Ladies and gentlemen, thank you for standing by and welcome to the Smith & Nephew PLC Third Quarter Results Presentation. After the speaker presentation, there will be the question-and-answer session. Certain statements in this presentation are forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in the company’s filing with the Securities and Exchange Commission. I would now like to hand the conference over to Roland Diggelmann. Please go ahead, sir.

Thank you, Nadia. Good morning, everyone. And welcome to Smith & Nephew’s third quarter 2020 trading update. I’m also joined today by Anne-Francoise Nesmes, who I’m very delighted to have with us for her first results call as a Chief Financial Officer. Let me just start with a few high-level remarks. Firstly, I’m very pleased with our progress in the third quarter, and especially how the business and our employees have responded to the challenging circumstances. We’ve seen most of our global markets recover. Thanks to our work in Q2, we were actually ready. Our commitment to maintaining strong customer relationships, keeping our supply chain and manufacturing open, and investing in both retaining and training our people is paying off. Anne-Francoise will take you through our Q3 performance by markets and trading conditions and then I’ll cover the performance of the franchises. Stepping back from the quarter to look across the year, I’m also very pleased that we have continued to deliver on our strategy, while also responding to COVID-19 effectively. We have made great progress before COVID. We had great momentum in the second half of 2019 and we’ve continued the important work to transform the Group. I’m proud of the way the team has delivered on multiple fronts. Those include major product launches, M&A, R&D, and pushing forward our people and sustainability agendas. I will develop some of these themes with examples of what we’ve been doing to further enhance our mid-term growth profile in the presentation later. But first, let me hand over to Anne-Francoise to lead off the review of the quarter.

Thank you, Roland. Good morning, everyone. As Roland said, it’s my first results call with you and I’d like to say that I’m delighted to be here at Smith & Nephew, and I also look forward to meeting you in person whenever it will be possible to do so again. Now moving to the numbers. Q3 revenue at $1.2 billion declined by 4.2% on an underlying basis, and 3.7% on a reported basis, in line with the announcement we made on the 1st of October. Pleasingly, the U.S., our largest market, returned to growth in the quarter at 0.9% on an underlying basis, with revenue of $630 million. Of course, given the different recovery profiles, Other Established Markets declined by 6.2% and Emerging Markets by 14.5%. Now, looking into the detail of each region for Q3, we saw a general continuation of the patterns that had developed in Q2. As I mentioned before and you can see on the slide, the U.S. business continued to improve and returned to growth for the quarter. And as a reminder, by the end of Q2, surgery had restarted in all states, but with restrictions in some. By the end of Q3, the restrictions in Texas had been relaxed and lifted entirely everywhere else. The picture in our Established Markets is very mixed. Markets that were fastest to recover initially have continued to lead the way. In Europe, for instance, Germany and France returned to growth in the quarter and Southern Europe also improved. However, as we saw in Q2, the UK continued to be slower to recover with surgical volumes still significantly below the prior year. For Established Markets in Asia Pacific, Australia procedure volumes recovered further to approximately 90% of normal level by early October and Japan is now at similar level after lifting restrictions in the quarter. It is important to note, though, that there is still uncertainty in our Established Markets. We have seen some postponements and cancellations of procedures recently. And it’s not yet clear what the impact will be as new restrictions are being reintroduced. Additionally, the levels of growth in some European countries may reflect the systems working through the backlog of deferred treatments. Finally, looking at our Emerging Markets, they showed divergent performance. While it looks like a relatively unchanged rate of decline over the quarters is in fact driven by markets entering and exiting restrictions at different times. Q1 weakness was driven by China, as we know the first market to have COVID restrictions, but China recovered strongly in Q2 and again grew in Q3 as a whole. Capacity utilization remains over 80%. Q2 and Q3 weaknesses were instead driven by other emerging markets that were impacted by COVID later. These markets were still largely under restrictions as we exited Q3. For instance, India, South Africa, and many Latin American markets have yet to show a sign of recovery. Clearly, we are all interested in how the rest of 2020 and 2021 may develop. Unfortunately, visibility remains limited. As I’ve just explained, there is very significant geographical variability, including local restrictions being reintroduced in some markets. In general, we do believe healthcare systems are better prepared than they were earlier in the year, and we do not expect the same global impact as we saw in Q2. However, we still expect some impact. While it’s too early to quantify, we’ve seen increasing postponements of surgeries in the last few weeks in a number of European countries. As a result, our full-year 2020 guidance remains withdrawn, since the nature and the scope of any new restrictions to control COVID-19 through the year-end are not known. On listening to public health authorities and observing developments at this latest stage of 2020, you will not be surprised to hear that our expectation is that the impact of COVID will continue in the first half of 2021. But having said all of this, it’s important to remember that our strategic focus remains on delivering long-term growth. And we are investing accordingly. We are continuing to prioritize R&D investment, we have continued with our M&A agenda, which brings additional short-term margin dilution, and naturally, you should also expect the negative operating leverage effects we described earlier in the year to continue while volumes are under pressure. As we said before, we have been preparing new operational efficiency plans, which I have been reviewing since I joined. A significant component of the plan is around manufacturing. But as you know, manufacturing and supply chain transformation takes time to execute. And finally, as you look into 2020 and 2021, I’d like to remind you that the revenue headwinds from foreign exchange should result in a transactional headwind for the trading margin in both years. And with that, I’ll hand back to Roland to cover our franchise performance and our strategic progress.

