Ambu A S Ord

Good morning everyone and welcome to the conference call for AMBUS Q1 results. I am Nicolai Thomson from the investor relations team. I'm here with our CEO, Bonkrosé Gonsález, our CFO, Michael Heigard, and Basil Refai, our Chief Marketing Officer. Today's presentation can be found on our homepage and there will be a Q&A session at the end of the call. As usual, please limit yourself to two questions at a time and get back into the queue if you have additional questions. And with that very brief introduction, I'm very happy to hand over the word to our CEO, Juan José González.

Thank you, Nicolai. Hello, everyone. We are going to spend a few minutes talking about the company, the development in the market, our performance, the progress in terms of our innovation, And then we will open for Q&A. So let's start with the key messages for this call. First of all, the driver for the creation of a single-use endoscopy market continues to accelerate. Whether it is the focus on contamination, whether it is the pressure in terms of labor shortage, all that is highlighting the challenges with a reusable endoscopy model and the benefits of single use. In our Q1, we are reporting very strong performance adjusted by the NHS safety stock order. The company grew 13% driven by visualization growing 26% in revenue and 46% in volume. ENT and SYSTO continue to be the number one growth engine for the company. And I will spend a few minutes talking about the rapid penetration of ENT and SYSTO. And we are also advancing our entrance into GI. And Basel will talk about the progress with our Duo 1.5 and with our Gas for Launch. There is volatility in the market driven by Omicron. And I think many meta companies have talked about the impact on elective procedures and labor shortage. It's unclear in terms of how this will unfold. We see this as a short-term impact, and it is on the back of that that we are reflecting this higher volatility in our guidance. And in terms of our innovation, what is going to drive the continued rapid growth of our company, we are actually confirming our ability to bring all of our launches by 2022-23. including major launches in 2022, whether it is our entrance into the ESCO 5 in the Bronco Suite or the launch of our Duo 2.0 that will give us technical superiority, whether it's our entrance into Gastro or into Colon or Ureteroscope or our Cysto High Definition, the company will immerse as a leading single-use endoscopy player. Now, let me just spend just a brief moment to introduce SAMBU to any new investor in the call. And just for context, single-use endoscopy is one of the most attractive medtech markets. The market is expected to grow from $500 million to $2.5 billion by 2025. And the three main drivers of endoscopy are an increased focus on infection control, an increased need for workflow and efficiency, which is further highlighted on the back of the labor shortage, and rapid technology advancements. This is sensors, this is image enhancement software. So basically, every generation of single-use scopes is more powerful than the previous one, is more competitive relative to the reusable endoscope, and has a benefit around infection control and efficiency. Now, within this market, I'm with the number one player in single-use endoscopy. Over the last three years, the revenue take-up for the company is 16%, driven by a visualization business growing 34%. Actually, in the last three years, we have tripled our volume And we have increased our growth margin in the last five years by eight points, showing the profitability potential of this model. And our strategy is very clear. Number one, we want to build the most comprehensive and technologically advanced portfolio. by leveraging our R&D modular engine. Number two, we are introducing these products with a pricing that enables the rapid transition from reusable to single use. And we're able to do that because of our high scale low cost manufacturing setup. And finally, we are maximizing our first mover advantage by rapidly scaling our commercial infrastructure so we are in a position to effectively commercialize all of these new products. And it is on the back of this strategy that we will emerge in 2025 as a clear leader in single-use endoscopy. Now, let's talk about the recent developments in the market. And there are two things. One is the reports around endoscopy-related contamination from reusables continue to increase year over year. And if you look at this trend, if we pick a year, 2016, 709 reports in the U.S. By 2021, five years later, it's more than three times the number of reports. And going forward, we expect this to increase as the FDA is asking for more detailed reporting of this level of incidence. And the issue with this is that regulators and reusable endoscopy players are responding by setting more complex, more longer, more labor intensive reprocessing guidelines. creating more burden in the hospitals. This is an issue because at the same time we are facing a labor shortage challenge. Whether it is the American Nurse Association indicating that there is a national crisis, whether it is 24% of US hospitals reporting critical staffing shortages, there is basically no ability to be able to do more endoscopy procedures. And this market is growing year over year with the reprocessing guidelines that are becoming more complex while having these labor shortages. And all of these environments is highlighting the benefits of single-use endoscopy and why single-use endoscopy is a more efficient and effective way to do endoscopies in the future. And it is on the back of this that we have achieved a very strong performance in Q1. Basically, as I said before, adjusted for the NHS safety stock order in Q1 last year, our organic visualization revenue growth was 26% and our volume growth