Ambu A/S

Thank you. Good morning, everyone, and welcome to our full year 2019-2020 conference call.

My name is Nicolai and I am from the Investor Relations team. With me here at the Ambu Head office in Copenhagen, I have our CEO, Juan-Jose Gonzalez; and our CFO, Michael Hojgaard.

During this conference call Juan-Jose Gonzalez will talk about the highlights for the quarter and for the full year and Michael Hojgaard will review the financials and then we will take your questions. Please limit your questions to only three at a time and get back into the queue if you have additional questions.

The duration of this call would be approximately one hour, and you can, via our website, follow the investor presentation we will go through live. Now, I would like to give the word to our CEO, Juan-Jose Gonzalez.

Hello, everyone, and thank you for joining us this morning. It's an important day today.

We are going to share our full year results, the progress on our strategic priorities, on our innovation pipeline and give you an outlook for this New Year. Now, when we talk about Ambu, it's always important to start with two key factors regarding the company.

One is, what is the potential for single-use endoscopy market. And we have always sharing that single-use endoscopy is one of the most attractive medical device markets.

And I have to say after what we have experienced last year, we are even more convinced regarding the potential of this market, a market that will go from $0.5 billion in 2020 to $2.5 billion in 2024. And all the drivers behind the creation of this market, the higher focus on cross-contamination and infection control, the convenience and compelling economic offering, the rapid technology advancements, whether it is sensors or lining or software, combined with support from the government and regulators, each of these trends are becoming stronger every year and combined making the transition from reusable to single-use unavoidable.

Now, within a market as attractive as this one, we will expect to see more competitors coming in. So the question is, what will be Ambu's ability to compete in this market.

And there are three reasons why we believe and we're uniquely positioned to remain the leader in single-use industry. Number one, we have 10 years of experience in single-use endoscopy.

In many ways, we have created this market. Number two, we have a modular innovation engine.

We basically brought the modularization expertise from automotive, combined with the high cadence from consumer electronics, to create an innovation engine that allow us to develop and launch new products faster and at a higher scale than any other company. And this is augmented by the fact that we have a high scale low cost manufacturing.

Today we sell over 1 million of scopes a year, that basically gives us a scale advantage of 5 times versus our next largest competitor. And this high-scale low-cost manufacturing also allow us to introduce advanced innovation at prices that allow hospitals to migrate from reusable to single-use.

And, of course, all this innovation is supported by a dedicated commercial organization. Today we have the largest dedicated single-use endoscopy commercial organization globally, which has been strengthened over the last two years significantly.

And you can see how all of these competitive advantages have already translated into superior performance. If you look at three years ago, our visualization business was about DKK 600 million.

And last year it was nearly 3 times the size. That shows an ability to execute, to bring innovation and commercialize it in a way that delivers results.

And of course, going forward, all of these things, our modularization, our high scale, our commercial infrastructure are much bigger than what we have seen in the previous three years, which should be translated into superior growth. Now, let's talk about the key messages for this meeting.

First of all, on the back of COVID-19 pandemic, we see that a single-use endoscopy market is developing at a rapid pace. Health care systems are looking at ways to restart elective procedures in efficient and safe ways and single-use endoscope is part of a solution.

And in addition, the focus on contamination levels in endoscopy continues to increase. And last year, it was a record year in terms of peer publications.

What are the real issues with reusable endoscopy and what are the contamination rates? And what can be done to be able to move away from that.

Now, in terms of performance, last year was an important milestone for the company. We exceeded our one million single-use endoscopes, which consolidated as the largest single-use endoscopy manufacturer.

We grew 26% on the back of our visualization business growing, 81%. In the U.S., actually we saw an underlying growth of 23%.

And we not only increased our market share in broncoscopy, but we also strengthened our position on the back of GPO contract wins. The GPO wins by the way did not require price discounts.

The pricing impact from these contracts is minimal. And the main reason why we are able to secure preferential position in this contract without consisting in price is that, we already had the most attractive economic offering.

There was no need for Ambu to reduce prices to match any competitor. But actually, the breadth of our portfolio combined with the economic offering, combined with the pipeline, make GPOs conclude that this strategic partner as they create single-use endoscopy categories was sample.

And finally, we finished the year as a stronger company. We have a larger commercial infrastructure.

Our commercial infrastructure in the U.S. for visualization is three times the size as the previous year, is twice the size in Europe and Asia Pacific and we entered two very important endoscopy markets, urology and GI.

And I'm going to share how excited we are with the momentum we have seen with these launches. And finally, we remain committed behind our aspiration as being the world's most innovative single-use endoscopy player.

And on the back of that, you will see a rapid expansion of our innovation pipeline. Just to give you a sense, in the last three years, we introduced five new products in single-use endoscopy.

And for the next three years, we are planning to introduce 20 new products is four times the number of new product launches, that will make us by far the most innovative company with a broadest portfolio in the market. Now, to support this innovation and the rapid volume growth, we are also going to invest in a second single-use endoscopy -- structuring plant in Mexico that will be dedicated to support our largest market globally, the U.S.

And all of this investment in commercial infrastructure, in innovation, in manufacturing capabilities, is being translated on a guidance of an organic revenue growth of 17% to 20%, an EBIT margin of 11% to 12% and a target in terms of a number of single-use endoscopy sold of DKK 1.3 to DKK 1.4 million. Now, there are very few companies in medical devices that are able to grow in a year 26%.

