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 those statements due to a variety of factors. More information about these factors is contained in the company's filings with the Securities and Exchange Commission. I'll now hand you over to our host, Roland Diggelmann, Chief Executive Officer, and Anne-Françoise Nesmes, Chief Financial Officer. Roland, please go ahead. Thank you.
Thank you, operator, and good morning, everyone. Welcome to Smith+Nephew's Q3 call. With me on the call is our Chief Financial Officer, Anne-Françoise Nesmes. The Q3 was obviously still affected by a resurgence of COVID infections in the United States. When we do look at that effect, the majority of our portfolio is performing very well. There are challenges in Orthopaedics, and we're working through this, and we've announced further steps today to enhance our positioning. Now there are a few points I'd like you to take away from today. Firstly, two of our three franchises are above pre-COVID levels and growing well. Around 60% of our revenue now comes from the Sports Medicine and Advanced Wound Management, and they're showing the performance that comes from both innovation and good execution.
Secondly, we know there are still issues in Orthopaedics, but we're addressing them. We've announced the launch of our new cementless knee, filling a major product gap, and we're working through the supply chain challenge. Thirdly, we've taken a strategic step to strengthen our commercial model. Our Orthopaedics and Sports Medicine franchises will now be under a single leader. This aligns with some of the important growth opportunities in the markets, namely a trend to decentralization and specialization, and will better leverage Smith+Nephew's strength. I will cover those changes shortly, but first Anne-Françoise will take you through the details of the quarter. Over to you, Anne-Françoise.
Good morning, everyone, and thank you, Roland. I will start with an overview of the Q3 . The revenue in the quarter was $1.3 billion, with 5.5% reported growth and 2.3% underlying growth. The number of trading days was unchanged versus prior, which is different from Q1 and Q2, which had additional days. You can see on slide 4 our growth rate versus 2020 by franchise and region. Advanced Wound Management was the fastest growing franchise at 10.9%, and we also recorded positive year-on-year growth for both emerging markets and other established markets. The growth rates reflect, in part, differences in the prior year comparatives. For example, you may recall that the U.S. had returned to growth ahead of other regions in Q3 2020.
Of course, the comparison to 2019 is more helpful, and you will find more details in our release. In the U.S., procedure volumes were impacted from August by outbreaks of the Delta variant, particularly in joint replacements. Increased COVID hospitalizations and healthcare staff shortages resulted in lower elective procedure volumes. Growth versus 2019 was therefore slower than in quarters 1 and 2, although it was improving as we exited the quarter despite the supply chain challenges. Our business outside of the U.S., which represents around half of our revenue, continued to recover and move closer to pre-COVID levels. Europe accelerated and in emerging markets, India and Latin America returned to growth over 2019. Looking specifically at China, sales remained above 2019 with healthy end market growth. However, as in previous quarters, our growth was still impacted by channel adjustments ahead of the VBP implementation.
The detailed financial planning and negotiations for implementation are still ongoing. I'll now move on to the detail by franchise, starting with Orthopedics on slide 5. The decline of 5.9% reflected the headwinds of the Delta variant in the U.S., the supply constraints we flagged to you in July, and the channel adjustments ahead of VBP in China. The supply constraints meant we could not fully benefit from the knee and hip market rebound outside of the U.S., which you see reflected in the quarter's growth rate. We have a number of actions to address the challenges, and Roland will cover these shortly. In other reconstruction, the rollout of CORI continued with the European launch event held in August. Trauma & Extremities declined by 4.2%. This segment now includes a U.S. extremities business, which is a more elective line.
In sports medicine, joint repair grew by 9.5%, even with the quarter impacted by Delta in the U.S. Recent launches of FAST-FIX, FAST-FIX FLEX, and HEALICOIL KNOTLESS are both performing ahead of our plan, and it's encouraging to see knee repair recovering to close to pre-COVID levels. In AET, we announced the launch of the WEREWOLF FASTSEAL Wand, which seal blood vessels during procedures such as total joint replacements. Importantly, the new wands bring our leading radiofrequency technology from sports medicine to an orthopedic surgery application. This is an example of the portfolio leverage opportunities between our sports and orthopedic businesses, which Roland cover more in a moment. In ENT, growth was mainly driven by our Tonsil and Adenoid business in Asia Pacific region, and procedure volumes in the U.S. and Europe are still recovering.
