Smith & Nephew plc (SNN) Q4 2016 Earnings Report, Transcript and Summary

Great. Good morning. Veronika Dubajova from Goldman Sachs. I have two questions, please. Olivier, the first one is a strategic one. I think you have previously said that you believe that this business can grow at around 5% organically. Olivier Jean Bohuon - Smith & Nephew Plc: Yes.

I guess, can you give us your thoughts on how long until we see that 5%? Is that a question of 2018 or further than that? And related to that, how should we be thinking about operational leverage in that kind of environment? What would be the margin improvement that would come with that 5%? And then my second question and that may be more for Ian than for you, Olivier, is do you have any general thoughts on the impact of any tax changes in the U.S. corporate tax rate system, either just an overall lowering of the tax rate and what'd that mean for you or a border adjusted tax rate? Thank you. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Veronika. Can you hear me? Yes. Thank you for your questions. So, on the first question, do I believe that this business can go to a 5% growth and when? Yes, I do believe this business could reach 5% growth. And there is no doubt, I mean, we have to have some luck with the market, obviously. And I think that what we can do in terms of growth is our organic business development will help us to reach this figure. When? I don't know. I mean, we gave you the guidance for next year which is 3% to 4%. Is it in 2018, is it in 2019? I don't know, and I'm not going to give you any views on this. But, yes, I believe we can do that. I'd tell you, I did underestimate, and I have to be very honest about this, the disruption generated by the changes, big changes that we did in the company. It took us five years to make this happen. Why? Because I think it would have been a disaster without this time scale. We now have everything in place. We have the single managing director per country. We have this R&D which is now extremely well understood and managed, I mean there's number of things here which make me believe that this will be the real start of Smith & Nephew. And I will not tell you that if I was not totally confident. And that's why we give you now more data because we know that these things will happen. So, 5%, 4%, I don't know. I mean the idea is to improve the trading margin as we said, I mean on a step-per-step basis. I think that we have been – if you think about the trading margin in 2016, 21.8%. I mean we have been – it has been impacted by three things basically, I mean 120-basis point of forex, 60-basis point of Blue Belt dilution and the GYN business divestment. So, without these, trading margin would have been 23.7%, which is not bad actually. And so, I don't – I mean, I do expect that the company can for – because of the top line, because of management of the P&L, can grow year-after-year on the margin basis. And that's what we're going to do and that's what I'm going to be focusing on. So, that is the answer to the question on growth and margin. Now, on the U.S., you want to take it? Ian Melling - Smith & Nephew Plc: Sure. So, thanks, Veronika. As it relates to U.S., U.S. tax and what the Trump regime may or may not do, I wouldn't want to speculate exactly on that. But in terms of the U.S., we've been doing our modeling. We pay a lot of tax in the U.S. and so, lower tax rate would be a positive for us in terms of border adjustments. We're a net exporter from the U.S. at the moment, so that would probably be a good thing as well. Interest deductions, if there were changes to that, that would probably be a bad thing for us. So, we wait to see some more details as to how those things play together to work out the exact impact. Olivier Jean Bohuon - Smith & Nephew Plc: Tom? Tom M. Jones - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Thanks for taking my question. It is Tom Jones from Berenberg. First question on the guidance, I wonder if you could give us a little bit more