And there are even fewer that on the back of that are able to set a guidance of 17% to 20%. With this guidance, we are also showcasing that Ambu is today one of the fastest-growing medical device companies globally.

Now, let's go through some of the details behind this. And let's start with a case for single-use endoscopy.

And every quarter, I have been sharing with you how much more activity that is behind it. And I have to say, if we look at 2020; number one, the patient safety organization ERCI, actually listed device cleaning disinfection and sterilization as one of the most important safety concerns of 2020.

And it is on the back of that, that in 2020 we had the highest number of field review studies. And for me, it's something which is very important is having already concluded the contamination issues in bronchoscopy.

Having already evaluated and showing the serious issues around contamination into anoscopy, how now investigators are starting to focus in colonoscopy and gastroscopy. And some of that they initial studies are showing a contamination rate of over 10%, and as you can imagine that is very important as gastroscopy and colonoscopy account for more than 75 million procedures globally.

And in addition to that, we have seen the FDA and the National Association supporting the creation of single-use endoscopy. The FDA had a second safety recommendation CMS implemented, a special reimbursement for the outpatient channel, where they are absorbing the full course of single-use endoscopy and national bronchoscopy associations around the world has indicated that, if there is a need to do a bronchoscopy, but they recommend to do single-use bronchoscopy.

And it is on the back of that that we move into 2020 and 2021 with the single-use endoscopy market continuing to accelerate and develop. Now, if we look at our performance as a company, let me just say a few words regarding our anesthesia and PMD business.

Our performance last year was minus 1% in terms of organic growth. And there was a lot of volatility as these businesses are driven by elective procedures.

So when we saw the impact of COVID-19 in quarter three, we saw of course that electric procedures were canceled, the market reduced, and on the back of that, our performance declined. But since then, we have seen stabilization and we finished in quarter four more or less at the same level as we were in quarter one before the pandemic started.

Now, within the portfolio, there is a lot of volatility. As you know our resuscitators within anesthesia are using the treatment of COVID-19 patients and we experienced a significant increase in demand.

And that of course is being offset by the negative impact in patient monitoring, which is linked to the selected procedures. But overall, we are finishing the year, with a more stable core business, and we expect that next year especially in the second half as COVID-19 pandemic is stabilized that our core portfolio is going to grow faster than in a normal market.

Now, if we go into our visualization business, it has been an incredible performance last year, a growth of 81% exceeding the DKK 1 million endoscopy mark, the investment in our commercial infrastructure, the New Mexico plant that basically shows the momentum that, that we had behind what is our number one engine of growth as a company. And if you look at the performance by region, Europe basically doubled their Visualization business in bronchoscopy.

It took 15 points of market share in the rest of the world, whether it was in Japan or Australia. We also saw very rapid growth.

And in North America, our 71% growth, it's a higher also driven by the fact that we did our distributor transition the previous year. But if you adjust for that, our North America business grew 23% last year, with 19% growth in quarter four.

So basically our growth has recovered, as COVID-19 pandemic subside. And of all of our investments, we make North America very important growth engine of growth next year.

Now, if we look at the performance of the two businesses that we've had, at the beginning of last year, pulmonology and ENT. Overall, in the case of pulmonology we gained 700 new customers, since the start of a COVID-19 pandemic.

We expanded our market share. We finished the year with a 30% market share in pulmonology, with significant market shares both, in the U.S.

and in Europe, and with a very strong underlying demand as I mentioned in the U.S. And in addition to that, if you look at ENT, which is -- which is primarily an elective business, the run rate on ENT also has increased significantly.

So if you compare September of last -- September of 2020, with February before our COVID-19 pandemic started, our run rate has increased by 60%. Actually we have gone -- we have won 550 new customers in the U.S.

throughout the year, with 100 new customers in Q4. And there is a very strong uptick in terms of units sold, which will make ENT, an important growth engine for us this year and in the years to come.

But it's not just about pulmonology and ENT. We have very strong momentum there, but we also enter into urology and GI.

And in the case of urology, the initial performance of the product is very promising. First of all, we had positive results from our controlled market study.

And I will shed in a minute, regarding the results. But our aScope 4 Cysto has our most advanced technology.

So it's the first time that we are introducing a product that, we believe, it's very competitive with the most advanced reusable cystoscopies. And that traction actually has shown that, as soon as you get to parity, with reusable endoscopy performance then the transition to single-use will accelerate, 650 pro-demonstrations, 220 ongoing trials with a major U.S.

urology accounts. And 30 of the top 100 U.S.

urology organizations have already converted or they are on trial phase to adopt our single-use system, approval for Europe to start commercialization this year. And what you see on the right-hand side, is, how all of this is being translated into sales.

And what we have is a comparison regarding our aScope 3 in Broncho, compared with first month of our aScope ENT, compared with the first week of our aScope Cysto. And we were always saying that, ENT was penetrating the market at four to five times at faster rate than Broncho.

And as you can see Cysto, is penetrating the market at an even faster rate than ENT. It's early on but, Cysto is a six million procedure market, it's the largest urology market.

And everything that we know today indicates that, our entrance into urology is going to be successful and our aScope Cysto is going to be a very important growth engine for the company. And let me just share with you what is so special about this product that is making this level of performance.

And if you look at the clinical results that we have in terms of our system. First of all, we have 65 cystoscopy procedures performed.

We use 32, a top urology physicians across 12 sites. And we are ready to use our aScope Cysto for both diagnostic and therapeutic procedures.

