Ambu A S Ord

Thank you and welcome everyone for our quarterly three earnings. We are excited to have all of you this morning. Let me start with key messages for this call. First of all, the transition to single-use endoscopy market continues to accelerate. Over the last three months, we saw the safety communication from the FDA in bronchoscopy, recommending sterilization of reusable endoscopes when available. And the adoption of single-use bronchoscopy when treating patients at increased risk of spreading infection. That's basically increasing the cost of using reusable bronchoscopy and at the same time clearly encouraging healthcare systems, all healthcare systems to consider single-use bronchoscopy for certain patient profiles. And that will accelerate the penetration of the single-use bronchoscopy market. In addition, we saw the CMS reimbursement for single-use duonoscopy in the inpatient setting effective October the 1st approved. That basically means that in 40% of all duonoscopy procedures in the United States, there will be an economic incentive to use our Descope Duo given our prices. And we consider that between the support from the FDA encouraging all healthcare systems to use innovative technologies, and then the economic incentive from CMS in the case of Medicare and Medicaid patients, that the creation of a single-use colonoscopy market is going to accelerate. Now, it's not just about the market. It's also about where we are in terms of our performance. And we basically continue our accelerated growth on the back of new product launches. Our total company growth was 7%. And in terms of visualization, we were actually able to match the record peak that we had last year where we grew 81% growth. And if you look at our two-year CAGR, our visualization business is actually growing at a compound annual growth rate of 36%. From a volume point of view, in the first three quarters of this year, we have already sold 1.1 million endoscope units. And that is more than our entire volume last year. Our ASCOB Bronco continues to perform strongly. We don't see any impact in terms of pricing or in terms of competition. And in addition to that, what we are seeing is a very rapid growth of our ASCOB ENT and SYSTEM, where we continue to grow double digits quarter over quarter. These markets are significantly larger than pulmonology and will represent very important growth engines for us going forward. And in addition to that, we are very excited that we are four weeks from launching our ESCOPE Duo 1.5 and we have already filed for our single use gastroscopic system. ROA Scope Castro and our AVOX2, which have been already submitted for FDA clearance. And if we step back and we look at where we are heading, it is clear that we are going to emerge as a leading single-use endoscopy player. We are on target to introduce 20 new products by 2022-23. Half of them will happen next year. Next year, we have more launches than most of our key competitors combined. We are accelerating the construction of our new high-scale, low-cost manufacturing plant in Mexico. This is going to be the largest single-use endoscopy plant globally and reflects our ambitions in terms of growth. And we are also strengthening our leadership team and board of directors as we move into the next phase of our journey. And we are glad to see such a strong caliber of leaders joining our leadership team and being proposed to join the board. So let's look at the specifics. So if we look at the market, On the left hand side, what you have is the US medical device reports on reusable endoscopy related contamination and infections since 2014. And in 2014, there were 170 cases reported in the US. By 2020, we have 1,880. This is a growth of 11 times versus 2014. Now, it's not that there are more and more problems in terms of contamination. What's happening is that the awareness of the contamination issues that have existed all the time is actually increasing. And this will continue to increase because if you look at the FDA safety communications, both in bronchoscopy, urology, and They are not only asking hospitals to increase the quality of reusable reprocessing. They are not only recommending to use single use in specific situations, but they are also asking hospitals to monitor and report contamination related issues more closely. And on the back of that, what we expect to see is the true issue in terms of contamination in reusable endoscopy, which makes even stronger the case for authorities around the world to promote the transition to single-use and the creation of a single-use market. That's why we are confident that by 2025, we expect the market to be $2.5 billion. And in that process, it will be one of the largest new markets created in medical devices. Now with that attractive market emerging, let's see where is Zambu today and where are we heading? So first of all, in terms of our performance, we have delivered a two year figure of 14% compared to part of three, 2018-19. That make us one of the fastest growing medical device companies globally. And this is driven by our visualization business, which is growing at an impressive 36% CAGR. In terms of core, we continue to see volatility in terms of elective procedures. And the situation varies significantly by geography. Today, we are flat relative to two years ago. And we expect vaccine rollout continue and the situation stabilize. that the latest procedures will continue to come back in the market and on the back of that, our core business will improve. Now, in terms of visualization, it has been a record quarter for us in terms of visualization. This has been the highest number of units sold in every quarter in the history of FANBU. Actually, if you look at our entire, third three quarters volume, we already sold more than the total units we sold in the entire last year. And again, the growth is not just driven by our Bronco business, if you look at it year to date, where we continue to strengthen our relationships with GPOs and with IBMs, we actually have over the last six months secure preferential agreements with eight of the top ten IDNs in the U.S. But on top of that, we are seeing very rapid growth of our ENT and system, which are actually growing double-digit growth quarter over quarter. And they are doing that in an environment where elective procedures are still the threats. where access is still not 100% back to where it was. And just give you a sense in terms of how powerful these growth platforms are going to be for the future of AMBU. If you remember the total number of endoscopy procedures in ENT and SISTO combined, you're talking about 16, 17 million procedures which is six times more than the number of procedures in pulmonology. And that is just an incredible opportunity for us as we move forward. Now, if we look at the evolution of these two platforms, you can see that there is a volatility depending on the COVID-19 pandemic, but overall it's a very rapid penetration. One of the things we're excited about is that our success in EMT and system is not driven by contamination concerns. Those are not really issues in the decision making of healthcare systems. Our growth is driven by the performance of our growth from a technology point of view and is driven by the significant convenience and flexibility that we offer. It's a very good example that if we are able to bring more advanced technology, if we are able to practice in a way that it is a parity with reusable endoscopy, the benefits of our launches will allow us to participate in every single endoscopy segment. Now, of course, it's not just about that. Our future is very exciting. And I have to say, I think this is probably going to be the last year where we are able to show you our visualization pipeline in one slide. We are running out of