Ambu A/S

Thank you, and welcome, everyone, for our quarterly 3 earnings. We are excited to have all of you this morning.

Let me start with key messages for this call. First of all, the transition to single-use endoscopy market continues to accelerate.

And over the last 3 months, we saw the safety communication from the FDA in bronchoscopy recommending sterilization of reusable endoscope available and the adoption of single bronchoscopy when treating patients at increased risk of the spreading infection. That's basically increasing the cost of using reusable bronchoscopy, and at the same time, clearly encouraging health care systems, all health care systems to consider single-use bronchoscopy for certain patient profiles.

And that will accelerate the penetration of the single-use bronchoscopy market. In addition, we saw that CMS reimbursement for single-use duodenoscopy in the inpatient setting effective 1 October approved.

That basically means that in 40% of all duodenoscopy procedures in the United States, there will be an economic incentive to use our aScope Duo given our prices. And we can see here that between the support from the FDA, encouraging all health care systems to using Nordisk technologies and then the economic incentive from CMS in the case of Medicare Medicaid patients that the creation with a single-use duodenoscopy market is going to accelerate.

Now it's not just about the market. It's also about where we are in terms of our performance.

And we basically continue our accelerated growth on the back of new product launches. Our total company growth was 7%, and in terms of Visualization, we were actually able to match the record peak that we had last year, where we grew 81% growth.

And if you look at our full year CAGR, our Visualization business is actually growing at a compound annual growth rate of 36%. From a volume point of view, in the first 3 quarters of this year, we have already sold 1.1 million endoscope units.

And that is more than our entire volume last year. Our aScope Broncho continues to perform strongly.

We don't see any impact in terms of pricing or in terms of competition. And in addition to that, what we are seeing is a very rapid growth of our aScope, ENT and system where we continue to grow double-digits quarter-over-quarter.

These markets are significantly larger than pulmonology and will represent very important growth engines for us going forward. And in addition to that, we are very excited as we are 4 weeks for our launching our aScope Duo 1.5.

And we have already filed for our single-use gastroscope system, our aScope Gastro and our aBox 2, which have been already submitted for FDA clearance. And if we step back and we look at where we are heading, it is clear that we are going to emerge as a leading single-use endoscopy player.

We are on target to introduce 20 new product by 2022, '23. Half of them will happen next year.

Next year, we have more launches than most of our key competitors combined. We are accelerating the construction of our new high-scale, low-cost manufacturing plant in Mexico.

This is going to be the largest single-use endoscopy plant globally and reflects our ambitions in terms of growth. And we are also strengthening our leadership team and Board of Directors as we move into the next phase of our journey and we are glad to see such a strong caliber of leaders joining our leadership team and being proposed to join the Board.

So let's look at the specifics. So if we look at the market, on the left-hand side, what you have is the U.S.

medical device reports on reusable endoscopy related contamination and infection since 2014. And in 2014, there were 170 cases reported in the U.S.

By 2020, we have 1,818. This is a growth of 11x versus 2014.

Now it's not that there are more and more problems in terms of contamination. What's happening is that the awareness of the contamination issues that have existed all the time is actually increasing.

And this will continue to increase because if you look at the FDA safety communications, both in bronchoscopy, urology and duodenoscopy, they are not only asking hospitals to be -- to increase the quality of the reusable reprocessing. They are not only recommending to use single-use in specific situations, but they are also asking hospitals to monitor and report contamination-related issues more closely.

And on the back of that, what we expect to see is the true issue in terms of contamination in reusable endoscopy which make even a stronger case for authorities around the world to promote the transition to single-use and the creation of a single-use market. That's why we are confident that by 2025, we expect the market to be $2.5 billion.

I mean that process queue will be one of the largest new markets created in medical devices. Now with that attractive market emerging, let's see where is Ambu today and where are we heading.

So first of all, in terms of our performance, we have delivered a 2-year CAGR of 14% compared to quarter 3 2018, '19. That make us one of the fastest-growing medical device companies globally.

And this is driven by our Visualization business, which is growing at an impressive 36% CAGR. In terms of Core, we continue to see volatility in terms of elective procedures, and the situation varies significantly by geography.

Today, we are flat relative to 2 years ago. And we expect vaccine rollouts continue and the situation is stabilized, that elective procedures will continue to come back in the market.

And on the back of that, our Core business will improve. Now in terms of Visualization, it has been a record quarter for us in terms of Visualization.

This has been the highest number of units sold in every quarter in the history of Ambu. Actually, if you look at our entire -- our first 3 quarters volume, we already sold more than the total units we sold in the entire last year.

And again, the growth is not just driven by our Bronco business, if you look at it year-to-date, where we continued to strengthen our relationships with GPOs and with IPL, we actually have over the last 6 months, secure preferential agreements with 8 of the top 10 IDNs in the U.S. But on top of that, we are seeing very rapid growth of our ENT and Cysto, which are actually growing double-digit growth quarter-over-quarter.

