The move provides a cash injection and long-term funding for research in the high-tech area at a time when the British company has been struggling with tough markets for its main products.
S&N said it would receive $98m (£62m) cash, which will be used to pay down debt, and a $160m five-year note from the joint venture, to be known as Bioventus.
S&N, along with competitors, has been hit by low demand for hip and knee replacements as people postpone elective procedures because of concerns about job cuts.
It reported disappointing third-quarter results two months ago and Olivier Bohuon, who became chief executive last April, said at the time S&N needed to adapt faster to meet market challenges.
Bohuon said the biologics deal offered a solution that would benefit the company in several ways.
"In a single act, we have given our existing biologics business the resources to address longer-term development projects, retained access to the exciting area of orthobiologics, realised value for reinvestment in nearer-term opportunities, and freed up management resource to focus on driving efficiencies in established markets."
S&N will transfer the majority of its U.S. biologics team and clinical therapies business to Bioventus, in which it will have a 49 per cent stake. For the time being, S&N will continue to distribute clinical therapies products outside the United States.
Essex Woodlands, a global venture capital and growth equity firm, has $2.5bn under management.