space. But we are basically on target to introduce 20 new products by 2022 and 23. Half of the launches are going to be introduced in 21-22, including our S-COP5 system. And our ESCO 5 design has been completed. It is done. The timing of the launch is actually related to the regulatory approval of our Xbox 2, which we are trying to make sure we deliver against our promise on the ecosystem. That basically means that all scopes can work with our Xbox. to this hospital significant flexibility to allow them in an operating room to do a gastroscopy, and then a urethroscope procedure, and then a bronchoscopy procedure. In addition, we are adding one more pro to our pipeline, which is our ESCO-5 bronchosampler. And then in terms of GI, we are on track for the launch of our Ascope Duo 1.5. We actually just had a session with our top key opinion leaders from the US. They represent ERCP systems that account for the largest volumes in the country. And we went through all the improvements we are making, the elevator, the better image resolution, the better functionality. And we are excited in terms of how this S-COP Duo 1.5 will do. And, of course, we are launching this prod ahead of the expansion of reimbursement to inpatient procedures in October, which is going to be a very important moment to bring a single-use tonoscopy prod with superior performance right when ERCP systems have the economic incentives to transition. And in addition, we have filed for our S-COP gastro and ABOPS II to the FDA for approval. Now, let me just spend a couple of moments to highlight two of our 10, over 10 launches that we're having next year. And these actually, give you a glimpse in terms of the quality of our innovation, the strength of what we are trying to do, and more importantly, how, on the back of this innovation, AMBU is going to be transformed. So let me start with our ASCOP gastro and ABOX2. First of all, as most of you know, gastroscopy is an over 20 million procedure market. So if you look at the number of endoscopy procedures pulmonology and ENT and cystoscopes, all of them combined, they are actually smaller than the total number of procedures in gastroscopy. So this is a very large market for us. And we are introducing a high-performance centroscope, which includes the most advanced high-definition image sensor with maneuverability that we have tested that is on par with reusable scopes. We also have had reviews with top gas procurement leaders in both the US and Europe. And the testing and feedback supports our ability to address procedures that account for approximately half of the total market. And we will be able to tap into that market potential right from the moment we introduce the product. And we are introducing our ESCO 5 PRONCO high definition. And this is building on all of our experience introducing our previous system. In terms of performance, we know based on seeing competitor launches that our product have a superior image quality and handling. And it is going to be the strongest product single-use bronchoscope available in the market at the time that we launch. And with that, we will be able to enter into the Bronco Suite. And remember, there are about 3 million procedures in pulmonology. There are 2 million procedures in the Bronco Suite, which is a completely new market segment for us. And this ESCO 5, when we launch, will be integrated with our newest display technology platform, our AVOX 2 and our AV2 Advanced. So sometimes I get questions in terms of whether AMBU is prepared for the competition. The question I would say is whether the competition is prepared for AMBU, especially in bronchoscopy. If we look at what we are going to build, we are building the most comprehensive airway offering in the market. Our launch is in 2021 and 23. In addition of what we have already done in terms of DSCO4, a sampler set and our VivaSight 2. We're introducing our X-POP 2, our ESCO 5 Bronco, our ESCO 5 Bronco for specialty procedures, the ESCO 5 Bronco for smaller patients, our ESCO 5 Bronco for, ESCO 5 Bronco sampler, our next generation of video laryngoscope, and all of these connected, which will provide hospitals in airways departments with significant flexibility, basically able to address any type of bronchoscopy procedure with one complete system. That's why we say we have significant growth opportunities in EMT, significant growth opportunities in SYSTEM. We are entering into all these new segments. But our bronchoscopy business is one that will continue to grow going forward. And it will continue to grow because we are going to continue to have superior technology with the best economic offering and with commercial agreements that will prefer the position for our business. Now, when you look at the momentum we are finding in terms of volume and all the launches in front of us, we have decided to accelerate the construction of our Mexico plant. Now, this is going to be the largest single-use specialization plant. And again, it reflects the scale of our ambition and future growth expectations. And as you can imagine, building this plant and having it ready for next year will not only secure capacity, but will also help to mitigate supply chain disruptions. It will eliminate the need to air freight visualization products from Malaysia to the U.S. It will give us a dual sourcing strategy, which will give more reliability. And we are very excited to see our Mexico plant become operational in 2021-22. And let me just finish this business update, welcoming new members of our management team and also being excited with new members being proposed by the Board of Directors of AMBU to join us. We have Brent Scott, who is going to be our new President of Asia, joining us on October the 1st. He has over 30 years of experience in Asia Pacific, 24 of which were with Striker and he was one of the key leaders on building the region. This is very important because we consider Asia Pacific to be a region with significant growth potential. We have made very important investments. Just to give you a sense, our base in Japan is going so well that in q3 we saw the equivalent just in q3 we saw the equivalent of our entire group last year and we are just starting with our uh esco for bronco uh we are launching emt and fisto and opportunities in japan and australia and korea and china are significant uh we also have welcome barcelona our new chief marketing officer who comes from johnson and johnson medical devices and where he used to run a global and U.S. spine. Spine is a category with very rapid innovation, where you have multiple launches hitting the market at the same place, and he's going to lead our portfolio strategy and, of course, the execution of all of our launches. And at the board of directors level, we also have two new board members being proposed for our annual shareholders meeting. We have Suzanne Larson, the CFO of MoneyClean, with over 10 years of CFO experience in public companies and deep expertise in corporate finance, strategy, and business development. And we also have Michael de Trau, who was a former company group chairman of Johnson & Johnson Medical Devices. He led Ethicon globally, which is the largest surgery company with over 50 billion DKK in sales. Significant experience, not just across the US, Europe, and Asia Pacific, but also around building a new market, new segments, and competing through rapid innovation. what we are seeing across the organization. Our ability to bring top talent from across medical devices to help us to fulfill our journey. It reflects how excited they are to join a company with our potential and also how we are actually getting ready for what is going to be an exciting new phase in our journey. And with that, let me pass you with Michael Hoidar, who will talk about our financial results.