detail on where you expect the 20 basis points to 70 basis points to come from. You gave us a nice breakdown of the factors that affected 2016 something similar in terms of FX, operating leverage, et cetera, will be helpful for your guidance for 2017. And then the second question (32:27) or late last year, but I think it's probably appropriate to ask you again. One of Smith & Nephew's problems over the years has not been what you've done right; it's what's gone wrong. You just had kind of one headwind come after another. What can you say to us that can reassure your shareholders that you've put in place steps, procedures, whatever, to reduce the amount of missteps, to give it another word, because that's really been the fundamental problem over the years (32:55). Olivier Jean Bohuon - Smith & Nephew Plc: It's true. It is true. Tom M. Jones - Joh. Berenberg, Gossler & Co. KG (United Kingdom): A good business at heart, but there's always something that takes the edge off the growth. Olivier Jean Bohuon - Smith & Nephew Plc: Yes. Tom M. Jones - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Stopping (33:02) that is kind of key to the outlook for the future, I think. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Tom. Let me answer the second question, the second part of the question. You're right. I mean, you're spot on. And we have always said that we're always working on three cylinders out of four. So, as I said to you last time, we have now six cylinders. So, when we work on five on six, it's better than three on four. So that we try to avoid the big issue. Now, more seriously, I think that, yes, we have faced issues. We have faced metal-on-metal. We have faced RENASYS issue in the U.S. We have faced China. We have faced the Gulf tender. And those are big impact on the company. There's no doubt that there have been always bad surprises, and this has impacted dramatically, I'd say, our sales and our profit. Now, I think that the business is more stable. I mean, the Emerging Markets, China is now recovering, with the exception of the Wound business, which is still more difficult, but globally it's a better business. The Gulf tenders, I don't think this will change dramatically positively in the short-term, maybe it will come back on near-term if the price of the oil goes up. So, this is behind us. I don't think this will happen again. Now, we are in an industry which is always risky. We can always have a big recall. We can always have a big issue. We can always have – that happens. And I cannot predict it. What I can tell you is that we have built now a structure and a way of trying to get the right contingencies to avoid this type of issues in the future. If they are minor issues, I don't think it will be an issue anymore. If they are big stuff, who knows, I mean, I don't know. I cannot promise anything, but what I can promise is that we have put everything together to avoid this to happen again, and I'm extremely conscious of what you have said always, actually, which is we have always a problem. Well, I hope that we'll not have any more problems in the future – and certainly not execution problems, because I think this is behind us also. So, on the second part of your question, Ian, you want to take this, guidance on the margin? Ian Melling - Smith & Nephew Plc: Sure. Yes. Thanks, Tom. In terms of the 20 basis points to 70 basis points, I don't think we're going to quantify specifically what's in there. Clearly, there a lot of moving parts in that margin number. Just a couple of things to bear in mind, GYN is – we have another half of that – of a year of that business to overcome, which is a similar headwind to what it was in 2016. FX, at this point, in terms of impact on the margin we see is broadly neutral, and there are no big one-offs to reverse from 2016. So, clearly, higher sales growth helps drive the operating leverage. So, that's where we are. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Ian. We are now going to get a question from the phone.

