically, and we feel good about having contingency in there where we see a couple of different ways of kind of making the number. So you want to just take the margin point?

Just to give you a little bit more color on the margin. So just to be -- we are confident of the 9% to 10% profit CAGR over the 3 years. We've got very good visibility of delivering that profit growth. Now the phasing is a little bit -- so 2026 will be lower than the 9% to 10%. And then correspondingly, '27 and '28 will be slightly higher. That's not sort of wishful thinking or a hockey stick effect. That's really the result of the inventory reval, the headwind that we see in '26. Coming off a little bit in '27.

And actually in '28, it almost works in our favor. So this is something that we've got very clear visibility on in terms of delivering this profit growth over the life of the plan. And as Deepak says, we've also sensibly built some contingency in there to give you a little bit of color on those. So we've got the headwinds we talked about the tariffs. And we talked about for 2025, we said $15 million to $20 million on tariffs. That will be actually, we think, roughly $60 million in 2026.

So effectively a 45 bps increase '26 from '25. That's about 70 bps of headwind. On the inventory reval, we talked about is roughly 110 bps or so of reval headwind. The Wound pricing, again, that Rohit mentioned and talked through, that's going to be about 40 bps of headwind. ENT, the VBP component in China will be about 20 bps. So we're facing some quite considerable headwinds in '26. Notwithstanding that, because of the operational leverage and because of the $150 million of savings that we believe we can deliver, we're still going to deliver an increase in profit that's greater than our increase in sales in '26.

We're very confident of that. And then as you move into '27 and into '28, we're not going to give you the detailed margin bridges for those years. But clearly, the inventory reval diminishes. And we got -- all the actions we've -- as Craig said earlier on, all the actions to deliver that improvement have already been taken. So this just flows through over time as the manufacturing variances and the inventory reval flows through the P&L.

Obviously, the tariffs, actually, from a P&L perspective will potentially come off a little bit going forward, but we certainly won't see the same year-on-year increase in '27 and '28. And again, with the Wound these things will annualize. So in '27 and '28, we'll see the operational leverage really fall through in both those years, which is why we can be confident that the growth in '27 and 2028 will be above the 9% to 10% and '26 slightly below the 9% to 10%.

We've got very clear visibility on this. Now we've also baked in -- we talked about the operational savings, $150 million or so. We baked in all the savings going forward in '27 and '28, where we've got visibility of those savings. But it's fair to say that we're always looking for more. And obviously, for '27 and '28, we've got other opportunities that we can go after.

And just a final point, Hassan. What we've said is strategic M&A -- is M&A, not for the sake of M&A, but the strategy is a key part of it. And the idea is to allocate capital to drive sustainable growth across our group and areas where we have -- we see opportunities and we have a right to kind of be the rightful owners of the assets that we go after. And the question was around Sports and Wound and the answer is those are obviously two of the areas that we look at.

Phil Cowdy, who recently retired, put together the nice pipeline in terms of the opportunities that we see. Ajay Dhankar, who's now stepped into the role, has picked up the baton. And so we've got a very, very clear view as to what the potential opportunities are. But the timing has got to be right. The valuations have got to be right, but the operative word here is strategic M&A.

And just on to pick your point up on pricing as well. I mean we've seen -- look, we're not going to sort of split out pricing and volume by business unit per se. But we have seen pricing -- the benefit of pricing, if you like, start to come off slightly. So I think in '24, we talked about price increases of ex China, roughly 1.5%. In 2025, we expect that to be around 1% or so.

And in '26, we're assuming around 0.5%, 0.4%, 0.5%. So we're being very, very sensible about what we're assuming. We're not being overly optimistic about what we expect to achieve through pricing. Now of course, one thing I can say is our ability to drive through price increases in these markets through the level of sophistication that we're now using to spot pricing opportunities has stepped on year-on-year.

So the teams involved in looking in depth at all -- across all our products in all our markets and where we can drive price through, I think we're becoming more and more sophisticated about our thinking there. And yet, I think we're being sensibly prudent about what pricing increases we've built into our budgets.

That is actually one of the benefits of the 12-Point Plan, and it was one of the initiatives we specifically called out around pricing.

Go here and then I saw Graham earlier and then Jack.

Julien Dormois from Jefferies. Three questions on my side. First one is on Orthopaedics, especially on the -- you said pivoting from defense to offense in the division. And you highlighted LANDMARK as being an important product launch with that regard. So should we think that returning to market growth and maybe above is now a target for '27 and beyond or could already happen in '26? That would be the first.

Second, on biologics, which essentially relates to the changes in reimbursement. So could you just remind us of what could be the impact on the division next year? And whether that includes LCD happening or not? So just maybe the two scenarios around this would be super helpful. And the last one is on free cash flow. The target in '26 is broadly similar now to what you are aiming to deliver in '25. So just trying to reconcile the two and I understand why is that and you are not more ambitious? Yes.

So Craig, you go first?

I'll start with from an Orthopaedic standpoint. I think plan on offense, obviously, we've been doing that first OUS business, our trauma business has been on offense, hips with CATALYSTEM, clearly, the channel. And I think one of the catalysts for knees, for example, will be LEGION MS will be one step of that. As we launched that in Q3 now into Q4, it has gotten our sales force back into -- again, there's a retention component, but a fair amount of conversion opportunities as well.

So LEGION will play to that as we kind of lined out on that slide. And I do think that next Leap-frog to get to market share and our budgets are based on that as well will be LANDMARK. And we do think that there might be some upside as well because I think the commercial engine and the muscle has been built to execute and make sure we maximize that commercial impact.

The add up, just to get straight to your question, is '26 is when we expect to achieve market. And there's a bit of the composition of how we get there, right? There's knees and hips on the Recon side, and then you've got trauma on the other side and then you've got the total ortho, right? So what -- in Q2, we were overall at market in the combination, Q3, we came just a little bit off of it. We expect to exit the market in Recon -- exit '25 at market, which we've said, and that's still within what to play for. And '26 is the same. So it's a little bit of the composition that will vary in terms of how we get there. Rohit, do you want to get the LCD?

Yes, sure. So when we think about the upcoming changes around the use of biologics for wound and there are three elements within that. One is the PFS, which was impacting the pricing and the reimbursement for the physician office. The other one was ops, which was impacting pricing and reimbursement for the HOPD or the wound care clinic setting. And then the third element of that is which is LCD, which controls which products can you use in either of those settings and so on.

If you assume -- at least we know there's good clarity on the first two about happening. There's still some lack of clarity on the third piece around LCD. But if you work with the assumption that the LCDs are also happening, then we feel in that environment, because of what the way the LCDs are structured and our participation in those LCDs with our products, where 4 out of the 18 products are from Smith & Nephew that we have an ability to participate in that market by capturing share.

But overall, the market is going to go through a disrupted environment. It will be disrupted, and I think it only become clear in the first, I would say, 6 months or so because physician behavior will change. The patient flow will change. Where do the patients go now, whether they get treated at home or do they go to a clinic or do they go to a physician office. And then the competitive landscape will change depend upon the LCDs. So it's going to be a very active maneuvering that will go on within that space.

But given the assumptions that we have made around the first two, which are known and assuming that the LCDs also come into play, we feel good about increasing our share and participation. Obviously, there are some impacts from reimbursement, as John already highlighted, is one of the headwinds on the margin side as a result of that.

So bottom line, you put all these pieces together, even under the downside, downside scenario, we feel good about both the overall number for wound and the stack up to the group.It's the moral of the story. John, do you want to pick up the free cash flow?

Yes. So on the free cash flow, just to be clear, so we had 2025 where we stepped up from the Q3 trading statement from the $750 million to $800 million. Actually, part of that step-up is actually a one-off property transaction, which is about $25 million. That's obviously not going to be replicated. So $775 million on a normalized basis $800 million, including the property transaction. And then going into 2026, we'll see the usual step-up driven by the profit growth.

But we're also going to be putting a little bit more into capital expenditure to drive on the opening of our new facility, Melton and a little bit more into our ERP program. I think Deepak, you covered the plan to have a sort of single ERP solution across our business, actually, which is going to drive operational savings in the future, a little bit of a step-up in that. So that's why we are flat year-on-year. All of that said, of course, we started out -- just want to remind you, we started out last year with a number of $600 million. And obviously, we're now out turning the year with a number of $800 million.

Graham, you were next and then Jack and Veronika and then gentlemen on the front.

It's Graham from UBS. Two questions. One for Deepak, just on the guidance and one for Craig on Ortho. The guidance ranges, whether it's this year or next year or the midterm are all quite narrow in terms of the 1 to 2 percentage points. Maybe John can step in as well. In terms of your comfort on financial visibility, say, now versus 12, 18, 24 months ago, what have you done to give you that confidence on those narrow ranges?

And then just on Ortho, the ASC comment was quite useful actually in terms of understanding where the growth is coming from, but it implies there's probably a big opportunity still in hospitals. How much of that is product versus maybe the shift in compensation for sales?

Okay. I'll start off with the tightness of the range. So part of that, our thinking is not to get anchored to a number, right? So we're coming off of a place where we had a margin target in a specific year, we're trying to move away from that. And the delicate balance between having too broad a range you can drive a truck through versus something artificially too narrow, right? So -- but having said that, you get at something very important here, which is the predictability and forecastability of our business.

And we're not, I would say, best-in-class in that yet, but we've made significant steps in that direction. Orthopaedics is an eminently forecastable business. In our hands, it has not been historically. So a lot of the work that Craig has been leading around Ortho 360 and everything else is starting to get to a more predictable place, right? Because you've got a base, right? You've got your assets deployed, you know where the surgeons are, you know what the base volume is, this should be forecastable.

So we're getting there, I would say, over the next go through 2026, we'll be in a better place. So one of the things that, Craig, you look at is clean case scheduling. So maybe you have some encouragement to look at that. But what it is, is basically that you have forward visibility to all the elective cases because essentially knees and hips are elective cases.

So you should have the ability to see out a couple of 3 weeks, right? And you translate that into the future. So what we're trying to get at is we are getting more forecast -- better at forecasting. We're not quite there, but you should get to see it. So that is one of the underpins around the tightness of range. Anything you want to add to that, John, or...

The only thing I would say about the revenue range, the -- around 6% and then 6% to 7%. I mean, I would say that if you look at 2025 and you strip out China and the 170 bps drag, then on a normalized basis, we're coming out at 6.7%. Now China for 2026, it is a little bit of a drag, but it's nowhere near as much as a drag as it used to be.

I mean it's now a much, much smaller part of our overall business. So the drag that we expect to see from China next year is not huge. So we're exiting on a normalized basis at 6.7%. We're providing guidance of 6% to 7% over the next 3 years and 6% for 2026. I think these are eminently sensible numbers.

There are some headroom to pick up the ASC point.

Yes. I mean, relative to -- certainly, this year, again, we continue to see a good trend in ASC. But just to be clear as well, the value proposition in the hospitals, and I think that's where you're going, is just -- has been there and continues to be there. In addition, it's just that migration, as you know, continues to accelerate.

So as those surgeons are leaving a hospital setting to open up an ASC or gets recruited to an ASC or leave fellowship, that's been a big driver for us this year as well. So I think we'll continue to see good strong results in both site of care, and I think CORI is positioned well in both of them.

Jack and then Veronika.

It's Jack Reynolds-Clark from RBC. I just had a couple, please. First, coming back to the midterm growth guidance. I guess thinking about, obviously, this new level of growth versus the old level of growth and I guess, where our expectations are or where ahead of today's announcement. How much of this kind of comes from -- notwithstanding the commentary around China, which we've run through, but how much of this comes from new launches or is dependent on new launches versus executing well or better with the existing platforms?

And could you just go into a bit more detail on those contingencies that you mentioned in terms of kind of what's -- where the buffer is in the guide?

Yes, sure. So first off, over the last few years, we've been about half of our new products that Vasant covered. Half of our growth has come from new products. And we expect with the level of investments we've got in R&D and actually stepping it up into '26 and maintaining it, that will continue to be fuel to the fire. So think roughly half of the growth from new product launches. But an important piece is it's not innovation for the sake of innovation, but having a commercial engine to go with it.

You've seen plenty of evidence of our commercial engine working well in Sports and Wound. The new factor here is Ortho coming into gear so that we are firing on all cylinders, right? So there, we've got CATALYSTEM has already been launched, right? We're still in the early stages. LEGION MS, we've got we have got one month now. We're in December now, it launched in September. So that needs to pay off. REGENETEN, a great driver of growth that's been on the market.

So it is a mix of products we've already launched at various stages of commercialization, and there's new stuff coming. I mean the LANDMARK knee is the main thing. There's other things coming in the Ortho portfolio as well. So there's a nice add up of what's on market, what's to come. But at the end of the day, you got to have a commercial engine. And the new part is our Ortho engine in the U.S. is starting to now in a place where it can also fire, right?

In terms of contingency, I don't think it would be helpful for me to just really go into specifically where the contingencies are, right? But what we've said is, look, we're going to go above market, right, in sports. We're going to go above market in Wound. That's not hugely regulatory because we've been essentially above market in those areas. So what you got to believe is, can these guys keep doing that, right?

And I think hopefully, in the richness of the presentation, you have enough to form a perspective on it. The part in Orthopaedics, as we've said, grow at market. Now you can do the math and say, well, is that ambitious enough? Or do you think there's headroom? And where we've left ourselves some wiggle room really is to say, there is some headroom in Orthopaedics. We're not going to come out and say that or sign up for that, but there is a bit of not contingency per se, but perhaps some achievability baked into what we've set out as targets.

That's great. And then that leads me nicely to my second question on LANDMARK and the...

No, that was 1A and 1B. I thought that was 1 and 2. Go ahead, Jack.

So is there a risk that the rebalancing there and the launch risks some significant customer churn and there's actually a risk to the near-term business? Or is that under control?

So I think one of the things, as I kind of outlined and talked through a little bit is I think we put a significant amount of time into design and ultimately how both the conversion piece of it from getting existing customers, but also having it really attractive to new customers. So I think what you'll find is that people who use JOURNEY, this will be an easier transition for them because of some of the things that we're doing.