We are starting to see signs of an increase in the number of ear infections in the U.S. as more children return to school, and we expect an increased demand for tympanostomy procedures to follow and to drive demand for Tula. In Advanced Wound Management, we delivered above-market growth. The strong performance of the franchise has been across the regions and across the brands in recent quarters, reflecting the broad-based improvement in commercial execution. In Advanced Wound Care, the acceleration in Europe continued, and the U.S. reached double-digit growth over 2019. Bioactive growth was largely driven by SANTYL in the quarter, with slower surgical procedures in the U.S. affecting skin substitute volume. Finally, Advanced Wound Devices benefited from a market expansion strategy for PICO and continued share gains and hospital conversions for RENASYS in the U.S.
We are pleased to see the performance of this franchise transform over the last two years. I'll finish with the outlook. You'll recall that in July we reiterated our 2021 guidance of 10%-13% underlying revenue growth on a trading margin of 18%-19%. With three quarters of the year now gone, we are in a position to be more specific. We now expect both underlying revenue growth and the trading margin to be at the low end of the guidance ranges. This reflects the revenue impact of the Delta variant on surgery volumes in Q3, which we expect to improve in Q4, the ongoing supply constraints, and the margin impact of higher cost inflation partially offset by discretionary cost controls. Clearly, the guidance implies a lower underlying growth rate in the Q4 than in the first nine months of the year.
This is mostly due to the fact that there are four fewer trading days than in the Q4 of 2020. With that, I'll hand over to Roland.
Thank you, Anne-Françoise. When I look at the balance of the portfolio, there are clearly more positives than negatives. This slide shows the contribution of each part of the business to our growth so far this year, and it compares to 2019. Sports Medicine and Advanced Wound Management are above their pre-COVID levels, which is great. We're very confident they'll continue to outperform. ENT is still a drag on growth, but that's largely a market effect, and it's starting to move in the right direction. The combination of commercial execution, innovation, and also value-creating M&A is really delivering this profitable acceleration that we want. In Orthopaedics, we aren't there yet with knees continuing to be the main headwind. Some of the difference is the market. Joint replacement has proven more sensitive to the fluctuations of the COVID pandemic.
We have VBP in China, which is an additional headwind, that's specific to the franchise. More optimistically, some new growth drivers are still in the early days of delivery, such as the rollout of CORI and the entry into the Extremity segment, and then, of course, the launch of our cementless knee. However, there are still execution factors that need to improve, and I'd like to talk about the actions we're taking to address this. On the next page, first, we're tackling the supply chain challenges. We've made really good progress on the factors that are in our hands. Importantly, I've also appointed a new head of operations with direct experience in our markets, who is leading the response, and he has a particular expertise in Orthopaedics. We felt these primarily in Orthopaedics indeed, although some aspects are also affecting other categories.
The initial challenge was a product supply from Memphis, which is our main global Orthopaedics facility. Excuse me. The combination of a tight national labor market and specific local competition for people had created some temporary staffing shortages. That's improving now. We've significantly stepped up recruitment and retention with hiring fairs and additional incentives. Training and ramp-up of the new staff to full productivity takes a bit of time, but that's well underway. A second challenge was around disruption to logistics, so actually moving finished products around the markets. This has also improved, although some bumpiness remains from global freight availability. IT system improvements are helping here, and we're in the process of moving to a specialized logistics partner in the U.S. as well as doing that in Europe as well.
I think it's been widely reported, there are increasing global shortages and inflation on some raw materials and components, in particular in electronics. These shortages are likely to persist for a while, but we're taking action to mitigate the impact. We've engaged with suppliers to understand the new lead times. We've adjusted our production schedules and ERP systems to work with that. We're also looking in a broader context to protect supply by seeking prioritization for medical applications. In summary, I'm very confident in the team and in this plan. Secondly, and moving to the next slide, we're strengthening our commercial model. As we slowly come out of COVID pandemic, I believe it's the right moment to make a change, and I've been thinking about this for some time.
I've taken the decision to bring our Orthopaedics and Sports Medicine franchise together under a single leader. This change applies to our global marketing and to the U.S. commercial teams. The changing customer and market dynamics have created new high-growth opportunities for us, and the new structure will leverage our leadership in Sports Medicine and our broad Orthopaedics portfolio, and I believe position us to go after these targets more effectively. Just a couple of examples here. We know that care is becoming more decentralized. I think this has been widely reported. More Orthopaedics procedures are moving to the ASCs or to outpatient settings. We've seen that COVID has actually accelerated that. Our Sports Medicine franchise already has deep relationships with the centers that are starting to place hip and knees. In Orthopaedics, we also see further specialization.