Okay. Thank you. We will take our first question today from Mr. Cooper from Jefferies. Please go ahead, Chris.

Morning. Thank you. Just firstly on the Wound business in China, perhaps you could just confirm my understanding here. I believe you're now saying the weakness is expected to continue through the first half. If I'm correct, I believe you were (36:45) by the first quarter. Can I just confirm my understanding there, and if there has been a change, can you confirm why. And I'll come back to the second question, if that's okay. Olivier Jean Bohuon - Smith & Nephew Plc: Okay. Well, in China, we have said that, first of all, the business is showing significant improvement in China in general. We still have too much stock in the Advanced Wound Care business in the region. So, we expect this to remain as it is for the next four months, five months, six months and then to come back on a normal growth rate.

Okay. Just on manufacturing for the next one, can you just confirm how significant the new site in Costa Rica will be, and whether we can expect any meaningful cost advantages here? And how does any sort of proposed change in the U.S. tax legislation impact your plans there? Olivier Jean Bohuon - Smith & Nephew Plc: Well, this has not been driven by U.S. tax. The move to – Costa Rica is a very important site for us. We have more than 1,000 employees in Costa Rica. This site comes from the acquisition of ArthroCare. It's a Sports Medicine site, which is state-of-the-art. We are transferring, it is true, some activities from the Boston area to Costa Rica. And again, this has for us a very positive impact. I mean the capacity that we have there is huge. We are going to do the WEREWOLF COBLATION System in Costa Rica in the future.

Okay. Thanks. I'll get back in the queue. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you. Are there question from the phone?