was 46%. I mean, this is a record 419,000 units sold this year. If you look at our Q1 2021-22 unit sold, it has actually more than doubled in two years. And as a result, our visualization sales as a percentage of a company have increased from 35% three years ago to 55% this year. Now, if you look at the main driver for this volume growth, it is our ENT and cystoscopy offering. We continue to see a very strong traction of these two products, and they are actually growing double digits over previous quarters for the last six quarters. Actually in Q1, our ACE-COP-SYSTO have already generated more than 50% of what we sold in the full year last year, reflecting the rapid transition to single use. We are expecting this year that Urology and ENT combined are going to exceed the 700,000 units sold. This is very important because This is not a segment driven by contamination. This success is driven by the acknowledgement that with the technology of these products and the significant benefits in terms of workflow and efficiency, single-use ENT and cystoscopy is the smart way to move forward. And even with all the challenges that we are seeing in terms of labor shortage, we see that the more challenge, the more likely the hospital to rely on single-use endoscopy to be able to manage their hospital capacity. Now, many companies have talked about the impact of Fomicron. I think over the last few weeks, we have been seen reports from all the major hospital medical companies talking about the impact of Omicron on their business. Let me just give you a perspective in terms of how we see this impact in Ambu. First of all, we see the impact from Omicron started in mid-December last year and is expected to have a further negative impact in Q2 and Q3. We expect it to be more of a Q2 impact and in Q3 it will start coming out, but overall we see a negative impact in both quarters. In the short term, Omicron has the following negative impact. First of all, it is less severe, so it generates less extra demand in bronchoscopy than previous variants. It drives a contraction of elective procedures due to the hospital staff shortages driven by infection and self-isolation, and illimit access to hospitals to demonstrate new products, like in the case of our S-COP Duo 1.5. As a result, we expect our visualization cell growth to be impacted in Q2 and Q3 this year, and in spite of the Omicron disruption, we still expect our core business, our PMD and anesthesia, to deliver double-digit growth. Now, this is the impact of Omicron in the short term. Of course, at the same time as Omicron is impacting the elective market, it also further highlights that in the midst of labor shortage challenges, single-use represents the best alternative. So we actually see a benefit in terms of penetration of single-use endoscopy. over the medium term. We will emerge from this Omicron variant with a higher level of penetration than before. Now, I just spoke about the development in the market. I talk about our performance, the rapid growth of ENT and SYSTO, Omicron as a short-term factor that is driving volatility. Let me pass it to Basil Refai who will talk about our entrance into GI.

Thank you. And as Juan Jose shared, our goal is to be the number one player in single-use endoscopy, and a key part of that is to drive leadership in GI, which will be the largest single-use market in 2025. Now, we have an aggressive agenda in GI, which began with Duo, which is going to continue with Gastro, and follow with Duo 2.0, Colon, and Colangio, so that we build a full range of GI single-use scopes in our portfolio. And today I'm gonna focus on Duo 1.5 and on Gastro. So as we advance our Duo 1.5 launch, there are two key messages to take out from today. Number one is that this is going to be one of the largest single use endoscopy markets in 2025 because all the drivers of market creation are getting stronger and stronger. Reimbursement for single use is expanding. It began with Medicare outpatients and then expanded to inpatients And now, even over the past few months, we're seeing many more major private insurers providing a special payment for hospitals for doing single-use duo. And at the same time, reusable systems are continuing to have more problems. So just over the past few months, we've seen a Class 2 recall for the Olympus 180 system. We've seen a safety warning for the Olympus 190 system. And that just shows the complexity, and it shows the shortcomings of reusable duodenoscopes. And key message number two is that within that large single-use market, just as we're the market leaders in pulmonology and in ENT and urology, we believe that we will be the market leaders in duo. Technically, we have a scope that is very competitive. We just finished our 150-patient trial with eight of the leading ERCP centers in the U.S., places like Indiana University, which is the highest volume center in the U.S., the Mayo Clinic in Baylor, And across those 150 patients, we're seeing a more than 97% success rate. And that compares very favorably versus the competitor scope, which published a success rate of less than 91%. So technically, we have a scope that's very competitive. And then from an economic point of view, we have a more favorable price point. And we believe that these two combined are going to give us a higher win rate. And based on our experience so far in head-to-head trials, we're confident that we're going to be number one globally and especially outside the U.S. where pricing is an even more important decision factor. So on Duo 1.5, although we're seeing the near-term disruption from Omicron in terms of hospital access, overall we're very pleased and very encouraged with the high level of interest and the outlook for the product. Now, we've always said that Duo is going to be one of the largest segments in 