And they are doing that in an environment where elective procedures are still depressed, where access is still not 100% back to where it was. And just to give you a sense in terms of how powerful these growth platforms are going to be for the future of Ambu.

If you remember, the total number of endoscopy procedures in ENT and Cysto combined, you are talking about 16 million, 17 million procedures, which is 6x more than the number of procedures in pulmonology. And that is just an incredible opportunity for us as we move forward.

Now if we look at the evolution of these 2 platforms, you can see that there is a volatility depending on the COVID-19 pandemic. But overall, it's a very rapid penetration.

One of the things we're excited about is that our success in ENT and Cysto is not driven by contamination concerns as those are not really issues in the decision-making of health care systems. Our growth is driven by the performance of our products from a technology point of view and is driven by the significant convenience and flexibility that we offer.

It's a very good example that if we are able to bring more advanced technology, if we are able to price them in a way that it is at parity with reusable endoscopy, the benefits of our launches will allow us to participate in every single endoscopy segment. Now of course, it's not just about that.

Our future is very exciting. And I have to say, I think this is probably going to be the last year where we are able to show you our Visualization pipeline in one slide.

We are running out of space. But we are basically on target to introduce 20 new products by 2022 and '23.

Half of the launches are going to be introduced in '21, '22, including our aScope 5 system. And our aScope 5 design has been completed.

It is done. The timing of the launch is actually related to the regulatory approval of our aScope 2, which we are trying to make sure we deliver against our promise on the ecosystem.

That basically means that all scopes can work with our aBox to give hospital significant flexibility, to allow them in an operating room to do a gastroscopy, and then ureteroscope procedure and then a bronchoscopy procedure. In addition, we are adding one more product to the -- to our pipeline, which is our aScope 5 broncho sampler.

And then in terms of GI, we are on track for the launch of our aScope Duo 1.5. We actually just had a session with our top key opinion leaders from the U.S.

They represent ERCP Systems, that account for the largest volumes in the country. And we went through all the improvements we are making, the elevator, the better image resolution, the better functionality.

And we are excited in terms of how the aScope Duo 1.5 will do. And of course, we are launching this product ahead of the expansion of reimbursement to inpatient procedures in October, which is going to be a very important moment to bring a single-use duodenoscopy product with superior performance right when ERCP systems have economic incentives to transition.

And in addition, we have filed for our aScope Gastro and aBox 2 to the FDA for approval. Now let me just spend a couple of moments to highlight 2 of our pain -- our pain launches that we're having next year.

And this actually give you a glimpse in terms of the quality of our innovation, the strength of what we are trying to do, and more importantly, how on the back of this innovation that Ambu is going to be transformed. So let me start with our aScope Gastro and aBox 2.

First of all, as most of you know, gastroscopy is an over 20 million procedure market. So if you look at the number of endoscopy procedures in pulmonology and ENT and cystoscope, all of them combined, they are actually smaller than the total number of procedures in gastroscopy.

So this is a very large market for us. And we are introducing a high-performance endoscope which includes the most advanced, high execution image sensor with maneuverability that we have tested that is on par with reusable scope.

We also have had a reviews with top gastro key opinion leaders in both the U.S. and Europe.

And the testing and feedback supports our ability to address procedure of that account for approximately half of the total market. And we will be able to tap into that market potential right from the moment we introduce the product.

And we are introducing our aScope 5 Broncho high definition. And this is building on all of our experience in producing our previous system.

In terms of performance, we know, based on seeing competitor launches, that our product has a superior image quality and handling. And it is going to be the strongest single use bronchoscope available in the market at the time that we launch.

And with that, we will be able to enter into the broncho suite. And remember, there are about 3 million procedures in pulmonology.

There are 2 million procedures in the broncho suite, which is a completely new market segment for us. And this aScope 5 when we launch will be integrated with our newest display technology platform, our aBox 2 and our aView 2 Advance.

So sometimes, I get questions in terms of whether Ambu is prepared for the competition. The question I would say is whether the competition is prepared for Ambu, especially in bronchoscopy.

If we look at what we are going to build, we are building the most comprehensive airway offering in the market. Our launches in 2021 and '23, in addition of what we have already done in terms of aScope 4 Sampler Set and our VivaSight 2, we're introducing our aScope 2, aScope 5 Broncho, our aScope 5 Broncho for specialty procedures, the aScope 5 Broncho for smaller patients, our aScope 5 broncho for -- aScope 5 broncho Sampler, our next generation of laryngoscope and all of this connected, which will provide hospitals in airway departments with significant flexibility, basically able to address any type of bronchoscopy procedure with one complete system.

That's why we say we have significant growth opportunities in ENT, significant growth opportunities in Cysto. We are entered into all these new segments, but our bronchoscopy business is one that will continue to grow going forward.

And it will continue to grow because we are going to continue to have superior technology with the best economic offering and with commercial agreements that will present extra position for our business. Now when you look at the momentum we are having in terms of volume and all the launches in front of us, we have decided to accelerate the construction of our Mexico plant.

Now this is going to be the largest single-use Visualization plant. And again, it reflects the scale of our ambition and future growth expectations.