Foot and ankle surgeons also specialize in bone, in both bone and arthroscopic repair. That gives us another opportunity. Then also in capital equipment, we can take more of an integrated approach to selling our digital surgical portfolio, including CORI and the updated arthroscopic tower. When the two sales forces work together to pursue opportunities like these, having both franchises under the same leadership will enable greater coordination, but also a more unified incentivization. I believe this combined surgical business will be led by our President of Sports Medicine and ASC, who has taken that franchise to strong profitable growth and leadership in many categories. As some of you know, Brad Cannon has been with us for nine years and previously successfully led U.S.-Europe and also global marketing, and also, orthopedics, has broad orthopedic experience.
Under his leadership, I expect the team to drive strong commercial excellence throughout and also identify efficiencies over time. We've addressed a large gap in our Orthopaedics portfolio, and I'm very pleased to announce that the launch of our cementless knee option is now underway. The first U.S. surgery with LEGION and CONCELOC was performed in October successfully. The CONCELOC technology uses 3D printing of titanium to generate the network of pores where initial bone fixation occurs, as you can see on the right side of the slide. This technology is already proven in use in hips with our REDAPT Revision System. We're now bringing it to knees for the first time. This is just the initial step. We'll continue to develop the family of products. We plan to add the cementless implant to CORI, our next generation robotic surgery system in 2022.
We're also working on bringing cementless to other parts of our knee portfolio, of course, and we're initiating clinical studies to seek approval in other regions of the world. In commercial terms, adding cementless gives us access to a key segment, more than $400 million in value in the U.S., and growing faster than the rest of the knee market, growing at a double-digit rate, actually. Also, by filling the one gap in our offering, it better positions us to pursue new businesses with the portfolio as a whole. On top of the organizational changes, this launch is really an important step in returning to knee, the knee business to market growth. We expect the benefits to be visible in 2022.
In summary, looking at 2021 after 9 months, I'm delighted by the performance of the Sports Medicine and Advanced Wound Management franchises, which together are around 60% of our total business. We're showing that we can drive strong and profitable growth, and we bring consistent commercial execution together with internal innovation and high-quality acquisition. I'm confident that this will continue. Turning to Orthopaedics, the supply chain challenges have been disappointing, of course. We've made good progress here on addressing the issues under our control, and there's more work to be done. The new operations leadership team is now fully engaged. The decision to strengthen our commercial model is something I've been reflecting on for some time. It is playing to our strength. With our end markets recovering, now is the right moment to make that change.
This, I believe, is the right strategy to return to broad market growth. On innovation, and I can't say this enough, I'm really excited about our pipeline. Starting to roll out cementless knee is an important milestone, of course, and there's more to follow across all the franchises. Finally, we look forward to talking more about the topics we've highlighted today and what we're doing to win in each part of the business. We have a meet the management event scheduled for December sixteenth, and looking forward to engaging more with you then. With that, I'll be happy to take your questions now. Thank you.
Thank you. Our first question today comes in from Tom Jones of Berenberg. Tom, your line is open. Please go ahead with your question. Thank you.
Oh, good morning, and thank you for taking my questions. I'll keep it to just two. The first thing I just wanted to clarify on your kind of expected performance in Q4. Obviously, with you having done 14% growth in the first nine months and guiding to 10% for the full year implies quite some significant deceleration in Q4, maybe even just slightly more than the four selling days would account for.
I just wanted to make sure there was nothing beyond comp effects and the selling days that gives you any cause for concern across any of your franchises that would lead you to expect, but perhaps looked at on an average daily sales basis, a deceleration in Q4 versus Q3. The second question was just on the sort of logistics and raw material issues that are affecting your business. To what extent do you think these are things that are affecting everybody and therefore just the market that is kind of being restrained? Or are there some areas where you think you're being disproportionately impacted by these issues and are perhaps as a result, losing a little bit of share?
I just wanna kind of tease out whether it's something that's affecting everybody equally and therefore unwind, you know, as and when these issues resolve or there's, you know, something specific to Smith+Nephew that unfortunately is affecting you disproportionately.
Thank you, Tom. Thanks for your question. On quarter four, I can make it very short. This is the 4 selling days. There's nothing else. Everything else we factored in and we've also mentioned, obviously, there is the COVID variant, the Delta variant, there is the VBP in China. As I said, everything's factored in, so nothing that we have covered here.