And we have obtained 100% success rate. Our product can be used across all different types of cystoscopy procedures across all different aspects.

And more importantly, 93% of all the ratings were very good or good ratings around image quality, bending, navigation and the overall performance of the scope and the monitor. Now, the reason why the adoption is so fast is that when you take a reusable cystoscope and you send it for cleaning and sterilization the image resolution of performance of the product deteriorates.

So if you do that every day, every week, every month after a year you have a product with a diminished image resolution and that reusable product compared with our aScope Cysto is inferior and that's basically what is driving that rapid adoption. Now it's of course not just about urology.

We also entered into GI. And we believe that single-use anoscopy is going to be one of the most important markets in single-use endoscopy.

And that's why this launch is so important for the company. So first of all, we advanced our controlled market release, which confirms adequate performance across ERCP procedures.

We are actually expecting a rapid penetration of single-use endoscopy. First of all our U.S.

GI commercial organization is 100% in place. We are talking about 190 dedicated salesforce in GI, most of them coming from the GI sector from the largest GI endoscopy players in the country.

And they have actually performed not just over 550 product demonstrations but actually they have lined up 300 of the largest ERCP hospitals in the country. These hospitals account for more than 60% of a total U.S.

duodenoscopy market volume. We are gearing towards a full commercial launch starting in December.

And we also have submitted our U.S. clinical trial to ClinicalTrials.gov and we are expecting to start in January 2021.

On the back of what we are seeing in terms of the engagement of duodenoscopy accounts to adopt single-use, our commercial infrastructure, the receptiveness on the product, we believe that our aScope Duo is going to be a major growth engine in 2020, 2021. Now that makes – that's why 2019 and 2020 was so important.

But we plan to continue to innovate and to continue to innovate rapidly. Our aspiration is to be the world's most innovative single-use endoscopy player.

And what you have here is the pipeline that we have shared with all of you. And a couple of things.

Number one, we increased our R&D organization by 80% in 2019, 2020 to make sure that we maintain our advantage in sensor technology and lighting and so forth. Last year, we introduced three new products.

I just spoke about our aScope Cysto and our aScope Duo. But of course, we also introduced our most advanced monitor our aView 2 Advance.

And all of our aScopes works with same aView 2 Advance, which also gives us modularity and synergistic effect. Hospitals don't need to buy new monitors or processors to use our technology.

But once they do their initial investment, they can leverage that across our entire portfolio of offerings. Now, this new year 2020 and 2021 is also going to be very important in terms of number of launches.

We are planning to introduce four launches, out of which three are going to be in GI. We are going to enter into colonoscopy and gastroscopy in the second half of the year.

We are going to introduce our new aBox, which is the advanced processor that will allow us to deliver a superior image solution, and we are also going to expand into the Broncho suite. And right now we have 30% of the pulmonology market, which is about three million procedures.

But we have not entered into the Broncho suite, which is another three million procedures. And the launch of our aScope 5 is going to help us to double the market size in bronchoscopy and enter a market with a product that have very advanced image solution, which will be used to -- for physicians to do very complex diagnostic procedure.

And that's going to be a very important launch, and one that will ensure that our Bronchoscopy portfolio continue to grow. But it's not just about our launches next year.

Let me show you what we are planning for the next three years. And what you have here is a comparison of the number of launches that we had in the previous three years, with a number of launches that we are going to have over the next three years.

And basically, in the last three years, we introduced five new single-use scopes and monitors. And for the next three years, we plan to introduce 20 new products.

For this year eight the following year and eight the following year, but basically will make sure that Ambu continues to have by far the broadest portfolio in single-use endoscopy. It will make sure that we are the company, that move faster to the next-generation technology to make sure that every time with regarding of the endoscopy procedure, a physician pays our product and compare it with any other single-use competitor product that it has the best clinical performance.

And it will allow us also to complete our offering. All of these launches are focused on bronchoscopy, on ENT, on urology and GI.

So, it's not about entering into new markets, but in the markets that we have already declared that we are going to enter to go deeper and consolidate Ambu as a leading single-use endoscopy company. So, this is what I wanted to share with you.

We have a promising and exciting June in front of us. But let me pass it with our CFO, Michael that will talk about our financial performance.

Thank you, Juan-Jose. Let me start by going through some of the highlights for the full year.

We delivered an organic revenue growth of 26%, driven by 81% growth in Visualization. We expanded our commercial and innovation infrastructures and hired approximately 1,000 new colleagues who have now joined Ambu.

Our Visualization sales force in key markets have up to tripled in size. The financial results for 2019-2020 was significantly influenced by the pandemic, leading to an overall stronger demand for aScope four Bronc and the further strengthening of the value proposition for single-use endoscopes.

The demand also increased for resuscitators which led to growth in Anaesthesia, while the cancellation of elective procedures meant that PMD saw a decline in sales. For Visualization, we experienced high double-digit growth rates across all geographies, leading to a full year Visualization growth of 81%.

The European growth was positively impacted by COVID as bronchoscopy is part of the treatment of COVID patients. In the U.S., however, the approach from the association of pulmonologists was to avoid bronchoscopy on suspected COVID-19 patients, which led to lower revenue in the U.S.

in the second half. At the beginning of the year, the expected volume of single-use endoscopes was approximately 900,000 units.

However, as the year developed and the demand increased, the expectation was adjusted upwards to more than one million. And when the year ended, we have sold 1000 -- 1.085 million units equal to an increase of more than 70% over last year.