And as you can imagine, building this plant and having it ready for next year will not only secure capacity, but will also help to mitigate supply chain disruptions. It will eliminate the need to air freight visualization products from Malaysia to the U.S.

It will give us a dual sourcing strategy, which will give more reliability. And we are very excited to see our Mexico plant become operational in 2021, '22.

And let me just finish this business update welcoming new members of our management team and also being excited with the new members being proposed by the Board of Directors of Ambu to join us. We have Brent Scott, who is going to be our new President of Asia, joining us in -- on October 1.

He has over 30 years of experience in Asia Pacific, 24 of which were with Stryker, and he was one of the key leaders on building that region. This is very important because we consider Asia Pacific to be a vision with significant growth potential.

We have made very important investments. And just to give you a sense, our bet in Japan is going so well that in Q3, we sold the equivalent just in Q3, we sold the equivalent of our entire book level last year.

And we are just starting with our aScope for bronco. We are launching ENT and Cysto, and the opportunities in Japan, and Australia, and Korea and China are significant.

We also have welcomed Bassel Rifai, our new Chief Marketing Officer, who comes from Johnson & Johnson Medical Devices, and where he used to run Global & U.S. spine.

Spine is a category with very rapid innovation, where you have multiple launches hitting the market at the same place, and he's going to lead our portfolio strategy, and of course, the execution of all of our launches. And at the Board of Directors level, we also have 2 new Board members being proposed for our annual shareholders' meeting.

We have Susanne Larsson, the CFO of Mölnlycke, with over 10 years of CFO experience in public companies and deep expertise in corporate finance, strategy and business development. And we also have Michael del Prado, who was a former company Group Chairman of Johnson & Johnson Medical Devices.

He led Ethicon globally, which is the largest surgery company with over DKK 50 billion in sales, and significant experience, not just across U.S., Europe and Asia Pacific, but also around building new markets, new segments and competing through rapid innovation. They just reflect what we are seeing across the organization, our ability to bring top talent from across medical devices to help us to fulfill our journey.

It reflect how excited they are to join a company with our potential and also how we are actually getting ready for what is going to be an exciting new phase in our journey. And with that, let me pass you with Michael Hojgaard , who will talk about our financial results.

Thank you, Juan Jose. On July 1, we disclosed preliminary numbers for Q3 and we adjusted the outlook for the full year.

The actual financial performance for Q3 is in line with the disclosure that we have here today, but allow me to go through the numbers for the quarter. In Q3, our revenue increased organically by 7% and 16% year-to-date.

If we compare 2 years back, i.e., back to Q3 '18-'19, which was before the pandemic, the annual average organic growth rate since then was 14% for the total company. In Q3, visualization for the quarter was flat with organic growth of 0% and 29% year-to-date.

The 2-year organic revenue CAGR for visualization came in at 36%, which reflects the increased usage and penetration of single-use bronchoscopy we have seen from the before the pandemic through now where COVID-19 filling demand is leveling out. In the quarter and combined for all regions, we sold record 386,000 units of endoscopes and more than 1.1 million units for the half -- for the year-to-date.

Thereby, we have already now exceeded the full year volume -- the full volume of units sold the entire last fiscal year. In the quarter, Core posted a positive growth of 15%, which is made up by a mixed effect from anesthesia, posting a slightly negative growth of minus 1%, and PMD posting 44% positive growth.

The negative growth in anesthesia is a result of elective procedures gradually returning, offset by reduced demand for resuscitators and supply chain constraints. The high growth in PMD also shows our elective procedures returning on the back of low comparatives in the same quarter last year.

Finally, our EBIT earnings ended at DKK 88 million, with a margin of 9% for the quarter, and DKK 336 million and 11.2% year-to-date. On Slide 15, we show the geographical distribution of this quarter's revenue and organic growth rates.

North America accounted for 43% of revenue in the quarter and reported an organic growth of 32%. Visualization in the U.S.

grew organically by 47% in the quarter, positively influenced by product launches and with a 2-year revenue CAGR of 20%. The Core business -- for the Core business, elective procedures activity in America continues to improve, but with significant variability by state and with the delta variant picking up in many states.

Year-to-date, America posts organic growth of 16%. Europe accounted for 44% of revenue in the quarter, with sales declining relative to prior year and an organic growth rate being negative at minus 10%.

For Visualization, growth for the quarter came in at minus 26%, on back of a record high comparable last year. The 2-year revenue CAGR for Visualization however in Europe is at 48%, which underlines the very strong performance that we have seen.

In Europe, elective procedures continue to recover and across -- and access to hospitals is improving, but supply chain constraints is showing an impact in the quarter, with lower growth in anesthesia as shipments from Asia to Europe were delayed. For the rest of the world, we posted an organic growth of 7%, with Visualization at 31%, and the 2-year revenue CAGR of 64%.

Rest of world remains significantly impacted by national lockdown across all main markets in Asia and Latin America, leading to negative growth in both anaesthesia and PMD. Now on Slide 16, allow me to comment on the financial effects we see in the current environment showing impact on our supply chain and procurement activities.