Thank you, Juan Jose. On July 1st, we disclosed preliminary numbers for Q3, and we adjusted the outlook for the full year. The actual financial performance for Q3 is aligned with the disclosure that we have here today, but allow me to go through the numbers for the quarter. In Q3, our revenue increased organically by 7% and 16% year-to-date. If we compare two years back, i.e. back to Q3 18-19, which was before the pandemic, the annual average organic growth rate since then was 14% for the total company. In Q3, visualization for the quarter went flat with organic growth of 0% and 29% year-to-date. The three-year organic revenue CAGR for visualization came in at 36%, which reflects the increased usage and penetration of single-use bronchoscopy we've seen from before the pandemic to now where COVID-19 fit in demand is leveling out. In the quarter and combined for all regions, we sold record 386,000 units of endoscopes and more than 1.1 million units for the year to date. Thereby, we have already now exceeded the full volume of units sold the entire last fiscal year. In the quarter, core posted a positive growth of 15%, which is made up by a mixed effect from anesthesia, posting a slightly negative growth of minus 1%, and PMD posting 44% positive growth. The negative growth in anesthesia is a result of elective procedures gradually returning offset by reduced demand for resuscitators and supply chain constraints. The high growth in PMD also shows how electric procedures returning on the back of low comparatives in the same quarter last year. Finally, our EBIT earnings ended at 88 million DKK with a margin of 9% for the quarter and 336 million and 11.2% year to date. On slide 15, we show the geographical distribution of this quarter's revenue and organic growth rates. North America accounted for 43% of revenue in the quarter and reported an organic growth of 32%. Visualization in the U.S. grew organically by 47% in the quarter, positively influenced by product launches and with a two-year revenue cap of 20%. For the core business, elective procedures activity in America continues to improve, but with significant variability by state and with the Delta variant picking up in many states. Year-to-date, America posts organic growth of 16%. Europe accounted for 44% of revenue in the quarter, with sales declining relative to prior year and an organic growth rate being negative at minus 10%. For visualization, growth for the quarter came in at minus 26% on back of a record high comparable last year. The two-year revenue cake for visualization, however, in Europe is at 48%, which underlines the very strong performance that we have seen. In Europe, elective procedures continue to recover and accrue. is improving, but supply chain constraints is showing an impact in the quarter with lower growth in anesthesia as shipments from Asia to Europe were delayed. For the rest of the world, we posted an organic growth of 7% with visualization at 31% and a two-year revenue tender of 64%. The rest of the world remains significantly impacted by national lockdown across all main markets in Asia and Latin America, leading to negative growth in both anesthesia and PMD. Now, on slide 16, allow me to comment on the financial effects we see in the current environment showing impact on our supply chain and procurement activities. A combination of strong demand for our scopes and delays in the global container freight market have for Q3 forced us to continue air freighting single-use endoscopes and some core products. This has led to increased OPEX, but that has been required to support customers' needs. In the quarter, distribution costs relating to air freight and increased shipping costs accounts for approximately additional 13 million DKK of costs and yesterday approximately 32 million. We expect a full year impact from increased freight costs of approximately 55 million DKK or 1.4 percentage points of our EBIT. At this time, it's difficult to say for how long this will continue, but we do expect it to last far into next year. Our free cash flow for the quarter is negative with 113 million DKK. This is mainly driven by increased inventories due to the longer lead times when shipping from factories in Asia to our main markets in America and Europe. Part of the increase is also caused by increased inventory of raw materials and components to increase safety stock levels and to ensure continuity in our manufacturing. Lastly, we have seen a trend of increasing prices on raw materials and components used in manufacturing, and we do expect this to continue into the fourth quarter. Now let me go through the key numbers in our P&L. Revenue for the third quarter came in at 973 million DKK equal to the mentioned 7% organic growth and a reported growth of 3%. Revenue for the first nine months was 2.9 almost 3.0 billion DKK corresponding to reported growth of 11 and organic growth of 16%. The 5% gap in reported versus organic growth is caused by the depreciation of the US dollar versus DKK. The gross margin for Q3 came in at 62.5, which is two percentage points below our Q3 last year, due to mix, but in line with our second quarter this year. Last year, the relative contribution from visualization was high, which led to a more plausible mix. As in previous quarters, negative effects from reduced average selling prices are very minimal. Social capacity costs for the quarter were 520 million DKK, corresponding to a 14% increase compared to Q3 last year, with increased costs across all categories. As mentioned previously, we have continued to average scopes, and this has contributed to a higher level of cost within the selling and distribution cost line. EBIT ended at 88 million DKK in the quarter, with a margin of 9.0%, And for the first nine months, EBIT came in at 336 with a margin at 11.2%. On slide 18, I will just mention some of the highlights for our cash flow and balance sheet. Free cash flow before acquisition for the quarter was negative with the mentioned 113 million DKK corresponding to 12% of revenue. For the first nine months, free cash flow came in negative at 138 million DKK or 5% of revenue. Investments for the quarter come in at 181 million DKK including investments relating to Mexico and are as expected. As discussed, the negative free cash flow are driven by the required additional investments into inventories, finished goods as well as raw materials. Working capital revenue relative to 12-month revenue is thus up by 4 percentage points to 21% of revenue by end of the third quarter. Lastly, total net interest-bearing debt came in at 638 million DKK and a gearing at 1.1 times ETA. The decrease in net interest-bearing debt over last year is driven by the capital increase and sale of treasury shares performed in January. And lastly, on slide 19, On the 1st of July, we updated the outlook for this year as a result of an increased impact from COVID-19 pandemic. A revised financial guidance for 2021 is repeated today and is as follows. Organic growth of approximately 17%, including expected growth in visualization to be above 30% for the full year. EBIT margin of approximately 10%. and social number of endoscopes could be sold to exceed 1.4 million units. And with these words on the financial performance, let me give the word back to you, Juan. Thank you very much.