Perfect.
On the logistics question, I'll just give you a couple of examples of some of the raw material shortages that we're seeing. It's the resin, it's silicone, it's electronic components, it's some of the circuit boards. It's been widely reported. I can't speak for our competitors, but I would expect that they're seeing the same. Whether they're seeing it in the same context and with the same rigor, I cannot comment on. These are mainly the areas where we're seeing global supply challenges, and we're seeing those also across different industries, so it didn't come as a surprise. We're very close with our suppliers and with the sub-suppliers.
We're really trying to get ahead of this and looking at the lead times, and factoring this into our manufacturing plans to try to absorb this. Typically, we're small buyers in the big scheme of broader industries of these raw materials. We typically also have an ability to pay. I think we're already in good shape here in the broader context. We're also looking to seek for a priority for medical applications and medical products as an industry and as individual company for raw materials shortages to be actually then prioritized to the medical device industry. There's a lot going on here. Quite a few moving parts.
Yeah. Perfect. Maybe just to follow up on the raw material side. If you had to kind of try and split the impact of the challenges you're seeing, how much of it is kind of a price effect and how much of it is just simply it's unavailable, and it doesn't matter what you pay, you can't get a hold of it?
Yeah. That's a good question, Tom, and I think you will appreciate that this is of course these are moving targets. Initially when there is a shortage, what you do is you pay more. Then there's some elements where literally there is a bigger shortage and when raw material has to be allocated. This is moving. I think we're gonna see this for quite some time until the global supply chains actually ease again. I believe overall, we have relatively good handle over this because we have, as you would expect, long-lasting suppliers. They all need to be qualified and validated. We know very well what the sources are.
Yeah.
Mm-hmm.
Maybe just one final question on this before I get back in the queue. Pricing, it's been. I think the general message is that there's not much you can do on the pricing side, but is that starting to change at all? Are there any areas of your business where you have been able to feed you know, these cost pressures through into higher prices?
Well, we've seen, of course, we're seeing some inflation on the materials and on freight. Excuse me. On pricing, we haven't seen more pronounced pricing pressure in this period. What we're seeing, of course, now is that some of our customers, of course, are also affected by some supply issues. I think price becomes actually the smaller part, and it's really availability that moves into the center of the discussion.
Okay. Perfect. That's all very helpful. I'll get back in the queue. Thanks very much.
Thank you. Thank you, Tom.
The second question of the day comes from Lisa Clive of Bernstein. Lisa, your line is open. Please go ahead. Thank you.
Hey, thanks. I just wanted to start with a question about the very specific behaviors of U.S. surgeons. Given my understanding of surgeons, their practice patterns, they tend to be very loyal to their main manufacturer. Since you haven't had a cementless product in market, what have your knee surgeons been doing? Have they been using another manufacturer for that segment of their knee procedures? Have they been sticking with traditional cemented knees more than their peers? I'm just trying to understand whether this launch will lead to, I guess, regaining volumes, so we can see some incremental volume growth versus the past year or two, or whether you just may benefit from the higher ASP of cementless models.
Thank you for the question. Sorry, I missed the name. The line was a little bit blurred there. Now what we've seen so far in our customer base, some customers continue to use our products, and they just use the cemented option. They do this because they're very familiar with the product, and the surgical technique and everything, and they like the product and the features. Some that then use cementless knees from competitors. I think that's both where we see the opportunities going forward. We have two very well-established brands in the market in the U.S. with LEGION and JOURNEY II, both with cemented options only.
As we move into cementless, that will give those surgeons the option to use cementless on the same known brands with the same product philosophy and surgical technique. Then in addition, it will allow us to actually compete in the cementless markets, which we're not competing today, and that has prevented us from approaching some larger centers who would not take a system on board that doesn't offer both options. We see opportunities with existing customers, and we see opportunities with new customers.
Okay. Just a follow-up. As we've seen this resurgence of cementless, I'm trying to understand sort of how to layer in the adoption of robotic knee surgeries versus the adoption of cementless. Are they sort of separate from one another, or is most of the cementless use happening in procedures that are using robotics?
Yeah, very good question actually. I think they in a way can be separate, but they can also go hand in hand. I think the cemented option does not prevent the use from CORI or robotics, of course. Of course, those systems are all proprietary, so you can only use CORI with our implants. What we've seen is with the advent of robotics, we've also seen that shift to cementless. The simple reason is that cementless surgery is quicker because you don't need to wait for the bone cement to harden intraoperatively. That gives you anywhere between 8-10 minutes in the time advantage. That's why the cementless knees have been used more in robotics.