Again, it's using existing instrumentation. And so the implantation will be more streamlined. And then that will also be very well received again by customers who are looking at options and bringing on new customers. So I think...

But to put it simply, for an existing JOURNEY customer, LANDMARK offers them a porous option with the current instrumentation. So it's a net add to the current JOURNEY customer. For customers who are not JOURNEY users, one of the reasons they are not is because they feel JOURNEY is hard to put in. So there's a bit of an activation barrier. So for them, we now have both a porous and a cemented option on a streamlined tray that offers us one more thing to go out and get competitive surgeons on.

So it's -- as Craig rightly says, it is designed to target both existing JOURNEY users to give them a porous option and for new surgeons who are not JOURNEY users, a full portfolio. That's a simple way to think about how we protect our existing business when we go to market with LANDMARK. And tray efficiency is absolutely key, particularly as a shift into ASC that mindset has been in AETOS, that's in CATALYSTEM, and now we're bringing to our knee platform.

So it's CORI, one platform everywhere. It's brand-new joint portfolio across all major joints, but tray efficiency designed in with the ASC in mind that I think is going to be a key unlock for us, Jack.

I think Veronika was next.

Veronika Dubajova from Citi. Three questions for me, please. One, John, I'd like to go back to the 6% growth guidance for 2026. And if I look at consensus, I think it's at 4.7%. Just curious if you have a thought on what we're missing and why the disconnect between what your targets and ambitions are for next year versus our own numbers. That would be the first one.

My second question is for Craig, and it has two parts, please. The first one is the SKU rationalization and to what extent you think that is going to represent a headwind to sales growth and kind of how you're thinking about navigating that?

Obviously, it's been somewhat disruptive to knees this year. So just thinking about that, in particular, in trauma into the next couple of years. And then my second question for you is around some of the competitive launches that Stryker announced. Sometimes, I guess, copying is the best form of flattery. But just curious how you're thinking about the gold product and also the sort of mini -- MACO/mini CORI whatever you want to call it. And then maybe my final question.

I like mini CORI. -- Or you could say CORI knockoff.

You should get some naming rights on that. And then maybe my final question is for you, Deepak. Obviously, the organization has gone through a tremendous amount of transformation under your leadership. We're 3 years in. Very helpful to sort of see the vision. But I guess it sort of seems a little bit more of the same. Maybe just your thought process on sort of strategic change that is bigger than what you've outlined here and kind of how you're thinking about the merits and the value of that.

Sure. John, you were first.

Yes. So obviously, it's a little bit tricky for me to comment on your collective consensuses. But look, all I can say is from a business point of view, as you would expect us to, we've done a detailed bottom-up budgeting process, and we're confident we can deliver the 6%. As I said, just to help you get there, this year alone, we were exiting at 6.7% ex China.

So it's not like it's unprecedented in that sense. But we've looked in detail at all of our businesses, the unders and overs, the challenges on Wound reimbursement on EMT, reflecting the VBP in China. So all the positives and negatives, detailed bottom-up gets us to 6% growth. We're confident of that. There's a little bit of contingency as you'd expect there to be. So we're very comfortable we're talking about around 6% growth for '26.

I'll go next. Yes. So first, relative to the inventory, I'll answer that one first. So again, the Ortho 360 operating model, we spend a lot of time and diligence in looking through this whole phaseout period, right, first off. Relative to trauma, again, it is a fair amount of brands, but a lot of those were legacy brands. And we do feel from a revenue perspective, it's not as much -- the risk is more minimal.

But we also believe, again, it's a great opportunity for -- to upscale them to our other brands, our key platforms. And so for us, it is just to get down to EVOS, the Nail, MAVERICK when we look at core trauma. But we are, again, hyper focused. And during our steering committees and during all our calls, we'll monitor that diligently. I think getting back to your question about MACO or the handheld, you've probably stole my line, so I won't say it again.

But we were the leader in robotic handheld surgery. And so for us, again, it is somewhat validating or it is validating that we were in the right direction 10 years ago. It speaks to the innovation that we have as a company that we were on the right path. And I think from our perspective, one is giving the control to the surgeons, number one. Again, it's probably -- if you look at the ASCs, the space constraints, the challenges they have of different economic pressures again than a hospital and how they're looking at technology.

So again, from my perspective, potentially following and copying or following the model that we have. But then the most important part is we just need to continue to be focused and diligent about expanding the functionality of CORI. And I think when you look at what we're doing in knees and workflow, I'm really, really -- even though I've had my hips done, I would be super excited what we're doing with hips, with reaming and impacting.

And then clearly, with shoulder, being able to do both humorous and glenoid, reverse anatomic, that functionality is, again, we think, is best-in-class. So we're going to be well positioned. Again, that scale -- the procedural scale for what an ASC does is going to really, again, differentiate us to what they have.

And I referenced it again in the presentation. OXINIUM, it's been around for a long time. And we have over 2 million-plus patients that have been treated with OXINIUM is 98% survivorship. There is an extensive clinical data to support and back that. And we feel, as we've seen them before come into market, we feel very good about the merits of our technology. And again, it's a material. It's not a coating. And so ultimately, again, I think when surgeons are looking at that choice, we feel pretty good about what OXINIUM delivers.

And just maybe a little bit more color on the portfolio rationalization because I think it's really important that we understand this. I mean, in essence, I see this as being a great opportunity to provide a much simpler and more efficient portfolio offer to our customers. And actually also allows us to focus on migrating them to our newer products, our more technical products. So I think this is as much -- this is a massive opportunity for us really in terms of simplifying our business. Just as it to help scale it a little bit as well.

We're talking in -- it is across both Ortho and Sports, but it's mainly in Ortho. We're talking about -- this relates to about 50% -- over 50% of our SKUs. So there's significant complexity in our portfolio that's been built up over years and years. We've got many SKUs that are specific to a local market, serving a very, very niche need. And these SKUs in totality are less than 10% of our Ortho revenue. So 50% plus SKUs reflecting about 10% -- less than 10% of our Ortho revenue.

So to me, this is a fantastic opportunity to simplify, to offer better products to our customers, to reduce our cost to serve through that simplicity, to reduce a significant chunk of capital in our business and drive returns. This is -- I think this is a very important next step for us, building on some of the initial portfolio rationalization that took place with the 12-Point Plan to massively simplify our portfolio over the next few years.

And we're going to do this on a 3-, 4-, 5-year basis. And most of it will take place over the next 3 years. Some will take a little bit longer depending on market by market. But this is not something that we're doing without a very clear and well thought through plan, and there's significant upside driven through this activity.

And the key here is balance. You heard the word a couple of times here. It's growth, it's asset deployment and it's margin. And you've got to kind of navigate that tightly, right? And so which is why we're going to take a number of years to get through this because that's precisely to kind of get revenue right. Now quarter-to-quarter, maybe have some impact in one place more so than another.

But the key is the council that -- or committee, I forget the word you used, Craig. But the body that looks at this is actually get that balance right from quarter-to-quarter. I just want to make sure I understood your third question around strategic. I heard culture and then I heard something about more of the same. Can you just kind of make sure I -- can you repeat that so I get the essence of the question right...

Your thoughts on the strategic nature of your business -- and how you kind of thinking about...

I got you. Okay. Look, I mean, today, Ortho is about 40% of the group. The remaining 60% is Sports, Wound and ENT. When you play this forward over 3 years or 4 years, there's some changes plus/minus, but there's not a dramatic change in the composition of portfolio. I think that's what you're after. Look, at the end of the day, what we're getting to is this notion of firing on all cylinders. It's super important that we don't have the drag that we've had with Ortho.

And that has been a significant, obviously, a margin drag, but it's been a drag on growth as well. And as we shift into this, with Ortho growing at market, obviously, the other two businesses growing above market, they're going to be carrying load in terms of pulling the thing forward. But one of the things about this plan is the margin uplift, 300 bps to 400 bps by '28 and close to 600 bps by 2030. That's a very meaningful kind of a shift, right?

So the role of Ortho now has been a huge drag on margin and profit now changes into kind of bringing into better balance. So what you're seeing is the top line composition not changed that much. But underneath that, you are going to get a better balanced picture. As we -- as far as whether we go far enough or not, I mean, that's a different question or the time frame and so forth, right? But from this point forward, it's actually a very nice kind of a journey of Delta.

So one last question here. I'm going to go -- I promise to call on you.

It's Kane Slutzkin from Deutsche. Guys, just on China, quite small in your life now. Just wondering what is the sort of long-term thinking of your position in that market? I know a couple of months back at the roundtable, we sort of -- John, I think you might have mentioned 18- to 24-month kind of process or time line around what you're thinking there.

So if you could just give us a couple of comments there. Craig, just on the Ortho market, we've obviously had J&J sort of spinning out the Ortho piece. Just wondering if you've got any sort of high-level views on what that might mean for the market, obviously, maybe a more focused player. And John, just for you on leverage, can you just remind us what the target is? Was it 2x on the balance sheet?

Yes, the leverage is an easy one. It's 2. On the China one, I'll tackle China. Look, at the end of the day, it is a small portion of our group now. And what we're focused on is building a sustainable business. And what that means is we need to make sure it's contributing both to growth, but also importantly to margin. And that may inform the selection of which category and segments that we choose to participate in going forward.

So for example, with trauma, we made the decision to exit trauma when the price levels didn't support a sustainable business. In recon, we took an option to participate because we want to see how the robotics market develop in the country. Suffice it to say now that we're not seeing it develop as we had hoped, right? And therefore, we're going to make a decision on how we want to participate in that segment.

And you'll see us apply that thinking as we go through this. Taking a step back, now should we be in the market or not? I mean, look, it's a large market. There's billion-some-odd people. It's hard to just simply say we're going to walk away from the market. That's not -- it's not an idle decision. It's not an idle strategic question, but that's not our starting point.

For us is, can we serve that market and patients there sustainably. And so far, in sports post VBP, it's still a business we want to be in, both from a top line margin standpoint. ENT, let's see how things play out. And Wound similarly, it's a small business. Much of it has already been gone through VBP. We'll see how we get there in terms of the compensation.

I know I'm not duck in your question, but did you want to address at all talk about the J&J aspect of it?

You go, you talk about the market, I'll come back to what you say -- it didn't come out right. I was going to build on his comments at where he left.

No. I mean, I think, again, with the spinout and as we think about as they're moving into a business unit structure, again, there -- it's something that we've done, again, to get the focus. We certainly, over the -- probably the next 18 to 24 months, we think that there will probably be disruption, obviously, and that could present its opportunities and clearly presents some challenges as well.

But I think all on an overall balance is a net neutral. Certainly, there'll be a more focused Orthopaedic company in the long term, in the long run. And -- but again, we're going to continue to look at where we can take advantage of some opportunities here in the short term.

I got nothing to add. So there's some questions on the...

So just to -- on your leverage point as well because given that Deepak told you the target, I'll give you a little bit more color. We're going to -- we think we'll exit this year at sort of 1.7 to 1.8x, so below our target. And that's notwithstanding, of course, the $500 million share buyback that we did in the last half.

Okay. So from the webcast, how much above-market growth do you need to deliver in Sports and Wound to achieve market leadership? And then I think a clarification. You said your 2028 ambition is that you're at or above market in Orthopaedics. When will knees get back to market?

So Scott, do you want to take Sports, Rohit and then Craig.

Yes. In sports, I mentioned that we're #1 or #2 in almost every subsegment in which we compete today. That's true of the geographic markets as well. And we're #1 or #2. In more than not, we're the #1 player in the market today. There are a couple of big ones like the U.S. where we're #2.

And so those are the areas where we have to continue to grow. And I think that it's -- there are a couple of components of that is maintaining the strength of our core. We talked about all the different subsegments. So we've got to continue to invest in that part of it. But we can also kind of shift the kind of competitive conversation to the areas like biologics and regenerative medicine and sports medicine with REGENETEN, with CARTIHEAL as well as the advanced enabling technology.

So I think it's a good play. But in terms of where we have to go mathematically in terms of growth, I think the high single-digit growth targets that we talked about and then opportunities for upside to accelerate beyond that is what will be required to get us to outright #1 in all the markets and globally.

Yes. On the Wound side, if you recall the chart, we were #2, but a close #2 with a 1% difference between the leader and us in our market share. With our projected growth based on our broad portfolio, based on all the things that I mentioned about which areas we're focusing on and participating in the high single-digit growth projection relative to what the market leader currently is focused on somewhere in the single digits, low single digits to mid-single digits, we expect that with this growth trajectory, we would be a market leader in the time horizon that we have talked about.

Yes. I think from a hips perspective, so I look at Ortho as a whole, I think hips, again, we have CATALYSTEM, which is a driver right now. And then the next phase, again, will be the CORI RI.HIP enablement with the reamer and the impacter.

Go to core trauma. Obviously, we've got -- and that will be at market or above as we move to core trauma with the refresh of the nails, we feel, again, and the EVOS platform that we'll continue to maintain at or above market. And then shoulder, clearly, as we've been performing above market, granted off a smaller base. We continue -- that trend will continue at or above market, both as we launch Stemless and then as we have that RI.SHOULDER capabilities. I think when it comes to knees, what I would say is that, again, I think there's probably a two phase here, again, with LEGION MS as it gets out here at the end of -- in September and through the fourth quarter, that will be one thing that will carry us.

And then obviously, LANDMARK will be that next phase that gets us or Leap-frogs back and attain market share. And our ambition is to go above that as well.

So think '26 -- end of '26 to get to market in knees with the build over time, just to give a rough picture for knees.

I'm going to put a couple of questions together like a good sell-side analyst. What -- you mentioned 60% -- more than 65% of your U.S. knee implants perform robotically in CORI accounts. How many of your knees overall performed robotically in the U.S.? In your guide, what have you assumed for pricing within Orthopaedics from '26 to '28? And then do you think you spend -- your spend on R&D is sufficient to achieve the goals of the strategy and remain competitive with larger peers?

That's all on Ortho? Is it?

So the R&D is a broad question.

