Smith & Nephew, the UK medical devices firm best-known for its artificial hips and knees, is to spin off its biologics and clinical therapies division into a joint venture with a US private equity group.

The new entity, named Bioventus, will be 51% owned by Essex Woodlands and 49% by S&N. In return, the latter will receive a $98 million fee in cash, which will be used to pay down debt, and a $160 million five-year note from Bioventus. 

S&N will transfer the "vast majority" of its 450 staff from the spun-off division to Bioventus and, for the time being, will continue to distribute its clinical therapies products outside the USA. Chief executive Olivier Bohuon said that “in a single act we have given our existing biologics business the resources to address longer-term projects, retained access to orthobiologics, realised value for reinvestment in nearer-term opportunities, and freed up resources to focus on established markets".

He added that "Essex Woodlands are strong partners and the JV will benefit from their significant expertise in developing healthcare businesses". In 2010, S&N’s biologics and clinical therapies business reported sales of $223 million and trading profit of $44 million.

The transaction is expected to be completed in the next few months and will be "modestly earnings dilutive".