Thank you, Anne-Francoise. Moving on to the franchises, indeed. All three showed significant improvement, both over Q2 and over the June growth rates. Orthopedics declined by 2.8% globally, Sports Med and ENT by 4.5% and AWM by 6.1%. Regional patterns within the franchises were largely similar to those of the Group. Moving to Orthopedics, we continue to see a stronger performance in hips than in knees, as well as a higher proportion of the emergency cases in the hip market. Surgeons also appeared to be preferentially treating hips. For us at Smith & Nephew specifically, we’re seeing additional strong growth from the rollout of our OR3O Dual Mobility Hip System. In July, we announced the U.S. launch of CORI, our new generation robotic surgery platform for total and UNI knee arthroplasty. Customer reaction from the new form factor has been overwhelmingly positive, as it meets the needs for a smaller, more portable robotic system. Other Reconstruction declined 3.1% in the quarter, including a return to growth in the U.S. That reflected recovery in capital sales, along with the weak prior-year quarter for the acquired Brainlab orthopedic recon business. Trauma continues to improve with growth in the U.S. and Asia-Pacific for the quarter, as well as for plates and screws and our hip fracture business globally. In Sports Medicine, Joint Repair declined 2.7%; this was really driven by recovering elective surgery volumes, although lower than normal levels as competitive sports activity remained a drag on some specific knee procedures. In markets where procedure volumes are recovering, AET capital sales have also recovered. Our pipeline of business remains good and we’re seeing a step-up in evaluations, particularly around the LENS 4K Imaging System. ENT has been slower to recover, understandable caution from parents in particular has remained the drag on growth. However, we did start to see some improvements late in the quarter in the U.S. Our focus in ENT has been on readiness for the recovery with the rollout of HALO COBLATION Wands and training surgeons to use the Tula tympanostomy system. Revenue for Tula has been slow so far with lower ear infection rates as a result of COVID restrictions. We’ve effectively lost 12 months, but we’re continuing to invest, for example, in additional clinical studies and of course, on market readiness. In Advanced Wound Management, all three segments showed improvements over Q2. Although, as expected, recovery has been slower than in the surgical business. The factors include a higher proportion of sales coming from Europe, specific to us; restricted access to OR cases for non-essential staff in many regions; and key acute hospitals staff remaining focused on COVID care. In AWC, we saw significant improvement in the U.S. and Europe, including some European markets returning to growth. Bioactive sales declined 4.5%. Debridement and skin substitute market volumes were down by single-digit percentage, with improvement late in the quarter. Advanced Wound Devices declined 6.9%, with the overall recovery mainly driven by the U.S. I’d like to finish by spending some time on what we’ve done to enhance our mid-term growth profile and in line with our strategic imperatives. In September, we announced a conditional agreement to acquire Integra’s orthopedics extremities business. Extremities is a market we viewed as attractive for some time. It’s a high growth category with 67% growth in the U.S. extremities market, clearly accretive to our current weighted average market growth rate. The asset is also synergistic with our existing business. As with many of our tuck-in acquisitions, we have the ability to sell the acquired portfolio through significantly wider reaching channels than it’s been sold through today. Our retail and sports sellers are already calling on surgeons that also perform shoulder arthroplasty. We will now be able to sell them as Smith & Nephew shoulders. For our Trauma business, we are already calling foot and ankle surgeons and upper extremities and Integra products will further enhance our offering there. And the asset brings a team of extremities specialists into Smith & Nephew with established distribution capabilities of their own that we can also benefit from. Finally, the transaction adds to our pipeline with a next-generation shoulder, bringing short stem and stemless technology into the portfolio, expected to launch in 2022. With these opportunities, we expect to drive double-digit revenue growth for the acquired products. You should see the Integra transaction in the context of the broader strategic progress we’ve made this year. We’ve been building on the progress of 2019 and establish further drivers of growth. Firstly, you’ve seen important product launches from our internal R&D. We covered the technical differentiation of CORI and INTELLIO at our analyst event in September. We’ve talked less about HALO, but it’s an important launch in ENT. HALO brings our last generation of COBLATION technology to tonsil and adenoid surgery, ready for recovery in that part of the market. All three of these launches can also drive both capital and consumables. And we have a full pipeline still coming. To pick just one example, the next generation of PICO which we expect to launch in late 2021, following regulatory clearances and various approvals. Secondly, we’ve made further progress in adding growth through M&A. The recent Integra transaction and Tusker in January are examples of the tuck-in acquisition strategy that’s familiar to you by now. We’ve also added to our digital technology capability. The MiJourney acquisition laid the foundation for ARIA, our digital platform to connect providers across the patient’s episode of care that we believe will enable the reduction of post-acute cost, improvement of clinical efficiencies, and the generation of value-based datasets. The technology has potentially broad applications, but is particularly suited to the high growth ASC segment. And finally, we will continue to expand the acquired assets from previous years. We have successfully completed requirements for CE Mark with REGENETEN and NOVOSTITCH PRO, both of which we acquired as U.S. assets. And then in Wound, we have now fully trained our U.S. bioactive field force to sell Grafix and Stravix and start driving the revenue synergies of the Osiris acquisition. So between these various steps, we have put additional and meaningful mid-term growth drivers in place across all three franchises. In summary, I return to my opening slides. Q3 was significantly better than Q2 and I’d like to take this opportunity to also thank all of our employees globally for the way they have responded in these difficult and challenging times and for remaining focused on supporting customers and patients through the crisis. COVID-19, as we all know, has not stopped, but we will continue to work on important measures to transform Smith & Nephew, and I’m very excited by our progress here. And finally, what about the future? Smith & Nephew is now a company with a purpose and a plan. We focus on what we can control. This is commercial excellence, delivering on our R&D pipeline, building our culture, and driving efficiency. The Smith & Nephew of today is more agile and we have proven able to respond rapidly to changing circumstances. Looking further ahead, we’re building a stronger company. We have a proven strategy, an excellent management team, and a robust balance sheet. When we move beyond COVID-19, we will remain committed to our mid-term ambition to consistently outgrow our markets, at the same time as delivering improvements to our trading profit margin. With that, I thank you for your attention. Anne-Francoise and I would now be very happy to take your questions. Thank you.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. The first questions come from the line of Tom Jones from Berenberg. Please ask your question.

