Vitrolife AB (publ)

Hello and welcome to the Interim Report Quality Tree 2023. My name is Caroline and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over the call to your host, Mr. Patrick Toth, to begin today's conference. Thank you.

Thank you. Good morning, and welcome to the conference call for the interim report, third quarter 2023, for the Virtual Life Group. Today is the 27th of October, and the time is now 10 o'clock. My name is Patrick Toth, and I'm CFO for the Virtual Life Group, and I will now hand over the word to our CEO, Bronwyn Belfast.

Thank you, Patrick. Good morning, everyone. For those of you who haven't met me, my name is Bronwyn Brosey. I joined the Deep for Life group on the 1st of August, so just coming up on my first 90 days with the company. I'm a MedTech executive with 26 years experience working in the healthcare and life sciences industry. So I spent quite a bit of my career working at Johnson & Johnson, at Medtronic, and more recently at Thermo Fisher Scientific, where in fact I was based out of Uppsala, Sweden. I thought it might be useful just to start by sharing some of my perspectives and observations coming in to the industry and into the vitro life group. So I'll start maybe by sharing some of the perspectives on the market. We're clearly operating in terms of reproductive health in a market that is growing. primarily due to increases in maternal age, but access to care does remain limited, primarily due to affordability. We're seeing a lot of consolidations of clinics by the large chains, but I guess something that stood out to me as I traveled around the globe is that the procedures are still quite labor-intensive, making scalability a challenge. That in turn brings, I believe, an opportunity to bring a lot more automation and digitalization to the workflow to support our customers. What we currently see is a heavy reliance on the expertise of individuals working in the clinics. Something quite unusual then that I haven't seen in most of the areas where I have worked in healthcare, and that is we see that standards of care can differ by region. In the context of reproductive health, as an example, we see a lot of genetic testing in the US, so it does play quite a large role there. However, that's not the same in other areas of the globe. My conclusions on the Vitrolife Group, again, I'm only 90 days in, but I believe as a company, we're very well positioned within this growing market. So we're in a growing market, but we also have a lot of potential to develop that market. I believe our company provides best in plant service. Our products are synonymous with quality. And everywhere I go around the globe, people talk about in very positive terms, the support that we provide to our customers. I think our time-lapse platform, Embryoscope, is a core source of differentiation for the virtual life group, and this technology brings automation to the very core of the IVF clinic. And then I guess the other thing that stands out for me is the sheer breadth of our portfolio, end-to-end, from products to tests to services. which allows us to address those differing standards of care, which I have observed. So I will now move to page three of the presentation and start with some of the Q3 highlights. We experienced improvement in our growth margin to 55.7% during the quarter, and this is primarily driven by product and market mix. Very strong growth in EMEA of 14% in local currencies. We experienced this across the portfolio and across the region. So very nice to see this. And we had our GX Media EMDR approved. This very much strengthened our position as a global leader in media. And in fact, during the quarter, we had double digit growth in media again during this quarter. So very much a source of strength for the neutralized group. I will now move us to page four and take you through some of the numbers in more detail. I guess the key summary from this slide is that we did deliver profitable growth globally despite experiencing headwinds in the US. So sales for the quarter were 848 million SEC. That's an increase of 6% in SEC and an increase in organic growth of 3% during the quarter. I would like to point out that we do see quite a variation in regional performance with EMEA and APAC doing well, but we were challenged in the U.S. Coming on to margin, as I've already mentioned, we increased our margin to 55.7, and this is coming from, as I just mentioned, product and market mix. On EBITDA, EBITDA margin of 33.9%. The EBITDA margin is even stronger given non-recurring SEC of 24 million for the same quarter last year. So I would say good performance also on the EBITDA margin. And then just looking at the first nine months of the year, EBITDA margin and cash flow both performing well. If we look at our total sales of 2.6, that's 10% increase in SEC and 5% in local currency. And if I could now ask you to move to page five of the presentation, we will discuss the sales and growth down at the regional detail. Okay, so here you can see the variation in regional performance that I have just discussed. So in America, we had an organic growth of minus 8%, in the Maya, 14%, so very strong performance there, and in APAC, 5%. The decline in the US, I would like to address that first, The decline here is related to a fall in sales of our Aira test, combined with a loss of PGTA sales due to enforcing of testing by a large customer, which we mentioned in the previous quarter. So very much Aira and the enforcing of that particularly large chain impacting heavily on the American results. If I come to EMEA, we had a very strong performance in EMEA with all business areas performing well. In fact, we delivered 44% growth in technologies with strong demand across the region for embryoscopes. APAC performance was 5%. In APAC, we had both our consumables and our genetic services performing well. In China, in fact, we delivered double-digit growth, so very strong performance yet again in China. Our challenge in APAC was on the technology side, and essentially we had a very strong Q3 last year with multiple time-lapse installations, most notably in Japan, and this made the comparables on the technology side challenging. However, I would say that on the genetic services and consumables portfolio, just to reiterate that, we did perform well. In terms of the regional contribution, again, this is something that has jumped out at me as an incoming CEO, and that's the share of the total sales. So we do see a very healthy spread in terms of regional contribution, with 33% coming from Americas, 37% from EMEA, and 30% from APRAC. I will now move to slide six and take you through more details on our consumables business area. In consumables, I think we saw steady, I believe we saw steady and consistent growth across all regions. We delivered an organic growth in local currencies of 8%. 7% in America, as you can see, 7% in EMEA, and 9% in APAC. We are taking share in media. I just want to point out that we are doing very well on the media side. We continue to take share And we have invested in more automation in our media production in order to be able to meet demand because we do forecast continuing strong demand on the media side. I would like to call out quarter two of this year, which was particularly strong. And there may be questions in terms of our ability to maintain that momentum. Q2 was particularly strong because we saw a lot of pent-up demand, most notably in the APAC region and particularly in China, which led to a very strong quarter in Q2. We now see the growth normalizing, returning to more normalized levels. But at the same time, we do still see growth above market in Q2. the APAC region. So in summary, a steady and consistent performance across our consumables business area. I would now like to move you to slide seven of the presentation, where we will discuss the technologies business area. Good to see on the technology side that we are back in double-digit growth. So we saw organic growth here in local currencies of 14%, America's performance was 5%, EMEA 44%, and APAC minus 8%. Time-lapse brings a lot of automation to the core of the lab, and it is a key differentiator for the VITR life group. So it is important that we continue to grow double digits in technology. We want to continue to do that and, in fact, accelerate that trend. We see EMEA doing really well with new customer installations across multiple countries. And if I come to APAC, we were challenged, as I mentioned, by the strong comparables in Q3 of last year. However, our pipeline for time lapse and embryoscopes in Q4 in APAC is very strong. China, as I mentioned, is doing very well with time lapse, and we won a number of new tenders during the quarter. So again, time lapse back in double-digit growth, we're seeing strong revenue on the capital sales, but also our consumable service pull-through is performing very nicely. If I can now ask you to turn to page eight of the deck, where we will discuss the genetic services business area. So in genetic services, we had an organic growth in local currencies of minus 5%. EMEA and APAC both performing well with 9% growth in both EMEA and also, in fact, in APAC. but we experienced a decline in the Americas region of minus 15%. The US performance was impacted by the declining ERA, and we were also impacted, as I previously mentioned, by the insourcing of PGTA. ERA, just to put into context, is approximately one-fifth of the sales of genetic services And I would like to address the actions that we are taking to remediate the decline that we are experiencing on Aira. So we are generating additional clinical evidence with the non-selection trial. We are also working on in-market use protocols with our customers and also improving on education for our users. And then finally, and very importantly, we are reinforcing the intended use of the ERA test, which is in risk patients, repeated implantation failure patients. With these actions, it is our goal and our aim to mitigate against the decline that we are experiencing in ERA, both in the U.S., but we are also experiencing ERA decline in EMEA. EMEA and APAC then performing well despite the decline in era. And in fact, we saw double-digit growth for PGTA in both EMEA and APAC. And what we are seeing across the genetic services portfolio is a steady increase in growth across the newer tests that we are bringing to market. We did announce at ESHRA that we've launched eight new products. Some of these products are tests coming down the genetic services side of the portfolio. And I think our teams, our commercial teams across the globe are doing a very nice job at accelerating the growth of these tests and reducing our reliance on Airob, but also bringing more innovation, very importantly, to our customers. And with that, I would like to hand over to Patrick, who will take us through our geographical segment.