Our core business delivered a negative growth of 1% with Anaesthesia posting positive 7% growth, driven by the increased demand for resuscitators. PMD saw a negative growth of 10% as COVID globally caused a shift in priorities at hospitals leading to elective procedures being put on hold.

Lastly we ended the year with an EBIT margin before special items of 12% as we accelerated our commercial investments. North America accounted for 45% of revenue with an organic growth of 25%.

With the transition of the distributor in the U.S. of aScope 4and an expanded Visualization sales organization U.S.

was prepared for strong growth in 2019-2020. A year after the transition, we can confirm that all businesses have been retained and that the decision to go direct was the right one as it has enabled us to deliver better service to our customers in a troublesome year where we were able to demonstrate an underlying growth in bronchoscopes by overall 23% in the U.S.

The impact of COVID on the business in the U.S. is complex.

Towards the end of the second quarter we saw a positive impact from the pandemic, which continued into Q3. However, as virus spread, we saw less activity at hospitals.

This was combined with restricted access to hospitals and changes in guidelines from American authorities on how and when to bronc. Since end of Q3 and into Q4, we have however seen a steady recovery as elections are being resumed.

On this basis, Visualization in the U.S. has grown 71% with the above mentioned 23% underlying volume growth in bronchoscopes.

Anaesthesia grew 8%, driven by a strong demand for resuscitators and breathing circuits. PMD however declined by 8% as much of the portfolio taps directly into elective procedures.

Europe accounted for 43% of revenue with an organic growth of 32%. Visualization sales grew by 96% as a consensus view in European healthcare was to switch to single-use endoscopes, which had a significant and very positive impact on the demand for our single-use endoscopes.

Q2 and Q3 were the high point with two and three-digit growth rates, respectively while Anaesthesia saw an organic growth of 6% driven by resuscitator sales like in the U.S. and PMD declined by 10% also due to cancellation of elections.

The rest of world accounted for 12% of revenue with an organic growth of 13%. The organic growth in Visualization was 55% driven by sales in Australia, China and Japan.

The market dynamics in rest of world were similar to Europe and the U.S. with regard to Anaesthesia and PMD except that the surge in demand peaked in Q2.

This impacted our ability to supply primarily resuscitators and resulted in an organic growth of 4% in Anaesthesia and a decline in PMD of 15%. So now let me go through the key numbers on our P&L.

Revenue for the fourth quarter was DKK871 million, up 44% organic while our full year top-line ends at DKK3.6 billion. This corresponds to an organic and reported growth of 26% including positive impact from COVID and the effect from transitioning to a direct sales model in the U.S.

The gross margin for Q4 was 61.4%. And for the full year our margin ended at 62%, up four percentage points over last year.

This year's gross profit was very positively impacted by a better product mix due to the volume growth in Visualization and by scale in our manufacturing. Capacity costs for the quarter were DKK507 million, an increase of almost 60%.

For the year, total capacity costs are up by 54% ending at almost DKK1.8 billion. The growth comes primarily from a 61% increase in selling and distribution costs due to the expansion of the commercial infrastructure across regions.

Lastly EBIT ended at DKK29 million in the fourth quarter and a 3.3% EBIT margin for that quarter. For the full year we reached an EBIT margin of 12% corresponding to DKK428 million in EBIT.

Moving on to the highlights of our cash flow and balance sheet. Free cash flow before acquisition equals negative DKK133 million of -- which again equals minus 4% of 12 months revenue.

Cash flow from operating activities is down by DKK238 million and is attributable to the lower reported EBIT, but also to changes in net working capital. The changes to working capital includes the normalization of working capital following the decision about transferring the distributor back in Q4 last year and building the direct sales organization including a compensation paid of DKK136 million or US$20 million.

Milestone payment of €40 million or DKK298 million conditional on the FDA clearance of our duodenoscope was paid after the end of the year in October 2020. At the end of the year, networking capital ended at 16% of 12 months' revenue.

And our total equity ended at DKK2.4 billion equal to a ratio of 48% of total assets. And lastly, net interest-bearing debt ended at DKK1.3 billion corresponding to a ratio of 2.2 times EBITDA before special items.

And lastly, let me outline the financial guidance for 2020-2021. 2019-2020 marked our entry into new endoscopy areas with the launch of our single-use cystoscope and our duodenoscope.

For 2020-2021, our organic growth is now expected to be in the range of 17% to 20%. The growth will be driven by Visualization which will continue to see high double-digit growth rates.

We expect our two new scopes aScope Cysto and aScope Duo to contribute sizable amount to our organic growth. The COVID pandemic has affected our Visualization business in terms of changed growth patterns across geographies and these patterns will affect the geographical growth rates for visualization in 2020-2021.

Anaesthesia and our PMD business were negatively impacted by COVID in 2019-2020. Both business areas are expected to return to positive growth rates in 2020-2021 as the market conditions improve.

The negative impact of COVID in 2019-2020 will cause Anaesthesia and PMD to exceed what is considered our normal growth rates for the long-term in 2020-2021. The growth rates for these businesses will be relatively low in the early part of the year, while we expect to see an increase towards the end of the year 2020-2021.

Lastly, we expect our organic growth to be back-end loaded and, especially, Q2 and Q3 can be relatively soft due to the last year's comparables. In terms of EBIT margin before special items, we expect to be in the range of 11% to 12%.

The quarterly buildup of the margin will be back-end loaded as we continue to get scale as we launch our pipeline and convert the market. Endoscope units sold is expected in the range €1.3 million to €1.4 million units.