Good morning. I had a couple of questions. Thank you for taking them. The first is, I just wondered if you could shed a little bit more color on the differential between the hip and knee growth that you saw in the quarter. Do you think that’s broadly reflective of the market or do you think there were some Smith & Nephew-specific factors beyond OR3O that are playing into that? And I guess the question is, what do you think the sort of near-term outlook for both the hip and knee businesses is? Do you expect that differential to continue? And the second question I had was really on Integra. Your guidance that you expect to exceed your WACC in year five is probably one to two years longer than usual. Does this just reflect the sort of the fact that you’re not expecting new shoulder until 2022 or is it perhaps more symptomatic that the good acquisitions are just getting a little bit harder to find, so you’re having to push the boundaries of what’s acceptable in terms of a ROIC WACC spread and the time to achieve that positive spread?

Thank you, Tom. Thanks for the questions, I’ll take the first one on hip and knee differentials. First, I think there is probably going to be a market factor and then a specific factor to Smith & Nephew. So in hips, what we’re seeing is that we’re seeing more emergency reconstruction or also trauma. That’s certainly a fact. There’s probably surgeons that treat hips further or more earlier than these in the broader context. So from that end, we expect that differential to continue. And then on the portfolio-specific side, as you pointed out, we’ve had great success with OR3O. It is still only at the beginning of the launch, so we expect that to continue to deliver strong growth numbers for us. And then on the knee side, we still don’t have a – we are working hard on having a CORI offer as well. So I think that will also continue to have a certain impact and underpin the differential. On the Integra acquisition, I think you’re absolutely right. We have to differentiate between the type of acquisitions, of course, and if it’s more technology-based, in the case of Integra, I would say, it’s a mixed technology. As you pointed out, we have a shoulder that’s in development, which we’re very excited about which will only come in 2022. And it’s a commercial play as well because we acquire commercial capabilities, but typically acquisitions in technology probably take a bit more time to return on – with the return on investment.