Thank you. I mean, this quarter three reflects what we have been discussing over quite some time. First of all, the developments to support the creation of a single-use endoscopy market. The strong growth momentum of the company on the back of a strategy focus on superior innovation. Our strength in terms of high-scale local manufacturing, modular R&D engine that allow us to bring to market not only a larger number of products, but also faster in a very efficient way. And how in the back of all of that, we are going to emerge as a leading single-use endoscopy player. Let's just open for Q&A now.

Thank you. If you would like to ask a question, please press 01 on your telephone keypad. If you need to withdraw your question, you may do so by pressing 02 to cancel. There will now be a brief pause while questions are being registered. The first question comes from the line of Benjamin Silverstone from ABG Sunder Collier. Please go ahead, your line is open.

Thank you very much. Hi, Juan, Michael, Neville, and Matt. I hope you're well. I have three questions to begin with, if I may. The first one is in terms of the ASP and the scopes. So if we just take the pre-announced numbers, it was initially 380,000 sold this quarter, but it ended up being 386,000, so 1.5% higher. But revenue is only up 0.2%. And also if you look at the previous year, the scopes are much higher than the revenues. So could you just please give us some indication of what is driving this SAP shift? My second question is in terms of the growth in the different markets. We obviously see North America doing very well, but Europe is down 10%, predominantly driven by the visualization segment. Is this an indication to, or could we conclude that we might have to sort of rethink how we see COVID-19 as a one-off? You were quite specific last year that we did see a one-off in Q2, but in Q3 last year, there were no one-offs. Should we rethink this or how should we see the base for the next couple of quarters in Europe going? And the last question is in terms of the pipeline. So I'm just wondering, you have now put the gastro and eight box into a submitted for FDA clearance. I just wanted to know if you could clarify if this is according to your initial timeline and if you still expect them to launch in H2 2021. Thank you.