Yes. Our next question comes from Michael Jüngling from Morgan Stanley. Michael K. Jüngling - Morgan Stanley & Co. International Plc: Yes. Thank you and good morning. I have two questions. Firstly, on the optimization program, what will be the incremental EBITA benefit that you have in 2017 over 2016? Second question is on RENASYS II. What are your expectations for a speed to recovery of the lost sales that you had previously? Are you able to collect 20, 30, (39:11) in recovered sales from that product? Thank you. Olivier Jean Bohuon - Smith & Nephew Plc: Sorry, Michael. On the RENASYS, could you – I mean, are you talking about the U.S. here? Michael K. Jüngling - Morgan Stanley & Co. International Plc: Yes. I'm talking about the U.S, because... Olivier Jean Bohuon - Smith & Nephew Plc: Okay. Michael K. Jüngling - Morgan Stanley & Co. International Plc: ...in the past, I think you highlighted you lost around $40 million in sales. Olivier Jean Bohuon - Smith & Nephew Plc: Yes. Michael K. Jüngling - Morgan Stanley & Co. International Plc: And therefore the question is, as RENASYS II is rolled out in the United States, what is your ability to recapture those sales? Olivier Jean Bohuon - Smith & Nephew Plc: Okay. Well, first, let me remind you that our negative pressure wound therapy strategy is driven by the market expansion of the portable negative pressure in the world, and not really on the traditional negative pressure. We have now received the regulatory approval of two devices, the RENASYS TOUCH and the RENASYS GO. And we're launching, actually, these products. We expect to have a launch which will not be an aggressive launch. The idea is not to get back on the competitors on this one, but really to have a sufficient base in the hospitals to generate more sales for our portable device negative pressure wound therapy. And that has always been the case. And if you remember what we said when we have to stop RENASYS in the U.S., the idea was to say to you, well, we'll come back with TOUCH and GO and we'll not come back with the old RENASYS, so we had a gap at this time. And the idea was to come back slowly with this product, not to invest dramatically in the traditional negative pressure, but to invest much more in our portable device therapy. Mike, you want to add something, Mike, on this? Michael G. Frazzette - Smith & Nephew Plc: Just to reinforce, thanks for the question, Michael. I mean, our strategy in negative pressure has been from the get-go to focus on single-use disposable negative pressure and to further develop the market and shift the market to PICO which is our single-use disposable negative pressure. We're reintroducing RENASYS TOUCH and RENASYS GO, as Olivier says. TOUCH, however, we do have a bit of an IP minefield to navigate through. So, we're being careful in the way that we're doing it. We do think that eventually those tabs (41:37) will be declared invalid. At the same time, we're looking at some workarounds from a design standpoint, but as Olivier said, we're not in a hurry to get back in the market with traditional negative pressure except to the extent that it helps us sell disposable PICO negative pressure which is doing quite well. We've grown our negative pressure. Our PICO business doubled in size last year. We expect, as Olivier pointed out earlier, with the benefit of home health reimbursement in the U.S. to continue to drive that type of performance on an ongoing basis here. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Michael. On the optimization, Ian, you want to take this question? Ian Melling - Smith & Nephew Plc: Sure. Thank you, Michael. Just in terms of Group optimization, as you know that program has been delivering ahead of plan and we're now substantially complete with all the cost of that program. There are some small benefits to annualize in 2017. But I would say the impact will be smaller than it was in 2016. And so, it will be a help towards our margin guidance. Michael K. Jüngling - Morgan Stanley & Co. International Plc: Okay. Thank you. A follow-up question on RENASYS, I can't see why it would not be of interest to recapture the $40 million in sales that you had lost. Because initially the idea was to recapture the $40 million in sales and that's part of the reason, I guess, you also kept the sales force at its maximum force. So, why not recapture the $40 million? Olivier Jean Bohuon - Smith & Nephew Plc: That's a good question. First of all, let me remind you that the traditional negative pressure market in the U.S. is not what it was used to be. If you remember, five years ago, this market was roughly a $1.6 billion market. We now have $1 billion market and even less than $1 billion market. So, the prices in this market are going south and south and south. So, again, it's less profitable. It's a lot of investment to do. And here, I never said that we don't want to get back and to come back on this $40 million. I never said that. I said that we want to have a modest launch and we'll launch in the U.S. step by step because we have – and we believe more profitable return on investing in PICO around the world and in the U.S. included. And Mike was pointing out that we have doubled the sales of PICO, almost double, last year in the U.S. So, I mean, this works extremely well and we believe that on a long-term basis, the PICO and the portable devices are much more important or will be much more important than the traditional at-bed negative pressure instruments. Michael K. Jüngling - Morgan Stanley & Co. International Plc: Thank you. Olivier Jean Bohuon - Smith & Nephew Plc: So, we're going to take another question from the phone, because we have many people there.