Growth will be driven by the bronchoscopes, but also the rhinolaryngoscopes ENT, the cystoscopes and the duodenoscopes are expected to contribute to the overall unit growth. With this update let me give the word back to Juan-Jose.

Thank you very much. And let me just say that this guidance reflects the strong momentum of the company, the ability to continue to grow at very fast rates on the back of our innovation and investments in commercial infrastructure.

And we have the potential to become one of the largest European-based medical companies a company that is known for rapid growth, for high levels of profitability and for the strong creation of shareholder value. Now let's go into the Q&A.

Hi, thank you so much. I have two if I may.

So, my first one, I'm just wondering if you could give me an update so far on the number of doctors that you've already signed up for that duodenoscope trial commencing in January of 2021. I just noticed on slide 13 you indicated that the controlled market release confirms adequate performance of that duodenoscope in the ERCP procedures.

What has been your main pieces of sort of negative impact or concerns from doctors that have looked at this product so far? And then on my second question.

In Q4 we had 255,000 scopes which was pretty solid numbers, but it did fall slightly below current expectations. Can you just help me understand what drove that quite weakness?

Was it inventory builds up in hospital the result of COVID got high level, competition dynamics in various regions? So, any color on that would be helpful.

Thank you.

Yes Catherine. Thank you very much.

And listen in terms of the clinical trials; you will see that the details in clinical.gov, we are targeting multiple size and with every size there are multiple duodenoscopy physicians doing the test. So, you are talking about large scale number of people that will participate in this study which is what you need to be able to do a study of 500 patients.

In terms of CMR, I think we say that is adequate as it reflects the fact that there are several different ERCP procedures of very different complexity. And right now the experience that we are having showed that a product can perform across different levels of complexity.

I mean the only thing that we can tell you is that there are some highlights regarding the superior performance of our aScope Duo, e-matter solution, a filter view, a weight of the scope, maneuverability which is very important in ERCPs. And then we also see that there is a learning curve.

These are new products to -- for a physician different to reusable scope. They are designed to be very similar.

But at the end, they are slightly different. So, they always have to learn how to basically maneuver them.

And what we have seen is that when they go through a couple of procedures, we are able to quickly adjust our technique and being able to perform them successfully. So, that's as far as we can tell you.

And then in terms of volume -- last year having a year of significant volatility as you can imagine and the main difference between Q4 and Q3 is mainly Europe where as you might remember Europe grew exponential in Q3. And there were movements in terms of orders and so forth that creates such a difference in terms of growth rates.

But when you step back from all the volatility and you just see the overall growth rate for the year, you can see that we are finishing -- having gained significant market share in pulmonology with a very encouraging performance in terms of ENT system. And then on top of that we have Duo that we believe is going to be an important growth engine for us this year.

So, that's maybe where it's better to focus on.

Super. And then just one quick one if I can squeeze it in.

Just doing last math. To me it looks like relative to Q2 and Q3, we've seen a low single-digit decline in the average ASP per scope.

Can you help me understand the mix effects that came into play in Q4, or basically any idea on proportion of pulmonary versus the ENT versus other scopes that you sold this quarter?

Yes. I cannot give you the breakdown of our scopes, but I can tell you that as we have been saying all the time that we have very, very stable prices.

So the only impact you are seeing in the average blended ASP from quarter-over-quarter and Q3 into Q4 comes from that blend. I think as Juan-Jose was also alluding to what is very important to understand is that in Q4, we have a high-growth in aScopes in the U.S.

of 19% if you measure the direct growth in the market. That is what has been actually delivered into the hospitals.

So that's probably one of the issues or one of the reasons why you see an uptick in the overall price because we have very high prices in the U.S.

That’s super. Thanks so much.

Hi, good morning. I have three questions.

So my first question is to your Visualization sales in North America and whether you can sort of comment a little bit around the sales dynamics here in Q4 and whether you consider your sales to be satisfactory? Because when I look back to 2018, 2019 and Q2 and Q3 so the two quarters prior to your Tri-anim termination, you did around US $23 million US $24 million in sales in North America Visualization.

Since then you've tripled the sales force you've launched three new products and here in Q4 you then do around US $28 million. So how should we think about this?

Is this -- is there an impact from competition? Is it a matter of the market not really being back from COVID yet?

And would you have expected more? So that's my first question.

And then my second question is to -- the growth opportunities in the new products that you're bringing to market for the current year. So you mentioned in connection with guidance that you expect sizable impact from both the cystoscope and the duodenoscope.

You didn't mention the ENT portfolio. Is that simply just a matter of it not having been launched in the last year or my end question is really whether you could give any sort of light on the hierarchy of which of these new products you expect to contribute most to growth?

And then my final question is just a quick one on the duodenoscope trial. Can you give us sort of a very rough indication on the length of this trial?

Should we expect a readout after a couple of months, or should we think something more like nine, 10 months before we have a readout from the start in January? Thank you.

Hi, Christian. This is Michael.

So I will take the first two questions and Juan-Jose will take your third question. So I think the Visualization growth in the U.S.

is really, really difficult for you to evaluate based on the numbers that we provide. So I think the best indicator we can give you is that this year we have been able to grow 23% over last year.

So what we're telling you is that in '18, '19 we had the buildup of the distributor. And by the end of Q3, we communicated to transition the distributor and that was all the inventory liquidation and so forth.