Sure, thank you very much, Benjamin. So let me start with the ASP. And first of all, there are no changes in our ASPs within visualization. Our ASP in bronchial system ENT remains stable. In the case of bronchoscopy, we, I mean, short of the announcements, we have seen very little competitive activity. looking at the competitor pros we don't think they bring anything really superior to our S-COP4 and of course their pricing is also not competitive relative to us so we don't see any need to change our S-COP4 pricing the difference is all driven by mix and again The main highlight is not just that we have a very strong bronchoscopy business. The main highlight is that on top of that, our ENT and cysts are growing very rapidly, much faster than what we thought. In terms of growth by region, listen, there is a lot of volatility in the market, depending on how, when COVID started and how much it hit. different geographies last year. So I wouldn't read too much our relative performance in Q3. Remember that there are also distributors and NHS shipments that kind of change how different reuse perform in every quarter. and i would actually encourage you to look at it over a longer period and then project from that the truth is that on the back of the kobe 19 pandemic we are emerging as a stronger company across the us europe and asia pacific and in terms of uh in terms of gastro and our gastro system i mean this is a very important initiative for us and we see the same conditions in bronchoscopy, ENT, and CISO to be applicable in gastro. It's a more straightforward procedure from a technical point of view and having personally hear the feedback from the gastro care opinion leaders, we are very excited with this launch. I would say this is consistent with our plans and I will not just provide a narrow launch times a but this is going to come this is going to come next year and and we will see but i think it's going to be a very important growth engine for the company thank you one just to follow up on the first two questions in terms of the asp if the changes are due to a product mix and the bronco is still strong but we are seeing a much stronger emt and system

Wouldn't we then also have to see some organic growth if we have the same strong base in Bronco, but then a higher base in the other two segments? And in terms of the European market, just to clarify, so we should not sort of incalculate any sort of one-offs. You still expect to grow from the base that you had last year when you look at the year in Europe.

Benjamin, hi, this is Michael. I think you're rational on the first part of the question. I think you're zooming into too much level of detail here. I think you cannot focus on our preliminary number of scopes and then compare that versus the increase in revenue that we came up with with the final numbers. I think what Juan Jose is saying is that the overall ASPs are stable. We are seeing an effect from Mix that we are selling more of the ENT and the SYSTO and relative lower prompt numbers, but overall the business model is solid and unchanged. I think the analysis you're trying to do, the quality of that piece of data does not allow for that analysis. And could you please repeat the second part of your question? It was not completely clear to me. You talk about the base for the growth going forward in EMEA, whether we can apply last year's revenue as that.

Thank you, Michael, for clarifying the first one as well. For the second one, I just want to clarify if, you know, I was thinking when we looked at Q3, should we now perhaps start to incorporate some sort of one-off effect from last year, like you did in Q2? But then one mentioned that, you know, we should not look at just a quarter, but the year in total, because there are obviously some volatilities here. So I just want to clarify if that was correctly understood, that you are not, you know, you're not seeing any sort of one-offs that you have to sort of adjust for in Q3 in EMEA.

No, I think every time we see a one-off, you can rest assured that we will let you know. And we did so last year. And now as we are moving out of the COVID-19, things are normalizing and we are getting closer into something that is an organic-driven baseline. And then we will guide you based on that when we move a little forward.

Thank you so much, Michael. You're welcome.

Thank you. The next question comes from the line of Thomas Bowers from Danske Bank. Please go ahead. Your line is open.

Yes, thank you very much. A couple of questions here from my side as well. So just getting on with the duodenoscope, so on the call you mentioned you have KL feedback on version 1.5 as far as I understood. So can you just elaborate, have they just seen the product or have they actually been using it in testing in some patients based on that feedback you have? And then Secondly, also the Duo, so any additional items now that you want to improve in version 2.0 aside from the sensor upgrade that you previously have mentioned. And then just lastly on the ASP, so how should we think of ASPs in visualization, of course, in Q4? because you guide for plus 30% organic growth in visualization for the full year, and then you say now above 1.4 million scopes. So I assume this does not sort of reflect that you are looking at potentially 1.5 or maybe even higher in terms of units. I assume that you will change your guidance. So is there anything in that ASP in Q4 that should definitely be materially higher than what you have shown us in the third quarter. And then just lastly on ASP, I was still just seeing you give away low single-digit TPO discounts here for the products, or is there any now also that you are growing in volume and getting larger accounts on board also for Sisto and ENT? I guess historically you have given away some volume discounts, so I guess that must in some way impact your ASPs slightly. Is that correct? Thank you.

Yeah, thank you Thomas. And let me start talking about the ASPs and then I will talk about Duo. First of all, our GPO agreements have not required us to give any price discount. And we do not expect any changes in our ASPs next quarter or for the foreseeable future. we are the most competitive company in terms of pricing our competitors are launching products which either are inferior or at parity versus where we are at a higher pricing so we don't see any need to change our pricing going forward so that's one thing just to be absolutely clear and of course our pricing is really driven by parity with a usable endoscopy in each of the procedures. And that will be the guiding pricing for any of the new launches that we have. Now in terms of Duo 1.5, I mean, we're launching in four weeks. So I guess we will all very soon see the actual performance in the market. But I mean that the product continues to be used in the market, our S-COP Duo 1.0. And we have done quite extensive testing in terms of our Duo 1.5. And without getting into details, you should expect an improved elevator, an improved functionality, and an improved image resolution. And next year, we are also introducing our Duo 2.0. And basically what Duo 2.0 gives us is two things. One is improved resolution on the back of our more advanced sensor. And the second one is connectivity with the AVOX together with our gastro and colon to make sure that gastroscopy GI departments are able to do any type of GI procedure with the same system and provide the same flexibility that we want to provide in Airways as we presented. Now, the launch of new generations does not represent that our current generations are not performing well. It just reflect our strategy. We compete based on superior innovation. As soon as there are more advanced sensors As soon as we have more technology in terms of maneuverability or more advanced image resolution software, we will introduce pros to market. A very good example is our ESCO system. It's doing extremely well. We are growing very rapidly month over month. And yet we are introducing our ESCO system high definition next year. And you will see that happening across our entire range.