A combination of strong demand for our scopes and delays in the global container freight market have for Q3 forced us to continue airfreighting single-use endoscopes and some Core products. This has led to increased OpEx, but that has been required to support customers' need.

In the quarter, distribution costs relating to air freight and increased shipping costs account for approximately additional DKK 13 million of costs, and year-to-date, approximately DKK 32 million. We expect a full year impact from increased freight cost of approximately DKK 55 million or 1.4 percentage points of our EBIT.

At this time, it's difficult to say for how long this will continue, but we do expect it to last far into next year. Our free cash flow for the quarter is negative with DKK 113 million.

This is mainly driven by increased inventories due to the longer lead times when shipping from factories in Asia to our main markets in America and Europe. Part of the increase is also caused by increased inventory of raw materials and components to increase safety stock levels and to ensure continuity in our manufacturing.

Lastly, we have seen a trend of increasing prices on raw materials and components used in manufacturing, and we do expect this to continue into the fourth quarter. Now let me go through the key numbers in our P&L.

Revenue for the third quarter came in at DKK 973 million, equal to the mentioned 7% organic growth and a reported growth of 3%. Revenue for the first 9 months was DKK 2.9 billion, almost DKK 3.0 billion, corresponding to reported growth of 11% and organic growth of 16%.

The 5% gap in reported versus organic growth is caused by the depreciation of the U.S. dollar versus DKK.

The gross margin for Q3 came in at 62.5, which is 2 percentage points below our Q3 last year due to mix, but in line with our second quarter this year. Last year, the relative contribution from Visualization was high, which led to a more profitable mix.

As in previous quarters, negative effects from reduced average selling prices are very minimal. Total capacity costs for the quarter were DKK 520 million, corresponding to a 14% increase compared to Q3 last year, with increased costs across all categories.

As mentioned previously, we have continued to airfreight scopes, and this have contributed to a higher level of costs within the selling and distribution cost line. EBIT ended at DKK 88 million in the quarter with a margin of 9.0%.

And for the first 9 months, EBIT came in at EUR 336 million, with a margin at 11.2%. On Slide 18, I will just mention some of the highlights for our cash flow and balance sheet.

Free cash flow before acquisitions for the quarter was negative with the mentioned DKK 130 million, corresponding to 12% of revenue. For the first 9 months, free cash flow came in negative at DKK 138 million or 5% of revenue.

Investments for the quarter come in at DKK 181 million, including investments relating to Mexico, and are as expected. As discussed, the negative free cash flows are driven by the required additional investments into inventories, finished goods as well as raw materials.

Working capital revenue relative to 12 months revenue is thus up by 4 percentage points to 21% of revenue by end of the third quarter. Lastly, total net interest-bearing debt came in at DKK 638 million and the gearing at 1.1x EBITDA.

The decrease in net interest-bearing debt over last year is driven by the capital increase and sale of treasury shares performed in January. And lastly, on Slide 19.

On the 1st of July, we updated the outlook for this year as a result of an increased impact from COVID-19 pandemic. Our revised financial guidance for 2021 is repeated today and is as follows: organic growth of approximately 17%, including expected growth in Visualization to be above 30% for the full year; EBIT margin of approximately 10%; and total number of endoscopes to be sold to exceed 1.4 million units.

And with these short words from -- on the financial performance, let me give the word back to you, Juan Jose. Thank you very much.

Thank you. I mean this quarter 3 reflects what we have been discussing over quite some time.

First of all, the developments to support the creation of a single-use endoscopy market; the strong growth momentum of the company on the back of a strategy focused on superior innovation; our strength in terms of high-scale lowcost manufacturing; modular R&D engine that allow us to bring to market not only a larger number of products, but also faster in a very efficient way; and how on the back of all of that, we are going to emerge as a leading single-use endoscopy player. Let's just open for Q&A now.

I hope you are well. I have 3 questions to begin with, if I may.

The first one is in terms of the ASP endoscopes. So if we just take a look at the preannounced numbers, it was initially 380,000 sold this quarter, but it ended up being $386,000, so 1.5% higher, but revenue is only up 1 point -- sorry, 0.2%.

And also, if you look at the previous year, the scopes are much higher than the revenues. So could you just please give us some indication of what is driving this ASP shift?

And my second question is in terms of the growth in the different markets. We obviously see North America doing very well, but Europe is down 10%, predominantly driven by the Visualization segment.

In -- is this an indication to -- or could we conclude that we might have to sort of rethink how we see COVID-19 as a one-off? You were quite specific last year that we did see a one-off in Q2.

But in Q3 last year, there were no one-offs. Should we rethink this?

Or how should we see the pace for the next couple of quarters in the year going? And the last question is in terms of the pipeline.

So I'm just wondering, you have now put Gastro and aBox into a -- submitted for FDA clearance. I just wanted to know if you could clarify if this is according to your initial time line and if you still expect them to launch in H2 2021.

Sure. Thank you very much, Benjamin.