So what is important to understand is two things that we had a very, very satisfactory transitioning of the distributor. We have taken over all accounts.

There has not been any casualties in that process. And on the back of that we have retained the prices.

We have -- the expected price levels in the U.S. that we had when we were -- for the portion of the account where we were direct.

And that entire portfolio including what was taken over have been growing by 23% on average throughout the year. There's been some lows and some highs in the quarters especially the Q3 was very difficult as we reported.

But overall 23% on top of this transitioning is a very, very satisfactory result we believe. With respect to the guidance.

I think, I actually said when I mentioned the number of scopes I mentioned Cysto, Duo as well as ENT. So if I did not put words to it with respect to the growth in values that was a mistake.

You're going to see a very, very nice growth contribution next year from all three recently launched products namely ENT, Cysto, Duo and we're very, very comfortable about the prognosis that we are working with.

Okay. Thank you.

Thank you. I would just add what makes Ambu such unique company a number of growth engines that we have.

Just if you look at our exit higher share point in pulmonology, market is stabilized, you should expect our pulmonology to grow at a very healthier way, but on top of that we are still building ENT. And of course, we just launched Cysto and Duo and we are expecting an even faster level of adoption.

So we got very eye on one specific launch, but the fact that we have four attractive growth engine for the company is at the core behind our ability to be able to set such an aggressive guidance in terms of top line growth. Now in terms of the clinical, we expect it to take us a year to complete.

And again, we will share preliminary results when we finish our first 60 patients. And of course, we are moving with a clinical trial, because we are confident regarding the performance of our products and the ability to show a positive results in clinical…

Okay. Thank you very much.

Thank you, Christian.

Yes. Thank you very much.

A lot of sort of follow-ups here from me. First of all, can you just confirm that the aScope Broncho in Q4 in the U.S.

was 19% that was sort of what I heard you say or I think I heard you say previously? And then maybe in connection with that, can you maybe comment a little bit on how you see the first part of the first quarter here related to the aScope with also in particular the increases in COVID-19 cases here in Europe and maybe U.K.

in particular. And maybe also if you have any color on inventory levels at the hospitals.

So that would be very helpful. And then just a follow-up on the duodenoscope.

So I understand the trial will take approximately one year to complete. So what was the sort of the time line for the first 60 patients?

And can you confirm it is still a U.S. trial, or have you included European hospitals to that as well?

Thank you.

Sure Thomas. So first of all, let me just confirm our growth of 19% in Q4 that was our aScope Broncho.

Now in terms of COVID-19, I think we are going to have a difficult winter and we are seeing a rapid increase in COVID-19 cases. And we should expect similar dynamics to what we saw during the first wave, but maybe not to such an extreme level.

I think hospitals are starting to learn how to treat patients. They are also learning how to be able to continue elective procedures in spite of a pandemic.

So the big swings that we saw in the first wave is something that we are not expecting. Now having said that, we believe we are going to see a positive impact in Europe.

We feel that in the U.S., there would be more pressure, but as we have a larger commercial infrastructure, a larger number of new accounts and deeper penetration that we should be able to continue to grow. And then we are expecting not to face COVID-19 challenges in the second half of the year.

And on the back of that we will see a very strong acceleration. And then finally, I mean, we will share with you the 60 patients as soon as we have them and this is still a U.S-focused trial.

Okay. Thank you very much.

So just to understand. So in the full year guidance 2020/2021 guidance you have some impact expected from COVID-19 in Europe.

Is that correct?

Yes.

Okay. Great.

Thank you.

Thank you.

Good morning Juan. Thanks for the question.

So just in terms of the cadence through the year, it looks like you're putting towards obviously a stronger second half with respect to both top line and margins. Just wondered if you could give us any sort of bandwidth around the cadence of margins and particularly for the year and whether we should be thinking about Q1 being perhaps even lower than the fourth quarter?

In terms of -- again just around the scope growth you're looking to potentially add another 200 to 300 scopes over the last year. I was wondering if you're willing to just give us how that extra 200 to 300 how -- roughly how many you're expecting from Broncho Duodeno and Cysto and ENT will be useful?

I think also just more generally do you have any plans for greater disclosure around the actual scope numbers rather than just one particular scope number which would become I think probably a little bit less helpful? Thanks.

Sure David. I lost your voice for your third question.

Do you mind repeating that?

The first question.

No the last one.

The last one. Yes just because -- any plans to improve your disclosure around the number of scopes a single scope number when you're reporting now of four different four to five different types of scope.

A single scope number will be less helpful than we actually got the actual numbers of individual scopes?

Yes. So let me address the question number 2 and 3 and then Michael will talk about the expected evolution of our margin quarter-over-quarter for this year.

But -- so today, we do not provide specific information by segment. We give you our overall sale for Visualization Anaesthesia patient monitoring by region, the pipeline and we give you some highlights in terms of what is a level of traction.

And of course, we are always looking at making sure that you have enough information to be able to properly assess the company. So we haven't made any decisions regarding further disclosure by segments.

But of course, we expect as the business becomes larger and more complex at some point that's something that that we will certainly consider. But this is I can tell you as Michael mentioned before, we expect ENT, Cysto and Duo to be important growth engine for us starting this year.

And the combination of the rapid penetration in the case of Duo the high price point make it have a positive financial impact in the company. And then this is something that you need to estimate in terms of how much will it be.

David. So I think when you make your model on how the scalability of Ambu is going to evolve as we go into the year, I think you need to make the prognosis on your growth of course.

