Q-Med and Smith & Nephew enter into strategic alliance in osteoarthritis treatment

Q-Med AB and Smith & Nephew Orthopaedics Trauma & Clinical Therapies (NYSE: SNN, LSE, SN) today announced that they have formed a strategic alliance to develop and commercialize Q-Med’s proprietary technology for the production of stabilized non-animal hyaluronic acid, NASHA™ for orthopeadic uses. The purpose of the transaction is to explore Q-Med’s versatile technology for the management of osteoarthritis (OA) in joints and to explore other orthopaedic uses and diseases. The two companies have entered into a licensing and supply agreement under which Q-Med AB has granted Smith & Nephew Inc. the global exclusive right to market, sell and distribute DUROLANE and other products intended for the management of orthopedic conditions and diseases. Q-Med will manufacture and supply all products developed under this transaction. Smith & Nephew will focus on, and bear the costs for, the clinical development, registration and commercialization of new products worldwide. DUROLANE is the first and only single-injection hyaluronic acid therapy for the treatment of OA of the hip and knee. DUROLANE has been approved for the treatment of OA in the knee in Europe since 2001, and for the treatment of OA in both the knee and hip in Europe and Canada since 2004. More than 100,000 patients have been treated with DUROLANE. Q-Med submitted a Pre-Market Approval (PMA) application to the US Food and Drug Administration (FDA) in March 2006. Mark Augusti, President, Smith & Nephew Orthopaedic Trauma and Clinical Therapies, commented, “The joint fluid therapy market is growing quickly, driven by increased patient awareness and demand for non-surgical alternatives for the treatment of osteoarthritis. This strategic transaction with Q-Med enhances Smith & Nephew’s presence in this market, and underscores our commitment to the development and commercialization of effective therapies to help patients regain their mobility.” “This is a milestone event for Q-Med. We are thrilled to enter into this relationship with Smith & Nephew. Not only are they the most successful company in the US fluid therapy market for OA, they also bring significant product development expertise and experience. We are looking forward to our collaboration on expanding DUROLANE into the United States, and exploring some of our innovative NASHA™ concepts in orthopaedics. The synergies of this relationship will benefit Q-Med, Smith & Nephew and patients worldwide” says Bengt Ågerup, Ph.D. and CEO of Q-Med AB. Ken Reali, Vice President, General Manager, Smith & Nephew Clinical Therapies, added, “An estimated 20 million people in the United States suffer from osteoarthritis. Osteoarthritis represents a significant healthcare issue worldwide, and less then 5 percent of that population seek treatment with their healthcare provider. DUROLANE complements our existing product portfolio and pipeline, and this agreement provides an opportunity to drive significant growth in the fast-growing joint fluid therapy market.” Under the terms of the agreements the major financial component will be royalties on product sales worldwide. The royalty rate will vary depending on the commercial conditions in the markets in which Smith & Nephew will promote the products. In addition to the royalty payments, Q-Med has received an upfront payment of USD 10 million, and will receive four additional milestone payments, which could total USD 60 million, related to the US approval and commercialization of DUROLANE. About Smith & Nephew Smith & Nephew is a global medical technology business, specializing in Orthopaedic Trauma & Clinical Therapies, Orthopaedic Reconstruction, Endoscopy and Advanced Wound Management products. Smith & Nephew is a global leader in arthroscopy and advanced wound management and is one of the fastest growing global orthopaedics companies. Smith & Nephew is dedicated to helping improve people's lives. The company prides itself on the strength of its relationships with its surgeons and professional healthcare customers, with whom its name is synonymous with high standards of performance, innovation and trust. The company has over 8,500 employees and operates in 33 countries around the world generating annual sales of USD 2.6 billion in 2005. Forward-Looking Statements This press release contains certain "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. In particular, statements regarding expected revenue growth and trading margins discussed under "Outlook" are forward-looking statements as are discussions of our product pipeline. These statements, as well as the phrases "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions, are generally intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors (including, but not limited to, the outcome of litigation, claims and regulatory approvals) that could cause the actual results, performance or achievements of Smith & Nephew, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual report on Form 20F, for a discussion of certain of these factors. All forward-looking statements in this press release are based on information available to Smith & Nephew as of the date hereof. All written or oral forward-looking statements attributable to Smith & Nephew or any person acting on behalf of Smith & Nephew are expressly qualified in their entirety by the foregoing. Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement contained herein to reflect any change in Smith & Nephew's expectation with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Q-Med AB Analyst and Media Inquiries: Anne Rhenman, Director Investor Relations and Corporate Communications +46 (0)70-974 90 15 Erika Kjellberg Eriksson, CFO +46 (0)70-974 90 20 Bengt Ågerup, CEO +46 (0)70-974 90 25 Smith & Nephew Analyst Inquiries: Debbie Scott, Financial Dynamics +44 (0) 20 7269 7110 deborah.scott@fd.com Smith & Nephew Media Inquiries: Stacy Wygant, Smith & Nephew, Inc. +1 (901) 399-5879 stacy.wygant@smith-nephew.com In the US, Q-Med AB’s affiliate is the wholly-owned subsidiary Q-Med Scandinavia, Inc. Q-Med AB (publ), Seminariegatan 21, SE-752 28 Uppsala, Sweden. Tel: +46(0)18-474 90 00, Fax: +46(0)18-474 90 01 info@q-med.com, www.q-med.com, Corporate identity number 556258-6882.