Again, here we see opportunities as we bring the cementless option onto CORI.
Great. One more just, sort of high-level question. As we think about the shift to ambulatory surgery centers that's happening in the U.S., can you explain to me sort of where the incremental volumes in the ASCs is coming from? Is it a surgeon who would've been doing a procedure in a hospital who now has some sort of relationship with an ASC and has just shifted that volume out? In which case it's not really much of an opportunity for a sort of market share shift because I assume that that surgeon would stick with their sort of core manufacturer. Or is it, you know, more surgeons who have historically worked in an ASC setting like sports medicine doctors doing more knee procedures?
Yes. Thank you. That's a really good question. I think it's both actually. There's a certain shift from obviously the standard hospital to outpatient or ASCs. This has been accelerated through COVID. As you would expect, patients prefer to go to an outpatient setting. Same-day surgery, of course, is more attractive. What you're also seeing is a shift to, I would say, the younger, the easier to operate patients who actually can be operated on going for same-day surgery. What we have seen is actually the number of procedures done in ASCs about doubling in this period of COVID. The trend is there will continue to persist.
Of course that gives opportunities to physicians to operate in ASCs. The number of ASCs has been growing really rapidly over the last several years. I think we now have the same amount of ASCs in the U.S. as we have hospitals, and we continue to see that shift from a low base of course. We think that for total knees, the number of knees performed in ASCs probably between 10%-15%. We've seen this, as I said, we've seen this number double. The big advantage for us is of course, we know those ASCs through our Sports Medicine franchise. We're calling on those. These are our core customers for Sports Medicine interventions.
In addition, I think we continue to see some specialization, which is also fostered by ASCs, where physicians continue to specialize on certain procedures, market their skills, and that also leads to a further shift into a decentralized environment.
Right. Just a last follow-up. Obviously there's just more procedures getting done, but do you think you have higher market share today in the ASC setting versus the hospital?
Would you-
In knee replacements specifically.
It's probably about equal at this stage. That's why we see opportunities to better leverage this through a joint approach, and really leveraging the contacts and the relationships we have through the Sports Medicine franchise. In summary, I'd say the market share is probably about equal, maybe even a bit less, because again, the ASCs tend to favor a cementless option.
Right. Thanks very much.
Thank you.
Our next question today comes from Hassan Al-Wakeel of Barclays. Hassan, your line is open. Please go ahead.
Thank you very much. I have two questions please. Firstly, could you provide an update on your take from the recent China tender results? Where do you expect the impact to shake out for Smith+Nephew, and what drop through do you expect from the cuts and any offsets that you have. To follow up on that one, you know, what are your expectations around further national tenders to trauma or indeed sports meds? Secondly, could you talk a bit about your expectations around the backlog of procedures as we look into next year? To what extent do you think supply challenges that you face this year will restrict your ability to fully realize this demand as things stand today? Thank you.
Thank you, Hassan. On VBP, this all continues to be quite fresh, so we'll certainly be able to give you a more detailed update at full year. The expectation is, and what we've seen is, distributors ordering patterns change in anticipation of lower prices, so the inventories have been reduced. We think that for now this has been to the tune of about $20 million-$30 million for us. Of course, what we're doing now is engaging in negotiations with the distributors on how to move the business going forward. This is ongoing. We know that the VBP tender will come into effect next year in March. We have that time to negotiate new pricing with the distributors.
We're obviously also looking at our go-to-market. We will certainly make adjustments there to reduce the cost to serve the market, and then take it from there. On national tender, there have been regional tenders on trauma, so my expectation is that this will indeed be rolled out with a national trauma tender, in the same fashion. I do not expect that for sports for the simple reason that it is a more complex business. There is less national competition, and it is a business that is made up both by arthroscopic, by the towers, the enabling technologies, and then the joint repair. It's a more complex business.
I don't see that for sports at this stage, and it's also a smaller business overall, which probably won't lead itself to a tender. On the backlog, obviously the backlog is there. It's difficult to quantify, because we don't have access to individual patient data. But there's different studies here that I summarize as follows. I'd say in the U.S., the backlog typically gets worked on quite quickly. The incentives are aligned. It's a for-profit market. Hospitals, physicians are making money with total joint replacements. The backlog typically is probably worked down in maybe two to three months. We're probably seeing a longer backlog in central European markets, probably around maybe six to nine months. It's higher in the U.K.