Okay. So do you want to take the two Ortho points, Craig?

Yes. I think the first one was price, correct? So I think you answered a little bit -- or the question was a little about price volume mix. So again, our assumptions again are from an implant standpoint. So when we look at joint recon, obviously, a hypercompetitive market. So from a pricing standpoint, we're pretty much neutral on the pricing to flat to a little bit negative. I think overall, from trauma we performed better. So we do anticipate price increase. But I'll come back to the mix as we continue to move, we'll see good mix shift as well as we move people to CATALYSTEM or to Cementless, be it LEGION MS or to the LANDMARK knee, that should be a good mix driver from our standpoint. The second question, I mean, my apologies...

Robotic knees overall. On robotics.

What's our robotic knee?

So from an overall -- so we're over greater than 30%.

We'll give you the Q4 number. We've been at around 30% in the last quarter, but we're navigating above that in terms of the proportion of our knee business that goes through CORI. So that was the question...

And then R&D...

R&D, so Vasant, do you want to pick that up, Vasant?

Yes, I'll take it. So the question is, is the spend on R&D sufficient to drive the strategy? Listen, you're unlikely to come across any head of R&D or innovation that says, I have enough money to do everything that I want to do. But having said that, the short answer to your question is yes. I think the spend that we have that we've consistently have had over a few years is not only enough, but will drive the RISE strategy.

A couple of comments just to add to that, and Deepak, maybe you want to add. Listen, we have a track record of delivering transformative innovation. So we've done that. And even if you take CORI as an example, we're in the third generation. And we've done that through focus and prioritization working with the business units. And in R&D, it's not just about how much money you have to spend, but it's what do you do with what you have.

And when I look at our product portfolio across all our businesses, and you heard from all the BU presidents, our portfolio, I believe, is second to none. And so I'm confident that with the increased spend in '26 and '27 that the pipeline will contribute to the bold ambitious plan of RISE and elevate Smith & Nephew performance and deliver higher returns going forward.

Just two points I want to build to that. In the way we run this, actually, the level of R&D is set by the business units, right? So this is not a starting point of how much you want to spend in R&D as a group and then we sort of parse this out, right? I mean you've got your -- I mean, each of you would rather spend more than you possibly can, but you've got the margin imperatives you're working through, right? So each of the levels are set by the businesses within add up overall.

What I would say at a group level, I think what you probably saw and some of you have used this parlance, which is if you look at our greatest hits reel, it looks pretty good for a company our size. And Vasant used the words punching above our weight class. Generally speaking, we've done well with what we've got in terms of the level of innovation we brought to market, areas where we actually led the market in many areas now where we are behind. I mean, for example, in Orthopaedics, because of the complexity of our portfolio, we're, in some sense, kind of playing catch-up on the implant side.

But in CORI, we've talked about others leading -- following us in terms of the paradigm we've chosen in robotics. So even at our scale, even when competing with much larger players in Orthopaedics, it's not like we're always constantly following. And where we've actually followed we've not necessarily done a knockoff. I mean CORI was a completely different paradigm, right? So we are actually bold in thinking about new paradigms, disrupting the market, looking at from first principles in terms of how we assess unmet needs.

So what you should take away from that is not all about money, although it's an important part of it, but it's actually how we choose to spend the money and how we execute to what we've got. And I'll say, reflecting on my own personal experience across three different companies that were known to varying degrees about our R&D, what we do exceptionally well is our execution engine in R&D.

These are guy's, this team that come in on budget, on time at a level that I would say, does stand out relative to my own personal experience, which -- this is now my data point of three, right? So just something for you to take.

We're now out of time. So let's get to wrap up.

Not one more. -- from my close, great. So maybe just all stay on stage. I hope what you were able to take away today is just how ambitious the plan is, but importantly, how achievable it is that we've got headroom even as we set our sights higher to a level of ambition that takes the company forward. We've got acceleration in growth. We've got acceleration in terms of profit. We've got free cash flow getting to levels that we've never been at, right?

And ROIC of 12% to 13% that is very, very significantly above our cost of capital. All of those things hopefully give you a sense for how we thought about our ambition, but also making sure we've built in enough contingency to be able to give ourselves some headroom, right? So hopefully, you've taken away that from today. What we also hopefully, you've taken away is just -- it's the numbers are the numbers, right? The aspirations is all of those things.

But it's the leadership team. Some of whom are sitting on the stage here with me today, and you've seen the bias of those, some of whom are in the room, you didn't hear from them directly, but who are every bit a part of the success and taking the strategy forward as the folks who are in this room.

And when I say we've got a world-class organization, leadership team, I hope you see that in how they come across, what they've said, how they've said, but also the manner in which they lead and the leadership teams that they've built underneath. I'm truly excited not only about the financial components of the plan, but really just what goes on behind the scenes in terms who's carrying it forward. What I hope you've also taken away is just substantially how much stronger we are as an organization. You can say that, right?

It's -- the words are what the words are. But hopefully, we've given you a sense for when we talk about us being stronger, we've made that come to life in the conversations we've had today. So truly, the substrate on which the strategy is built is on a much stronger foundation where we've got essentially an organization that's firing on all cylinders. So I hope what you've also taken away is we've got 170 years of history. That heritage is important to us, but we don't take for granted that we get to be around for 170 years.

We've got to evolve with the market. We've got to compete with the market. And I hope you've seen us kind of take not only stock of our heritage, but also make sure that we're evolving with the market. And finally, in terms of the outturn for the year, hopefully, you've gotten a sense for where we expect to land this year. And if we deliver to what we've said we've delivered, this will be a third year in a row that we will have essentially delivered what we said on the top line, what we said on the bottom line and given you a little bit extra in terms of free cash flow generation.

I realize that I stood here 3 years ago in the proverbial kind of whatever, where we had a 20% margin out there. I own the fact that we -- feel if we come to where we'll be a little bit short of that. But I hope you took away that those enormous headwinds that we had to overcome to get away from that. So with that, again, I'm very, very proud to be part of this team. I'm personally proud to be part of this organization.

This company has been around for 170 years. I am excited beyond what I can describe in words about what our future holds for the next 3 years, and I hope you share that excitement with us. So thank you very much for the time you took to be with us today, the time you took to review the materials to be engaged as you are, and I look forward to coming out post our results and continue to engage with you. So thank you very much for your kind attention.

Sorry, we'd just like to invite you all for those of you who would like to join to stay for drinks in the product fair just across the hall to continue to speak and carry on conversations with the management.

Not to belabor the point. An event like this, you go to many of these every month, and you have a sense for what goes on behind the scenes. There is an awful lot of work that goes on behind this to state the obvious. And I just wanted to thank the team that put this thing together, not only the leadership teams that drove the content and drove everything else, but our IR team that came together in its new formation in the throes of this Capital Market Day development.

I could not be prouder of the team in terms of how they came together and work together as a new team and how they work with us who've been part of this organization for quite some time in putting together something like this. So team really very, very well done. I couldn't be prouder of how the materials came together, how we came to this place. I just wanted to thank everybody that was involved in this.

Good morning. Thank you for attending today's Smith & Nephew Quarter 3 2025 Trading Report. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Deepak Nath, Chief Executive Officer. Please go ahead.

Thank you. Welcome to the Smith & Nephew third quarter results. As mentioned, I'm Deepak Nath. I'm the Chief Executive Officer, and joining me is John Rogers, our Chief Financial Officer. Today, we reported Q3 results that remain consistent with our expectations and support our full year guidance of both revenue growth and trading margin.

Underlying revenue growth was 5% for the quarter in line with the run rate of H1, and that was driven by continued momentum in Sports Medicine and Advanced Wound Management. Orthopaedics growth reflected trends broadly similar to the prior quarter in our recon and robotics business. Strength in Hips in the U.S. helped offset softer performance in Knees while internationally, strong Knee sales balance more modest results than Hips. We had our strongest ever Q3 for core Replacements worldwide and global growth in Trauma and Extremities was also strong.

Group growth was well balanced across geographies, and China headwinds are now beginning to abate. Excluding China, underlying revenue growth was 6.4%. Key product highlights for the quarter include strong double-digit growth in REGENETEN, Q-FIX KNOTLESS, EVOS, AETOS, FASTSEAL, CATALYSTEM and LEAF. These products are visibly driving the broader segment growth rates. Our operational improvements under the 12-point plan continue to flow through to the P&L. And we're seeing expected step up in profitability in the second half and that's supported by improved cost discipline, better mix and efficiencies across our commercial and manufacturing operations.

Strong working capital discipline and a focus on operational efficiency also means we're ahead of our cash flow targets. As a result, we're raising our free cash flow guidance for the year for more than $600 million to around $750 million. Innovation remains central to our growth and later, I'll share recent developments that support our confidence in our longer-term outlook.

For now, I'll hand you over to John to take us through the quarter in more detail. John?

Thank you, Deepak. So revenue in the quarter was $1.5 billion with 5% underlying growth and 6.3% reported, following a 130 bps tailwind from foreign exchange. Trading days were unchanged year-on-year. Geographically, the U.S. grew 5.5% and other established markets grew 3.9%. Emerging markets grew 5.4%. Orthopaedics grew 4.1% on an underlying basis. In Recon, we saw a continuation of the trends of the first half. In the U.S., Trauma and Extremities grew strongly and Hips grew above market again, which reflects both the sustained improvements in our commercial organization under the 12-point plan and the strength of our portfolio.

Hip performance continues to be driven by strong uptake of CATALYSTEM, which has now been on the market for a full year. The market shift to direct anterior hips is accelerating, and we are well placed to benefit. We are increasing our CATALYSTEM set deployments to support growth in Q4.

U.S. Knees remains soft as sales continue to be impacted by our ongoing portfolio rationalization efforts. While this is ultimately the right strategy for the business, it has led to some volume loss in the process. That said, we continue to win new customers and core replacements in the U.S. were strong in the quarter. We see Knee growth outpaces market growth in accounts where CORI is established, underscoring the potential of adoption growth. And as we continue to build out our portfolio, we expect Knee performance to improve just as we've seen in Hips.

In OUS, knees, Hips, Trauma and Extremities, all delivered strong performance overall, except for some localized weakness in Hips in emerging markets. We launched CATALYSTEM in strategic sites in Japan, which will drive growth in the coming quarters.

Trauma and Extremities grew 7.5% overall, an acceleration over the first half as expected. We continue to benefit from our EVOS plating system and AETOS shoulder. Our new TRIGEN MAX Tibia Nailing System is performing well ahead of expectations in the U.S., and we are awaiting regulatory approval in key international markets.

Other Recon grew 9.7%. Placements were strong, but revenue growth was impacted by contract mix with fewer direct purchases this year versus prior year. We are pleased with the continued growth of CORI replacements in ASCs and teaching institutions. Sports Medicine & ENT grew 5.1%. We are seeing stability and a gradual recovery in China following the anniversary of the Joint Repair VBP. The AET and ENT VBP are still to come, but the headwinds will be much smaller given the relative size of the businesses.

We have taken actions to manage our inventory ahead of implementation. Excluding China, joint repair growth was 13% up, maintaining the positive momentum we saw in the first half. REGENETEN and Q-FIX KNOTLESS , which launched in Europe this quarter were key drivers. AET growth was led by RF and FASTSEAL in the U.S. and strong emerging markets. ENT growth accelerated sequentially despite a continued soft tonsil and adenoid market in the U.S.

Let's now look at Advanced Wound Management, which grew plus 6% in the quarter. Within that, Advanced Wound Care grew plus 1.1%. Good OUS sales growth was offset by some softness in the U.S. ahead of our ALLEVYN Complete Care product launch in [indiscernible]. We expect this to drive growth in the segment going forward. Outside the U.S., ALLEVYN performed well with significant tender wins in the UAE and Saudi Arabia.

Turning to Bioactives, which was up 12.2% for the quarter, we again saw strong growth in SANTYL. This reflects easier comps given the supply chain challenges last year, which has stabilized and a recovery in underlying demand as customer confidence in supply returns. We continue to monitor developments around Medicare reimbursement and local coverage determination. At the end of last week, CMS issued the final update to Medicare reimbursement for skin substitutes in the physician office setting, which is broadly in line with the initial proposed rate. Based on what we know today, we anticipate that this will be a headwind to Advanced Wound Management sales and have a 25 to 50 bps negative impact from group trading, profit margin for 2026.

However, there are still some unknowns, including how it will impact clinical practice and physician behavior, which will only become clear in the first few months or so after implementation. These results keep us on track to meet our previously raised outlook of mid-single-digit revenue growth for Bioactives for the year, even despite a tough Q4 comp.

Advanced Wound Devices grew 6.7%. LEAF and PICO performed well, reflecting strong demand. PICO is benefiting from targeted initiatives in the surgical setting in the U.S. and similar efforts are now underway internationally. Growth in U.S. RENASYS moderated, reflecting some softness in the acute care channel while performance outside the U.S. remains strong.

I'll finish with the outlook for 2025. Guidance remains unchanged, except for free cash flow, which we are raising, we continue to expect around 5% revenue growth and a trading margin within the range of 19% to 20% for the full year. Our increased focus on cash and capital efficiency has yielded better-than-expected free cash flow, and we now expect to deliver around $750 million up from our previous expectations of more than $600 million. This reflects the sustained progress we've made in working capital improvement, particularly within our Ortho business and the operational cost savings we've driven over the life of the 12-Point Plan. The impact of tariffs for 2025 remained a net headwind of around $15 million to $20 million, consistent with previous expectations and will compound further in 2026. We continue to look for ways to mitigate this impact. And we continue to expect to drive further margin expansion beyond 2025 through continued momentum and efficiency gains.

And with that, I'll hand back to Deepak.

Thanks, John. As I mentioned, innovation continues to be a hallmark of our strategy. Importantly, more than half of our growth continues to come from products that we've launched within the last 5 years, reinforcing the strength and relevance of our innovation pipeline. We have several highlights this quarter.