And Thomas, maybe I can answer. You had a question about our Q4 ASP and growth and units.

Yeah, and guidance.

Yeah, exactly. I think my answer to that is a little bit along the lines which we said to Benjamin that I think we're going into a level of details here that we're probably miscalculating ourselves a little bit. We guide the 1.4 ASP. million units remember there are no decimals after the four and again our overall ASP we don't expect it to change but there will be mixed impacts and it's within that that you need to model it out.

Okay I guess and just to be clear maybe I missed it but so the feedback you have on the duodenoscope is based on version 1.5. The latest one that you mentioned is based on 1.5, and it has been tested. So 1.5 has been tested by some KOLs, and you have received positive feedback, and that, of course, leads you to the whole 10 September. Is that correct, Anders?

Yes, that's correct. We are confident in terms of our ability to penetrate the duonoscopy segment with our 1.5, at a time when the investment is being expanded. So I have to say that conditions couldn't be better to launch our 1.5 generation.

Okay, thank you very much.

Thank you so much.

Thank you. The next question comes from the line of Alexander Bergland from Bank of America. Please go ahead, your line is open.

Thank you very much. I have a question on duidoscopy and specifically on the U.S. Center for Medicare and Medicaid Services, so the CMS grants of the new technology add-on payment for 2022. So when the CMS calculated the weighted cost used to assess the maximum reimbursement, it tented it to Boston Scientific, who also made application, and based it on total number of projected cases, with 3,750 cases for AMBU, and 8,314 for Boston. So my question is, where do these projected numbers come from? Is it completely a CMS projection, or did you give them any expected numbers in your application? Basically, what I'm trying to understand here is if we as analysts should anchor around 3,750 butadienoscopes in Medicare in the US for 2022. And just for the record, I'm referring to page 881 of the CMS.

Yes, Alec, thank you very much for your question. And in terms of the volume projections, those are internal projections from CMS, so they do not reflect AMBUS assumptions in terms of how much we are going to sell next year. I don't tend to guide on specific segments, but I think you can be comfortable to assume that we are planning to sell more than that. Now, something which is important to comment is that in the case of inpatient procedures, because of the difference in pricing is not the same for XLB as it is for the S-COP Duo. Given the S-COP Duo pricing, there is actually a higher incentive for healthcare system to transition into our S-COP Duo technology. They actually will have a higher economic benefit that if they do it with a competitor product. So there is the incentive that clearly benefits Cisco Duo because of the pricing. And again, that's not really our focus, no.

Okay. I mean, I'm just asking, right? Just because, I mean, you're talking about, you know, having very good conditions for the Venuscope. It's 3,750 just, you know, Obviously, it looks like quite low number. But do you have any kind of comment or idea how they kind of came up with that number? Or it just seems like it seems very different communication from you and what they have been predicting?

I mean, I cannot really comment, but you know, of course, this market does not exist yet. And I would say very difficult to estimate in terms of how it will develop. The most important thing in the case of duonoscopy is to look at it over a longer period of time than just next year. And we believe that because of the risk of contamination, which is very high, because of the FDA safety communication and because of CMS reimbursement incentive for outpatient and inpatient procedures in 2025 when we believe this market will be 2.5 billion, single-use colonoscopy we expect is going to be one of the larger segments. That's really what we need to focus on.

Okay. Thank you very much.

Thank you, Alex.

Thank you. The next question comes from the line of Niels Lett from Carnegie. Please go ahead. Your line is open.

Great. Thank you. I'll just take one question at a time then. So my first question would be on your U.S. business where the sister scope and ENT scope seems to be doing very well. And given that the product mix in the U.S. is likely to become also, I guess, the product mix in Europe in a year or two, Could you just briefly comment on your ASP as it looks right now in North America and how far that is away from Europe in order to guide us in our modeling? Thank you.

I mean, do you mind just repeating the question? I just want to make sure I understand again. When you say U.S. versus Europe, what exactly do you mean?

Yeah, so I just, I mean, what's the ASP difference between North America and Europe?

I mean, I would say it varies by product. Our ESCO Bronco is slightly higher than in the US and in Europe. But for example, there is really no price difference in the case of Sisto. The most important thing to take is that if I take the US, for example, the US, we have, about 25, 30% penetration in pulmonology. This is a single use endoscopy market. And we have about 97% market share. And we see our ASP in bronchoscopy in the US is stable. It has not changed. It is not changing. And we are not planning to change it given what we are seeing in terms of competitors activity. And the same thing is for CISTO and for ENT. And the same situation is in Europe and in Asia Pacific. And the overall ASP of visualization will be a weighted average of where the growth of the existing portfolio plus the over 10 launches we're going to have next year plus the launches in the future. Within that, there are launches which have very high ASP, specifically our ASCOP Duo, but we can also expect higher ASPs for our EuretraScope, for example. And that will be compensated by other ones. So, you know, for now, I would suggest you to assume our ASP is stable for the foreseeable future, and our gross margin also stable for the foreseeable future.