This has been published. It's probably in excess of 12 to even 24 months in the U.K. It's very difficult to look into the backlog in some of the Asian markets with different patterns. Maybe just one correction, sorry, on the VBP. The impact that we've seen in the Q3 is more to the extent of $10 million. Sorry, I said 20- 30, it's more to the $10 million, so I want to correct that.
No, that's really helpful. Thank you, Roland. Maybe just to follow up, I mean, what are the offsets that you have in China, and what drop-through should we expect from the cut to EBIT? I guess in this context, also, in relation to the supply constraints, you know, what are the building blocks to your mind for 2022 in terms of margins and the pushes and pulls? To what extent should we still expect meaningful margin expansion looking into 2022 based on what you know today?
Yes, Hassan, I'll try to answer that relative to China. Obviously there will be a drop-through, but it's, as I said, too early to quantify. We will give you more details at full year. Once we're going through to the negotiations with our distributors, I think there is quite a few moving parts there. Certainly, the distribution channels will need to be adjusted. We're working on this. The margins for the distributors will be adjusted. Our go-to-market will change. We will certainly, that's one of the levers that we have is how we actually market and sell in the market itself. What we've previously said, I think about 50% drop-through is truly a modeling assumption at this stage.
At w e'll come back with more details there. Other opportunities of course is further investments and shift to more in sports, which is going very well, to further build out our wound management franchise, which is also performing. We have opportunities in China. Last but not least, of course, the potential in China continues to be very large. The volumes are expected to continue to increase over many years as access to healthcare is continuously improved, and also as we continue to see an aging population not very different from other markets. I think that will also continue to fuel the need for, in particular, joint replacement.
I guess, shall I pick up the question on margin and, Roland, if I may
Yes. Thank you, Françoise.
Hi, Hassan. Clearly, it's too early for us in the year to give 2022 guidance. Very fair to say when you look at 2021 and we've articulated how our margin is impacted. We've talked about R&D investment, which will continue. We've talked about the dilution from M&A, which you should expect to start to lessen. Of course, there's the FX, which has been a headwind until now, should turn into a tailwind. Then of course, there's, as you were talking about earlier in the call, the effects of inflation on raw materials.
There's quite a lot of moving parts, and we look to mitigate as much as we can, and we can certainly look to continue to drive a margin improvement year on year. The one thing I'd add as well to the question on when do we return to pre-COVID margin. Clearly, you know, we need to see a normalization of many factors, demand being one, the supply chain effect, the broader macro inflation that have resulted from the pandemic. And you know, currently, as a result of all of these, we haven't seen the operating leverage that you would expect to drive. You know, to w e will get back to pre-COVID margin, but we need to also see the normalization coming out as we come out of the pandemic.
Very helpful. Thank you both.
Kyle Rose of Canaccord, you have the next question. Please go ahead. Thank you.
Great. Thank you for taking the questions. So a lot's been asked, but I wanted to touch on two areas specifically. One, maybe could you just help give us some additional commentary around CORI and what you're seeing in the market and both what you're seeing now, but then maybe talk about how you see the market evolving. I'm just trying to understand, you know, with you know, J&J launching their system as well, we've got all the major ortho players with a robotic system on the market. Do you see true differentiation capable of shifting share from the robotic side? And then number two is maybe talk about a little bit in the U.S. on the wound care devices side.
Are you seeing early signs of pull-through from some of the tenders on the device side into the broader wound care business, or is that something that we can expect in the future?
Yeah. Thank you. Thanks for the question. On CORI, we've seen good continued adoption, and it's really encouraging. I think we've now also launched in EMEA, in Asia. We've had sales in India as well. We see some good adoption of CORI, and I think absolutely there is differentiation potential in robotics. Now, first of all, as I mentioned, these systems are all closed. Every implant system or provider has its own robotics. That makes it an interesting approach to the market because you can argue either through implants or through robotics capabilities. I think that offers a differentiation potential. In our case, we have a very different approach in that we have a handheld system. We have a burring approach.
Most importantly, I think also this doesn't require a pre-surgery CT. The startup times in the OR are actually very, very short. Altogether, we believe we have a truly differentiated solution here. With a cementless knee option, I think we also have now an additional asset to market. More to come. I think it's actually a good thing that all the four big players now have their own robotic system because robotics is here to stay, and I think the differentiation is clear, but it will also continue to widen the gap to the smaller players who don't have robotics on offering. On wound care, I've been really very pleased with the development in wound care in the U.S., outside the U.S.