Thank you. Our next question comes from Gunnar Romer from Deutsche Bank. Please go ahead.

Gunnar Romer, Deutsche Bank. Thanks for taking my questions. The first one on PICO again. I think you said you almost doubled sales, I was wondering whether you can put an absolute number behind that and also share a bit your thoughts on the outlook in 2017 and how the competitive landscape is evolving. Then secondly, on execution, I was wondering whether you can provide some more concrete examples around the pricing strategy and the sales force excellence that you've initiated. Thank you very much. Olivier Jean Bohuon - Smith & Nephew Plc: Look, I'm going to answer pricing and the sales force excellence and maybe, Mike, you want to take the – Mike wanted to do both, but we'll share. So, I wanted to answer both, but I'm sure Mike will do a better job in answering the PICO question. Go ahead, Mike. Michael G. Frazzette - Smith & Nephew Plc: On PICO? < A – [063GWK-E Olivier Bohuon]>: Yes. Michael G. Frazzette - Smith & Nephew Plc: I guess, the short answer on PICO is we don't provide the granular data on PICO. We do expect us to continue to grow. It's not a giant base, so doubling the (45:43). It's a good result for us. We expect to continue to grow at a pace similar to that. The competitive landscape, I mean, while we are very respectful of our competitors, we haven't seen anybody with a product in single-use disposable negative pressure that can compete with ours with PICO. We've got a pretty good pipeline of products. We're in limited commercial release right now of our 2.0 product. And we expect to launch that either at the end of this year or early next year, which will give us a whole another platform to launch many more derivative products in single-use disposable negative pressure. So, we're pretty confident about it. We like the position we're in. If we can continue to move the market – remember that the vast majority of negative pressure patients that are using traditional negative pressure today can be moved to single-use negative pressure, which is why we're driving it that way, which is why going after the traditional business is not that important to us. It's important to be able to capture a piece of it because there's some of it that we can't move to single-use, but we like our position with PICO. Olivier Jean Bohuon - Smith & Nephew Plc: Yes. And I would add, if I may, on PICO that few things make me extremely optimistic about the PICO development in the future. A, we continue to roll out on many countries, new countries, which is definitely a plus. Two, we have a number of independent studies that have been generated during the last two years, three years which are going now to arrive showing the value of PICO and not only on the classical Wound that we were used to have, but also on the GYN, on the Recon, on the all type of wounds. And I really believe that this is for me the future. And we have a great device, better device. We have also developments of this device that we expect to launch in the future. So, I mean, nothing else and really big confidence in this product. And what Mike said is true. I mean it becomes, I would say, the basic use is now PICO instead of traditional negative pressure because the pumps are better, the quality of negative pressure is better. And so, it will be in the future – and price-wise, when you think about the price, it's also extremely interesting compared to the traditional negative pressure. So, all this makes me confident that this will be a great start. On the pricing and sales force excellence, it's pricing actually, health outcome also and sales force excellence. Those have been badly managed in the past. And I can say that pretty clearly because we didn't have access to all the data that we wanted to have. And it can look stupid, but it is what it is when you have complex silos or complex organization, we don't have always the prices of one single product across the world and also within the country, the variation of – and it was difficult to put processes in place to make this happen. So, what we have done and this is part of Mike's responsibility. We have said, okay, A, let's build a serious health outcome department, giving us data to support market access and to support pricing. And this early enough in the development of the product to be able to integrate this in the global marketing strategy of the product, and this is now operational. The second thing is integrating the pricing early enough in the process, pricing, and thinking about the pricing, the pricing corridors, that we want to have for a specific product, and launch with a clear view of what should be the price. And also think about the price as a critical tool of margin improvement, which was not the case before. Sometimes, we have seen launches of product which were dilutive compared to previous product, which is ridiculous. And that's why I'm so keen to bring disruptive innovations on the market is because if you are disruptive, you can give a good price to your product. So, price early enough, pricing corridors, pricing visibility across the world to avoid issues. These are important things, and this is what the department newly created of Mike is going to give us in the future. And that's why I believe that this will help to control, manage and optimize the pricing all across the world for all our products. Sales force excellence is the same story. Sales force excellence, I've been trying like crazy since the beginning to develop sales force excellence tools in the company, okay? Failure. Failure. And why a failure? Because, again, these silos were just incompatible with a sales force excellence process. One was saying, we have our own process. The other one was saying, well, we have a better one. And so, it was just a disaster. So, now, we have a transverse and Mike, running the commercial operations as a department able to look at this on a global basis. That changed dramatically. And I'd tell you, I've been visiting two countries since early January. Both countries have shown to me, something I've never seen before, data on sales force excellence, including all the changes which are critical. And we did that in the past in the U.S. for the Wound, and it worked very well, of incentives. We have de-capped the incentive because we believe that a good rep should make a lot of money and a bad rep should leave. So, we have now systems all across the world, which are working better. So, this will bring up the good reps, will bring down the bad reps. Sales force excellence is also some basic things. How many days do you work? How many days you see your customers face to face? And you realize that this question has never been asked, or if it has been asked, it has been forgotten. So, now, we have this on a regular basis. We have improvement, the CRMs, the number of days face to face, the days spent with the supervisor, and so on and so forth. I mean, it is well done now. And Mike, as someone in charge of this, which I think would, A, check; B, cross-fertilize, take the best of the countries and use it in other countries. It was impossible to do before. It is possible to now. And I believe this will change dramatically our ability to execute.

