Ambu A S Ord

Hello, and welcome to EMBU Q3 2019-20 webcast. For the first part of this call, all participants will be in listening-only mode, and afterward, there will be a Q&A session. Today, I'm pleased to present EMBU's CEO, Juan Jose González. Please begin your meeting.

Thank you. Good morning, everyone, and welcome to our Q3 2019-20 conference call. My name is Nikolai, and I am from the Investor Relations team. With me today here at the AMBU head office in Copenhagen, I have our CEO, Juan Jose Gonzalez, and our CFO, Michael Heigard. During this conference call, Juan Jose Gonzalez will talk about the highlights for the quarter, and Michael Heigard will review the financials, and then we will check your questions. Please limit your questions to only three at a time, and get back into the queue if you have additional questions. The duration of this call will be approximately one hour, and you can, via our website, follow the investor presentation. We will go through live. Now I would like to give the word to our CEO, Juan José González.

Thank you, Nicolai. Quarter three is an important quarter for all of us. We have an aspiration to become the world's most innovative single-use endoscopy company. And in quarter three, if we look at our results, if we look at the product with our innovation pipeline, If we look at the development of the market, we are well underway to fulfill this aspiration. Now, let's talk about what makes Ambu uniquely positioned to succeed. And there are two aspects. Number one, this is a unique market opportunity. The market is today 700 to 100 million, the single-use endoscopy market. with a penetration of 1% to 2% of the total endoscopy market. And we expect that this market is going to become $2.5 billion by 2024. This is unprecedented growth. Single-use endoscopy is considered one of the most attractive, if not the most attractive medical device market. And if you look at AMBU, We have incredible competitive advantage to emerge as one of the leaders within single-use endoscopy. Number one, we are today the number one in volume, and we expect by the time we finish the year that we will also be the number one in volume with over a decade of experience in single-use endoscopy. We have clear competitive advantage, both in terms of modular innovation and high-scale low-cost manufacturing. That's why we are able to have the richest pipeline in the industry. We have 15 new products launching over the next three years. We will enter all the major endoscopy segments. And we can do it with a healthcare economics offering that ensures that hospitals can move from reusable to single-use without incurring an additional cost. And finally, we have the global largest single-use commercial organization dedicated to make sure that we can create a market and penetrate a major healthcare system with our single-use visualization business. That's why when you put all of this together, we are able to advance our agenda in a way that other companies will not be able to. For example, this week we secured a sole source agreement as part of Premier Ascent program. Premier Ascent Program, it's a thousand hospitals and it is one of the major programs for Premier in the US. And we are able to do it because of the fact that we have already today the most comprehensive portfolio. We expect this type of agreement to actually strengthen going forward to see more of these agreements around the world and as we bring all of our innovation further strengthen our position. Now, let's talk about our business update and what are the key messages in terms of our quarter three. And there are basically three key messages. Number one, the COVID-19 pandemic is accelerating the development of the single-use endoscopy market. There is a much higher awareness in terms of infection control. Healthcare systems are measuring better contamination. And on the back of that, they are looking at single-use endoscopy as an attractive solution. And within all of that, of course, our ASCOV-Bronco is being used in the treatment of COVID-19 patients. And on the back of that, we are expanding our customer base and increasing the penetration of our existing customers. Now, all of this, it is translated into a remarkable performance. We are growing 21% in quarter three, on the back of our visualization business growing 81%. This is the fastest growth in visualization of our last 16 quarters. We are actually tripling our business versus three years ago. In Europe and Asia Pacific, we are actually doubling versus last year. Now, the impact of COVID-19 has been positive in visualization, and like in other hospital medical device companies, as it contracted elective procedures, it has had a negative impact in our core business. Now we are seeing a gradual improvement, and in July we are back on positive growth across all regions and all business areas. But we have certainly seen a decline, especially in the first part of our quarter three. And it is this decline in our core business what we are reflecting in our full year guidance. Now we expect to grow 26% with our EBIT growth hitting around 12%. Now, because this adjustment is really linked to our core business, our guidance for our visualization volume remains unchanged, and we are expecting to hit