2025, and the next question is, how big can gastroscopy be? So let's talk about gastro. First of all, Gastro is one of the largest endoscopy segments. It's bigger than pulmonology, ENT, Cysto, and Duo combined, so it's a very large market. It's also a very diverse market, so gastros can be performed in the endosuites by GI doctors, but they can also be performed in the operating room by bariatric and foregut surgeons, They can be performed in intensive care when patients are too frail to move from intensive care to the endosuite. They can be performed in the emergency room. So there are millions of gastroscopies that are taking place both inside and outside the GI department. And then the question is, are the conditions in gastro similar to what drove single-use adoption in Cysto and ENT and Bronc? And we believe that the conditions are similar. And there are three main challenges with reusable gastroscopy systems. First of all is lack of availability. So there's a need to do gastroscopies across these multiple care settings while reusable equipment is mainly available in GI departments. That makes it difficult outside of GI departments because you need to move a tower or invest in having a specific tower, which is not always possible. And when we speak with doctors, they talk about the challenges of operating across multiple sites of care. They describe the cumbersome process of moving bulky towers throughout the hospital. And they share that that's why more than 2 million procedures are delayed every year because of scope availability. The second challenge is the workflow burden. And there's a need to do more and more gastroscopies, but the complexity of the current reprocessing model simply does not allow that, especially with the staff shortages that we're seeing today. And again, when we speak with doctors, they talk about the burden these volumes are putting on nurses and other staff and the impact that has on morale and burnout and staff turnover. the uk is a great example where you know as a nhs system they want to have less than one percent of patients waiting more than six weeks for gastroscopy before covid started just purely because of staffing shortages that number was at 10 and today that number is over 40 so that means there's a significant waiting line that will not be addressed through reusable endoscopy and that situation in the uk It's the same as the situation we're seeing in Germany, in France, in the U.S., in Japan, in most of our key markets. So, by the way, these first two points, lack of availability and workflow burden, those are exactly the drivers that led to the adoption of single-use in ENT and SYSTO. And then on top of that, you have a contamination risk with a more than 500% increase in cross-contamination FDA complaints just in the past five years. So those are the challenges with reusables. And of course, single-use gastro allows you to address all of them. It allows you to perform gastroscopies at all times in any setting with low capital investment. It eliminates 100% of reprocessing, and it's 100% sterile, which by the way, for areas like the operating room, which is a sterile environment, is important. And single-use is a better solution than taking a non-sterile reusable into that site of care. So those are the conditions that support single-use penetration in gastroscopy. Now let's talk about our single-use gastro system, which we're excited to share was just approved last week. Now the overall message here, the most important thing to know, is that this is by far the most advanced technology we've introduced, both in terms of scope and in terms of display platform. Now in terms of the Ascope gastro, this product was specifically designed to target half of total gastroscopies. It has a camera sensor that's four times more powerful in terms of image resolution than our Ascope 4, and the feedback from doctors is that it is so similar that they can take this with practically no learning curve and put it into practice immediately. They share that the mechanical performance and maneuverability is on par with reusables, and they even share that some features like bending performance is superior to reusables, especially compared to the reusable scopes that they work with day to day, the scopes that have degraded over time. And we're gonna be launching this scope with a global ASP of $350, and that means that we're gonna have an economic value proposition to go to the product performance that supports transitioning large volumes of procedures to single use. Now in terms of our display and processor platform, we designed the ABOX2 to be at the center of our ecosystem for the future. It has a full HD image with advanced image processing, and it has increased processing power versus AVU2. And that, combined with our new camera sensor, will set a new benchmark in terms of image performance. It has a touchscreen display, which doctors describe as intuitive and like an iPad. And, of course, the compact design combined with a low capital investment and a global ASP of 7,500 makes it more easy to adopt in multiple sites of care and unlock those volumes. So with a very large and diverse market, with the conditions that support the transition to single use, with the most advanced technology we've introduced, and with all the positive feedback we've gotten these past few months from dozens of KOLs in different markets, we're excited about what single-use gastro can do, and we're proud of everyone at Ambu who helped bring this important innovation to health systems, to doctors, and to patients. And we're confident that with both 301.5 and gastro are poised to be important growth engines for the company as we expand our presence in GI. And now to share more on our broader innovation pipeline beyond GI, I'm going to hand it back to Juan Jose.