So let me start with the ASP. I'm truthful, there are no changes in our ASPs within Visualization, where the ASP in broncho, it seems to me ENT remains stable.

In the case of bronchoscopy, we -- I mean, short of the announcements, we have seen very little competitor activity. Looking at our competitor products, we don't think they bring anything really superior to our aScope 4.

And of course, their pricing is also not competitive relative to us. So we don't see any need to change our aScope 4 pricing.

The difference is all driven by mix. And again, the main highlight is not just that we have a very strong bronchoscopy business.

The main highlight is that on top of our ENT and Cysto growing very rapidly, much faster than what we thought. In terms of growth by region, listen, there is a lot of volatility in the market depending on how -- when COVID started and how much it hit different geographies last year.

So I wouldn't read too much our relative performance in Q3. Remember that there are also distributors and NHS shipments that kind of change how different regions perform in every quarter.

And I would actually encourage you to look at it over a longer period and then project from that. The true is that on the back of the COVID pandemic, we are emerging as a stronger company across U.S., Europe and Asia Pacific.

And in terms of gastro and our gastro system, I mean this is a very important initiative for us. And we see the same conditions in bronchoscopy, ENT and Cysto to be applicable in gastro is somewhat straightforward procedure from a technical point of view.

And having personally hear the feedback from the gastro key opinion leaders, we are very excited with this launch. I would say this is consistent with our plans.

And I will not just provide a narrow launch times but this is going to come next year. And we will see, but I think it's going to be a very important growth engine for the company.

Just to follow up on the first 2 questions. In terms of the ASP, if the changes are due to a product mix and the broncho is still strong, but we are seeing a much stronger ENT and Cysto, wouldn't we then also have to see some organic growth if we have the same strong base in broncho, but then a higher base in the other 2 segments?

And in terms of the European market, just to clarify, so we should not sort of inculcate any sort of one-offs? You still expect to grow from the base that you had last year when you look at the year in Europe?

Benjamin, this is Michael. I think your rationale on the first part of the question, I think you're zooming into too much level of detail here.

I think you cannot focus on our preliminary number of scopes and then compare that versus the increase in revenue that we came up with, with the final numbers. I think what Juan Jose is saying is that the overall ASPs are stable.

We are seeing a effect from mix that we are selling more of the ENT and the Cysto and relative lower profit numbers. But overall, the business model is solid and unchanged.

I think the analysis you're trying to do, the quality of that piece of data does not allow for that analysis.

And could you please repeat the second part of your question, it was not completely clear to me. If you talk about the base for the growth going forward in EMEA, whether we can apply last year's revenue as that.

All right. Thank you, Michael, for clarifying the first one as well.

For the second one, I just wanted to clarify if I was thinking when we looked at Q3, should we now perhaps start to incorporate some sort of one-off effect from last year like you did in Q2? But then Juan mentioned that we should not look at just a quarter, but the year in total because there are obviously some volatilities here.

So I just wanted to clarify if that was correctly understood that you are not -- you're not seeing any sort of one-offs that you had to sort of adjust for in Q3 in EMEA.

No. I think every time we see a one-off, you can rest assured that we will let you know.

And we did so last year. And now as we are moving out of the COVID-19, things are normalizing, and we are getting closer into something that is an organic-driven baseline.

And then we will guide you based on that when we move a little forward.

A couple of questions here from my side as well. So just kicking off with the duodenoscope.

So on the call, you mentioned you have gave feedback on version 1.5 as far as I understood. So can you just elaborate?

Have they just seen the product? Or have they actually been using it in testing in some patients based on that feedback you have?

And then secondly, also the Duo. So any additional items now that you want to improve in version 2.0 aside from the sensor upgrade that you previously have mentioned?

And then just lastly, on the ASP. So how should we think of ASPs for -- in Visualization, of course, in Q4 because you guide for plus 30% organic growth in Visualization for the full year, and then you say now above 1.4 million scopes.

So I assume this does not sort of reflect that you are looking at potentially 1.5 million or maybe even higher in terms of units. I assume that you will change your guidance.

So is there anything in that ASP in Q4 that should definitely be materially higher than what you have shown us in the third quarter? And then just lastly on ASP, are we still just seeing you give away low single-digits GPO discounts here for the products?

Or is there any -- now also that you are growing in volume and getting larger accounts on board also for Cysto and ENT. I guess, historically, you have given away some volume discounts.

So I guess that must, in some way, impact your ASP slightly. Is that correct?

Yes. Thank you, Thomas.

And let me start talking about the ASPs and then I will talk about Duo. First of all, our GPO agreements have not required us to give any price discount.

And we do not expect any changes in our ASPs next quarter or for the foreseeable future. We are the most competitive company in terms of pricing.

Our competitors are launching products which either are inferior or at parity versus where we are at a higher pricing. So we don't see any need to change our pricing going forward.

So that's one thing, just to be absolutely clear. And of course, our pricing is really driven by parity with reusable endoscopy in each of the procedures.

And that will be the guiding pricing for any of the new launches that we have. Now in terms of Duo 1.5, I mean we are launching in 4 weeks.