A very strong focus on execution, a focus on commercial activities, an enhanced focus on larger tenders on C-suite, and some distinct wins in some IDNs. We're seeing that coming through. Not everything has been able to come through due to the circumstances. Some of the market is still depressed, like on devices because of the lower surgical volumes. Overall, wound is doing very well, and we're seeing some of that pull-through happening indeed.
Our next question comes in from Veronika Dubajova of Goldman Sachs. Veronika, your line is open. Thank you.
Excellent. Good morning. Hi, I'm Françoise and Roland. Three questions from me, please. One, I wanna push you a little bit on this reorganization of ortho and sports medicine. For those of us on this call who've been covering your stock for a while, I remember that's how the business was structured, and actually the decision was taken four or five years ago to undo that, which actually seemed to drive some improved performance in the business at the time. I'm kind of curious why you are going back.
To that old structure and how you're thinking about the risks of disruption over the next 12 months or so as you reintegrate the two businesses together. If you can also just confirm that Skip Kiil is leaving, that would be great. That's my first question. My second question is to push you a little bit on the ortho performance. You know, I appreciate obviously the market softened. If I look again, you know, at your performance comp adjusted relative to where Stryker and J&J have reported, you are losing market share pretty substantially in all segments of hips and knees except for U.S. hips. If you can maybe break out for us, what impact do you think within that the supply issues have, versus, you know, underlying momentum, that would be helpful.
Just maybe a quick thought on why you think the hip performance outside of the U.S. is still poor relative to what everyone else has reported. You know, my last question is just on VBP circling back. You know, I appreciate you guys are still trying to figure out the pricing dynamic, but maybe a quick comment on where you think your volume market share will settle out. Because from the data that we see, it looks like you have actually lost some volume share through the tendering process. If you can confirm that, or if I'm doing something incorrectly on that, let me know. Thank you.
Thank you, Veronika. Let me start with the reorg. I think you're absolutely right. There used to be a time when this was together. I think the markets have evolved. The markets have changed. We continue to see that trend to decentralization that I mentioned, and it has actually accelerated quite remarkably through the pandemic. I don't think it will go back. If you talk to big healthcare systems, it's all about managing the patients in the appropriate setting, and whatever can be done in a decentralized setting will be done in a decentralized setting. I think there's also been big advancements in surgical techniques, improvements around the surgical procedures, smaller incisions, shorter lengths of stay, same-day surgery, and then also improvements on the materials.
Altogether, I think, joint replacement is now firmly moving into an outpatient or even a same-day setting. I think that's one of the main reasons. We also see the specialization. Of course that is different in different markets. Certain specialization, of course, happens around foot and ankle, around knees, around shoulders, where you see surgeons performing only these surgeries in this anatomy, but then across the different options, so doing ACL as well as doing knee replacement. Again, that also lends itself to a special address. I think we have a great opportunity here because we are a very strong player in sports, because we are calling onto the ASCs in the U.S.
Now, I'd also make clear that this doesn't mean that we're combining the sales forces where there doesn't need to be. I think the disruption will be actually very minimal, if none. It's really aligning where we can and providing common incentives, align on how we address common surgeons and common customers. Where the customers are still distinctly different, we will continue to run separate sales forces. Yes, Skip is leaving. That's correct. He has decided to pursue an opportunity outside of Smith+Nephew. At this stage, I also wanted to thank him for his contribution in the last three years in really driving very different momentum through Orthopedics. The Orthopedics performance in the quarter, I think it was a softer performance in the quarter.
You're absolutely right. I would say knees, what we see is what we've mentioned, no new issue. It's the cementless knee gap, with a faster growth in that subsegment of cementless, where we until today have not been able to play. That has cost us market share. On hips outside the U.S., it is mainly a supply issue that we haven't been able to supply all customers as we wanted. It's a mixed impact, and I would say probably half and half is portfolio and half is supply. Finally, on VBP-
Sorry, it's Anne-Françoise Nesmes here, Roland, just to quantify a little bit the supply impact. Please, that's not precise science. To build on Roland's comment half and half. You know, it's not a precise science. It's an estimate to the best that we can. You know, we do believe the supply headwind was around $20 million-$30 million, and as Roland said, affected out of the U.S., particularly. That's our ballpark assumption. Sorry to interrupt, Roland.