Thank you, Dondre. And moving then to the slide showing the geographical segments. And what you will see here on the slide is the gross income and the selling expenses, and thereby also the market contribution per region. And this builds up to our gross income and gross income margin of 55.7%. The gross income per region is, of course, also impacted by the product mix. but it gives overall a good indication of our performance on that side. And following the growth and product mix for business areas just that Bondrin just presented, we see that starting with Americas and then compared to the contribution model last year that we have decreased from just below 72% down to just below 26% in market contribution. on that side, whilst we on the other hand then have strengthened the market contribution significantly then in EMEA from 30 to approximately 40%. And we are more or less flat or with a slight improvement than in April. So let's move to the next slide where we will then see the consolidated numbers for the quarter. And just to repeat, the next sales then for the quarter was 848 million Swedish crowns, which is an increase of 6% in Swedish crowns. We had a slightly lower currency impact during this quarter compared to previous quarters, taking out then the currency impact, moving us then to the organic growth in local currencies. And those were then 2% in total sales. We had in previous years had the sales of COVID and also discontinued business related to GPDX in China, which means that the comparable growth number is 3% for the group. Moving on then to the gross income, margin, as I just said here, 55.7%, which is an increase compared to Q3 last year, and that is impacted positively by the product mix, and also the efforts that we are doing then on the operational excellence. Moving then down to the EBITDA, we increased that one to 287 million Swedish crowns. That gives us a margin of 33.9%. And then compared to Q3 last year, where we also then had an extraordinary income during the quarter of 24 million Swedish crowns. So on the ongoing basis, this quarter was stronger than last year. So move to the next slide, where we will look a bit more into the operating expenses. And you see that one increased with 5% in Swedish crowns from 274 to 289. But in local currencies, our operating expenses increased with 2%. We have increased and continue then to do marketing investments and marketing activities into key markets. and that represents an increase of 6% in local currencies. Admin is on the similar level in Swedish crowns, that's actually a slight decrease than in local currencies. We see also that R&D is going slightly lower during this quarter compared to last year, and that is due to project phasing, and that is then the decrease of 6% in local currencies. And as I said, during Q3 last year, we had an extraordinary income that was related to the AT and insurance claim of 24 million Swedish crowns. So that comes here as a negative operating expense, which is an operating income. So 24 compared to 4 during this quarter impacts, of course, the COMP numbers. So moving then to the next slide, where we will then summarize the key financials. And two steps here is that we have continued them to strengthen the margins. We do that with good progress here, given also that we have had relatively low growth. This shows also that we have done improvement in our operational excellence programs and going in the right way in those improvements. So we have then the adjusted gross margin where we take out in the amortization and for acquisition related intangible assets of about 58%. And here also what I want to stress is that we continue then to deliver strong operating cash flow with 214 million Swedish grams for this quarter, which then gives a year to date of 586 million. which again, focus operating cash flow brings us down to the next step, to EBITDA, which is now one type. So with those words, I'll leave it back to you, Sandra.