In Recon, following FDA approval earlier this year, we fully launched our LEGION medial stabilized knee in the U.S. this quarter. Medial stabilized inserts are designed to provide surgeons with stability and improved kinematics while aligning LEGION with the 3 major market trends in Knees, the shift to medial stabilized inserts, which are now used in over 30% of procedures and the trends towards robotics and cementless fixation.

As we build out our Knee product portfolio, we remain confident that the acceleration we have seen in the rest of our Recon business will ultimately extend to Knees. In Sports Med, we established a new Category 1 CPT code for our CartiHeal AGILI-C cartilage repair implant. The implant received breakthrough device designation from the U.S. FDA and is the only FDA-approved device for this indication. The new code will streamline reimbursement processes for providers and payers and support the integration of CartiHeal and the standard clinical practice.

We're already having positive conversations with payers and are working with early adopters to build a body of compelling evidence ahead of the new code becoming effective in January of 2027. In August, the AAOS revised its guidelines for shoulder rotator cuff repair to include a strong recommendation for the use of bioinductive implants. Bioinductive implant support the body's natural healing process of the tendon by inducing new tissue growth. We're pleased that REGENETEN is well aligned with these updated guidelines and are excited about its long-term potential.

In Wound, we're launching ALLEVYN Complete Care, our new foam dressing, in the United States. This proprietary unbonded design defends against factors that contribute to pressure injuries and its multiway stretch technology improves conformability to the body's anatomy and ease of application. Early customer feedback has been positive. Overall, this was a solid quarter, which takes us almost to the right -- almost to the end of our 12-Point Plan.

Our business is undoubtedly in a better place. The global business unit structure has allowed us to drive greater accountability, faster decision-making and execution and increased focus -- customer focus. You can see the benefits across the portfolio. Orthopedics remains on an improving trajectory, Sports Medicine and Advanced Wound Management are maintaining the strong momentum, and we are seeing a step-up in profitability, cash flow and ROIC.

We recognize that U.S. Knees are not yet performing in line with our expectations, and it will take time to get there. But the sustained growth we're seeing in U.S. Hips, Trauma and Extremities serve as a powerful proof points that U.S. Knees will do the same. We've already made the changes that we believe are necessary to our commercial engine and manufacturing footprint. And we are gaining new customers while we're expanding our Knee portfolio. These actions position us for continued improvement in the coming quarters and beyond.

As I've said before, 2025 is not the endpoint of our ambition. And I'm excited to have the opportunity to lay out the next phase of our growth at our Capital Markets Day in December. We are holding 2 events, in fact, in London and in New York. In London, we will introduce our new strategy following the conclusion of the 12-Point Plan, including our midterm priorities and financial goals. In New York, we'll follow up with greater detail on our growth drivers and share insights from our customers.

I look forward to seeing many of you at either or both of these events, and I remind you that both will be webcast.

With that, let's move to questions.

[Operator Instructions]

Our first question comes from Jack Reynolds-Clark from RBC Capital Markets.

I have 3, please. The first is on revenue guide. So given kind of the -- I guess, the slowdown in Q3, do you think there's a risk that underlying growth for the full year comes in kind of slightly below that 5% mark you've guided to for the full year? And kind of what gives you confidence in the tick up through the remainder of the year?

Then on margin guidance, you've talked before, I think about anchoring at the kind of the middle of the range of the 19% to 20% range. I guess does Q3 performance impact how you're thinking about that now? Kind of where are you and where do you suggest we anchor within that?

And then regarding 2026 and the impact of the LCD. Can you talk through the assumptions around kind of the bottom and top end of the 25 to 50 bps margin impact you've guided to? And kind of what the driver will be where you come in that range?

Sure thing. So first of all, we feel confident about our revenue guide for Q4, that's informed by our funnel, our sales funnel in Q3, particularly on the back of the CORI placements, the new customers we have won over and they start to integrate our products into their practice. And obviously, we've got one full month of Q4 under our belt. So we are confident of our revenue guide.

We're equally confident on our margin guide as well. We've said 19% to 20%, but we've led you into the midpoint of that range, and we are very confident about continuing to be there with a slight positive bias. And regarding the impact for LCD of 25 to 50 bps. As you know, the current reimbursement schedule really goes towards physician office. And it's not LCD per se. That's not what the ruling was about. It's really about reimbursement for the physician office channel. We still don't know about the hospital outpatient channel here. So there's still some uncertainty around how that will play out.

That informs our range of 25 to 50 bps. The reimbursement level of [ 127 ] is in line with what was out there before [ 125 ]. And of course, there is the uncertainty around how practice patterns will adapt to these new guidelines. So the combination of these factors give us the range of 25 to 50 bps. So hopefully, that addresses your question.

Our next question comes from Veronika Dubajova with Citi.

I will keep it 2, please. My first one is just actually going back to Jack's question around the revenue guide. I think when you had previously talked about the shape of the year, you had always kind of cautioned us around the fourth quarter and how difficult the comparison base was and sort of -- I think the messaging from you as always, this is something that we should expect the fourth quarter to be weaker. Obviously, with where Q3 has progressed and your comments, Deepak, just right now and how you feel about the rest of the year. Just curious if your thinking on that has changed and maybe what's driven that? Is it a phasing of revenues through Q3 and Q4? Just if you can talk through that, that would be super, super helpful.

And the new SMEs, I hate to be the person to ask this question, but I have to, just -- obviously, we are still seeing a very, very wide gap between you and the market. I know you are continuing to work through the portfolio rationalization, but I was hoping maybe you can give us a little bit of the financial impact of what the portfolio rationalization meant from a sort of actual sales basis points of growth? And then how you're thinking about sort of when we might see this gap narrow somewhat from where we are at the moment? And is this really sort of a 2026 event? Is this a Q4 2026 event or 2027? Just your updated thinking on that.

Sure. Thanks, Veronika, for the question. I'll lead off and I'll hand it over to John to talk through the shape of the year. So let me pick up your U.S. Knees point. As you rightly point out, we are behind the market within that. We've acknowledged that, and we've -- there's a number of factors, but one we call out really as the most important of them is the ongoing portfolio rationalizations, particularly relative to GENESIS, which is the relevant platform within the U.S. This is a line that we've long straddled as we've gone through the 12-Point Plan program in terms of how aggressively to address this, particularly with our focus on capital efficiency, and really driving the business in a more efficient fashion than we have historically.

It is a line we've tried because go more aggressive, then we put top line at risk being more conservative and that obviously impacts the returns in the business. And so while we've recognized that inherent kind of attention there, we have gone forward with that effort. So what gives me confidence? So first of all, to anchor everyone, U.S. Knees is about 9% of the group. As I look ahead, I'm very encouraged by the pace of CORI placements. We called out, it was a record Q3 for us.

I'm particularly encouraged by where we're placing CORI; teaching institutions where historically, we've been somewhat under-indexed and there's quite a bit of effort we've put into kind of strengthening our presence which has been good to see. Our placements into ASCs have also been very, very encouraging. And as we called out, where we placed CORI, we see above market levels of utilization and where we also placed CORI, we see great uptake. So all of those are very encouraging.

The introduction of LEGION medial stabilized inserts is a factor we're just now getting going. Actually, in the final month of Q3 was where we fully launched, and we look at the pipeline into Q4. We feel very good about the uptake, particularly into competitive accounts. So you put all of these things together, while the shape is not exactly as we had expected. Q4 is actually shaping up to be a reasonable quarter for us. So hopefully, that gives you a little bit of the texture behind U.S. Knees?

And John, do you want to comment on the financial.

Yes. Just on the shape of the half, I think, Veronika, you're right, Q3 was a little bit softer than expected. But Q4, we expect to be a little bit stronger. So in around the 2-player draw and we're very comfortable with the guidance of around 5% for the full year. And just to reiterate, we expect to be in the middle of the range on the margin with a slight bias to the upside, which is what we said previously. So really no change to what we said on guidance.

But let me give you a little bit of color behind that shape. I mean I think in terms of Q3, a little bit softer. There are a number of drivers. China was probably a little bit worse than expected. We talked about 150 bps impact of China for the full year. We think that will be probably end up being about 160 or 170 bps. I mean, impacts to China may be a little bit worse than expected. Obviously, ENT was a little bit soft in the quarter; U.S. Knees, a little bit soft; AET, a little bit soft, explaining why Q3 was slightly lower than perhaps we had anticipated.

That said, as I just said, Q4, we expect to be stronger. We've got one extra trading day. We've got the benefits of new product launches in CATALYSTEM, where we're deploying new sets that will drive growth hard there in Q4. We've got the launch of the leaving Complete Care coming through in the U.S., where we expect to see some upside. We've got the benefits of LEGION MS inserts coming through in Q4. So there's a number of reasons to believe why we think Q4 will be a little bit stronger.

And as Deepak said at the beginning, not that I like to get drawn into talking about individual trading periods within a quarter, but we've gone through P10. P10 is actually our biggest period of the quarter. And we can see those numbers already. So that -- all of those things combined give us complete confidence in delivering our guidance for the full year, as I've just set out.

Our next question is from Hassan Al-Wakeel from Barclays.

A couple, please. Firstly, as you look into 2026, what are the key pulls and pushes on the margin? And to what extent there's continued softness in Knees next year, hold back your margin expansion potential in this business and overall versus what you might have thought at the start of this year?

And then secondly, if you could please elaborate on the Hips weakness outside of the U.S., how much of this was down to China? And is that market or share or both? And how are you thinking about the future of this business?

Great. Hassan, thanks for the question. So first of all, for '26, we've outlined a couple of factors that work against us in terms of headwinds. But the overall message is that we expect to deliver margin expansion beyond where we exit in 2025. So that's the headline.

In terms of Knees, the combination of Knees and Hips hasn't played out exactly as we had expected at the beginning of the year, but the overperformance in Knees and the softness -- sorry, overperformance in Hips and the softness in Knees actually allow us to still deliver margin in line with expectation, certainly for 2025. And as we go into 2026 as well, actually, that combination works for us.

So despite kind of where we are with Knees, that doesn't impact for us just because of the strength in Hips where we expect to outturn in Orthopedics in terms of margin for '25 or indeed for '26. In terms of Hips OUS, the reason is China and actually softness in the distributor markets. There's nothing particular about either market or share to call out there, there are quarterly fluctuations, particularly in the distributor market. So there isn't anything noteworthy that we would call out around Hips OUS.

And Hassan, just to maybe give you a little bit of color on 2026. Clearly, we're going to set this out in a little bit more detail at the Capital Markets Day and obviously provide specific guidance at our prelims in February of next year. But as you rightly highlighted, there's a number of headwinds going into 2026, which we called out in the release. So tariffs being an obvious one. Skin subs pricing being another and we provide a specific guidance there. VBP on ENT and the annualization of AET coming through. And then there's a little bit on the inventory rebound as well as a result of lower manufacturing costs.

So there's a couple of headwinds that we've got to take account of going into 2026. That said, we've always been confident of the benefits of the actions we've taken on the 12-Point Plan coming through. So the manufacturing benefits that we expect to drive margin accretion in the second half will continue to come through in 2026. We've got further saving opportunities to deliver in 2026. So when you add all these things together, in the round, we continue to expect to drive further margin expansion into 2026 beyond from 2025. So we'll set that out in a lot more detail, of course, as I said, at the Capital Markets Day and the prelims, but that just gives you a little bit of a flavor for the direction of travel going into 2026.

Very helpful. And the future of the China business?

Look, we constantly evaluate where we choose to make investments. And we're committed to building a sustainable business in China, and we'll continue to evaluate product line by product line where it makes sense for us to do that. Just to remind this group, Trauma, for example, be -- post the implementation of VBP, that wasn't a profitable business for us. So we chose to exit the market. And so a decision like that we expect to make across all product lines. So the key is to build a sustainable business and we'll continue to keep evaluating that on an ongoing basis.

Our next question comes from Graham Doyle from UBS.

And just 2 questions for me on margins. Firstly, just, John, in terms of the guide for this year, we've only got 2 months left, and it's a pretty wide margin range. So can you maybe remind us why kind of November, December could be quite broad in terms of the impact of the business and why you haven't got better visibility on that at this point?

And then just on next year. So obviously, the numbers could be wrong. I look at ENT, AET, the Wound you described and tariff, I guess like 150 bps of margin headwinds next year. So is it realistic to assume a modest margin uplift against that? Or do you think you can do something a bit more similar to this year?

Sure. I'll take both of those. So in relation to the guidance on margin, I think we've been very clear that we expect to be in the middle of the range with a slight bias to the upside. So that gives you a sort of indication of the direction of travel for the full year. There's obviously always lots of moving parts, not least of which Q4 is a big quarter. But nonetheless, 19.5% with a bias towards the upside gives you a little bit of a narrowing of the overall range.

In terms of for next year, again, we're not going to get drawn today on giving specific guidance. We sort of set out for you what we see as being the key headwinds, and we also set out where we think we can offset those through operational efficiencies and then various savings coming through in the P&L such that for 2026, we would expect margin accretion year-on-year. But we'll clearly provide a lot more color on that in the detail, both at the Capital Markets Day and of course, when we give specific guidance for '26 in our prelims in February.

Our next question comes from Kane Slutzkin from Deutsche Bank.

Sorry, I think most have been answered. But just a quick one on the U.S. Knees. It sort of picked up yesterday from one of your competitors talking about a sort of soft or a slowdown in the U.S. revision market. I don't know if you had any comments on that. And just on the sort of U.S. Recon piece, I mean, you're sort of saying you're quite confident in the Q4 number. Just wondering, the comp is pretty tough, isn't it? And would it be right to say most -- a lot of that would be in the U.S. sort of the higher-margin stuff in Q4 in terms of the comp?

Yes. So I'll take that, Kane. So U.S. Knees provision, yes, there was a modest effect that we saw as well, but we called out the dominant factor for us in terms of the softness. And in terms of U.S. Recon, obviously, we know how -- what our comps look like. And when we talk about how we're positioned and our ability to hit the full year numbers, we've taken that into account. You're right. The U.S. was a strong quarter for us last year in U.S. Recon.