more than 1 million endoscopic units this year. Now, all of this means that we are actually emerging from the pandemic as a stronger company. With a 26% growth outlook for this year, AMBU is today one of the fastest-growing medical device companies globally. We are doing it while strengthening our organization, both in innovation and commercial infrastructure. We are, on top of that, entering into the largest market in endoscopy, with the launch of our ASCOP system in urology and our ASCOP Duo in GI. These new markets are going to be important growth pillars for the company. Now, let's talk with a bit more detail regarding the impact of COVID-19 and why the single-use endoscopy market continues to strengthen. And we have seen two things. Number one, there is an increased focus on infection control. There was a recent peer review meta-analysis that was done that showed a 15% contamination rate in duonoscopy. And actually, if you look at the last DDW conference, the largest conference in GI endoscopy, there were 17 papers that were presented on contamination in duonoscopy. So overall, there is a much higher level of awareness regarding contamination issues in reusable endoscopy and the need to look for alternative solutions. And that is combined with the guidelines from the FDA and national associations. For example, recently the FDA issued its second safety recommendation asking US hospitals to move from traditional reusable scopes to more innovative technologies, highlighting Ascope Duo as part of a solution. On top of that, all the national bronchoscopy associations, both in the US, in Europe, and Australia, are indicating that in the midst of the COVID-19 pandemic, if you need to do a bronchoscopy, that you should consider doing a single-use bronchoscopy. And all of that is creating a more positive environment for the development of our single-use endoscopy market and within that for the development of AMBU. Now, now that we talk about the market, let's talk specifically about the COVID-19 impact on visualization. So first of all, if you look at the impact of ASICOP for Bronco in Europe and the rest of the world, it has been transformational. In our quarter three, our Eurovisualization business grew three times, and we doubled our business in the rest of the world. Actually, we are seeing double-digit growth in all of our European territories. with the United Kingdom as the main growth driver as they prepare for the second wave. Now, in the case of the U.S., as you have seen, a different level of performance. And the reason why it is different in the U.S. is because in Europe, when a COVID-19 patient arrives, the first thing they do is they use single-use bronchoscopy to check the health of their lungs. While in the case of the US, single-use bronchoscopy is only used in the cases where patients have more severe conditions. And of course, our single-use bronchoscopy is part intensive care and part elective, and the elective part is being affected as elective procedures are being canceled or postponed. Now, we have seen a positive evolution after our quarter three, and in July, we have our U.S. socialization back on a strong growth. Now, to meet the increase in our global demand, we have completed the expansion of our manufacturing capacity for Horesco Bronco, and now we are in a better position to fulfill any future demands related to our second wave. And it is on the back of that that we are selling 337,000 units in our quarter three, and that we are maintaining our guidance of over one million scopes for the full year. Now, while the COVID-19 impact has been positive in visualization in the case of our core business, it has been negative, especially in P&D. And again, this is similar to what we have seen with other hospital medical device companies that participate in elective procedures. There has been a postponement of these elective procedures and that has had a negative impact, especially in patient monitoring that declined 32% in quarter three. The reason why our anesthesia business has not declined to the same level is because of our resuscitators. And our resuscitators, similar to a single-use bronchoscopy, play a very important role in the treatment of COVID-19 patients. And that is offsetting the decline that we are experiencing in the rest of our anesthesia portfolio. Now, we have seen, after a sharp contraction in April and May, a recovery of our corvices as well. And in July, all regions and all business areas are back in positive growth. Now that we talk about the impact of COVID-19 in our performance and how that is driving our outlook for a 26% growth, let's look at another very important element of our agenda. We say that we want to become the most innovative single-use player in endoscopy. And we have the richest pipeline in the market to deliver against that. We are launching 15 new products over the next three years. And if you look at our key milestones in quarter three, we introduced our ABU2 Advanced. And with this product, now we have superior image resolution in pulmonology. It's a monitor that combines with our advanced sensor with our advanced image enhancement software provides an image resolution which is unmatched in the market today. We also got approval for our ACE-CoV system. We