Right. So, my second question on the 550-patient trial with your duodenoscope, which is supposed to be relaunched here as of September. So, is it correctly understood this will be relaunched with the ABOX1 processor?

Yes, yes, that's correct. And I think in the last call, I mentioned that we will be sharing the clinical results in our Q1 earnings, and we are committed to that deadline.

And will the final result of the 550 patient trial be ready for publication at the DDW convention next spring?

I mean, I'm not sure about that. I'm sure we'll have some type of communication at that point. I think it's a very good forum to showcase the strength of our innovation. So you will see us, I'm sure, showing data on Duo. We'll probably be showing data across several of our other launches.

Great. I'll jump back on the queue.

Thank you, Nils.

Thank you. The next question comes from the line of Christian Rion from Nordea. Please go ahead. Your line is open.

Hi. Good morning, and thank you for taking my questions. I have a couple as well. So my first is to visualization in North America and whether you can elaborate a little bit on the sequential development in revenue. compared to Q2 revenues in North America, visualization is slightly lower in Q3. And as I understand you, it seems that both ENT and CISTO revenues are higher quarter over quarter. And I would also have expected general activity in terms of elective surgeries to be higher, which ought to have been supportive for the bronchoscope, but it seems the bronchoscope revenues will still have been lower quarter over quarter. What is going on there? And my second question is to the duodenoscope and just reflecting on the comment you made earlier on the call, Juan Lucero, on the 1.0 product continuing to be used in the market. Can you give us any kind of indication on what kind of numbers the 1.0 has shipped in as of now. Are we talking tens of units? Are we in the hundreds? Any comment on that would be helpful. Thank you.

Sure. Let me start with you and then the evolution of the visualization in North America. In terms of Duo, I would say it's very small. We are focusing on the launch of our Duo 1.5, but of course we have customers that are using our ASCII Duo and we are servicing them. But really the focus has been around getting towards the launch of our 1.5. In terms of the visualization in North America, I just want to echo the comment from Michael Holger. There is a lot of volatility in the market, a lot of volatility in terms of comparables and a lot of volatility in terms of quarter over quarter, including logistic disruptions that we had in quarter three, both in our core and in our visualization products. I will just step back and look at this over a longer period of time to get a sense of where we are globally and by region. Now, let me just say this. With the creation of a single-use endoscopy market, we have always assumed that North America is going to be the leading region. And based on everything we see, the focus of the authorities, the special reimbursements, the focus of healthcare systems on adopting single-use endoscopy, and the progress we have seen with our contracting wins and the development of ENT and SYSTO, and what we are about to see with our launch of our Duo 1.5. North America is going to be a very important growth engine for us going forward.

Okay. Thank you.

Thank you, Christian.

Thank you. The next question comes from the line of Iwei Zhou from SEB. Please go ahead. Your line is open.

Hi, gentlemen. Thank you for taking my question. I have a couple questions here. Let's do it one at a time. Just firstly, a follow-up question on ASP. So without going into too detail, just on the – just compared to your pre-release sales lamp, right, Now you got $523 million for visualization, and previously it was 522. And so you have $1 million more revenue from additional 6,000 units scope. And data, if I do the calculation, please correct me if I'm wrong, and data gives ASP of 170 DKK. And if I remember correctly, you have a bronx scope around the US dollar, 280, 270, and you have a ENT at 150, 130, and you have a cytoscope at the $200. But then my calculation doesn't match those price at all. Could you help me understand it here?

Thank you. Thank you for the question. Again, I think I have answered this, but I think you need to look at the date of the announcement that we sent out. So it came out in the evening on the 1st of July, and if you imagine yourself being in the Indian room of AMBU at that time having to to make up the revenue and the units and everything for the quarter, factoring in currency impact and everything, and also being sure that everything is diligently prepared. We did not have a lot of time, so what we did was we provided the best and most conservative number that we could possibly do, and I think when you look at it afterwards, we come really, really close. As a foundation for your analysis, you should use the actual recorded numbers as from this morning, and you should not spend too much time understanding the relative small gaps that you find vis-a-vis the preliminary numbers.

Okay, fair enough. Thanks. And then maybe just follow up. Could you please give us an indication on the sales, please, between the Bronx scope, Cypher scope, and the ENT for the quarter in terms of unit sales?

No, we cannot do that. I think you need to base yourself on our overall strategy presentation and the comments that you're getting here today. We cannot break out the numbers. No, thank you.

All right, cool. And my second question on a duodenal scope. I mean, we have heard some positive doctor feedback on your competitor, XOD, from the USDDW conference. So for you to compete here, so what would be your key focus in the product improvements with the version 1.5, apart from the elevator system and image quality? Because you mentioned a little bit on the functionality. Could you please add a bit more color here?