We've obviously taken that into account when we express this confidence. But the one other thing, as John highlighted, we have one extra trading day as well, but we've been quite transparent with you about full reported numbers and also ADS as well so you can judge for yourself how we do. So we've taken these things into account when we have reiterated our confidence in that.

And the sort of target for market growth, is that still the end of this year? You haven't changed that, have you?

We have not. Yes, for exit, we've always said exited market, and that remains very much within reach. The shape of it that maybe looks a little different than we had thought, better performance in Hips versus Knees. But when you add that together in terms of a better U.S. Recon level as we said, we expect to be exit end market and that remains within region.

Okay. So I guess a bit of legwork maybe will be done by Hips. And there's nothing really to call out there in terms of any potential sort of headwinds that could sort of derail the overall kind of U.S. Recon piece? I'm -- just you talking about U.S. Recon now?

Yes. Look, it's a dynamic market, right? So there's always moving pieces, but we factored that into our confidence and expression of where we expect to outturn the year.

Our next question comes from Julien Dormois from Jefferies.

I have 2. The first one relates Bioactives. You were kind enough to provide a margin guidance for next year as to how it will impact you. But just curious whether you could do the same in terms of sales headwind that would be into; 26 and also how you see this change in reimbursement impacting the competitive landscape and whether you expect to gain some share over the medium term?

And the second question relates to the pricing in Ortho and particularly in Recon, we've seen an inflection in the pricing trends that has been reported by U.S. peers since the beginning of the year and again in Q3. So how should we think about the Hip and Knee market growth into '26 and beyond, if there is the return of structural price pressure?

Sure. I'll take that. So we've disclosed margin impacted Bioactives. Obviously, there's an associated sales impact, but we've not been explicit about that just for competitive reasons. So that's the first part of your question. In terms of the competitive landscape evolution, obviously, what we've got now is reimbursement. The LCD, there's been no update to that since the announcement was made some time ago. And if the LCD remains in place as it is, clearly, there will be a fewer number of competitors, and we expect to benefit from that. And of course, if that changes, then we'll have to adapt.

But putting the pieces together, I feel good about how we're positioned in the Bioactives landscape. And clinical data has always been a key part of our value proposition. We invest behind not only the product but generating clinical evidence, and we expect to stick to our knitting with that. And so I feel good about how we're positioned in this landscape, clearly a dynamic one.

In terms of ortho pricing, we've had favorable pricing until recently. I've always said that we expect that to moderate and revert to kind of more normalized levels, and we're seeing that in our business, right, when you look at kind of the [indiscernible] of -- picture. And as we go into 2026, I expect that to continue in terms of going back to historical levels of pricing. There's obviously the shift in dynamic in terms of site of care from hospitals to ASC and that has an impact as well.

So putting all these pieces together, it remains a dynamic and a competitive market, but we feel well positioned to compete in that on the back of, a, the improvements we've made in terms of our wiring and Orthopedics, the improvements we made to our commercial engine and our portfolio that has gotten better and better and actually we're positioned to make even more enhancements, particularly to our Knee portfolio, which we'll detail out in the Capital Markets Day. So we feel -- I feel very good about how we're positioned within this competitive market.

And just to give you a little bit of color on the Orthopaedics pricing. We're seeing sort of improvements year-to-date roughly around just below 1%, which as Deepak said, would be slightly above the norm. That's year-to-date impact. And in Q3, that probably drops to about 0.7% in Q3. So we're seeing the trend that Deepak describes. And I would imagine that for next year, we'll probably see a benefit on pricing of around 0.5% or so starting to get back to more normalized levels.

[Operator Instructions] our last question comes from David Adlington from JPMorgan.

Maybe just on other Recon, where it was certainly a bit of a slowdown there. I think on CORI placements and mix. Maybe just give us some further color and your expectations for Q4 would be great.

Sure. Just to remind you, David, in terms of other Recon, we put all of the robotics consumables in Knee. So we've kind of detailed that out previously. So what we have in other Recon is effectively the impact of cash sales of CORI placements -- of CORI's. As I remarked and John as well, we are very pleased with the placements of CORI. And as I've historically commented, it's placements and utilization. And I'm very happy with where we're replacing them across a range of institutions, normal hospitals, academic medical centers where historically, we've been under-indexed and we've done a lot to improve upon that, as I said. And then actually ASCs were the increasing volume growth is.

And I'm very, very comfortable with those placements there. And second is utilization. And roughly where we place CORI, we see in steady state utilization of greater than 50% of our knees, and that's actually a pretty good number. And where we place CORI, we tend to see above market levels of growth in Knees. So you put these points together, both in terms of placement, in terms of utilization, in terms of where we're replacing them. The story is very good. And as I said, we had a record Q3. And when you look at the funnel for Q4, that's shaping up very nicely as well.

I think, David, the reason for the relatively low number in Q3 was as we explained, is basically the mix of contracts. So if you're on the cash side or on the volume-based side, to Deepak's point, this Q3 was actually a record Q3. We have never had a stronger Q3 in terms of CORI placements. So we feel very positive about that. And actually, we expect to see the other Recon line bounced back in Q4 to a similar level that we saw in Q2. So we're very happy with the momentum and direction of travel.

Thank you. There are no questions at this time. I'll turn the call over to the management team for closing remarks.

Great. Thank you very much for your questions. We're looking forward to seeing you all at our Capital Market events in London and in New York and looking forward to telling you about the next chapter of this Smith & Nephew journey and kind of what that looks like. So looking forward to seeing you all. Thank you very much for your engagement today.

Welcome to the Smith & Nephew second quarter and first half results meeting. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is Chief Financial Officer, John Rogers.

So 2025 is a key year of delivery for Smith & Nephew. I'm pleased to announce the results that put us firmly on track for both our full year growth target and the guided step-up in profitability. On revenue, 6.7% underlying growth in the quarter reflects sequential acceleration across all regions and business units.

In Sports Medicine, we've maintained the strong momentum across Joint Repair and AET outside of China. In Wound, the continued performance of AWD and the rebound in bioactives produced double-digit growth for the business unit as a whole. In Orthopaedics, we delivered yet another quarter of growth and in line with our previous commitment, our Recon and Robotics business sustained its recent improvement, both internationally and importantly, in the U.S.

This is now the fourth quarter of sequential improvement in U.S. Recon and Robotics. On profitability, 100 basis points of first half trading margin expansion is slightly ahead of what we indicated as we brought some efficiency savings forward. We remain on track for our full year margin guidance of 19% to 20%, which includes the impact of tariffs. There's still a lot of uncertainty about where tariffs will settle, but we continue to expect a net headwind of about $15 million to $20 million in 2025.

As previously indicated, we expect that margin expansion will pick up further in the second half. This should come from cost savings increasingly dropping through to our P&L, particularly from our manufacturing network optimization over the last 2 years, together with the reduced year-on-year headwind from value-based procurement in China. I've talked already about the improvements in growth and profitability. At the same time, better alignment of the commercial organization and operations has enabled us to bring down days of inventory.

The delivery of our ambitious cost savings and a move to ongoing efficiencies has also brought down restructuring charges. The result is a 70% increase in trading cash flow and almost $250 million of free cash flow in the first half. Finally, I'm also pleased to announce an additional element of value creation for shareholders with a $500 million share buyback in the second half of 2025. This is made possible by the operational efficiencies delivered under the 12-Point Plan and will be fully funded by the 2025 cash flow and existing balances. So it can be delivered while maintaining our leverage and without compromising any of our growth plans. I'll return to some of these themes later, and John will talk more about profitability, cash and returns in his presentation.

For now, I'll take you through the details of the quarter. Revenue in the quarter was $1.6 billion with 6.7% underlying growth and 7.8% reported following a 110 basis point tailwind from foreign exchange. Growth also included a headwind from 1 fewer trading day than in the prior year. All business units accelerated sequentially, and I'll come to the detail in a moment. Geographically, the U.S. grew 8.7% and other established markets grew 7.4%. Emerging markets declined 0.2%, reflecting strong double-digit growth across the Middle East and India and the impacts of volume-based procurement in China beginning to ease.

Excluding China, emerging markets grew by 12.2%. As we indicated in our Q1 announcement, we have passed the peak of the China impacts, and we expect these to continue to ease through the second half as distributor destocking in Orthopaedics reduces and as we lap the effects of Joint Repair VBP.

For business unit performance, I'll start with Orthopaedics, which grew 5.5% underlying, and this is an overall solid performance. Total Reconstruction Robotics grew 5.2% with the U.S. growth of 4%. This is the fourth quarter of sequential growth improvement in the U.S. on an ADS adjusted basis. Global Knees and Hips grew by 2.9% and 3.4%, respectively. Growth remains higher outside the U.S. with Knees benefiting this quarter from the timing of a tender order in the Middle East. Almost half of our Recon business is outside the U.S., where we're demonstrating that our portfolio can deliver with good execution.

As you know, China has been a headwind in recent quarters due to destocking at distributors. The inventory levels have continued to come down and have approached more normal levels at the end of June. In addition, we expect the destocking to ease during the third quarter. So we should see the China headwind on our OUS sales start to fall away in the second half. U.S. Hips and Knees together showed acceleration over Q1 with 2% underlying growth and 3.6% adjusted for the 1 fewer day, a measure we refer to as average daily sales or ADS.

This is the fourth quarter of sustained improvement for U.S. Hips and Knees combined. Hip performance was strong as we continue to roll out the CATALYSTEM Hip System, which makes us more competitive in the high-growth direct anterior segment of the market. We'll accelerate set deployment in Q3 and are also preparing to bring the platform to other markets starting in Japan.

The softer U.S. Knee growth was due in part to some slowing in procedures toward the end of the quarter among our active surgeon base as well as positive actions that we are taking to increase profitability through streamlining the portfolio and focusing on higher volume accounts. Reassuringly, the balance of competitive wins versus losses has continued to remain favorable.

On an ADS basis, U.S. Knees grew 0.1% and Hips at 9.1%. Other Recon grew 39.8% and reflects another good quarter of Robotics placements, particularly in the U.S., where we're seeing strong growth in ASCs and in teaching institutes. This should mean we're well positioned as the market continues to pivot away from the inpatient procedures and ideally placed to capture future leading surgeons. We also continue to develop our offering with the launch in June of the CORIOGRAPH preoperative planning and modeling for shoulder replacements.

Trauma and Extremities grew 4.4%. The AETOS growth contribution is steadily increasing as we deploy more capital and convert new surgeons, while the EVOS plating system continues to be a key driver, partially offset by a slower quarter for some of our legacy systems.

We're continuing to refresh the portfolio with the launch this quarter of the TRIGEN MAX Tibia Nailing System, which could expand our indication range and features modernized instrumentation. Further nail launches are expected in the coming quarters, and we expect Trauma and Extremities to return to stronger growth in the second half.

Sports Medicine and ENT grew 5.7% in the quarter. Within that, Joint Repair growth was 8.4%, including the expected headwind from VBP in China. This is expected to be the last quarter before we lap the effect of the implementation in Q3 of 2024. Excluding China, Joint Repair growth would have been 13.7%, representing an acceleration in Q1 2025 with a very strong quarter across our other markets. Growth was double digit across all of knee, shoulder and hip repair with the REGENETEN and Q-FIX KNOTLESS suture anchors remaining the key contributors.

We expect this good momentum to continue as we extend REGENETEN into Hip and Achilles and as we further roll out Q-FIX. We are developing CartiHeal AGILI-C as a longer-term growth platform, including a new disposable instrument set, which we expect to launch in the near future. Arthroscopic Enabling Technologies grew 2.3%, again, improving sequentially. We saw continued growth from WEREWOLF FASTSEAL, which is supporting strong COBLATION revenues.

ENT grew 3.6% with good growth driven by our ARIS for turbinate reduction, offsetting a softer quarter for tonsils and adenoid procedures in the U.S. Looking forward, we expect ENT to follow Sports Medicine with the VBP process in China that's expected to take effect in 2026. To give a sense of the size of our business, total ENT sales were around $35 million in 2024. So while VBP would be a noticeable drag on ENT growth, it should be a significantly more modest headwind at a group level than previous VBP processes.

Looking now at Advanced Wound Management, where growth increased to 10.2% following the strong rebound in Bioactives. In Advanced Wound Care, 2.6% growth reflected continued strong performance in foams, films and skin care, offset by a decline in infection management.

In Bioactives, growth came from the expected sequential recovery in SANTYL alongside double-digit growth in skin substitutes. Although we'll face tougher competitors in H2 as we lap the launch of GRAFIX PLUS, we now anticipate mid-single-digit growth for Bioactives in the year.

You'll have seen the proposed updates to Medicare reimbursement of skin subs in the outpatient and physician office setting, including moving to a single payment. Since no products were excluded from participating in the market, it is unclear how clinical practice will be impacted. So while the details of the proposal are yet to be finalized, we anticipate that this will be a headwind to both Advanced Wound Management sales and profitability in 2026. And that would be before any mitigating actions.

Finally, Advanced Wound Devices revenue grew by 12.7%, led by our single-use negative pressure platform, PICO, and with strong growth from Leaf, our patient monitoring system. In traditional negative pressure, competitive wins are an important part of our growth opportunity. I'm delighted that we were recently awarded a U.S. Department of Defense contract for RENASYS TOUCH, succeeding in a competitive tender process, having demonstrated clinical efficacy and operational fitness. With an initial term of 5 years, which can be extended to 10 years, this contract is worth up to $75 million. Coupled with an ongoing broader refresh of AWM, we are confident about the long-term outlook for Wound.

And with that, I'll hand over to John.

Thank you, Deepak. Revenue was $3 billion in the first half, up 5% on an underlying basis compared to Half 1 2024. Reported revenue was up 4.7%, including a foreign exchange headwind of 30 basis points from the relative strength of the dollar against most major currencies versus the same period last year. As the dollar weakened in the second quarter, the ForEx headwind on revenue became a tailwind, and we now expect a circa 50 bps ForEx tailwind on revenue for the full year.

Performance in China was in line with expectations. And excluding these headwinds, growth would have been 7.2% on an underlying basis. This represents a 220 bps headwind in Half 1, in line with our guided full year impact of circa 150 bps as the impact of Sports VBP unwind in the second half.