Very comprehensive answer. Thank you. Olivier Jean Bohuon - Smith & Nephew Plc: Thank you. Question from the – yes. And then (53:21) and then it's you.

Hi. Lisa Clive from Bernstein. Could you give us an update on the U.S. traditional Wound market? What do you think the U.S. AWC market is growing roughly today given the broader trends towards (53:37)? And what is the interest in some of the risk-sharing initiatives you've put in place around preventable readmissions? Second question on Syncera, we haven't heard about that in a while. The model itself is a pretty radical transformation, so perhaps not entirely surprising that the uptake has been perhaps more hesitant than you originally thought. But is it spurring other conversations around cost control? Is there more actual uptake signed contracts today? Just how does that overall influence the outlook for your U.S. Hip and Knee market? Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Lisa. So, Mike, do you want to answer this question? Michael G. Frazzette - Smith & Nephew Plc: Sure. Olivier Jean Bohuon - Smith & Nephew Plc: Yes. Michael G. Frazzette - Smith & Nephew Plc: Lisa, thanks. I'll answer Syncera, and then maybe, Phil, you can talk to some of the Wound dynamic. So, our Syncera model we still believe in. You're right, it is a disruptive model. We continue to make progress. We have not seen the inflection point that we'd planned when we first launched it and we've talked about that over the last several quarters. But we continue to make progress, and we did again in the fourth quarter. We captured some more business. Some more accounts moved our way. I think at the end of the day, we're just ahead of the curve on this model. It's a lower-cost model. It doesn't meet 100% of the patient population, but it does help deliver a health system a substantial savings if they're willing to do patient matching, which most of them do today, anyway. Then, with the advent of CJR, what it's done is it's given us the ability to pivot slightly and take on a broader Smith & Nephew value solutions approach that you've heard our competitors come out with very similar type programs. So, we're looking at everything from surgery scheduling to help minimize the cost of instrumentation to patient matching. We've been out in the market now in a leadership position with VISIONAIRE and patient match instruments for a long time; we'll continue to drive that. And we're looking at other types of services to bolt on through an overall solutions approach that gets at the total 90-day episode and that bundled payment. There was a question early on or at least a comment early on about U.S. and what's going on in the U.S. We're going to continue to pay attention. I think, irrespective of whether the new administration and the new Secretary of Health and Human Services continues to push the bundled payment approach in CJR, I think Tom Price has voiced an opposition to it. We still expect there to be continued price pressure. And at some point, whether you're looking at the entire bundle or you're back to just looking at fees in the way that the 90-day episode is broken up, that the pressure will return to the implant itself. So, unless we're able to show clinical differentiation, then we're going to be in a competitive environment price-wise, and I think there, again, we're in a good place with Syncera. We've got a very good model. It's demonstrated effectiveness in the accounts that have converted to it, but like I said, it's been slow-go. Phil Cowdy - Smith & Nephew Plc: Sorry, Lisa. So, just on the Wound Care market in the U.S., which I think you were asking. So, 2016 was very consistent with 2015 at sort of 4% or 5%. I think what you saw there as the penalties for hospital-acquired infections kicked in 18 months ago, two years ago. You saw that market increase. We don't break that out, or we don't give that number specifically, but we performed, I would say, very healthily against that market rate, particularly driven by our ALLEVYN and ALLEVYN Life range. Olivier Jean Bohuon - Smith & Nephew Plc: Yes, I mean, U.S. is a good example of what the return actually. The Wound Care growth for the one were there (57:44) before. You remember it was not good for us, and we have now, as Phil said, a very strong growth actually. And we are beating the market in Wound Care. We have a superb portfolio. I think the global Wound Care, again, you will not see globally high growth in the first half of the year because, again, of the Chinese environment. But this doesn't mean that the U.S. is not performing very strongly. So, we are extremely happy with the Wound Care – and Wound Devices actually, in the U.S. So, we have one question here (58:20). Front row. Jimmy Muchechetere - Investec Wealth & Investment Ltd.: Thank you. Jimmy Muchechetere from Investec Wealth. A couple of questions. The first one is on the trading margin. I'm just wondering how the mix shift to higher growth products is going to affect the operational gearing? And then secondly, the 10 basis points to 15 basis points per annum improvement, do you consider that a stretching target, or are you being very conservative, given that your margin is still way behind competitors'? The second question is on Trump. And thank you for the comments you've made already, but I'm just wondering how repeal and replace or repeal and repair of ACA would affect Smith & Nephew and your end markets? And then secondly, whether the pricing debate would spill over from pharma to medical devices and how that would impact new pricing, getting paid for new innovations? Olivier Jean Bohuon - Smith & Nephew Plc: Thank you. So, you take the first question, margin. Ian Melling - Smith & Nephew Plc: Yes. I will try. So, I think your question was, does the mix shift to higher growth products drive our margin? I think it's hard to say. We have higher growth products in the Emerging Markets. We have higher growth products in the U.S. Margins are different in our different franchises and our different businesses. So, I wouldn't call out a significant movement in either direction driven by that. And was there a second part to that question as well? Olivier Jean Bohuon - Smith & Nephew Plc: 10 basis points to 15 (60:00) basis points is stretch or not? Ian Melling - Smith & Nephew Plc: I would say the guidance is the guidance. I wouldn't want to comment on whether it's stretching or otherwise. Michael G. Frazzette - Smith & Nephew Plc: Jimmy, with respect to Trump and the ACA, if you recall, we didn't see a big increase when the ACA was initiated. We don't anticipate that there will be much of an impact with a repeal and replace. Again, depending on what type of reimbursement plan is put in place for seniors. We don't expect there to be too much difference from the current Medicare type of program that exists today, and for Hips and Knees, that's the majority of patients in the U.S. Olivier Jean Bohuon - Smith & Nephew Plc: And pricing, the last part of the question, do we see these pharma issues rebounding on – we don't know. I mean, there is nothing announced on this. There was no clear announcement about what is supposed to happen in the medical devices, so I don't know. So, we go back to the phone. There are some people waiting for questions at the phone.

