The National Wound Care Sector Deal Michael Lynskey Smith and Nephew Advanced Wound Care - PowerPoint Presentation

The National Wound Care Sector Deal Michael Lynskey Smith and Nephew Advanced Wound CareBusiness Director UK, Ireland and the Nordics

Who are Smith & Nephew?2 Smith & Nephew is a diversified advanced medical technology business that supports healthcare professionals in more than 100 countries to improve the quality of life for their patients. A constituent of the UK’s FTSE100 , our shares are traded in London and New York. FTSE100 S&N has paid a dividend to shareholders on its Ordinary Shares every year since 1937. Shares UK employees across 3 sites, York, Hull, Godmanchester 1,200 We have more than 15,000 employees around the world. 15,000 100

Smith & Nephew is a company of pioneers, extending access to advanced medical technologies and enabling better outcomes for patients globally. We’ve been doing this for over 150 years.Smith & Nephew supports healthcare professionals in their daily efforts to improve the lives of their patients.™Trademark of Smith & Nephew©2015 Smith & Nephew 64549 1856 S&N established TODAY 1856 Thomas James Smith opened a chemist shop in Hull, UK and develops a new method for refining cod liver oil 1896 Horatio Nelson Smith entered into a partnership with his uncle forming TJ Smith & Nephew 1914days after the outbreak of WW1, we received an order to provide surgical and field dressing supplies to the French army within 5 months 50 FROM TO 1,200 1986 key acquisitions of Richards Medical Company in Memphis, specialists in orthopaedic products and Dyonics , an arthroscopy specialist based in Andover 1937 we were listed on the London stock exchange 1995 acquired Acufex Microsurgical Inc , making us a market leader in arthroscopic surgical devices 1928 we produced an experimental bandage – ElastoplastTM 2001Oxinium™, a new material that improves performance and increases the service life of total joint replacementsystems, first introduced 1999we were listed on the New York Stock Exchange and in 2001became a constituent member of the UK FTSE-100 index 2011PICO™, the first pocket-sized, single-use system, revolutionizes the negative pressure wound therapy market 2013JOURNEY™ II BCS sets a new standard inknee implant performance, designed torestore more normal motion We are proud of what we do and value our 15,000 employees who make this possible We have been pioneering health solutions since 1856 and now have a presence in over 100 countries 15,000+ PRESENTDAY Over 100 1953 we developed a special low-temperature plaster for the Everest climbers on the 1953 expedition. It enabled them to send backtheir camera films, sealed and airtight! This same research led to the development of important industrial products During WW1, staff grew from 50 to 1,200 3

Growing Burden Of Wounds The burden of wound care is comparable to other major long-term conditions & its growing 4 Ashma £1.8 Alcohol £ 3.5bn Dementia £ 4.3bn Obesity £ 5.1bn Wound Care £ 5.3bn Cancer £ 5.6bn Diabetes £ 10bn The True Cost of Wound Care Annual NHS spend in £billions 1 1. Data based on review of published data; data and references available on file. NHS spend data non adjusted for co-morbidities. Data correct as of March 2016. © Entec Health March 2016 Burden of wound care falls disproportionately on the frail elderly and those with multiple co-morbidities

Growing Burden Of Wounds Burden of wound care falls disproportionately on community providers 5 NHS ‘Typical’ CCG Estimated number of pts w/ a wound 2.2M 11,200 Community nurse visits pa 10.9M 54,600 Practice nurse visits pa 18.5M 93,400 GP visits pa 7.7M38,700 O/P admissions pa3.5M 17,400Drug prescriptions9.7M490,000 Dressings/bandages335M1.8M Increasing incidence due to demographics & co-morbidities Falling number of nursing recruits, increasing retirement, Brexit pressures. Practice/Community Nursing

So how are we all doing with wound treatment? Our patients and customers are not winning in wounds… A decade that has seen NPWT Silver & antimicrobials Bioactives & tissue replacements Significant investments Multiple $ bn industry investment Higher product costs Global Market has grown from $4.5bn in 2008 to $8.4bn in 2018 (nearly doubled in 10 years) + 9.8% Increase in patients with a wound by 2019 1 in 5 Patients with chronic wound readmitted within 30 days 2-3x Longer hospital stays More products for wounds ‘alone’ is not the answer Patients, providers and payers are looking to industry for a solution to improve outcomes * Vowden et al. ; † Drew et al. ; ^ Ousey et al. Why is it so difficult to improve outcomes? A future approach must take the whole patient management system into account The problem is getting worse … No more wounds are healing than 10 years ago Why is it so difficult to improve outcomes? WOUND PATIENT PRACTICE