That’s very helpful. And then maybe one quick follow-up, maybe for Anne-Francoise. Welcome to Smith & Nephew. I was just – it’s – it was on the bond issue really. I mean, Smith & Nephew is a company that has historically relied more on bank debt and bond debt. So I just wondered if we should be reading anything into the fact you’ve been a little bit more aggressive on the bond side here? And is that just about locking in attractive interest rates for a long period of time? Or is that about reducing refinancing risk and pushing the maturity profile out quite some distance?

Thank you, Tom, for your question. Nice to meet you virtually, so to speak. So in terms of the bond quite clearly, an element of the refinancing was opportunistic. The market, the interest rates are very low. And therefore, when we look at our debt maturity profile and the market, we felt it was a good time to execute the strategy of diversifying our sources of funding. As you said quite rightly, we relied historically on bank loans and the profile was skewed to that. So we were opportunistic in terms of benefiting from a positive market environment and therefore we have a more diversified source of funds, which gives us the ability to execute our strategy.

That’s very helpful. I’ll get back in the queue.

Thank you. The next question comes from the line of Kyle Rose from Canaccord. Please ask your question.

Great. Thank you for taking the questions. Two from me. The first, I just wanted to see if you could give us a little more information regarding the Integra acquisition. I guess why was that the right mix of assets now? And then, how do you think about the opportunity with respect to future M&A? Should we expect more tuck-ins of a similar size or do you have any appetite to maybe take a bigger play? And then secondarily, on the U.S. market, specifically as it stands in Wound Care. If I remember correctly, you highlighted some positive contract wins on the AWD side, I think, about this time last year. Have we started to see those impacts in the U.S.? And then how should we think about the bioactive business, given you’ve got the sales force fully trained and engaged? How should the U.S. Wound Care business broadly trend as we think about exiting 2020 and into 2021? Thank you.

Thank you. Kyle. Thanks for the questions. On Integra, I think you probably heard me earlier or in the past as well, talk about complementing our strong reconstruction business with upper extremities and notably with the shoulder. So we’ve been looking at the market for some time. We always felt this would be very complementary to the portfolio. And I’m very excited about the development that’s underway for a new shoulder system, stemless and with various options. So we felt that was the appropriate time. We pushed it through despite the current challenges, but we feel very comfortable with this. It also gives us a play – an additional play in foot and ankle, which is great. And with that, it strengthens the commercial capabilities also, not just with the joint team but also of the trauma team. So, I believe we have opportunities there. We acquired a full commercial sales force in the U.S. and then we have some distributors in Europe and then in the rest of the world that also, I believe we can leverage better in-house. So we feel very good about this acquisition, both strategically and in the current timeframe. On U.S. Wound Care, indeed, some wins which have taken and will take a bit longer to materialize because of the current environment, as you would expect. But I feel very comfortable here. I think we’ll have a good fourth quarter in AWM overall and that will also be owing to some improvements in bioactives as you mentioned. We now have a fully trained sales force on both ends, the Smith & Nephew and the prior Osiris have cross-trained and we have the ability to sell bioactives now across and I think that will help us. We also have on the regulatory and the reimbursement front on the – in the U.S., we will see some support for that.

Thank you for taking the question.

Thank you. The next question comes from the line of David Adlington from JP Morgan. Please ask your question.

Good morning, guys. Thanks for the questions. So, two please. So firstly, just on Wound. You’ve had a couple of peers report that have sort of come in slightly better in terms of growth. I just wanted to see if you are losing share or if there was anything with respect to maybe your geographic mix is impacting your growth on the Wound Care side? And then secondly, just in terms of margins for the full year, obviously, you’ve pulled out the transactional impact from foreign exchange. Maybe you could just expand a little further on that and how we should be thinking about revenues and cost evolution through the second half, the full-year margins? Thanks.

Thank you. We don’t typically comment on the margins on the third quarter. So we will try to give you a little color, but maybe Anne-Francoise can give you some general comments there. The first one on Wound. Absolutely, we have a different mix. We have a strong business in Europe, which has been more affected by COVID, as you all know. I think that’s one reason to bear in mind. We have seen some softness in Asia, some of that related to staffing patterns. I don’t feel at this stage that we have enough data to say whether this has had an impact on market share. I think we’re well positioned, but the access to healthcare facilities over the – during the COVID crisis, of course, remained challenging in some markets. And then, of course, in devices, we also see an impact from the lower number of elective surgeries.