Okay. Thank you. Our next question comes from Julien Dormois from Exane. Please go ahead.

Hi. Good morning, gentlemen. Thanks for taking my question. It's actually about Blue Belt. Sorry if it's been answered already, but I joined the call lately. I was just wondering if you could give us more granularity about the performance of Blue Belt in 2016, for example, the level of sales or the number of systems that you have placed, typically in the U.S.? And maybe also on how the number of procedures per system is evolving? Olivier Jean Bohuon - Smith & Nephew Plc: Thank you, Julien. We don't disclose precise numbers. What I can tell you is that we grew at 50%-plus, actually, the Blue Belt acquisition. We also have had the approval of the Total Knee, and you remember that we have started the year with Uni Knee only, and the Total Knee business obviously opens us a much bigger market than the Uni Knee. So, we are confident of the fact that this product and these robots will have a big success in the future. So we are – what we have seen so far is really good. Mike, you want to add a few things or... Michael G. Frazzette - Smith & Nephew Plc: Well, I mean, the integration is going well. We've hit all of our milestones that we set out to hit. We've accomplished the financial results, as Olivier said, that we shot for in our board plan. We received a modification to our 510(k) for Total Knee after a very successful limited commercial release. So, we're on track to launch Total Knee a little later in the year, as we suggested. I think, relatedly, the ZUK Uni that we acquired from Zimmer if you recall, when Zimmer acquired Biomet, they disposed of their ZUK Knee. That's also performing quite well, and it's performing well in concert with Blue Belt. Because if you recall, Blue Belt robotics' first order of business was to help drive the Uni space. So, again, good progress. We got a long ways to go. We're up against a very tough competitor in Stryker. But we like the market development that they're doing. It's helping educate the masses. And we think, going head-to-head, that we've got a favorable product. As more procedures move from high-cost hospitals to lower-cost ambulatory surgery centers, they're going to look for mobile robotics, which we have. They're going to look for a lower cost, which we have. And they're going to look for something that isn't tied to other types, other modalities like CT scans, et cetera, which, again, we have. So, again good progress, we've got long ways to go, but we're making good headway. Olivier Jean Bohuon - Smith & Nephew Plc: But having said that, Julien, I think it's also important to note that we are not changing our guidance on Blue Belt, so we still have a dilution expected in 2017 as I said before. So, we have another question from the phone? Anyone there? Who?

Anymore in the room? Olivier Jean Bohuon - Smith & Nephew Plc: In the room? So – Veronika, what did we say? Two questions. Go ahead.

Just following up on, actually, NAVIO. Mike, can you talk about the, I guess, the (64:56) to the total new rollout commercially? How much training you have to do? What's the capital investment required for the robot to upgrade it to have the Total Knee capability? Your competitor was also coming out with a Total Knee this year. They've been doing a huge amount of training over the past 12 months. Do you imagine you're going to have to spend the next 12 months training before you actually are fully commercial? If you can just talk about that broadly, that would be great. Michael G. Frazzette - Smith & Nephew Plc: I'll give you some really high level thoughts on it. I mean, it does require training because like any type of Enabling Technology or new Enabling Technology, at first, it's inefficient. And so, if it's going to slow down procedures and chew up OR (65:37) time, that's not good. So, it does require the training. When I hear that coming from the other guys, I can relate. So, we've got to invest in that. But the overall outlays for an account is far less with NAVIO than it is with our competitor. So, we think it's an attractive offering from an economic standpoint. And in terms of the rest of the instrumentation, it's not too different than typical in (66:06) reconstruction. Olivier Jean Bohuon - Smith & Nephew Plc: Any more question from the room or the phone? If not, we will conclude.