Thank you, Patrick. So in terms of closing remarks, what do we need to do as a veteranized group? We need to continue to drive profitable growth. How are we going to do that? by accelerating penetration of our time lapse globally. I think we have some very nice momentum there, particularly in EMEA, very healthy pipeline in APAC and US, but we absolutely must need and will accelerate growth of that very critical and differentiated platform for us globally. We need to increase our share in consumables. We have a strong position on media. We need to continue to advance there. across the globe. I think, again, we have some very good momentum. As I've mentioned, we've invested in improved automation, so we do have ability to meet that increased demand, and it's a very important part of our consumer growth portfolio. We need to drive revenue of our newly launched products and tests. We have brought innovation to the market. This is a market that needs increased innovation. It's crying out for increased innovation. And we want to make sure that we increase the revenue contribution coming from the products that we have launched across all three business areas. Point number four, we must execute on our ERA remediation plan, both in the U.S. but also in EMEA. And as I've laid out, there are three points to that plan, evidence generation, in-test protocols, and very importantly, segmentation and targeting, which is the indication for the error test is in risk patients. And then, as Patrick has mentioned, I think the team certainly, I see this coming in. As a new CEO, I think the team has done a very nice job, led by Patrick, on the operational excellence. We need to maintain our focus there. It's very important that we diligently control our costs, look for efficiencies so that we can continue to invest in accelerating our top line and bringing new innovation to market. And then finally, just to say that we are planning to host a capital markets day on the 12th of December. During the Happy Markets Day, we will share details on our future vision of the reproductive health industry, our corporate strategies, which we are currently working on, and the role that we want to play in terms of bringing more innovation to the workflows of our customers to help them increase capacity and, very importantly then, to increase access for treatment customers. to patients. So we look forward to seeing some of you, hopefully have some of you joining us at Capital Markets Day on the 12th of December. Thank you very much. I will now hand over to the moderator who will open up the session for Q&A. Sure, thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from Lanieko Blemke from Seven. The line is open now, please go ahead.

Hi and good morning Domina and Patrick. I have a few questions and I'll take them one by one. Starting on genetic services, it seems like it's quite healthy growth here in both EMEA and APAC. Do you feel like it's sort of starting to stabilize here and that you're able to continue to grow?