And as we said previously, we expect the full sales force expansion to be in play when we go out of this current quarter here. The model is of course going to be very front-end loaded.

That means that the margins that we're going to have in the late part of the year are going to exceed what we will be reporting here in the beginning of the year. It's difficult for me to guide you with a lot more details without really getting into the fundamentals.

So I think those should be the main assumptions that will drive your model.

Thank you.

Hi, thanks for taking my question. I have two.

Firstly, a follow-up question on the EBIT margin guidance here for next year. Would you please give us an indication on your expectation for gross margin?

And also, any comment on the sales and marketing costs and R&D expense would be very helpful? And secondly, on the CapEx ratio the two percentage point increased CapEx ratio for next year and how much that we're looking to the Mexico plan?

And how much would increase depreciation when the facility expansion is done? Thank you.

Okay. Yes.

So let me see how much I can help you here. Your first question was about you said, our expansion of the gross margin?

Yes.

If I -- I think the way you should see it is that, what is driving the gross margin is the product mix, less the capacity costs that we have in our operation. And overall the capacity costs that we are going to have as we go into 2021 are not going to exceed very significantly above the level whereby we enter 2020.

So we're going to see a pickup in the gross margin that is relating to the impact from the positive mix that we're going to have. Then you talked about the Mexico, and the level of investment that we're going to have this year.

The level of investment here, in 2021 are going to be relatively modest. I can't give you the exact number, but out of our total investments for this year is going to be say well below 10%.

So the part of the investments, are going to come the year following 2021. And then with respect to the amortization that this is going to drive that that is honestly too early, because those are only going to kick in the year 2022/2023.

But as I recall, we would be amortizing such an asset, roughly over 15 years.

Okay. Great.

Thanks. And a follow-up question here.

And how much capacity expands in Mexico plan?

We have not said anything about that yet. But we would come back on it on a later time, when we approach, the opening of the factory.

Great. Thanks.

I'll jump back in queue.

Okay. Thank you.

Good morning. So my first question on your duodenoscope.

Do you expect to sell it, while you trial the product in these 500 patients? And also, are you expecting to get paid, for those 500 scopes, or how many is going to be used for those, 500 patients?

And that leads me to my last question. So what would be the total cost for this study?

Thank you.

Sure. So let me just go back to my comments regarding, the progress on the commercialization of our aScope Duo.

We have 100% of our GI commercial organization in place. That's a salesforce of about 190 people.

We have done more than 550 demonstrations. We have lined up 300 of the largest ERCP centers in the U.S.

that account, for more than 60% of our total U.S. volume to start evaluations as soon as we start our full commercialization, which is 1st of December.

So, if you are asking me, whether we are planning to sell while we do the clinical trial? Yes.

The plan is to do this full commercialization. And that's why we say, that our aScope Duo is going to be an important growth engine for the company.

And it's going to be basically the driver of sales. It's not going to be the -- it's not going to be the clinical trial.

Now in terms of the clinical trial, we don't really comment in terms of details of how the mechanics work, but we are commercializing this trial basically.

Okay. Great.

And then just finally, did you still record a positive ASP effect of approximately 13%, 15% in your U.S. Visualization division in quarter four?

Could you repeat please that again, whether we record a...

Whether the, ASP effect was positive by around 13% to 15% in your U.S. Visualization division in quarter four, as in the…

Yes.

… previous three quarters?

Yes. Year-over-year we are seeing exactly the same prices on our direct business, as we've been seeing in the previous quarter.

So that means, that the uptake that we have gained from transitioning the distributor has been booked.

And there will be no ASP effect from the Broncho in the U.S. in fiscal 2021?

Not something that is out of the extraordinary. We have a very, very stable business over there.

I think that's also what we have been communicating quite over some quarters now that because we have a unique product here we have stable prices. And that's also the reason why we are not coming out saying that attaching the product to GPO contracts comes with a big cost.

That's not how it is playing out.

Okay, great. I’ll jump back in the queue.

Thank you.

Thank you, and thank you for taking my questions. I have two if that's okay, and I apologize in advance if they already been asked.

I was briefly interrupted on the call for one brief moment. The first question is in regards to your new product launches, you announced that you had eight new products launching in the next few years in addition to the 12 that we already knew.

I was wondering if you were able to give a bit more flavor on these eight new products that we don't really know anything about at the moment and potentially some flavor on the size of these products and the material nature that they will have on your business. And the last question is regard to your production.

You mentioned that you will open your new production plant in Mexico in 2023-ish. And as I recall you have a capacity limit in Malaysia of around three million scopes.

Would you be able to give some flavor on the production capacity at your new plant in Mexico? Thank you.

Sure. Thank you.

Thank you, Benjamin. So in terms of your question regarding the -- in terms of your question regarding the new product launch, do you mind just repeating again exactly what you would like to know?

Of course. Thank you.

So if you could give some flavor on the material nature that we have in your business? So you know -- which products are they going to be…?

Yeah. Let me just give you a bit of perspective.

First of all, we are going from five new products to 20 new products. And that just shows the power of having an add-in the modular engine.

Because only if you have an R&D modular engine, you are able to basically do what is called core-based innovation and then customize it to be able to come up with multiple products at the same time at a faster rate with lower cost and lower development risk. And this is something that as you can imagine, we are going from five to 20.

And as we continue to remain committed to our investment in R&D, when we go and announce our pipeline for years four to six, you should expect to see another jump in terms of number of new products. And our plan is the following regarding the next three years.