No, no, not at all. Thank you. Françoise, third question around VBP and the volumes. We have been awarded the volumes that we were expecting. I haven't seen this to be less than before. Now, of course, we also have to think of these volumes as, in a way, a right to play. We've all been, in a way, validated as vendors, those who have been awarded the VBP tenders. I think the volumes have yet to then shake out. We look at this as minimum volumes, and to the expectations that we've had prior. I don't see our volumes dropping through the VBP.
That's really helpful. Can I just quickly follow up, Roland, on the knee sort of cementless issue? Obviously, that will be a huge help in the U.S., but not necessarily in the OUS markets. What do you think you need to do outside of the U.S. to improve the knee momentum? Or is that really just a supply issue? As that resolves, do you think your OUS knees momentum will also improve?
Yes, I think it's a combination of two. I think we will have opportunities with cementless. But indeed, the trend to cementless is more pronounced in the U.S. And the pricing differential is also higher in the U.S. from cementless to cemented than, in particular, in Europe. But the options to have cementless will of course help us in Europe, especially around large centers, and large public healthcare systems. Supply, of course, is an element, and that will help, and we need to get that right. Finally, we'll also be supported by the further rollout of CORI, and the entire robotics platform, because, of course, predominantly this is being used for knee surgery.
Got it. Thank you both.
Thank you, Veronika.
Our final question on the line comes from David Adlington of J.P. Morgan. David, your line is open. Please go ahead. Thank you.
Good morning. Thanks, operator. I mean, most of my questions have been answered, but maybe I'll just push a little bit further. I know you won't want to give a lot of color around next year, but just maybe higher level, you've got an 18% base from this year. I think historically you pointed towards FX tailwind for next year to 40 to 50 basis points. The first question, does that 40- 50 basis points tailwind still stand where we are today? Then as far as why you mentioned it, but you've pointed towards a return to, you know, low-20s margins if you get back to sort of 2019 volumes.
I think we'll be there next year, maybe if you know, some high-level comments about whether you think you will be there next year or not. Even with the VBP, do you still think that stands at that sort of low 20s margin with those sort of volumes? Thank you.
I think the first question, you're right to say we're not giving guidance on 2022 yet. It's not our practice. To reiterate what I said earlier, there's quite a few moving pieces for next year, you know, in terms of the macroeconomic environment, inflation, the inflation pressures everybody's seeing, the supply, the global supply challenges, which we look to offset. What I said is you should expect to see continued margin improvement year on year, but we will not be back to pre-COVID levels. In terms of getting back to pre-COVID levels, it's really dependent. It's no longer a story of just getting back to volume. The economy, the world has been significantly disrupted.
I think we all say it's not just about the demand levels, it's also the normalization of the trading conditions. You know what will happen to inflationary pressure. We need to adapt our model as well to VBP, to your point. There's quite a few moving pieces in terms of return to pre-COVID level which you know remains our ambition. We need to see some normalization and offset some of the pressures we see today. Finally, in terms of the FX tailwind for next year, at this stage, it is softening slightly and probably looking a little less, but more to come on that.
Perfect. Maybe just one quick follow-up. I mean, on supply chain issue, if demand does come back, will your supply chain resolve quickly enough, do you think, in order to be able to meet that increased demand?
As we've outlined, you know, in the presentation, there's almost three components to the supply chain issue. There was the labor, which Roland articulated, the labor in Memphis, sorry, to be more precise, which Roland articulated. We're improving. We're making progress. There was our own sort of network, you know, distribution logistics, which we're improving. Therefore, the third component is raw material challenges, disruptions to the supply chain. That's a little bit harder to anticipate and forecast. You know, those impact the global supply chain for many companies, and that's the one where it's hard to have a view. As we articulated, we're working with our suppliers. We've vetted those in terms of our production planning, so it should adjust over time.
With some of that, we're doing what we can that's within our control in terms of working our suppliers. There's an element that we cannot unfortunately define.
Okay, great. Thank you.
Thank you once again.
As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. We currently have no questions on the line, so I'll hand back over to the team for closing remarks. Thank you.
Thank you, operator, and thank you everyone for dialing in. Thank you for your questions and wish you all the best, and we'll be in touch soon. Hopefully, we'll hear and see you all around our meet the management day December sixteenth. Thank you very much.
Thank you very much for joining today. You may now disconnect your lines. Have a lovely rest of your day. Thank you.