Yes, I mean, I think at this point we are, of course, relatively familiar with competitor products. And more importantly, we understand better the performance of our ESCO DUO 1.0 and key areas of improvement that we are bringing into our 1.5. And that's basically, as I said before, the elevator. When I say functionality, I mean the wheels, the valves, to make sure that they work in a way that is more comfortable for the surgeon. And then the image resolution, a sharper image resolution. And we have work to deliver on all of those. And that's what we are bringing into market. Now at this point with our GPO agreements, the ones that we shared before, we announced that we will get automatic access for all of our innovation. And that includes our S-COP Duo. We have also done significant pro demonstrations and placements of our mailbox. So we are actually are already in some of the largest ERCP volume centers in the US. We know we are bringing an improved product that meet the needs of customers. And on top of that, we have a superior economic value proposition. And it is on the basis of all of that that we are confident in terms of our relative competitiveness.

Okay. Thank you. Lastly, I have a question on the gross margin. Could you please quantify the margin impact from the cost inflations?

whether we can quantify the specific impact. I cannot give you a number, but I think what we are letting you know today is that we, as all other industries, do see an impact from the raw material inflation on, you know, plastic metals and also on electronic components that are going into our manufacturing. There's an impact in this quarter, there will be an impact in the fourth quarter, and there will also be an impact as we go into next year. But I cannot give you a specific number.

And maybe in relation to the sales percentage?

No, I think that's the same.

I cannot give you that. I would say the most important thing regarding this logistic disruption and raw material inflation is that we consider them to be temporary in nature. and our focus as a company is to make sure that we execute on our strategy, that we maximize our first mover advantage, that we bring our innovation, that we strengthen our commercial infrastructure, that we have a manufacturing in place, that we have the right talent. And all of these logistics and raw material at some point supply and demand are going to go back into balance and this is going to And whatever the impact it had in profitability will go away. You know, I think five years from now, we're going to look at all of this disruption as a blip. And the most important thing is which is the largest single-use endoscopy player. And we are planning to be that one.

Okay, thank you.

I'll jump back to the queue. Thank you.

Thank you. We have a further question from Benjamin Silverstone from ABG Sandal Collier. Please go ahead. Your line is open.

Thank you very much. It's just a quick question to Juan. You did mention this in the presentation, but if you just please clarify again, what was the underlying reasons for the ASCOPE 5 postponement? I think you said something about the regulatory, just to be sure that I answered that correctly. Thank you.

Yes. So I mean, first of all, we are trying to do something which is different to what some of your players are doing. We are bringing over 10 pros next year. And these 10 pros do not work as a standalone. But the idea is that all of them are supported by a single ABOX working as an ecosystem. So in the case of Oresko 5, the design is done, we have a product ready, we are basically in manufacturing. And what is driving the timing of the launch is the regulatory strategy for our APOCs, that we are basically trying to synchronize with all the other launches. Now, when we bring this into market, where it is where it is a few months later or not, we are bringing the most advanced single-use prompt copy system in the market. And by that, I mean the most advanced compared with all the competitor announcements. This product will have the most advanced image resolution. It will have the most advanced handling. the most complete size ranges, and it will be unique in terms of our compatibility with all of the other S-Copa pros that we will have in our portfolio. And it is on the basis of that launch that we plan to enter into the Bronco suite and ensure the continued growth of our Broncoscopy franchise.

Thank you, Juan.

Thank you.

Thank you. The final question comes from Neil Flett from Carnegie. Please go ahead. Your line is open.

Thank you. Just to follow up on your OPEX and sales cost in particular. So we saw a drop in your sales and marketing cost in this quarter. I presume that has to do with a reduced sales staff in the U.S., So when should we expect to see your sales costs ramping up again? Would that already happen here in quarter four or is that supposed to take place going into next year or will you be able to keep it at this level for a few quarters?

Hi, Niels. I think when you look at the cost that we have incurred here in the third quarter, you can model it out how it will be given our guidance for the fourth quarter. And I'll give you any comments on for next year. But by and large, the organization that we need to build is out there. So I think as consistent to what we have been communicating is that we have been doing the major investment into our overall commercial infrastructure that has been put behind us.

Yeah, and just to wrap up, if you look at the size of the commercial infrastructure in the U.S., there are no changes in terms of the overall size. Of course, as we introduce new products and enter into new segments, we continue to evaluate the relative performance and deploy resources accordingly. But we will finish this year with a stronger commercial infrastructure than last year. And maybe just to wrap up the call, this is a new market being created. And we are doing it in an environment of significant volatility with the COVID-19 pandemic and some short-term disruption. My only advice when you look at AMBU is to maybe elevate a little bit from looking at the small variances, quarter over quarter or pre-announcement versus announcement. At the end of the day, like in any other case of medical devices, a new market being created of significant scale, different companies competing to be able to secure a leadership position. In the case of AMBU, with our first mover advantage, our strategy is to compete through superior innovation and focus as a peer player, single user endoscopy player. And our results in Q3, our growth, the momentum, the progress in terms of innovation, what we are bringing into the marketplace and how we are strengthening our talent, just reflects how strongly we are executing our agenda and how confident we are that we will emerge as a single user leading player. Great. And I look forward to see you guys in the next quarterly earnings.