So I guess we will all very soon see the actual performance in the market. But I mean, the product continues to be used in the market where aScope Duo 1.0 and we have done quite extensive testing in terms of our Duo 1.5.

And without getting into details, you should expect an improved elevator and improved functionality and an image resolution. And next year, we are also introducing our Duo 2.0.

And basically, what the Duo 2.0 give us is 2 things. One is improved resolution on the back of our more advanced sensor.

And the second one is connectivity with the aBox together with our gastro and colon to make sure that gastroscopy GI departments are able to do any type of GI procedure with the same system and provide the same flexibility that we want to provide in airways as we presented. Now the launch of new generations does not represent that our current generations are not performing well.

It just reflect our strategy. We compete based on superior innovation.

As soon as there are more advanced sensors, as soon as we have more technology in terms of maneuverability or more advanced imaging solution software, we will introduce products to market. A very good example is our aScope system, is doing extremely well.

We are growing very rapidly month-over-month. And yet we are introducing our aScope system high definition next year, and you will see that happening across our entire range.

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

I think my...

Yes, on guidance.

Yes, exactly. I think my answer to that, it's a little bit along the line, which we said to Benjamin that I think we're going into a level of details here that we were probably miscalculating ourselves a little bit.

We guide the 1.4 million units. Remember, there are no decimals after the 4.

And again, our overall ASP, we don't expect it to change, but there will be mix impacts. And it's within that, that you need to model it out.

Okay. Okay.

And then just to be clear. Maybe I missed it, but -- so the feedback you have on the duodenoscope is based on version 1.

-- the latest one that you mentioned, is based on 1.5, and it has been tested. So 1.5 has been tested by some KOLs, and you have received positive feedback.

And that, of course, leads you to launch in September. Is that correctly understood?

Yes. That's correct.

I think we are confident in terms of our ability to penetrate the duodenoscopy segment with our 1.5 at a time when the investment is being expanded. So I have to say that conditions couldn't be better to launch our 1.5 generation.

I have a question on the duodenoscopy. And specifically on the U.S.

Central Medicare and Medicaid services, so the sales lost ground of the new technology add-on payment for 2022. So when the CMS calculated the weighted cost used to assess the maximum reimbursement, it's tilted to Boston Scientific also made application.

And based on total number of projected cases, with 3,750 cases for Ambu and 8,314 for Boston. So my question is, where do these projected numbers come from?

Is it completely a CMS projection? Or did you give them any expected numbers in your application?

Basically, what I'm trying to understand here is if we as analysts should bank for around 3,750 duodenoscopes in Medicare in the U.S. for 2022.

And just for the record, I'm referring to Page 881 of the CMS August report.

Yes. Alex, thank you very much for your question.

And in terms of the volume projections, those are internal projections from CMS, so they do not reflect Ambu's assumptions in terms of how much we are going to sell next year. I don't tend to guide on a specific segment, but I think you can be comfortable to assume that we are planning to sell more than that.

Now it's something which is important to comment is that in the case of inpatient procedures, because of the difference in pricing, is not the same for EXALT D as it is for aScope Duo, given the aScope Duo pricing, there is actually a higher incentive for health care system to transition into our aScope Duo technology. They actually will have a higher economic benefit that if they do it with a competitor product.

So there is the incentive that clearly benefits aScope Duo because of the pricing. And again, that's not really our focus now.

Okay. I mean I'm just asking like is because, I mean, you're talking about having very good conditions for duodenoscope.

That's 3,750 just -- obviously, it looks like a quite low number. But do you have any kind of comment or idea how they kind of came up with that number?

Or yes, just seems like it seems a very different communication from you and what they have been predicting.

I mean, I cannot really comment. But of course, this market does not exist yet.

And I would say, very difficult to estimate in terms of how it will develop. The most important thing in the case of duodenoscopy is to look at it over a longer period of time than just next year.

And we believe that because of risk of contamination, which is very high, because of the FDA's safety communication and because of CMS reimbursement incentive for outpatient and inpatient procedures, in 2025, when we believe this market will be 2.5 billion, single-use duodenoscopy, we expect it's going to be one of the larger segments. That's really what we need to focus on.

I'll just take one question at a time then. So my first question would be on your U.S.

business where the cystoscope and ENT scope seems to be doing very well. And given that the product mix in the U.S.

is likely to become also, I guess, the product mix in Europe in a year or 2. Could you just briefly comment on your ASP as it looks right now in North America?

And how far that is away from Europe in order to guide us in our modeling?

I mean the -- Niels, do you mind just repeating the question? I just want to make sure I understand again.

When you say U.S. versus Europe, what exactly do you want me to...

Yes, yes. So I just -- I mean, what's the ASP difference between North America and Europe?

I mean I would say it varies by product. Our aScope Broncho is slightly higher than in the U.S.

and in Europe. But for example, there is really no price difference in the case of Cysto.

The most important thing to take is that -- if I take the U.S., for example, the U.S., we have about 25%, 30% penetration in pulmonology. This is a single-use endoscopy market.