So I’ll take the question then, Roland, around margin to the extent. Whilst I say, I remind you around the cost savings we’ve put in place to mitigate the impact of COVID-19. And we’ve talked about and we indicated in May that we were targeting up to $200 million of savings in discretionary costs for the full year in 2020 versus our expectations or budget. We are delivering on that, we are delivering these targets and really was in areas around variable pay, third party commissions, travel, consultancy. So some of that was directly linked to activities. And therefore, I would point out as well, you should not consider the savings as being structural in nature as you look at 2021. So that’s in play and that’s certainly being realized. And then the other element you need to think about for the full year is the transactional FX, which you mentioned and of course some negative operating leverage from the fact that the volumes are reduced. But that – just as well, if I may, since I’m on the topic of margin, I think it’s important over time to focus on volume and revenue growth. We will look at efficiencies, we will continue to be as efficient and drive for efficiencies, but the margin will move as we drive volume growth and therefore the strategic topics that Roland has covered are very critical, are important in terms of driving margin.

Okay, thanks.

Thank you. The next question comes from the line of Veronika Dubajova from Goldman Sachs. Please ask your question.

Yes, good morning and thank you for taking my questions, please. My first one is sort of a follow-up on the question that David just asked around margins. I think, Anne-Francoise, your predecessor talked about, from memory, I think 50 basis points of transactional FX impact. If you can just quickly clarify whether that number is the same or if it’s changed? And if you have any insights into what it might look like in 2021? I think you alluded to maybe that there being some continuation as we have moved into 2021. That would very much help us with our modeling. And my second question is a big picture question for Roland. Obviously, appreciate we are living in a very uncertain environment, and I think you made in your prepared remarks, the statement that you think COVID will probably be here through at least the first half of 2021. I guess, I’m just curious, in that context, how you are thinking about the Group’s ability to return to positive organic revenue growth? And what do you think when might that come in your mind? Is that really a second half 2021 event or might that happen sooner? I mean, I guess the comps in the first half will be very easy, but just kind of curious how you are thinking about that. And two, just what do you think you need to see to get to that sustainable positive organic revenue growth and I guess revenues getting above the state, were at above the level where they were in 2019?

So while Roland thinks about the more forward-looking question, I will pick up the forex. You had to be glad to know, there is consistency with my predecessor. I know normally a CFO comes in and everything is new and changing, but he will be very consistent. You are right to say, Veronika, that the forex is about 50 basis points in 2020 and we expect the same roughly in 2021. So, Roland?

Hi, Veronika. On the growth, of course, on the return to growth, I think that’s, of course, the big question that we are all asking you. What we see, of course, is a continued impact of COVID. We have limited visibility like everyone else as to how long this will go. We are seeing very different guidance in the recovery. We’re seeing, overall, I think a very strong resilience in this industry overall when you look at elective surgeries, when you look at a return to activity levels, sports med, and wound in general. So I’m generally optimistic. I don’t have this – I don’t know how long the current crisis will continue. Clearly, it will be different in different parts of the world and we have seen that. What we have also learned I think through the first wave is clearly that we have now, as all stakeholders and I’m talking politics, society at large, healthcare systems, healthcare delivery, and also industry, I think we have learned a great deal on how to manage parts of that crisis. I don’t expect the same level of shutdowns and restrictions. And I also think we have very good protocols across the board now in place that really aim at one thing: providing patients with the care that they need and that care, as you know, the fundamentals are there. They will continue to be strong. They are supported by the global demographic trends, more aging population that needs more care, more access to healthcare facilities and healthcare in general in emerging markets. So I think the fundamentals are very good. And I would expect us to be able to return to growth that exceeds 2019 as soon as the COVID restrictions or as soon as we have the ability to fully manage the COVID impact. I look at that in the second quarter and third quarter, we did grow despite some challenges in the U.S., in China, in Germany and that fueled my optimism that despite the challenges as an industry, but also at Smith & Nephew, we have taken the right learnings and we are able to grow in these circumstances.

That’s very helpful. Thank you, Roland, and thank you, Anne-Francoise for your answers as well. And nice to meet you over the phone. Just a quick follow-up, if I can, Roland. One of your peers has been very optimistic about the backlog and they have quantified what they think is the backlog of canceled delayed surgeries, patients in pain. What are your views on that? Do you share that optimism? And have you guys done any work on when do you think we might get that vaccine? Is there – what’s the sort of bolus of demand that might appear once we get it? Or do you think that’s not how it will play out? And I will go back into the queue with that. Thank you, guys.