Performance was broad-based with all 3 business units contributing significantly to the overall group. Orthopaedics grew 4.1%. Sports Medicine and ENT grew 4.1%, although again, excluding China, growth would have been 9%. Advanced Wound Management grew 7.1%. Overall, a good set of growth figures and particularly good to see that 3/4 of our growth is drawn from products launched in the last 5 years.

Moving now to the summary P&L. Gross profit was $2.1 billion, resulting in a gross margin of 70.5%, which is a 40 basis point increase on the prior year, driven by positive variances on price and volume. We saw a further 60 basis points of positive leverage across our operating expenses as we benefited from operational savings in SG&A and only a small uptick in R&D spend driven by Half 1, Half 2 phasing.

Operational savings were slightly ahead of expectations as we accelerated some of our operational savings into the first half. We also expect to catch up some of the shortfall in R&D spend in the second half as well as absorb the bulk of the $15 million to $20 million tariff impact Deepak outlined earlier. So overall, trading profit grew 11.2% to $523 million with a margin of 17.7%, up 100 bps.

And I'll explain the various drivers of the margin expansion on the following slide. Slide 12 shows the detailed trading margin bridge. Going through the moving parts, we absorbed headwinds of 130 basis points from input cost inflation and 140 basis points from the introduction of VBP in China. These costs were more than offset with 190 basis points of revenue leverage from price and volume and 170 basis points from productivity improvements, not only in manufacturing, but also across all other areas of operating expense. FX movements contributed 10 basis points.

We have now sustained a trend of revenue leverage offsetting input cost inflation, which means VBP aside, cost savings have been able to drop through to trading profit. As previously guided, we expect the impact of VBP China to unwind in the second half, such that the full year impact is around 110 basis points. We expect operational savings to step up slightly in the second half versus the first, albeit not as much as previously cited given the acceleration of savings I mentioned earlier.

Furthermore, we expect the bulk of the $15 million to $20 million tariff impact to take place in the second half as well as some catch-up on R&D spend. The net effect is that we expect a step-up in margin in the second half, such that the Half 1 to Half 2 margin uplift remains comparable to previous years to deliver margin in line with our guidance of 19% to 20% for the full year.

I'll now come on to trading margin by business unit. As you can see from this slide, the majority of the margin expansion came through Orthopaedics, where our transformation initiatives to reduce inventory, streamline instrument set allocation, portfolio simplification and focus on higher volume accounts resulted in 230 basis points of margin expansion in Half 1 2025. We expect these dynamics to continue into the second half.

Sports Medicine and ENT margin declined 130 basis points, reflecting the VBP impact in China. If we stripped out China from these numbers, we would have seen margin accretion in the first half. As we annualize the impact of VBP on joint recovery, we expect to deliver margin accretion in the second half. Advanced Wound Management margin increased 160 basis points due to mix, ongoing efficiency gains and the timing of SANTYL revenues in the prior year.

And for 2025, we reiterate that the bulk of our margin expansion will come from Orthopaedics at over 200 basis points with accretion of around 50 basis points coming from Sports Medicine and Advanced Wound Management combined. As we've already mentioned at previous results, we've changed our central cost allocation process to better align costs to the appropriate business unit. With this fuller allocation in place, only $28 million has remained as truly central costs, in line with prior year and our previous guidance that these will be broadly flat year-on-year in 2025.

The purpose of the change was to create transparency and accountability, and there are already positive behavioral changes as a result. We've seen greater scrutiny of spending plans, lower demand for new projects and greater discipline in constructing robust business plans for new IT investment spend, as an example.

We showed you this slide at our interims last year. As a reminder, it details the gross run rate savings of $325 million to $375 million we are targeting for 2023 through 2027. As we set out at our prelims in February, including '23 and 2024, we have delivered a cumulative savings of $210 million. This comprised $155 million relating to the 12-Point Plan and zero-based budgeting and $55 million relating to earlier programs. That's actually the faint dotted line you see there on the 2023 column.

On zero-based budget, implementation is on track across all business units and central functions. Across our 5 work streams, 51 initiatives have been mobilized, which over half are now complete. We anticipate $120 million to $130 million of savings coming through in 2025. And as you saw from the margin chart earlier, we delivered circa $50 million of these in the first half, slightly ahead of our plan as we were able to bring some efficiency savings forward from Half 2 into Half 1.

In total, therefore, that delivers run rate savings from the 12-Point Plan and ZBB of circa $275 million to $285 million at the end of 2025 with a further $50 million to $100 million of savings to come through in 2026 and 2027, very much in line with what we set out on this chart this time last year. We've now embedded our ZBB approach into our standard processes in line with our culture of continuous improvement.

Looking further down the P&L, earnings per share grew strongly, up 37% to $0.335 and adjusted earnings per share grew strongly, up 14% to $0.429, reflecting both revenue leverage, operational savings and significantly lower restructuring costs, which were $8 million in the first half compared to $62 million in the first half last year. We remain on track to incur an estimated $45 million of restructuring charge for the full year. The interim dividend of $0.15 per share is up 4.2% on Half 1 2024, in line with our policy set out this time last year of paying 40% of prior year full year dividend as the interim dividend.

As you know, inventory management has been a key priority of our 12-Point Plan, and I'm pleased to report a further 46-day reduction in DSI across the group to 506 inventory days, in line with our full year 2024 year-end position. The reduction in DSI delivered a $69 million reduction in inventory value at constant currency. All business units contributed to this performance with the biggest reduction in Sports Medicine and ENT. There was still an overall increase in inventory for launch products in the first half versus the same period last year. And this means our inventory mix has also improved with the units of the slowest turning quartile of SKUs down by 14% in Half 1 '25 versus Half 1 2024 and down 22% since the start of 2023.

Longer-term improvement will be down to improved forecasting and better alignment of production plans with the commercial needs at the SKU level, enabled by the improved SIOP process. There is still more work to do here, including aligning our SIOP process with our financial forecasting in a truly integrated business plan.

Inventory reduction remains a focus, and we expect further progress in Half 2 2025. Trading cash flow in the period was $487 million, with trading cash conversion of 93%, well ahead of the 60% in Half 1 2024. The improvement came from lower working capital outflows, particularly from the inventory day reductions I detailed on the previous slide. Capital expenditure is slightly lower year-on-year, but we expect to catch up some of this in the second half of the year as we continue to progress the development of our new manufacturing facility in Melton.

We expect to exit the year at a similar level of spend to last year. For the full year, we continue to target trading cash conversion of over 90%. With lower restructuring costs offset by slightly higher tax, free cash flow increased over 500% to $244 million. We expect to deliver free cash flow of well over $600 million for the full year.

This strong cash generation broadly covered the cost of CapEx, dividend and other costs in the period, meaning net debt at the 28th of June 2025 was only $38 million higher than at year-end 2024. The leverage ratio has also decreased slightly to 1.8x. As we maintain and build on this improved cash generation, capital allocation continues to be a focus. This is our capital allocation framework that you should now all be familiar with. As Deepak mentioned in his introduction, the good start of the year in terms of profitability and cash conversion has enabled us to increase our cash returns to shareholders in line with our capital allocation policy.

We intend to complete a $500 million share buyback during the second half of 2025. This will be fully financed from free cash flow and existing cash balances so can be delivered while keeping our leverage ratio broadly stable for the full year and without compromising any of our growth ambitions.

I'll finish with our outlook for 2025, which, as you can see, is unchanged. We expect to see a step-up in margin in Half 2, in line with what we experienced in both 2023 and 2024, reflecting the timing of cost savings and reduced China headwinds. The tariffs announced by the U.S. government early in the year have continued to evolve, and it remains to be seen what the final outcome will be, but we continue to expect a net headwind of around $15 million to $20 million, mainly to impact in the second half of the year.

We expect to deliver well over $600 million free cash flow for the full year and the strong start to the year in terms of profitability and cash conversion has enabled us to increase our cash returns to shareholders with a $500 million share buyback during the second half, as I've just mentioned. You should see this as further demonstrating our commitment to value creation for shareholders in addition to our extensive operational improvements.

And with that, I'll hand back to Deepak.

Thank you, John. So when we launched the 12-Point Plan, one of our core ambitions was to reposition Smith & Nephew as a consistently higher growth business. We're very much on track. In the first 2 years of the plan, we delivered growth of over 7% and 5%, respectively. And in the first half of the year, we've delivered yet another 5% despite some significant headwinds. That includes 2 fewer trading days for the half. And while China headwind has passed its peak, it still had an impact on H1.

So if you look through the detail of the quarter, you'll see we're doing what we said we would do. Sports Medicine and Wound continue to grow well. In U.S. and the U.S. Recon specifically, we're showing progressive improvement quarter-by-quarter. And our investment in innovation is supporting the acceleration in revenue growth.

Let me take a moment to go into more detail on these 2 last points. A year ago, we highlighted the strong performance in Trauma & Extremities based on new product introductions, implant supply, capital deployment and improved commercial execution. We also detailed that all the same elements were in place to improve performance in our U.S. Recon and Robotics business as well.

As with T&E, these actions have driven 4 consecutive quarters of sequential improvements in U.S. Recon and Robotics revenue growth. On implant supply, key product line item fill rate reached its target in the fourth quarter of 2023 and capital availability followed soon after. With hip set shipment also was at goal in fourth quarter of 2023 and knee sets started reaching their goal in the second quarter of 2024. This is also being supported by a steady stream of product launches over time, such as the newly launched short-stem hip.

We also launched 10 new features on CORI between 2022 and 2024, further contributing to the recent recovery in our hip and knee implant sales growth. We have further new product launches planned to continue this positive momentum. Innovation has been a key significant driver in our transformation to a higher-growth business. Across '23 and '24, more than half of our underlying revenue growth came from products launched in the previous 5 years. In H1, this proportion was 3/4 or 75%.

We continue to invest in our innovation pipeline and introduce new products across all of our business units in the first half of the year, which we're confident will help us sustain our improved revenue growth profile. In Orthopaedics, we expanded our nailing range with a new system for stable and unstable tibial fractures. TRIGEN MAX builds on more than 2 decades of proven performance and industry-leading design from our TRIGEN nails portfolio.

In Robotics, we received FDA clearance for CORIOGRAPH pre-op planning and modeling services in total shoulder replacement during the second quarter of 2025, which expands our offering to cover all joint replacement procedures; knees, hips and shoulders.

In Sports Medicine, for the first time, Smith & Nephew is able to market REGENETEN for extra-articular ligament injuries in the U.S., creating opportunities to reach more patients with soft tissue injuries around the body. With an initial focus on hips capsule repair, we have future expansion planned in other extra-articular ligament repairs. In addition to new products, we also announced a number of significant evidence milestones during the first half of 2025, supporting the adoption of key product families. For instance, a recently published randomized controlled trial of Smith & Nephew's handheld robotic system demonstrated the value for patients and surgeons of robotically assisted total knee replacement with JOURNEY II BCS. Patients experienced significantly better outcomes, including reduced pain, improved function and higher satisfaction compared to conventional surgery at the 1-year time point.

In conclusion, I've talked a lot about our 12-Point Plan. We're now in the final year of our 3-year transformation that I first set out for you in July 2022. And Q2 performance is yet another proof point that we are on track to deliver our ambitions. Each of the 3 parts of the 12-Point Plan is delivering great progress. The rewiring of our Orthopaedics business is well underway with sequential growth acceleration over the last 4 quarters at the global ortho, U.S. ortho and U.S. Recon and Robotics levels.

Orthopaedic inventory levels have improved, and we've seen the associated expected step-up in ortho margin. Both Sports Medicine and Wound Management have shown consistent momentum since the start of the program and productivity improvements are clearly visible in the P&L. In other words, our operational improvements are increasingly translating into financial gains. In Q2, once again, we delivered revenue growth ahead of historical levels, even with headwinds from trading days and China. This higher organic growth is underpinned by fundamental competitive strengths, better commercial execution and a high cadence of innovation across our portfolio.

Cash flow has also stepped up significantly in the last 12 months with better control of inventory to the point where we can start returning excess cash to shareholders through our $500 million share buyback. There's still more to do around profitability, but the 100 basis points of expansion puts us on track to deliver the guided step-up in full year margin. As a reminder, we've delivered 240 basis points group margin expansion from H1 2023 to H1 2025 despite greater headwinds than we expected when we first laid out the plan in 2022.

As I told you in the full year 2024 results, since the start of '23, we've successfully offset over 700 basis points of headwinds from inflation, foreign exchange and VBP. Finally, these improvements are sustainable. A key objective of the 12-Point Plan has been to drive increased accountability and greater discipline in execution, both of which are now embedded in our culture and our ways of working. As I've said before, the 12-Point Plan is a necessary step, but it is not the limit of our long-term ambitions. We'll set out the next stage of our strategy at a Capital Markets Day in early December. I'm looking forward to seeing you all there and formal invitations will follow shortly.

So with that, we'll now take your questions.

Jack.

Jack Reynolds-Clark from RBC. I've three, please. The first is on revenue guidance. So with Q2 having been, I guess, stronger than I think people were expecting, does that imply that there's upside to the 5% target for the full year? Or are you expecting things to slow down elsewhere in the business? Then on margin guidance. So I appreciate you mentioned some kind of moving around of R&D and possibly some other expenses as well. But could you walk us through, John, the bridge in H2 margin and whether the kind of upper end of the 19% to 20% margin range is possibly more achievable?

And then the last question was on U.S. Knees. So could you just run us through some more detail of the work you're doing there and kind of how much of the weakness was driven by the market versus your own activities and how you're thinking about kind of growth versus margin in that segment going forward?

Sure. I'll frame this up, and I'll leave it to John to kind of give you the margin guidance. So overall, as we mentioned, given all the puts and takes that we see, we feel good about the guidance for the full year. So there are positives and negatives as we go through. We'll continue to improve commercially in the back half of the year, but we do have a step-up that we expect, right, both from a revenue standpoint and from a profit standpoint. We're in a more uncertain environment. We've characterized for you what we expect the impact of tariffs to be. But fundamentally, there is a much more uncertain period. That, coupled with the step-up that we need to see in the back half of the year, particularly around margins and all the various effects around comparators, China VBP falling off and other things, we feel at this point, it is prudent to maintain the guidance that we've given, both in terms of revenue and margin.