Is we are going to remain focused on broncoscopy ENT urology and GI. So all of these launches that 12 as you know plus the eight new ones are going to be focused on this segment.

The second thing is similar to what you are seeing over the next two years, the plan is that we continue to introduce very rapidly next-generation of products that we -- in the same way as we went from aScope 1, 2, 3, 4, 5, you will see us with our end high resolution, our cystoscope high definition and our Duo version 1 and Duo version 2. You will see us actually continue to move very rapidly to the next generation.

We consider this to be an innovation phase that we intend to win. Now as we move into next generation, we are also completing our portfolio.

We want to make sure that where it is in bronchoscopy, or it is in GI that we have the most of big portfolio. That's what you are seeing us launching our aScope Duo, Colon, Gastro, Duo version 2.

And you can imagine that part of this a new product we make sure that within GI, we continue to innovate and complete the portfolio. And that's basically the best strategy in terms of our innovation.

You will also see us focusing on more advanced monitors, a more advanced aBox processors that help to strengthen the agnostic performance of single-use products. Now in terms of how material our launches in year three are going to be.

The only thing I can say is that we are focused on making sure that we have an innovation cadence that allows the company to sustain its rapid growth rate, as it becomes larger and larger. And that's basically how we have selected the next kind of year three, that's what we are expecting in terms of that impact.

And Benjamin with respect to the capacity you're fully correct that out of Malaysia we have a blended capacity somewhere around two, three quarters, 3 million units per year. And you can almost do the math that assuming that the factory in Mexico is available in the beginning of 2022, 2023, we are going to have quite significant headroom still remaining in Malaysia to grow.

With respect to the capacity that we would be building in Malaysia, we would like to move a little into the construction before we give you further details but it's going to be a very comprehensive site that we will be setting up in Mexico.

Thank you very much.

Good morning, guys. Thanks for squeezing me in here.

And just a couple of quick ones. I know you spoke earlier on in this year about new accounts being created I think a 10% extra in Q2 and then 5% in Q3.

Do you have a number at hand for your total global accounts, now I think we are about 6,300 before any details on that? Just on the GPO contracts, I think it's quite positive there.

But just to confirm, you mentioned that the ASP is set to remain stable broadly with the group that we've seen up to now. Is that the case?

And is that the case for the duration of the contract three years? And is there any kind of minimum order commitment from these GPOs in order to enter into these agreements?

Thanks a lot.

Sure. Thank you, Michael.

So in terms of total number of new accounts I guess you had a number before and you can look at some new accounts that we have now. But I would say that we – if you look at the key markets where we have a direct commercialization, we have been able to penetrate with our single-use bronchoscopy in all major – in all the major health care systems.

Now in terms of ASP, this is important to know. If I'm a GPO and I decide to create a single-use endoscopy segment, and I look for a partner to have a sole source agreement, basically Ambu is the natural partner.

It has the most attractive economic offering with a significant price advantage. It has a broadest portfolio.

It had best clinical performance. And on top of that, it has a pipeline that will allow any health care system which are part of the GPO to use single-use endoscopy across procedure.

And it is because of that that when we have signed this agreement, we haven't had to reduce our ASP. Our ASP is stable for the entire duration of the contract.

Now every agreement is different in nature. In the case of Premier, for example, you have a surpass and the Ascent agreement programs, where you are a member of that program, you need to get a percent of your total single-use endoscopy buying from a manufacturer in this case from Ambu and the implication of that is that we not only have access across all the health care systems which are part of GPO.

But it's also difficult for any member that to move away from our single-use bronchoscopy for example because, then it will lose a preferential in terms of pricing. And we also get a benefit that, as we introduce our pros they are in the contract and then they are embraced by the health care systems so they can get to that level of volume threshold to access for the preferential terms.

In other GPOs you have different programs. But in general, what these GPO agreements are doing two things.

One is, creating the single-use endoscopy category. And that was very important for us because, now we are not going to compete in urology and GI as a very small company going against very large players.

Now, within single-use endoscopy, we are the largest single-use endoscopy layer. But also, is giving us a reach and access for all of our 20 new products coming in and creating barriers for any company that tries to move health care system away from Ambu.

Great. Thank you.

And maybe just a follow-up then, is there an agreement within those contracts then for some of the new projects that are going to launch in the coming year or two, particularly the colonoscope and gastroscope. Is there a price agreed there?

Yes. I mean again, it varies by type of program within the GPO, but in the ones where we have the agreement, we actually have automatic access.

As soon as we get the approval, then we are able to commercialize that product. And that's for the entire -- that's for all products to be launched during that time of the contract.

Okay. Thank you, very much Juan-Jose.

Thank you, Michael.

All right. Thank you very much.

And let me just say 2019 and 2020 has been, I would say a difficult year for anybody that works in health care. It has been a reminder regarding the importance to collaborate the importance to work together across our government health care systems and manufacturers, the value of innovation, that helps to address problems like contamination and important product society plays.

We have tried to fulfill our responsibility, making our resuscitators and single-use endoscopy available. But also in the process, we have seen an acceleration in the development of the market.

We have developed -- we have demonstrated a very strong performance. We have investment in our commercial infrastructure and innovation pipeline.

We have entered new segments and now we have a new year coming in. We will still face a pandemic, but we are confident that we are building all the right assets to make sure that this company fulfilled its potential and in the process become one of the largest European-based medical company.

Thank you very much.