Okay. We actually do have a question from Ines Silva. Sorry about that. Ines, you can go ahead.

Thank you. I would just like to ask if you could highlight for 2017 what you feel are the most important products that are going to help drive growth, excluding whatever positive impact we get from Emerging Markets? And then secondly, just coming back quickly on the (66:46 – 67:00)? Olivier Jean Bohuon - Smith & Nephew Plc: I'm sorry. We could not hear your second part of the question. I mean, I can talk to you about the products, but the second part of the question, is it the CJR? What do you ask, please, if you don't mind to come back on the question?

Sure. I just asked if you think that the CJR is going to continue to be a theme in 2017 when you have your pricing discussions with hospitals. Olivier Jean Bohuon - Smith & Nephew Plc: Yes.

Or if that's less of a theme now that maybe the program is not going to get expanded with Tom Price leading the HHS. Olivier Jean Bohuon - Smith & Nephew Plc: Okay. Well, let me first answer the first question, and thank you because actually you helped me for my conclusion; I wanted to rebound on this thing, why do we believe that 2017 will be a good year for Smith & Nephew. Obviously, the product are number one in the list. And where do I believe that we are going to do good things, definitely in Sports Medicine, whether it is in Joint Repair where we are continuing high growth or in Enabling Technologies with the addition of two products I was mentioning: the WEREWOLF and the LENS, both products having shown a super adoption. INTERTAN is also in Trauma will give us also a lot of satisfaction. We expect obviously to capitalize again on the JOURNEY II platform with the launch of the JOURNEY II XR, which is also a new addition to our JOURNEY platform. So, the Knee business as a whole should be good. We expect also that the REDAPT Revision System in Hip will help us to fill the gap that we have in our portfolio and come back at a normal market growth in the Hip business. I expect PICO to continue to be a strong level of growth this for the product. And I'm expecting Europe to be back on track. We have two issues again this year in Europe. Slight issues linked to management, linked to the reorganization, linked to the fact that in the UK and in Germany, we have moved all the sites. As you know, we have closed Marl in Germany and moved everything to Hamburg. In the UK, we have moved everything. And yesterday or the – no, it was yesterday – day before yesterday, I did make the grand opening of our new facility in Croxley Green in Watford. And this takes all the people we have in UK in Godmanchester, in Hull, I mean talking about the commercial people of Hull, in York. They are all now in Watford. Obviously, this changes obviously the picture and we have lost people. We have lost dynamic. We have now everyone in place, a lot of new people. This place is enabling us also to attract more talents. It's easier to have a high level professional here in London than in other places in the country. We have seen that in France. We have closed our facility in Le Mans in the West and we have moved it to Paris also. We have lost behind unfortunately some people, but we have been able to hire new talents with amazing level. So, all this is done. So, it will change the way we operate. There's no doubt. We have done that in Australia. We have closed Melbourne and this has generated some disruption in Wound Care. Now, everyone is set up. We have a new MD in Australia. We have a full organization. So, going back to your point, I think that all these issues that we had are behind. So, I trust that Smith & Nephew will be successful in 2017. There is no doubt about these products, organization, pricing management, sales force excellence, and I leave behind a number of things. So, I'm so excited with that, I forgot your question actually.

CJR. Olivier Jean Bohuon - Smith & Nephew Plc: Yes. CJR. So, do we see a modification in the CJR or are things changing? Mike, you want to take this? Michael G. Frazzette - Smith & Nephew Plc: Well, we have – as we've said several times in the past, we haven't seen any significant impact to the business. We've experienced a lot different conversations with the customers, but it hasn't gotten to the point to impacting our business today. And we've got a very small but good team in Washington for government affairs, that keeps us abreast to this and stays engaged with policymakers. And we'll continue to do so. We'll see how it takes shape in the coming weeks and months. Olivier Jean Bohuon - Smith & Nephew Plc: Yes.