In terms of U.S. knees, as we unpack that a little bit, the headline is that at a U.S. Orthopaedics level, including Trauma and Recon, U.S. Recon and Robotics level and at a Global Orthopaedics level, we're seeing sequential improvement. And those are very, very strong proof points that the improvements in supply and product availability, commercial execution, our ability to connect all the different pieces together is delivering the desired effects. So that's the headline in terms of where we are. I'm pleased with the progress we're making.

The softness in knees, which were offset by the greater-than-expected strength in hips, a couple of factors. First, we are going through a step to refocus our commercial organization to the higher volume accounts. I've said in previous settings that we've got a relatively long tail of accounts where we have surgeons use our products on an occasional basis with particular patient populations or what have you. While that's an important part of our business, we do want our commercial activities focused on driving kind of key primary use of our kness or hip platforms. So that's some concerted effort there going on.

There's also some level of portfolio rationalization work that we're doing, and I've highlighted that in the past. So we've got 3 Knee families that are relevant in the U.S. We are trying to get that down to 2 knee platforms, LEGION and JOURNEY. And there's work involved in having to transition surgeons and doing that.

By and large, we're successful in retaining most of our customers when we go through that process, but not all, and that does have an impact on top line. But these actions actually get us to a better position as far as our U.S. business is concerned from a margin standpoint. And these steps do contribute on the back of all the other improvements we're making in the factory and in terms of inventory control for the margin step-up that John talked about. But what we also saw related to this was particularly in the end of the quarter that we saw some slowdown in terms of the number of procedures in our active base of surgeons. And that did contribute to the numbers that we see.

So with that, John, do you want to take the margin...

Yes. Just to sort of build on a little bit what we said, we saw the 230 bps of margin accretion in Orthopaedics in the first half, which was a reflection of those changes that Deepak just talked about. And that very much puts us on track to deliver the margin expansion that we set out last year for Orthopaedics. So we ended last year with just below 12%. And if we look forward to this year, we should end north of 14%. So a big step-up, a big improvement in margin for Orthopaedics.

In terms of setting a little bit of color on the revenue guidance, I mean you're right to highlight that we did say that we would expect to see a step-up in Q3 given China annualizing, given the reversal of the impact of trading days. So in Q3, we've got level trading days year-on-year as opposed to 2 less in the first half. So we will expect to see a step-up in Q3.

That said, important to remind you that Q4 for us last year was a very strong quarter, particularly in the U.S. So we've got quite a tough comparator. So I would say that we're only 6 months of the way through the year. There continues to be significant sort of uncertainty over macro and external conditions like tariffs, for example. So now is not the time to be changing our guidance.

In terms of the margin phasing, again, we talked about bringing savings forward from Half 2 into Half 1. And of course, those savings will repeat in Half 2. So that's an upside. At the same time, we've got the impact of tariffs, the $15 million to $20 million that we made reference to. And that will, of course, primarily hit us in the second half. So that broadly offsets that. And then also, we've got the U.S. OUS mix in Q4 as well. Again, we had a very strong U.S. in Q4 of last year. So again, at this stage, I would say now is not the time to be changing our guidance on margin, the 19% to 20% holds.

And we've said in the past that we expect it to be broadly center of that range. And actually, if you look at the bridge from Half 2 '24 to Half 2 '25, so I'll give you a little bit of color here. We'd expect sort of cost inflation of around 1.9% or so. VBP on China will be about a drag of 80 bps or so. Remember, we said it was going to be 110 bps for the year. So that's averaging out Half 1, Half 2. We'd expect to see revenue leverage of around 200 bps or so and then operating savings of a similar amount to get us up to the circa 19% to 20% margin for the full year. So that gives you a little bit of color on the Half 2 bridge.

Richard.

Richard Felton from Goldman Sachs. First one, just a follow-up on margin. John, can you remind us the drivers of the operating savings in H2? How well advanced are those programs? How much visibility do you have that, that is going to be achieved and fully derisked? And then also, what elements of those operating savings are structural? And how should we think about that dynamic into FY '26? That's the first one.

The second one, just a follow-up on U.S. Knees, Deepak. You mentioned at the end of the quarter, a slightly softer procedure environment. Why do you think that happened? Why was that the case? And have you seen that continuing into Q3?

Sure. I'll take the U.S. Knees part. So this is in our base of customers, right? And it's hard to speculate. We don't know the reasons really. I mean we can talk about vacation schedules because there's vacations every year on that time frame. So it's hard to kind of really divide that. So it's hard to tell what drove that. What we can tell is there was a slowdown in our base.

I've in the past, been somewhat loath to comment on market. We're in a period of performance recovery in the Orthopaedics business, where it's sometimes difficult to parse how much of something is you or us versus the market, right? We can do that in Wound. We can do that in Sports. I've been loath to comment on that.

Now we're in a better place actually, much better place even in Orthopaedics in the U.S. than we were a year ago or 2 years ago. But having said that, what I do feel comfortable is talking about what's happening with our account base, right? And so -- but there seems to be, at least from what we can tell in our numbers, some slowdown related to vacations.

Surgeon transitions was another factor. As surgeons were moving practices in some cases, from hospitals to ASC settings or across networks that did have an impact unless something within our base. What's encouraging for me is when I look at churn, you've heard me comment about that in the past, where through much of '23 and early '24, we were net unfavorable. In other words, we lost more surgeons than we gained. For a variety of factors, retirements and those types of things were the large factor. And we had some competitive losses, too. But we also commented in the previous period that those have turned favorable starting in really the Q3, Q4 of 2024.

And I'm pleased to report that, that trend has continued even into Q2, building off of Q1. So I feel good about the operational progress that we're making. And I do feel confident as we go through the second half of the year, we'll be at a different place. And again, I come back to, in the end, there's different ways to slice and dice this. But what I'm looking at, in addition, knees [indiscernible], and we're looking at knees and hips separately as well. But in the aggregate, when you look at U.S. Recon, we're seeing nice sequential improvement, and we are closing the gap to market. We'll see, of course, not all of our competitors reported in the quarter. But when we look at the trend, Q3 '24, Q4 '24, Q1 of '25, we are closing the gap at the U.S. Recon level. And of course, outside the U.S., we've seen some strength now over the last couple of years. We've continued to maintain that. So overall, I feel good about where we're positioned.

So I'll hand it to you, John, for...

So in terms of the savings and where they're coming from, again, I'd point you to the slide that we've got in the deck, which sets out, I hope quite clearly, they come from across the board. There's a big chunk clearly that come from manufacturing, procurement, but there's also warehousing and distribution, business support, sales and marketing. We're seeing savings across the entirety of our business. We had 51 different programs, most of which are -- all of which are already in train and many of which are already complete. And so in terms of visibility of those savings, I feel pretty confident that we'll see that margin accretion come through in the second half, as we said, consistently before.

In terms of '26 and '27, again, point you to the chart, we should expect to see another $50 million to $100 million of savings flow through in '26 and '27 as a consequence of some of the changes we're making now as we see those flow through into future years. So again, we should see a little bit of support for margin improvement as we go into '26 and '27.

It's Graham from UBS. Just two for me, please. On the Ortho inventory in terms of the lower cost inventory started to flow through post the site closures over the last 12, 18 months. Have we seen much of that yet? I think we always thought that would be like a H2 sort of weighted story. So it'd be interesting to get some color on that. And then just on tariffs. One of your peers appears to be able to not pay tariffs on Hips and Knees. So just to get your sense as to have you explored the Nairobi Treaty for that protocol? And is there anything to do there?

Graham. So in terms of inventory, you're right, we've previously called out that the big -- the accumulated benefits of all of the network optimization efforts we've done will fully manifest in the second half of the year. We remain kind of on track to that. So that will be one of the key drivers of the continued margin step-up from where we are today into the back half of the year. But it's not like we haven't seen the impact of that already.

So those have come over the period of time one at a time. And so mechanically, what happens is you close a site, obviously, there's upfront costs associated with the site closure. We'll typically build up some level of inventory as safety stock in terms of what we manufacture there. And then we transition that production to elsewhere within our network. So the impact of all of that will flow through and there's a time scale associated with it.

What we're actually doing also in addition to that is as part of improving our product availability, which has twin objectives. One is to improve availability and actually reduce our inventory, right? And there, it's about how we connect supply and demand down to SKU levels. And we've been at this now since the start of the program. And there, we've made really, really good progress, in terms of being able to connect that at a much better level.

Now there's still more work to be done. But when I compare to where we were in '22 versus this, it's kind of a night and day thing. And that's part of what John talked about in terms of our inventory health being better. So he provided some stats around what our slow turning inventory has been doing. And in fact, when we started out, our mix wasn't great, right? We had too much of the stuff we don't need and not enough of the stuff we did need, right?

And part of that is because in our business, Trauma is relatively higher proportion compared to Recon. Trauma has particularly high inventory requirements and are particularly slow turning in that. So some of that is related to it, right? But we have actually brought down the slow turning inventory levels significantly. So that is another contributor in terms of both inventory levels and days of inventory coming down. And of course, the impact of that as it flows through the balance sheet and P&L is a bit more complex, right? There's inflation impacts that -- for which there are time scales associated with it.

The second thing is our capacity, manufacturing capacity. So we've taken down capacity, right? But we've navigated through much of this period with excess capacity. And that has obviously complicated impacts on both balance sheet and P&L. But all these put together, we are on track to delivering the margin expansion associated with this just as we said, and as you rightly call out, that was the second half of the year.

In terms of tariffs, obviously, we're looking at all different ways, including the one you mentioned as ways to mitigate. But as far as we can tell, based on our read of the situation, we're calling for a $15 million to $20 million impact. To remind you of our network, I think your question was more within Orthopaedics, referencing one of our competitors. For us, we've got 2 primary sites, well, 3 total, but it's Memphis, it's Malaysia, and we've got Switzerland.

And so on the one hand, because a significant part of our Orthopaedics production comes from Memphis, we're naturally hedged in that regard. But it's not 0. It's very much down to SKU level in terms of what comes from there. So there is actually impact, not to mention the impact of raw materials, the input feedstock that comes in from other places.

So look, it's a very dynamic situation. It's hard to call out where things actually settle out. So we've got a Tiger team that's looking at this at the pace that you would expect companies like ours to look at. And we're keeping that situation under review.

Just to build on Deepak's point there. If you look at our manufacturing network, as it happens, the more of the tariff impact comes through for us on Wound and Sports and less on Ortho because most of our manufacturing is U.S.-based for Ortho. So there's a little bit more of an impact in Wound and Sports than there is in Ortho.

I think, David, you had a question?

A couple from David Adlington at JP Morgan. Just on the buyback, John, given the strong cash flow in the first half, I just wondered how you're thinking about ending the year in terms of net debt to EBITDA? And then secondly, also good to see progress on the inventories. As you look into the medium term, where do you think you can get down to? And how much cash could that free up?

Do you want to take that, John?

Yes. So on the buyback, notwithstanding the $500 million buyback in the second half, I'm still expecting us to exit the year below our 2x net debt-to-EBITDA sort of target level. So giving us plenty of capacity for all of our growth ambitions, et cetera. So very strong cash flow, which is very positive.

On the inventory side, obviously, we don't want to overly guide to what we're going to deliver in the future. But you've seen the direction of travel over '24 and 2025. And we would expect that improvement to continue. I think when it comes to Sports and Wound, we're now getting down to what would be pretty good industry levels. I think the opportunity continues to exist in Ortho, and we've seen good improvement in the first half. We'd expect that to continue into the second half of this year and then further improvement in Ortho next year as well.

It's Sam England from Berenberg. So the first one, just in Hips, you called out the benefit from CATALYSTEM in Q2. How should we think about the market share gains you think this can drive, especially in the ASC channel given the focus on anterior surgery and how crowded is that space becoming now for anterior products?

And then just looking at the other Recon business and the growth there that you called out was driven by Robotics. Can you just talk a bit about demand and placements for CORI in Q2? And I suppose, is more of the demand being driven by the hospital or ASC channel, just some sense for the sort of split of demand between channels?

Yes. So we're pleased with the uptake of CATALYSTEM. Obviously, not every one of our competitors have reported, but you've seen 2 report. We feel good about where we're positioned. The surgeon feedback on CATALYSTEM has been very, very good. And so we feel good about how we're positioned there and continuing to have traction across a range of settings, not only in ASCs, but also in hospitals, academic centers and community hospitals as well.

So we feel good about its value proposition. As you know, the market over the last 3 or 4 years has gone through a fairly profound shift from a traditional approach into direct anterior approach. So we were among the later players, not the first players to come into that space, but we have a very compelling product offering in a segment that's rapidly growing. So feel good about the surgeon feedback and the resonance that we're getting across the range of settings.

In terms of Robotics, what I'm looking at -- what we're looking at is not just placements, right? We could be executing a place first kind of strategy. What we're looking at is both placements and utilization. And we're seeing very nice uptake. In other words, where we place, we've got surgeon champions that are using that integrated into their kind of routine practice, which is really kind of the true measure of what we're trying to do.

We're also looking at whether it's driving competitive conversions. So we're using that primarily to retain our existing customer base, both of which are important. So there's multiple things we're looking at around CORI, placements just being one of many factors.

And continue to be pleased with the progress there. We're looking at how we do an ASC channel as well as in teaching institutions where historically, we've kind of skipped a beat or 2. And so the progress we're making on both of those is very, very encouraging for me. So overall, very pleased with how CORI is doing across channels, and the type of utilization that's getting and maybe where we replace them.