Thank you, Jakob. Thank you for the question. Yes, we're definitely seeing some stabilization. In fact, EMEA and APAC, both doing well, we believe both growing above market. Just on the PGTA side, we're seeing very strong growth in EMEA and APAC. So clearly, in terms of that standard of care dynamic that I spoke about in my opening slide, it would certainly appear that genetic services is starting to gain some traction outside of the U.S. I think the other sign of health coming from the business is that the contribution from the different tests that we have in the portfolio is becoming more balanced. So we do have less reliance on Aira and slightly less reliance on PTTA. So the newer tests that we're bringing to market are starting to increase in contributions.

Okay, that's good to hear. And then on the ERA test, I think you said something about the development in EMEA, but I missed that. Maybe you can repeat that. And then also, overall, how has the sales development been throughout the quarter, if you see a stabilization or continuing to decline more?

Yes. So again, thank you, Jacob. So ERA is declining in the US. It is a sharp decline, and hence we're taking the measures which I've spoken about. We do see a decline in EMEA, not to the same extent, I would have to say, and we're not experiencing a decline in ERA in the APAC region. So really, the majority of the issue in relation to ERA is coming from the US.

Okay, and then moving on to APAC, just wondering sort of on China, where you see the market activity currently sort of normality, and then also a lot of other sectors are fighting headwinds from China right now, and I'm wondering if you see any concern from that when we look forward?

Yeah, I can take this one, Patrick, and then maybe if you want to add anything. So we're performing very well in China, Jakob, which I have to say, for me, coming into the VitaLife group, that's not something I've experienced in other areas of healthcare, and certainly it's not what I hear from some of my connections in other medical device companies and lifestyle companies. But we are doing very, very well in China. We had double-digit growth yet again during the quarter. We won a number of tenders for time lapse. Our consumables business is doing well. So I would say it's not that we're holding up well in China. We're doing particularly well. We believe this is sustainable. Our products and services have a great reputation. reputation in the market. Time loss is very well received. We have an excellent team on the ground in China, which I think attests to the performance that we've been able to deliver quarter after quarter. So we are not experiencing the headwinds that other companies in the industry are seeing. I don't want to sound complacent. Of course, we have to be very alert to those challenges. But so far, we have been able to navigate anything that has come our way and been able to continue to deliver double digit growth in the region. Patrick, I'm not sure if you have anything to add there.

No, I think you said it very well.

Thank you.

Okay. And then on time lapse, you mentioned that you have a strong pipeline. So I'm wondering if there's anything in particular behind that, such as, you know, IDA score, for example, or anything else. This also relates back to China, Jacob, as one market particularly, because as we have said previously also, when you see recovery coming back from COVID, you normally start off then with consumable products, and then comes more capital sales after that one. And we see that same thing in China now as well. food growth in China for time maps during the third quarter. And of course there are a significant amount of outstanding tenders for the fourth quarter and a bit into the next year as well. So China is obviously one market where we do have strong presence in already and a strong base and a lot of opportunities in China as well. And then of course, if you go to America, there we also see increased activity. On that side, of course, as you know, there are a lot of customers in the U.S. that are working and focusing on biopsy, but we do think that we are getting the traction to get the focus on workflow, but we also see customers that really want to use both technologies and both techniques there as well. So we are getting into a good momentum when it comes to America's going forward as well. Very good. And my final question is on sort of, you know, the Cooper-Cook deal. It seems like it has, you know, definitely fallen through now. So how do you see this impacting sort of the competitive dynamic going forward?

So thank you, Jakob. Yes, clearly that deal has fallen apart. never easy, I guess, for either party, but these things happen. I think for us, you know, Cook has, we have clearly already taken quite a bit of share in terms of the Cook media business. So we've already, I guess, capitalized on that opportunity. Cook do still have a, you know, very strong performance and robust demand for their ETCs. And I expect that that demand will hold up for Cook going forward. They have an excellent reputation in terms of their transfer catheters. So my prediction would be that Cook will manage to hold firm with the products that they have remaining in that part of the portfolio.

Okay. Thank you very much, Beth, hopefully.

Thank you. We will take the next question from line Audrey from Carnegie. The line is open now. Please go.