Thanks, Veronika. Yes, of course, we – as you can imagine, we are running on multiple scenarios. The challenge with those is, of course, we don’t have the full visibility. So we have the scenarios in the drawers and know what they could lead to, but I just can’t give you any numbers or data here, because we just like everybody else, we don’t have the visibility. Now, specific to the backlog, absolutely, we have seen that. It’s not a uniform pattern that we see. But of course, you have, especially in the private healthcare system, you build backlogs quicker and they will be worked on faster. So those are the markets that actually responded and recovered fastest. And then, again, the question when we were talking with our customers becomes what is backlog, what is really organic growth and what’s the mix and time can you address that. Clearly, what we’re seeing in other healthcare systems, which are more public-driven is the buildup of waiting lists. This is something that I think in the system inherent is unavoidable. We don’t like to see this, but at the same time, what it also gives you is the certainty that, of course, you’re going to continue to see ongoing demand because that waiting list will have to be worked over sometimes pretty long periods of times. So it’s a very mixed picture. I’m afraid I can’t give you this crystal ball view that we all would like to have.

Thank you. The next question comes from the line of Lisa Clive from Bernstein. Please ask your question.

Apologies. Just as we think about – could you maybe comment a bit on the competitive dynamic in the negative pressure market? And two-folds, one, how you’ve been progressing in continuing to increase your penetration of the hospital base, the traditional negative pressure. And also number two, whether you’ve seen any competitive threats from the Combitech products that launched a while back?

Certainly. Thank you, Lisa. We believe that we’re very well positioned in this marketplace. We believe that with PICO we have really a very, very strong product. We have continued to invest in it. We will have the next generation of PICO coming in late 2021. We entered this crisis with the devices growing at double digits. We were very confident that under normal circumstances we can carry that rate forward. Yes, of course, there is competition. I don’t view this as a huge threat. We have good information on our product, what it does. We have the performance data. We have, in some cases, very specific clinical data that points to the effectiveness, the superiority of PICO. So that’s what we’ll continue to do: invest in value-based offerings, document what we do in the clinical setting. And I feel really, really strong about our PICO franchise.

And then within the hospital setting, you obviously lost some momentum several years back when the products had to be withdrawn for a little bit due to some issues around FDA approval of an update. How has that progressed in terms of regaining market share?

Yes, you’re absolutely right. I mean, I think it’s about regaining market share. I think it’s both an opportunity for the hospital setting and the home health setting. In the hospitals, RENASYS was actually growing double-digit pre-COVID. So we feel that we have regained some momentum and that we have put ourselves in a position to actually capture market share again.

Thank you. The next question comes from the line of Oliver Metzger from Commerzbank. Please ask your question.

Yes, hi. Thanks a lot for taking my questions. First one is on the recovery in hip implants. Could you give us any idea what part of this increase was related to pent-up demand versus underlying development? My second question is on Integra. So can you also give us some indication how Integra has performed over the last nine months now, excluding the negative impact related to the corona pandemic? So all the potential has shown a higher resilience to your core business. Thank you.

Thank you, Oliver. On the first one, on the hip side, I think we have seen really good growth. It’s really difficult to say whether that was pent-up or just organic. I think for the most part of it, it is a mix. We are seeing that hips are being performed quicker than knees in general, and I think with the OR3O we really had a very strong launch and some pull-through effect on the rest of the hip franchise as well. And then, of course, hip surgery is also more prone to trauma, especially in the elder population. So that certainly also helps in that context. On the Integra data, I will have to come back to you. I don’t have those on top of my mind. What I know anecdotally is, of course, that there has been an impact just like for everybody in the industry as well on the Integra extremities franchise, but I don’t have that number. We will get back to you if that’s okay, Oliver.

But just as a reminder – just as a reminder, Oliver, to just give some value context, we did put in the announcement that Integra generated $90 million of revenue in 2019 and traded small, but they are reporting soon as well. So you’ll get their data.

Okay, great. Thank you.

Thank you. The next question comes from the line of Chris Gretler from Credit Suisse. Please ask your question.

Yes. Thank you, operator. Good morning, Roland and welcome, Anne-Francoise. I have two questions. The first also relates to Integra. Actually, could you provide the sales split into lower and upper extremities for that business? And I notice now, it’s a relatively small market share that you are buying there. Is there any appetite to grow that business and your relative market position via acquisition further on or is this basically kind of the beachhead you have to the necessary – the beachhead necessary to grow organically? So that will be the first question. And the second question, maybe just on October trading. If you maybe have some indication about the trends that you have seen just as of late. I was a bit surprised that kind of the three months in Q3 were kind of fairly stable. So I was just wondering kind of whether you had a bit of an indication for us how now things are doing on a run rate basis. Thank you.