And just again, just to build on Deepak's comments there. We're not going to split out, obviously, numbers that go into the channel, but it's fair to say that in the second quarter, we certainly over-indexed in ASCs in terms of the proportion of our CORI placements that went into ASCs in the second quarter, which I think is really encouraging. We said before, we think that CORI in terms of its form factor, in terms of size and its footprint and also its capital cost being significantly lower than the competition, actually puts it in a very strong position, particularly in the ASC channel. And we're starting to see that come through in terms of the number of placements we're putting into that channel.

Should we turn to the phone.

[Operator Instructions]

The first question comes from Veronika Dubajova of Citi.

Hope you can hear me okay. I have three, please. First one is just Joint Repair. Again, another impressive quarter for you guys with double-digit growth, excluding China. Just curious, Deepak, if you could touch upon the drivers that are enabling you to deliver that growth and how sustainable you think that is not just into the back half of this year, but also as we think about 2026?

My second question is just maybe if you can elaborate a little bit on the skin substitute exposure that you have and the risks that you might see there from the new proposal and maybe just give us a flavor for where your current pricing stands relative to the $125 that's been proposed by CMS. And then my final question is around the buyback. And just to what extent do you feel this year is giving us a good indication for your ongoing recurring future capacity to return cash to shareholders?

Sure. So in terms of Joint Repair growth, we take China out of it, as we've indicated multiple times, we will annualize the impact of Joint Repair VBP as we head into Q3. But when you look at our performance across all other regions, very, very nice double-digit growth. The key drivers are Q-FIX and what we've done with that and REGENETEN. And REGENETEN, it's increasing adoption within rotator cuff, which was kind of our lead indication. But as we expand indications into the Achilles in particular, we're seeing a bigger proportion of REGENETEN use -- not big a proportion, but increasing proportion within the Achilles as well. And of course, we're not stopping there. Hips is another area that we're going after.

So very nice uptake of REGENETEN, we expect it to be a platform technology. So we're starting to see its utilization across different joints. So Q-FIX, REGENETEN key drivers of Joint Repair growth everywhere outside of China.

In terms of skin subs, look, it will be a net headwind, both from a revenue and profit standpoint for our Wound business. Fundamentally, obviously, there's the pricing that you mentioned. But in addition to that, there was no products got taken off the market as a result of this. So how practice patterns change as a result of that does remain to be seen. But relative to a previous version of this where on the back of expected clinical evidence, there'll be fewer players in the market at lower price point with some limits on adoption was for us, we had characterized it as a net neutral thing for us as we pivot into this regime, which, of course, hasn't been finalized, it would be a net headwind.

Obviously, for the year, we've taken this into account in our guide and made some remarks and John did as well. So we feel good about our ability to kind of navigate through this headwind for 2025. And of course, as to 2026, as we look in the year, we're not going to guide to that quite yet. Now it's not the moment to do so. But let's just say that we're active participants in it. We remain committed to bringing forward products that have strong clinical evidence back in. And in terms of what we're going to do, we're going to stick to what we think will be the right way to develop products that are substantiated with clinical evidence, and we'll see how things evolve from there.

In terms of buyback, do you want to take that, John?

Yes, I'll cover that. Again, just to make very clear, I'll sort of draw your attention to the capital allocation policy, which is very clearly set out. So first and foremost, we want to be able to invest in our organic growth. That's absolutely clear. That's one of our key objectives is to drive the growth of our business forward. Secondly, we want to be able to acquire businesses that are complementary to our portfolio that will assist in driving growth. Thirdly, we've got to pay a dividend. And then if there's anything left over from that, then, of course, we have the option of paying a share buyback or doing another share buyback.

But I want to make it very clear that, that is the last option and that the primary focus is driving our top line growth, investing in our business through organic growth and acquisitions and obviously paying a dividend. And then as the last element of the capital allocation, share buyback. So we were able to make the share buyback in the second half of this year of $500 million. As I said earlier on, we will expect to still end the year below our target leverage ratio and with all the capacity that we need to drive our top line growth.

The next question comes from Hassan Al-Wakeel of Barclays.

I have three, please. Firstly, Deepak, if I can follow up on your comment on slowing procedures amongst more active surgeons in Knees. I wonder if you're seeing this beyond Knees. And separately, any color on the weaker OUS Hip performance and any key challenges faced here. And I guess, combined, what are your expectations here and in U.S. Knees in the second half?

And then secondly, if I can follow up on Skin subs. Was the stronger growth in the quarter supported by any physician behavior changes due to the LCD? And then on the proposed reimbursement, I appreciate behavior can change as can volumes. But what is the impact from the lower price in isolation? And what is your exposure to the hospital inpatient channel? And what are the mitigating actions that you could take? And then finally, how are you thinking about the pipeline of potential bolt-on deals, particularly as we look into next year given the buyback announced for this year?

Okay. So what we've seen in terms of procedure slowdown was really in Knees and Hips. And medically, a different level of, I would say, urgency around knee placements versus hip replacements, as you know. So what we've seen in our active base was really more around knees compared to hips. And so that's that. In terms of hips OUS, there's a China factor or an ex-China factor OUS. There's a little bit in Japan, for example, that we're looking at. But overall, OUS orthopaedics performance remains an area of strength. So we continue to perform well commercially and although there's quarterly volatility, primarily around timing of distributor orders and things, we feel good about how we're positioned OUS very large. But there are individual markets where there may be something from one quarter to the next.

In terms of Skin subs, in terms of physician behavior changes in response to pricing, we did see some of that, but it was not to the extent that, that was the dominant kind of factor driving our performance there. Now we have not previously split out how much of our business is Skin subs. But I'll just say it's material, but in the realm of -- from a group impact standpoint, I expect that with pricing changes here, we'll be able to navigate through this. So I guess, rather than get into breaking out the impact of Skin subs, I'll just leave it at that.

In terms of proportion of utilization in hospital versus physician office, it's about 25% of -- sorry, 40% of use is in the physician office compared to the hospital. In terms of our own activities, we've always had a strong presence on the hospital side, which we continue to maintain. And in terms of development of products, we continue to be focused on not just coming up with the next version of skin subs, but also investing behind the development of clinical evidence. And that will remain the case as we go into next year and beyond. So skin subs.

And in terms of acquisitions, as John mentioned, a key priority is to drive growth, top line. And at the level of buyback that we've announced, we are not going to be limited in terms of the type of bolt-on acquisitions that we're going to be able to do as a result of it. So we feel good about the opportunity set in front of us and the ability to execute on that. Bolt-on M&A or M&A in general is a key part of value creation in MedTech. We have an active corporate development team that's well plugged into the ecosystem, and we've got a pipeline that we feel good about. And we don't feel constrained in our ability to do those bolt-on M&A even with the announced buyback.

Yes. And just to add some color to your question on Hips, Hassan. Just looking at the numbers for the second quarter, we were actually up on an average daily sales basis. Globally, we were up around 5% for Q2. And actually, if you look at ex China, we were up 7.5%. So you're right to highlight the OUS growth was pretty flat in the second quarter. But to Deepak's point, we expect that to significantly step-up in the OUS numbers, significantly step up in the second half as some of the impacts on China start to reverse. And we should see a pretty strong Half 2 on our Hips ADS growth on OUS basis.

The next question comes from Robert Davies of Morgan Stanley.

I have three. First one was just how you're thinking about the strategic position within Ortho, I guess, within the context of both the 12-Point Plan and within the context of -- you mentioned the constructive discussions with the activist. Maybe just provide us a little more color on that. The second question was around the trajectory for margins beyond 2025 and whether the sort of savings plans that you've laid out has changed your views over the midterm profitability targets of the company?

And then the final one was just around the sustainability of growth, I guess, and just getting a little more color on the future pipeline. You've obviously made a lot of comments over the last couple of years around the products you brought to market. I just wondered if you could provide some color around the pipeline looking forward over the next couple of years. Anything meaningful to look out for?

Yes, sure. So with Orthopaedics -- look, we're a portfolio company as many other MedTech companies are. And in terms of Orthopaedics, what we've said a number of times is, as we look dispassionately at all different ways in which we can drive shareholder value, far and away, the best opportunity is to get orthopaedics functioning as it has the potential to do and as it once did within our portfolio. And as I've detailed in this quarter and its previous presentations, we're making really good progress in our ability to do that.

And there's a number of elements associated with it in terms of product availability, the way we connect supply and demand, our commercial execution, which itself has multiple pieces around people, process, how we manage the business. On every one of those fronts, we've made tremendous progress. So when I take a step back and look at all the things we could be doing, driving performance improvement along the dimensions that I've outlined is by far the best thing we can do for shareholders at this point. And we are well on a path to doing that. And I do believe we get it to where this business can perform in its ability to deliver great returns, whether it's in terms of revenue growth contributor, contributor in terms of margin expansion, which, as John mentioned earlier, we're on track to go to about 14% margin this year, which is more than 200 bps.

As we look ahead, that journey will continue. 14% is not the endpoint, but it's a waypoint along the journey. So as we look ahead, we expect it to do its part in driving growth, importantly, driving margin expansion as we get it back to levels at which we were a number of years ago.

And importantly, as we move into a position where it starts to deliver excess return ahead of its -- on cost of capital. So we have all of those opportunities in front of us in Orthopaedics. I think we've, with Q2 delivered yet another proof point on our journey there, but we've got more to do in the balance of 2026 and then, of course, as we look into the future.

And that brings me to the second question that you have around continued margin expansion. We have said that the target for '25, which is 19% to 20%, that's not an endpoint. It is a punctuation, but we expect to continue to improve beyond that. In particular, Orthopaedics margins, we expect to continue to expand as we go into 2026. The right time for us to be talking about what we expect to do would be on the back of full year 2026 results so that you can judge how we did on the 3-year transformation program, where we're positioned and what makes sense in terms of reasonable midterm targets.

So we'll come out and do that. As a prequel to it, in our Capital Market Day, we'll detail out what we see as the key growth drivers. I'll take the mystery out of it. We are an innovation-driven company. We've said 3/4 of our growth in H1 was from products launched in the past 5 years. And we've commented on that periodically. Full year 2024, that number was about 50%, in 2023, that number was about a little over 50%, I think we might have said 60%. So we've had a good track record of bringing forward innovations. We're not always first to market, but what we bring forward, and if you look at our greatest hits wheel, if you will, we're actually punching above our weight class in terms of the type of innovations we bring forward.

And as an organization, we're very, very committed to maintaining our levels of investment within R&D. That will be one of the key drivers of growth. So going forward, we expect to build off of where we hope to exit in 2025 in terms of further margin progression, but we'll detail that out at the right time. In terms of sustainability of growth, we've gone from kind of being a low single-digit growth kind of company into kind of a mid-single-digit growth company during this transformation period. I think at this point, we've given you enough proof points in terms of our ability to do that.

So the next chapter will be to build off of where we've come, right? So here, I'll leave this a little bit of a mystery, so you can come to the Capital Market Day and see what those drivers are. And then of course, with the full year, we'll give you that in more detail.

And just to sort of comment on the margin trajectory. As always, there's a lot of moving parts on margin. As Deepak highlighted, we've got the positives in terms of the additional savings coming through, and I talked about $50 million to $100 million at least coming through in '26 and '27. We've got the positives in terms of the continued progression on the Orthopaedics margin, as Deepak says, 14% is not our end game. We expect to continue to improve that over time. At the same time, of course, we've got to offset the challenges of tariffs coming in, in '26 and also, of course, the impact of Skin subs. So there's always lots of moving parts, but we hope to set out at the Capital Markets Day clear direction of travel as to where we expect things to go forward and also, obviously, at the prelims in February of next year, provide very clear guidance as to what we expect to happen in 2026.

Yes. Just a quick build on what you said, John, in terms of sustainability of both growth and margin. Part of being a portfolio company is being able to go through all these different factors and offset these things to deliver more consistent kind of top line growth and margin expansion. That's part of being a portfolio company. But another thing that I'll accentuate here is in terms of sustainability. When you look at how Q2 turned out, the growth came from all regions and all of our businesses. And that's been a theme that if you go back and kind of look at our messaging over previous quarters, that is something that's been true actually for a number of quarters now.

So it's not just coming from one particular part of our business, but the growth has been relatively broad-based. And that you should take as another encouraging sign in terms of the sustainability of growth as we move out of this period of transformation or turnaround into more kind of new and improved Smith & Nephew.

The next question comes from Kane Slutzkin of Deutsche Bank.

Just quickly on U.S. Recon, you're obviously still targeting the market growth rates by end of year, I would assume. I'm just wondering if anything has changed in your thinking there in terms of how you get there given the softer U.S. Knees, but stronger Hips? And then just secondly, you obviously mentioned you're in the final year of the transformation. You're making good progress against this plan. Without being too sensational, I'm just wondering with the Sapient stake sort of slowly building, could you sort of just provide us with any confirmation or details of the nature of any discussions you've had with them, what their influence has been to date, if at all? And I guess, just how active have they been?

Sure. In terms of what we're targeting, as we've said before, getting to market growth in U.S. Recon remains a goal. Ideally, we would like to do that with all parts of our business kind of working, right? So in other words, we want to continue to show progress in Knees and progress in Hips, right? But obviously, there's multiple ways we could get there. In Q2, we had -- not overperformance, great performance in Hips that offsets a somewhat softer performance in Knees, right?

So we expect to build on both of those things as we go into Q3, Q4, but the objective is at the U.S. Recon level to exit market. So it could be a different shape, but that remains the goal.

In terms of Sapient, as you know, our position has always been we maintain open dialogue with all of our shareholders. We spend a considerable amount of time, John and I do, engaging with our shareholders in an open and constructive way. And so we have done that with Sapient as well. The conversations so far have been quite deep, quite meaningful and constructive, and we expect to maintain that as we move forward as well.

The next question comes from Dylan van Haaften of Stifel.

So just one clarification at the end for me. Baked into your tariff guide, are you using the Nairobi protocol for any of the, let's say, non-U.S. for U.S. business? And I'll stop there.

The short answer is no, not at this time.

We currently have no further questions. So I'd like to hand back to the management team for any final remarks.

Great. Thank you very much for your questions. As we said, we're very encouraged by where we are in Q2 and remain confident in our ability to deliver within the guidance that we've set out. So thank you for your attention today.