will talk about what are some of the early learnings of this launch, but that gives us access to what is considered the largest endoscopic market within urology, a market which is bigger than our current pulmonology market. And, of course, we got a granted breakthrough designation for our S-COP dual, and we got clearance from the FDA. And with that, we are entering into GI, and I will also give you some details in terms of where we are. Now, all these are very important achievements in the face of a COVID-19 pandemic, and it reflects the ability of the R&D, regulatory, and commercial organizations to execute in what has been a very difficult environment. Now, COVID-19 has had an impact in terms of the next generation of products, and this is on the back of travel restrictions and ability to be able to work with some of our third-party suppliers. That actually is resulting in a delay in our launches from our second quarter next year to the second half next year for our ASCOP column and gastro. All the rest of the launches remain as planned. Now, let me just give you some highlights in terms of our ASCOP system. Again, this is a six million procedure market for us. We are going to expect a rapid uptake similar to what we have seen in ENT and faster than what we actually saw in pulmonology. We say this because we have done around 500 trial demonstrations. We have 213 ongoing trials. Actually, if you look at the top 100 largest urology centers in the U.S., In 21 of these top 100, we have either converted or we are in the middle of trial. This level of activity, this level of receptiveness is much higher than what we saw when we launched pulmonology and when we have entered into EMD. And the main driver of this is the perception on EMAS resolution. And basically, our S-COP system has our most advanced sensor. It has the most advanced image enhancement software. And it has our latest monitor technology with EFU to advance. And when you put all of that together and you compare that image resolution with a reusable SISTO scope, which after going through several reprocessing, lose its image capability. Basically, the feedback from the healthcare system and the urology physician is that they perceive a better image resolution, which combined with the convenience and flexibility, the ability to do more cystoscopy procedures with existing infrastructure, the strong healthcare economics, will make this market convert very rapidly. Now, that is in terms of system. Let's talk about now our entrance into GI with the launch of our ASCOPE Duo. GI represents the number one strategic priority for the company. GI accounts for 70% of the total endoscopy procedures globally. And we expect that by 2024, single use to endoscopy is going to be one of the largest segments in the market. And that's why this launch is so important. We can today disclose that actually we have granted breakthrough designation with the FDA. That basically means that throughout the development process, we work closely with the FDA on securing the approval. And we are expecting a rapid market, rapid conversion. It's very rare for the FDA to issue two safety recommendations to U.S. hospitals. That combined with a CMS reimbursement in the outpatient channel is going to ensure that all hospitals in the U.S. move to innovative technologies and single-use colonoscopy being the one that will guarantee no risk in terms of contamination. We know it's going to be one of the preferred solutions. Now, we have started our control market release. We have conducted today over 400 trial demonstrations. We have some positive feedback from physicians on the back of this product demonstration. We get positive feedback in terms of the image resolution. We get positive feedback in terms of the feel of the product. We get positive feedback in terms of the weight. And overall, we are excited in terms of moving forward. To be able to support this launch, one of our key priorities is to build a significant commercial infrastructure, especially in the US. We are on track to build our 170 reps in the US, and they are working well with Cook Medical as part of our marketing agreement. And through that, we are getting access to all the major to endoscopy centers in the U.S. We expect all this infrastructure to be in place by the end of Q1 next year. And then in terms of our clinical study, and I would say this is similar to what other pharmaceutical and medical device companies are experiencing, COVID-19 is disrupting the ability to start clinical trials in the time that we were planning. Our plan was to start 1st of September and what we are seeing is that the administration in our key selected site is having some problems to finish their contract and have everything in place to make sure that we can execute this clinical trial without any problems. And therefore we are delaying the start, but the clinical trials is an important part of our launch agenda. We are committed to share the as soon as we complete the study. Now, that is in terms of the highlights, in terms of the performance of the company, the progress of our innovation, and where we are with our launches to urology and GI. Now, let me pass it to Michael, who is going to provide more details in terms of our financial performance.