Improving Outcomes And Releasing ResourcesThe three drivers to improving clinical outcomes and releasing resources Reducing healing time: Early intervention to expedite healing could prevent wounds becoming long-duration static wounds . Reducing the frequency of dressing changes for some or all patients could result in a reduction in nursing resources. Complications such as wound infection. Reducing wound complications has the potential to free up nursing time and other resources.

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The Wound Sector Deal Industrial Strategy – the Grand Challenges ABHI The NHS 5yr Forward Plan The National Wound Care Strategy Programme Industry Partners Dept of Health Get It Right First Time (GIRFT) directive Office of Life Sciences AHSNs NIHR NOCRI Health Tech Partnerships 10

The Wound Care Sector Deal Addressing practice variation in wound care to drive improved outcomes & efficiency Wounds are an ‘unrecognized’ and ‘un-prioritized’ as a long term conditionAssociated with significant prescription costs, hospitalisations, and burden on community nursing 66 % of community nurse time is spend ‘managing wounds ’. Total cost to NHS is comparable to obesity and cancer Growing burden of wounds Majority of pt. contacts are through non-specialist providers, typically community nursing Lack of standardised pathways and protocols for front line nurses = practice variation Sub-standard knowledge on treatment optimisation due to wound care complexity = practice variation High staff attrition creates inconsistencies = practice variation What’s driving excess costs and morbidity? Reduce practice variation to deliver optimal outcomes and improve efficiency Harness digital solutions to provide CLINICAL DECISION TOOLS to improve practice consistency Harness data generated by digital solutions for further R&D and big-data analysis for continuous improvementSupport innovation with “Outcomes Based” Commercial Contracts Sector Deal Potential 11

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Wound healing Providers can evaluate healing trajectories and proportion of stalled wounds on caseload. Data can be used to drive decision making and enable earlier intervention of products such as PICO. Nursing hours released Application integrates with system one, allowing clinicians to spend more time with patients and less time on administration. Reduced costs Application helps to ensure product selection is appropriate, reducing waste and optimizing clinical outcomes. Clinical decision making Assessments are complete and used to empower dressing and treatment selection. Eases access to referrals and helps senior clinicians identify patients requiring escalation. Major benefits to new and junior nursing who often find decision making hard. Fewer visits Algorithm facilitates right product, right patient, right time to give the right decision and naturally reduce nurse burden. Use of the most effective products and pathways means even progressing wounds can realise a significant resource saving. Benefits Of ‘Digital Standardised Care Pathway’ For Community Setting

Potential Impact On N ational Health Resources – NHS England Current practice Proposal Difference Estimated volume of dressings (1 yr ) 24.4m 15.5m -8,923,897 Estimated number of nursing hours ( 1 yr ) 12,645,758 6,078 FTE 8,035,080 3,864 FTE - 4,610,677 - 2,214 FTE Estimated weekly hard to heal wound caseload 15,540 8,228 -7,312 Costs of dressings per year £ 173m £ 132m -£ 40m Potential to release 4.6m nursing hours across England, freeing up 2200 nurses (FTEs) needed to treat growing demand within current capacity Proposed spend underwritten by Industry through financial risk share contract

Smith and Nephew has committed to..1. Free of charge’ digital tool to be used at the point of care to drive new model of care, increase outcomes and support AI/Big Data through evidence generation2. Partner with regional based AHSNs to identify and validate ‘pilot’ sites 3. Directly fund validation projects at the AHSN regional ‘cluster’ sites – up to 3 sites initially4. Collaborative approach between AHSNs and identified Trusts/CCGs/ Tissue Viability services to create project teams to assess success5. Financial agreements with payers to ‘cap’ spend or risk share on costs during year 1 validation of outcomes phase, Outcomes Based Contracts

“It is our responsibility to ensure that every patient in the UK and Ireland should have the best wound care possible”