Great. Thank you very much, and good morning to both of you, and welcome, Bronwyn. A few questions on my end. Again, on China, and you're talking about, and please correct me if I misunderstood this, growth normalizing? Is this quote for China or for APAC? Because based on numbers and numbers throughout the last few quarters, it looks like China is far from its pre-COVID levels. And I was wondering, the general take on my end would be that in APAC, the reimbursement in Japan is now incomparable. So your take on where China is today in terms of its recovery from COVID? from COVID? That would be my first question, please. Okay. Thank you, Ulrik, for that. And I think it's more related to China, as you alluded to here. And obviously, we saw a strong pent-up demand starting then, in particular then during the second quarter. It wasn't so much of that one during the first quarter. But we have seen, if anything, maybe the activity has been a bit handsome during the third quarter on that side. On the other hand, as I said previously, I mean, the time-lapse equipment and the capital sales, that's picking up on the other end. But, of course, we also are strong in media when it comes to China. And, of course, that's fresh products. You start to build up that one. You have a bit of a stock for that one during the second quarter as well. But if anything, maybe it's slightly slower than it was particularly during the second quarter on that side as well. short shelf life. So, if your water stocking seems 2.2 into 2.3, we should see that lessen in terms of effect for 2.4, right?

Absolutely. Yes. That's correct.

Great. Second question on my end relates to your performance and especially on time lapse. It looks stellar in the quarter, to be honest. And just a general question, if you're seeing a big shift in interest on timelapse due to the IDA score, or was it an unusual number of deliveries on orders in Q3?

I can take that one. Yeah, so thank you, Mark. So I think it's a number of factors. IDA score certainly brings additional benefits, but I think it's more than that. I think it's the benefits that embryoscopes bring to workflow. So we're clearly operating an environment with staffing issues, scalability issues, and with time lapse. You not only have embryo evaluation, but it also helps with automation in general in the lab. And I think our team have done a very nice job on the ground in EMEA in reinforcing that message. So really what we're seeing in EMEA is we're seeing strong capital sales across multiple countries. Yes, doing well on IDIS score, but we're also starting to get a very nice pull through in terms of the consumables revenue coming off of the time-lapse system. So, very, very strong performance, certainly in EMEA, which we would like and want to replicate in other geographies. It's really a combination, Ulrich.

And would you say that, obviously, it sounds like, or correct me if I'm mistaken what you just said, but it looks like then, EMEA clinics are now more focused on workflow than they've been before. Because actually manual workflow in the IVF lab has been the case for the last decades. And then hamstring factor, obviously, and nothing has really kicked off in terms of improving workflow. So is this a renewed focus among IVF clinics in EMEA to automate their workflow or start to automate their workflow, so to speak?

Yeah, maybe I can start on that one. Thank you. Maybe I'll start on this one and Patrick can chip in. No one is escaping the labor shortages in, you know, anywhere in the globe and in any industry. And I think, you know, IVF is no different. So there's clearly staffing shortages. And I think you're right. I think what we are starting to see and what we are benefiting from is people addressing those workflow challenges. I don't think it's the sole factor, but I certainly, from what I'm hearing from our teams and the time that I have spent in a number of labs now across the region, is that the importance of workflow is definitely moving up the pecking order due to the staffing issues. Patrick, do you have anything else to add on that?

Perhaps you can pitch in on my next question, Patrick. I looked at your contribution margin for EMEA, and it looks like a big jump in margin from Q2. And it is a small portion of that relates to the gross margin. I'm guessing it's the newly introduced media in Europe. but can you give us some insight on what's happening on the contribution margin for that region? And I also noted a decline or a level of admin expenses that has dropped from Q2, and is this a new level that we should expect going forward? Yeah, so on the first question, then, on the new, I mean, We are growing across all the products here, as you know, and of course, the technology growth in the third quarter was really strong on that side, so that certainly helped. But also, I would like to stress that we are growing strongly in domestic services as well, which certainly also helps and adds to the contribution margin in addition to, of course, consumable technologies on that side. good growth across the region and for all the business areas. So strong performance on that side. Going through your second point then, when it comes to admin expenses on that side, of course, we are working with getting ourselves more integrated as a group. We are now soon two years down the line. We are making progress on that side as well. And these kind of levels are becoming a bit more normalized on that side as well. So, this is what we're working with, and this is part of the operational excellence focus that we are working on. Great. And I think we were talking about genetics. a few questions on genetics. You must have sort of lifted margins from Q3 here as well. Seasonally, Q3 is a generally weak quarter earning point for genetic services. So can you talk a little bit about the margin trend for genetic services as well? If it's possible, it would be helpful if you could There's some complication on how much error and decline in the quarter. You talked about the recent trend, and also you talked about this evidence generation. When are we to expect new publications coming out? And if we were to summarize United Services, and you mentioned EPCA growing, and both the mean and Apex, but these are a rather small market for genetic services. But is it fair to assume that ALI is declining overall and globally by around 30% EPCA growing sort of in the low single digits and PGCM by double digits? Okay, a lot of questions, I know, hopefully. You got them all. Yeah. Do you want to talk to, you know, whether you're there or should I go take it? No, I think you're right. I mean, ERA, as we know, I mean, as Bondi said, it's about to fix approximately all the revenues for your Netflix services, and that has declined significantly then during the quarter, and your numbers are not completely gone. So that is right. But what we see also here, as Bondi said, I mean, you are progressing with the other tests. as well the PDTA is growing strongly and that is also done in other markets but US where we are growing strongly on PDTA and also on PDTN and the assumptions that you made there is also a good assumption where we were on during the second quarter as well.