Thank you, Chris, for the questions. On Integra, firstly, I’m afraid we are not giving break downs at this stage. We may as we go further and we fully integrate the business. But from a business and strategic perspective, I think what it gives us is access to the shoulder market for the recon business. It gives us access to foot and ankle and other extremities, also in the trauma business. So it’s a great complementary business. It gives us a sales force that is dedicated and has access to specialists. It also gives us a crossover into sports med when you think about pure shoulder specialists that would do any surgery that is relative to shoulders. So there we can bridge nicely from sports med across the entire continuum and if necessary, into the recon side of it. So that’s really attractive. We continue to look at the market, of course, opportunistically, but right now with what we’re going to be bringing in-house with Integra, I feel very good about our ability to play in this faster-growing market of extremities and the shoulders in particular. And then I’m very excited about the development that’s underway with the great shoulder group, for a new shoulder design stemless state-of-the-art that will come to the market in 2022. So that will be the little bit of patients. But the state of the development there is well advanced. On October trading, we typically don’t comment on individual months, but I would say, it’s been there – I would say, a continuation at this stage, but remember, months to months variation is going to be pretty heavy. And then we are still not end – at the end of the month, so typically we have quite a lot of activities toward month end. What we certainly also see now is more restrictions being applied in Europe, in particular. I’m hopeful that they will not impact elective surgery overall in a large degree, but we will see again different restrictions being imposed. I believe that in Switzerland, in Germany, there is a great ambition to continue with elective surgeries, also on the basis of the learnings from the first base. Whereas in other countries, like Belgium, all elective surgeries have now just been suspended. But this information is just coming over the last few days. So you see that the situation is very fluid. And then I wouldn’t read too much in individual months. Same, by the way, holds true for quarter three, because there we have some very weak months typically as comparators with the summer months and the breaks, and this year everything was a bit different in terms of the pattern and the rhythm. So we’ll know more at the end of the year when we really have the full fourth quarter under our belt. And of course, we will know more about the ongoing COVID-19 situation.

Okay, thank you very much for your comments here.

Thank you, Chris.

Thank you. The next question comes from the line of Michael Jungling from Morgan Stanley. Please ask your question.

Great. Thank you and good morning all. I have three questions. Firstly, on sales force. Can you talk about the sales force turnover in each of your three franchises since COVID hit you in Q1 and Q2 of this year? Question number two is also on sales force. What do you expect will happen to your sales force stability over the next six months with a view perhaps that these sales reps have mouths to feed and are looking for a more stable healthcare area? And then finally, also on sales force, can you please update me on the split now that you have for ortho and sports medicine between your own sales force and how much goes through distributor sales forces? Thank you.

Good morning, Michael. Thanks for the questions. Yes, of course, sales force is very, very important to us. I am pleased to report that we have not had any layoffs or furloughing as a matter of fact in the organization. We took that decision very early in the crisis and of course that was to protect our sales force and to protect the strength of the organization. Since the attrition rate is well below last year’s as one would expect, but we have also taken many other measures protecting our sales force, especially around the U.S., where it’s a heavy commission-based sales force where, in some cases, we have advanced the commissions, we have ensured that even though the activity level dropped massively that those people remain with us. And I’m very confident that they will also remain with us in the future. First of all, as we continue to see the recovery, they will see that there are great opportunities for them. At the same time, I think there is, obviously, we did a lot as a company to support our sales force. Thirdly, these are specialists, it’s not that easy for them to shift from one to the other industry. So I think that’s quite inherent. Now on the third question between direct and indirect. We have made a couple of deals, brought distributors in-house, strengthening the direct sales, especially in the U.S. we continue to look for opportunities. Also, in other markets, some of the plans that we have put on hold for now, but we will continue to push to be more direct as we prefer, of course, to have the margin to the end user and have direct contact with our customers. Now the breakdown specifically, I don’t think we have been disclosing that. We might come back on that at a later stage, but I wouldn’t want to give you any number at this stage.

Okay. And then finally, Roland, I think when these furloughing schemes were available earlier this year, I think I asked you this maybe in Q1 or the Q2 earnings call. I think you were reluctant to take on any benefits. If – will this change this time around if COVID gets worse? Are you willing to take on government support schemes?

We would have to look at it on a case-by-case situation. Generally, I’m not really a fan of this, which is it always puts you in a certain situation where you are indebted or you own something. So that was an easy decision early on. I don’t expect the second wave, or whatever we call it, to be as heavy or dramatic as the first wave. So that question probably or hopefully won’t come up. But my position remains the same. We protect our organization, we don’t layoff for COVID, because we need each and every one for the recovery, because the fundamentals in the business are sound and we’ll continue to see growth in number of procedures in the future. And we don’t want to be dependent on government aid. So that’s been my position. I don’t see that changing in the circumstances.

Thank you.

Thanks, Michael.

Thank you. The next question comes from the line of Julien Dormois from Exane. Please ask your question.