And we have about 97% market share. And we see our ASP in bronchoscopy in the U.S.

is stable. It has not changed.

It is not changing. And we are not planning to change it given what we have seen in terms of competitive activity.

And the same thing is for Cysto and for ENT. And the same situation is in Europe and in Asia Pacific.

And the overall ASP of Visualization will be weighted average of where -- the growth of existing portfolio, plus over 10 launches we're going to have next year, plus the launches in the future. Within that, there are launches which have very high ASP, specifically our aScope Duo, but we can also expect higher ASPs for our ureteroscope, for example.

And that will be compensated by other ones. So for now, I would suggest you to assume our ASP is stable for the foreseeable future and our gross margin also stable for the foreseeable future.

Right. So my second question, on the 550-patient trial with your duodenoscope, which is supposed to be relaunched here as of September.

So is it correctly understood? This will be relaunched with the aBox 1 processor?

Yes. Yes, that's correct.

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

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

I mean I'm not sure about that. I'm sure we'll have some type of communication at that point.

I think it's a very good forum to showcase the strength of our innovation. So you will see us -- I'm sure showing data on Duo as we will probably be showing data across several of our other launches now.

I have a couple as well. So my first is to Visualization in North America and whether you can elaborate a little bit on the sequential development in revenues.

So compared to Q2 revenues in North America, Visualization is slightly lower in Q3. And as I understand you, it seems that both ENT and Cysto revenues are higher quarter-over-quarter.

And I would also have expected general activity in terms of elective surgeries to be higher, which also have been supportive for the bronchoscope. But it seems the bronchoscope revenues will still have been lower quarter-over-quarter.

And what is going on there? And my second question is to the duodenoscope.

And just reflecting on the comment you made earlier on the call, Juan Jose, on the 1.0 product continuing to be used in the market. Can you give us any kind of indication on what kind of numbers the 1.0 have shipped in as of now?

Are we talking tens of units? Are we in the hundreds?

Where are we? Any comment on that would be helpful.

Sure. And let me start with Duo and then the evolution of Visualization in North America.

First of all, in terms of Duo, I will say, is very small. We are focusing on the launch of our Duo 1.5.

But of course, we have customers that are using our aScope Duo, and we are servicing them. But really, the focus has been around gearing towards the launch of our 1.5.

In terms of the Visualization in North America, I just want to echo the comment from Michael Hojgaard. There is a lot of volatility in the market, a lot of volatility in terms of comparables and a lot of volatility in terms of quarter-over-quarter, including logistic disruptions that we had in quarter 3, both in our Core and in our Visualization products.

So I will just step back and look at this over a longer period of time to get a sense of where we are globally and by region. Now let me just say this.

With the creation of a single-use endoscopy market, we have always assumed that North America is going to be the leading region. And based on everything we see, the focus of the authorities, the special reimbursement, the focus of health care systems on adopting single-use endoscopy, and the progress we have seen with our contracting wins and development of CNP and Cysto and what we will -- we are about to see with our launch of our Duo 1.5, North America is going to be a very important growth engine for us going forward.

I have a couple of question here. Let's do it one at a time.

And just firstly, a follow-up question on ASP. So without being -- go into too detail.

And just on the -- just compared to your pre-release sales number. Now you guide DKK 523 million for Visualization.

And then -- previously, it was DKK 522 million. And so you have DKK 1 million more revenue and from additional 6,000 unit scope.

And that, if I do the calculation, please correct me if I'm wrong. And that gives an ASP of DKK 170 million.

And if I remember correctly, you have a bronchoscope around the USD 280, USD 270. And you have ENT at $150, $130.

And you have the cystoscope at the $200. But then my calculation doesn't match those price at all.

Could you help me understand a bit here?

Thank you for the question. Again, I think I have answered this, but I think you need to look at the date of the announcement that we sent out.

So it came out in the evening on the July 1. And if you imagine yourself being in the engine room of Ambu at that time, having to make up the revenue and the units and everything for the quarter, factoring in currency impact and everything, and also being sure that everything is diligently prepared, we did not have a lot of time.

So we made -- what we did was we provided the best and most conservative number that we could possibly do. And I think when you look at it afterwards, we come really, really close.

So as a foundation for your analysis, you should use the actual reported numbers as from this morning. And you should not spend too much time understanding the relative small gaps that you find vis-a-vis the preliminary numbers.

Okay. Fair enough.

Yes. And then maybe just a follow-up in the -- could you please give us an indication on the sales piece between the bronchoscope, cystoscope and ENT for the quarter in terms of unit sales?

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

We cannot break out the numbers. No.

Thank you.

All right, cool. And my second question, on the duodenoscope.

I mean we have heard some positive doctor feedback on your catheter ex-Saudi, from -- I mean, from the U.S. DDW conference.

So for you to compete here, so what would be your key focus in the product improvements with the version 1.5, apart from the elevator system in major quality? And I guess you mentioned a little bit on the functionality.

Could you please add a bit more color here?