Yeah, Ulrik maybe I could just add that You're correct in a lot of areas. So PGTA, you know, in its totality is not very large in EMEA and APAC, but the growth is significant. You know, we're talking north of 20% in both regions. The other area that I would highlight, the other kind of bright spot in terms of genetic services is on the CGT. So we're seeing, again, it's also low base, but really nice growth. over 30% in the main and over 50% in APAC. So that's back to the points that Patrick and I were making around diversification of the revenue contribution across the genetic services portfolio. And then finally, if I could just address your question around the evidence generation, that is going to take time. the reality is when you conduct these non-selection studies it's multiple centres, reclusement takes time so how long is a piece of string it's going to take us several quarters to be able to generate that evidence that's the reality and I think in the meantime we need to continue with those other actions that we're already taking in terms of the remediation But, you know, adjusting for era, and obviously I'm not being complacent. We need to address the era challenges. But if you do, you know, adjust for era, it is very nice growth and performance across the portfolio. I hope we've answered your questions.

Yes, yes. Just a follow-up on that. The margins. for genetic services must have lifted from 2.2. And this is a seasonally quarter for genetic services. And are you still seeing pressure across the genetic testing portfolio? Are they debating or what are the margin improvements coming from? I mean, the improvement from one is, again, as I say, I mean, we are for genetic services. The total growth is a bit shy, as you know. And that is being offsetted then by the improvements that we have done in the operation excellence on that side. So it's good progress on that side. So not really such a big improvement on the modeling side there, but good progress on the operation excellence, absolute result. Okay, great.

Yes, sorry, just maybe one final point. So we do have improved margins on the newer tests. They're more differentiated. So we are able to charge a premium for those tests. And that is going some way towards helping the margin contribution of genetic services. And I would say then to Patrick's point, combining that with the operational excellence program that we've been doing, the genetic services program, business area have been doing a very stellar job in terms of controlling costs and trying to increase efficiency. So they have been very much playing their part in terms of contribution to the group in that regard.

Great. And should we conclude then that the price pressure in this area has slowly started to abate versus what we have seen in this course?

No, I mean, if you look on the call it standard PDTA and particularly then in U.S., I mean, I wouldn't say that the trend has, you know, stopped dramatically on that side as well. I mean, it still continues price pressure on that side when it comes to the standard PDTA on that side. And we haven't seen that kind of price pressure in other markets for PDTA specifically on that side. But it's a bit too early to say that it has stalled or bottomed out on that side.

And maybe if I could just add that on the Aira side, we clearly have our challenges, but we do expect Aira to come under pricing pressure because there are new competitors coming into the market with Aira tests. In fact, we saw one last week at ASRN. Other competitors also have Aira offerings. So I think an additional challenge that we have to navigate on the Aira side is price pressure on that test due to the increased competition.

Okay, great.

The last question on my end relating to clinical trials and including time lapse. I guess I know that you've been working on improving clinical evidence for the time lapse and also potential trials, including a combination of genetic tests and time lapse.

And where are we at in regards to that?

I can start, yeah. So, a lot of work going on in that area, Ulrich, and we're very excited, okay, because I think by, without revealing all our future strategic plans, we believe that in time lapse, combined with the genetic testing portfolio, we have a significant opportunity to bring improved workflows, standardization, digitalization, all of those good things to to the lab. Evidence generation takes time. So the teams are working on it. I think we're also working on the technology readiness, okay, because it's very important that we don't just bring products to market, but that we bring products, tests, and services to market that are scalable. So I think we are currently addressing the technology readiness and also the evidence generation. I think it has to be both. But we are ramping up our efforts, I would say, in that area, which is what Patrick was alluding to when he was speaking about the R&D investments and phasing. So definitely more to come on that side. So you're on the money there, Ulrich. Great.

Thank you for taking my question, and I'll get back into the queue. Thank you.