Hello, good morning, Ronald, and bonjour and bienvenue, Anne-Francoise. I have two questions. One is on the U.S., especially the hospital group, the hospital systems in the U.S., which have started to reduce capex pretty heavily in Q2 and Q3 and which are obviously focused on protecting their cash flow given the context. Do you see that as a hurdle when it comes to the launch of CORI right now? And second leg of the question is, have you started to see some of your customers initiating discussions regarding some price concession on the device side of things? And the second question is a broader one which is on the cost side of things. If and when we get into a world post-COVID, do you see an opportunity for some structural cost savings maybe in terms of maybe less traveling, or maybe more remote or digital promotional activities, anything like this that you would start working on?

Hi, Julien. Thanks for the questions. Regarding the first question on capital spend, I think, indeed there was – obviously at the height of the crisis, there was some caution around capital spend. I think I haven’t come across any cancellations. It was more rather deferrals. Remember, these hospital groups are very competitive. They are mostly catered to the private markets. They want to have the latest in technology. And with that, I do expect capital sales to take up again. CORI, in particular, I think we’re very well positioned because we have a very differentiated solution, which has a much smaller footprint. It’s lighter, it’s more mobile, and with that, we believe we also have a much better cost base. And so, I don’t think that we will see a negative impact. On the contrary, I think we could actually see a positive also with regards to ASCs and the growth and actually the readiness of CORI for ASCs. On the pricing side, it’s been remarkably quiet so far. I haven’t heard much on this side. I think this will all come with a certain delay. I think everybody is – right now continues to be focused on managing through the crisis. There has been some inconsistencies here and there, but nothing that would have been systemic. And then on the cost and Anne-Francoise, please chip in. I think obviously we have engaged with customers definitely much more through digital means, different technologies, medical education, big convention and events and travel has all been impacted and in every crisis, you have opportunities. We have got to build on that. We have trained I think more than 20,000 physicians online through new means. This is certainly something that will stay, that will continue to build on. We see more opportunities in end-to-end solutions with indeed digital tools, whether that’s around identifying right patients for ASCs and managing through the reimbursement or accompanying the patients pre and post-surgery through also digital solutions. So there is a lot they will – that they will probably be accelerated and amplified through this crisis. And then, of course, there are some areas where we potentially will see lower cost of travel maybe of large conventions, of large meetings, that’s certainly a possibility.

So bonjour, Julien. I guess I will pick up the answer in English. Just to add to what Roland said is, most of the savings we have achieved are variable costs. They are not structural in nature, and therefore it will be our decision, our choice to then balance cost control with our ability to take part in a recovery of the market and reinvesting. And while some activities will change in shape, we are quite clearly balancing that recovery and cost control to make sure we can grow and recover.

Okay, thank you. Merci beaucoup.

Thank you. The next question comes from the line of Kit Lee from Jefferies. Please ask your question.

Thank you. Two questions for me, please. I think firstly just on France and Germany. You mentioned that the markets have returned to growth in Q3, but have you seen a softer recovery just toward the end of the quarter just given the rising infection rates or is it not the case? And then my second question is on the Advanced Wound Care business. Can you just split the performance between the surgery and community channel, whether one is growing faster than the other or you really see more pressure in one channel compared to the other? Thank you.

Thanks for the questions, Kit. I didn’t quite get the second one, so I will answer the first one and then maybe we can get back to that second question. So, Germany and France, we have seen good recovery through the quarter. That was really encouraging. And we didn’t actually see a softening later in the quarter. I think this actually continued to perform well. What we now have, of course, is a slightly new situation with latest announcements made as late as yesterday in both France and Germany with further – I would say, further measures to contain COVID, which we believe will in some form have an impact on, of course, elective surgery as well, and possibly also on activity-based surgeries. Now, how much that will be? We don’t know at this stage. As I mentioned, I think, these countries have also learned and they have also an ambition to continue to deliver care to their population beyond just looking out to COVID-19 patients. And I think that’s something that we have also experienced on the positive side, but what the impact will be, we don’t know. At this stage, the situation is fluid. We’re observing it. We have our people on the ground very close to our customers and we certainly will be able to react again as we have had – as we have done in the very recent past. I could see here my team is helping me; the question was around AWC and then the relative growth between hospital and community channels. Is that your question, Kit?

Yes, that’s right.

Okay. I’m afraid I don’t have the data here. We’d have to come back. Sorry about that. I don’t have that number globally.

Okay, thank you.

Thank you, Kit.

Thank you. There are no further questions. I would like now to hand the conference over to Roland Diggelmann for closing remarks. Please go ahead.

Thank you, Nadia. And thank you, everybody, for taking the time. I wish you all the best and a good fourth quarter to all of us. Thank you.

Thank you.

Good day. And thank you for participating today. Have a great day.