Yes. I mean I think at this point, we are relatively familiar with the competitor product.

And more importantly, we understand better the performance of our aScope Duo 1.0 and the key areas of improvement that we are bringing into our 1.5. And that's basically, as I said before, the elevator.

When I say functionality, I mean the wheels, the balls to make sure that they work in a way that is more comfortable for the surgeon. And then the image resolution, a sharper image resolution.

And we have work to deliver on all of those, and that's what we are bringing into market. Now at this point, with our GPO agreements, the ones that we shared before, we announced that we will get automatic access for all of our innovation, and that includes our aScope Duo.

We have also done significant pro demonstrations and placements of our aBox. So we are actually are already in some of the largest ERCP volume centers in the U.S.

We know we are bringing an improved product that meets the needs of customers. And on top of that, we have a superior economic value proposition.

And it is on the basis of all of that, that we are confident in terms of our relative competitiveness.

Okay. And lastly, I have a question on the gross margin.

Could you please quantify the margin impact from the cost inflations?

Whether we can quantify the specific impact, no, I cannot give you a number. But I think what we are letting you know today is that we, as all other industries do, see an impact from the raw material inflation on plastic metals, but also on electronic components that are going into our manufacturing.

There's an impact in this quarter. There will be an impact in the fourth quarter.

And there will also be an impact as we go into next year. But I cannot give you a specific number.

And maybe relative to the sales percentage?

No. I think that's the same.

No. I cannot give you the answer.

Yes. I would say the most important thing regarding this logistics disruption and raw material inflation is that we consider them to be temporary in nature.

And our focus as a company is to make sure that we execute on our strategy, that we maximize our first-mover advantage, that we bring our innovation, that we strengthen our commercial infrastructure, that we have our manufacturing in place, that we have the right talent. And all of these logistics and raw material, at some point, supply and demand are going to go back into balance.

And this is going to -- and whatever the impact it's having, profitability will go away. I think 5 years from now, we're going to look at all of these disruption as a blip.

And the most important thing is, which is the largest single-use endoscopy player, and we are planning to be that one.

It's just a quick question to Juan. You did mention this in the presentation.

But if you just please clarify again what was the underlying reasons for the aScope 5 postponement. I think you said something about regulatory.

Just to be sure that I understood that correctly.

Yes. So I mean, first of all, we are trying to do something which is different to what some of the other players are doing.

We are bringing over 10 products next year. And these 10 products do not work as a stand-alone, but the idea is that all of them are supported by a single aBox working as an ecosystem.

So in the case of our aScope 5, the design is done. We have a product review.

We are basically in manufacturing. And what is driving the timing of the launch is the regulatory strategy for our aBox, that we are basically trying to synchronize with all the other launches.

Now when we bring this into market, where it is a few months later or not, we are bringing the most advanced single-use bronchoscopy system in the market. And by that, I mean the most advanced compared with all the competitor announcements.

This product will have the most advanced image resolution, it will have the most advanced handling, the most complete size ranges. And it will be unique in terms of a compatibility with all of the other aScope products that we will have in our portfolio.

And it is on the basis of that launch that we plan to enter into the broncho suite and ensure the continued growth of our bronchoscopy franchise.

The final question comes from Niels Leth from Carnegie.

Just a follow-up on your OpEx and sales cost in particular. So we saw a drop in your sales and marketing cost in this quarter.

And I presume that has to do with a reduced sales that in the U.S. So when would -- should we expect to see your sales costs ramping up again?

Would that already happen here in quarter 4? Or is that supposed to take place going into next year?

Or will you be able to keep it at this level for a few quarters?

Niels, I think when you look at the cost that we have incurred here in the third quarter, you can model it out how it will be, given our guidance for the fourth quarter. And I don't give you any comments on for next year.

But by and large, the organization that we need to build is out there. So I think as -- consistent to what we have been communicating is that we have been doing the major investment into our overall commercial infrastructure that has been put behind us.

Yes. And just to wrap up, we -- if you look at the size of the commercial infrastructure in the U.S., there are no changes in terms of the overall size.

Of course, as we introduce new products and enter into new segments, we continue to evaluate our relative performance and deploy resources accordingly. But we will finish this year with a stronger commercial infrastructure than last year.

And maybe just to wrap up the call, this is a new market being created. And we are doing it in an environment of significant volatility, with the COVID-19 pandemic and some short-term disruption.

My only advice when you look at Ambu is to maybe elevate a little bit from looking at the small variances quarter-over-quarter or pre-announcement versus announcement. At the end of the day, like in any other case of medical devices, a new market being created of significant scale, different companies competing to be able to secure a leadership position.

In the case of Ambu, with our first-mover advantage, our strategy is to compete through superior innovation and focus as a pure player single-use endoscopy player. And our results in Q3, our growth, the momentum, the progress in terms of innovation, what we are bringing into the marketplace and how we are strengthening our talent just reflects how strongly we are executing our agenda and how confident we are that we will emerge as a single-use leading player.

[Indiscernible]

And I look forward to see you guys in the next quarterly opening.