Thank you. Thank you. We will take the next question from line Susanna from SHB. The line is open now. Please go ahead. Hello. Here's Susanna from . I also have a couple of questions. I thought I'd start with time lapse. So particularly this quarter has been very strong in EMEA. However, you do mention this German lawsuit. Can you give us an insight into the magnitude of this lawsuit, particularly regarding the one patent that now has been stated as infringed? Will this impact your technology going forward? And especially in the context of you saying that you want to accelerate the trend in terms of double digit growth. So that question first of all.

Okay. Hi, Susanna. Thank you for that question. And as we write also in the report here, it's an indirect infringement during the other part of the one patent. Once one of them, there is no infringement on that side. And I should also say that we are working on our procedure going forward. We do not, on the other hand, foresee any major impacts on that side. This is then related to the German market. But it's, and of course, we have just said this will have no financial impact for this quarter on that side, and we are working closely on this specific topic, but it will not really have any major impact on our success going forward in India.

Okay. Good. Then going back to genetic services, specifically with the ERA, You have addressed that the major sales decline is in the U.S., but you're now also seeing it in EMEA. And I was wondering if you could sort of contextualize this. Would you say this is just the beginning of the EMEA decline? I'm thinking sort of the ESHRA guidelines on ERR use. Do you see that accelerating going forward?

No, I think we saw the climb here, as we said previously, during the third quarter for some techniques in parts of EIA as well. It's obviously hard to judge whether that will be a trend going forward. But, of course, there is pressure on the EIA test on that side as well. But again, keep also in mind, as you are very aware of when it comes to Escher, that this one is also in their scale, red, green, and orange. This is an orange rated test as well, which is a good sign that it is obviously a test that can be used for patients as well. But it's hard to say anything about the trend on that side of the stage.

Hi Susanna, thank you for the question. Maybe if I could just add to Patrick's point. I think the decline that we're currently seeing in ERA in EMEA is mainly confined to two markets. We don't want to be complacent and assume that it's going to stay in those two markets. But for the moment, the vast majority of the decline is actually coming from one country in particular. So most of the rest of EMEA seems to be holding up and similarly for APAC. But it is difficult for us to predict, Susanna. Hope is not a strategy, so we have to be prepared to execute on the remediation plan that we have rolled out in the U.S. We're going to need to be doing the same in EMEA and ensuring that we reinforce the indication for use. Obviously, most of our customers are aware of the evidence generation and then the team is working very hard on education and in-test use protocols, patient education, etc. And then to just follow up with the ERA, can you say what share of the ERA or how much the ERA is down within genetic services compared to the peak ERA sales? And how you expect that to be going forward?

I mean, if you look, I mean, we have been seeing over the last years a slow decline in ERA. over the quarters on that side, and then we have seen a sharp decline in the last quarters on that side. So it has been continuing to be a bit downward-peaking on that side. And as we have said about previously as well, I think now the levels of usage of ERA for the RIF patients are basically where it should be on that side. So it's going on that right direction as well here.

Okay. And then my final question on genetic services. I was wondering, earlier in the quarter, we saw the announcement that KKR was potentially going to acquire UGIN. Now, UGIN is one of the largest European or in EMEA chains. How do you expect that will impact genetic service, specifically PDTA in Europe? Yes, Susanna, I can maybe start and then if Patrick wants to pitch in. So, clearly, when we see consolidation and we do clearly see that, the risk of PGTA insourcing is almost, is always there. We're uniquely positioned as a company in the sense that in the event that this happens, we do have the genomic kits that we have the opportunity, it's never a guarantee, but we have the opportunity of being able to provide the kits to the clinic or chain that insources in the event that they decide not to continue. So yes, the risk is there, but we do have the portfolio, thankfully, to be able to address that. And I think, you know, what we try to do is just We have very good relationships with most of the chains, with all of the chains, I would say. So we try to work with our partners together on finding the optimum solution. It's very interesting on the PGT insourcing because it's not a defined trend in one area. I've been digging quite deep on the numbers on this one. you know, yes, you see insourcing, but you also see outsourcing. So it's not like the trend is all going in one direction. Is that fair to say, Patrick?

Yeah. And just to add to this as well, I mean, obviously now we have... quite broad portfolio for the virtualized group as well. And it might be so that some call it basic things are in source, if that makes sense from that perspective, but we have an additional portfolio which we are continuously to strengthen. And it's also about adopting to focusing on workflow and workflow improvements on that side as well. So that's also where we have a strong position amongst the clinic chains focusing on standardization, and optimizing the workshop on that perspective as well.

Great. And then my final question is particularly on automation and standardization. So, Bronwyn, in your introductory letter in the Q3 report, you made a, I mean, you referenced automation and digitalization. And I was wondering if this is, Beyond time lapse, and I just worry if this is an area that you're interested in in terms of M&A going forward. Sorry, acquisition. Do you want a short answer or a long answer? The short answer is yes. So, you know, Susanna, what I see, and I've spent a lot of time now in the field with customers, is this really is a need. And I think as industry and as a virtualized group, we have an opportunity and almost an obligation to support our customers by bringing more automation to the workflow. It helps everybody. It helps, you know, the clinics and ultimately it benefits patients, increased capacity. And as we work on access and affordability, we want to make sure that the capacity is there so we can ultimately help patients. So, yes, absolutely. It does go beyond time maps. We are developing some in-house solutions and we are also looking at other options out in the marketplace that we believe we could combine very nicely with the plans that we are working on internally. But I do see it as a big opportunity and almost an obligation of the industry to bring more workflow and automation to support our customers. So the short answer is yes, and I've just given you the long answer. Patrick, I don't know if there's anything you'd like to add on that one. Spot on, Susanna. Thank you for the question.

Thank you. Thank you.

Thank you. We will take the next question from line. from . Please go ahead.

Great. Thank you for taking our questions follow up. Our impression is that the, it's great interest to see what the prospect is to improve the outlook and the traction of, of course, ERA, which is more challenging, and PDTA, especially in the Americas. Our impression is that you're probably more likely in a better position to improve the support from PGTA, and what's the prospect of sort of upgrades and improving the offer on that side? I mean, as you saw, and one of, that was one of the, during the summer was that we called Smart PDK Plus, which adds additional features to the standard PDK. So that is one thing. We will, of course, continue to develop and strengthen our capabilities when it comes to PDK. This is one level. And, of course, we are working on the next level as part of our R&D pipeline as well. So, more to come on that side as well, and then we have the non-invasive solutions that we are currently working with as well, which, as you know, we call on that side. So, full focus on developing and continue to develop the PDTA.

And maybe if, thank you for the question, and perhaps if I could just add to that, back to my earlier point, we are starting to see a lot of PDTA traction OUS, very high growth rates, yes, of a small base, but still some very nice traction there. So I think if we can combine the increased traction that we're getting on PGTA with increasing the revenue from the more differentiated PGTA Plus and the other PGTA additions that we have in the pipeline, it should position us very nicely to be able to capitalize on that trend of increased

And not that you're in the business of doing a forecast on a quarterly basis, but can we expect to see an improved momentum near term on the PGTA side in the Americas? I mean, we do know that we have an underlying strong growth in the market on that side. We are focusing. We are in a good position to continue to leverage out of that one. Then, of course, it will be exhibited. And we have seen that one customer, major customer, has been facing out during the third quarter. So that has had impact for us during the third quarter. But there is a good opportunity and an underlying growth in the markets for us as well. And then on the risk side, on the EERA, there is some increased competition as well. What about the risk of that sort of spreading to other regions? I mean, ERA specifically, I mean, it's so that we are, we were the first company out and basically call it the whole segment we call ERA, although it's related to endometrium testing. We have one competitor that has an equivalent product called ERP, but we also see other competitors coming in with similar names and products. And that is, of course, a signal also that the, that it is an attractive segment, focusing on the rich patients. So absolutely a sign in a good way.

Yeah, I would add to Patrick's point, our competitors are global, so we can expect increased competition on ARAS in all regions. Thank you for the question.

Thank you. Final question then, you're pretty clear in your vision then to increase the support from new and newly launched products. Perhaps you could provide us some insight into that proportion on genetic solutions right now. I mean, solutions that are sort of within two years old. and maybe an outlook what to expect going forward, or maybe that's something we can expect more about on the 12th of December.

Do you want to go? We're both trying to answer this question. So maybe I can just give my, again, I'm only here 90 days. I don't have all the answers. But in a previous life, and we will absolutely share this, we'd be delighted to share this on our capital markets day, In a previous life, you know, we would have set targets of having 20% of our revenue coming from newly launched products and the definition of newly launched products would be within three years. So it would certainly be an ambitious target, but we can look at that as we work through our corporate strategy and key metrics, which we will share on Capital Markets Day. But thank you very much for the question.

I think we're... Given the pressure, I suppose this is even more important. Yes, absolutely. Yes, and we will have an opportunity to explain more on that when we see you on the 12th of December. Thank you. Thank you. And I think we are running out of time now.

Thank you very much. I very much appreciated the questions and look forward to meeting you, getting to know you, and talking to you in the coming days, weeks, and months. Thank you very much from both Patrick and I and all of the team at the Future Life Group.

Thank you.

Thank you for joining today's call.