Ambu A/S

CSE:AMBU B

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to the Ambu A/S Report for Q1 2018 to 2019. Today, I'm pleased to present Lars Marcher, CEO. [Operator Instructions] Lars, please begin.

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you very much, and good morning, everyone. This is the announcement of Ambu's first quarter 2018/'19. And with me today, I also have my CFO, Michael Højgaard. Let me start out with a service announcement. Because in the past, you could only listen to the audio for these webcasts and download a PDF of the presentation, and now we have made a minor upgrade so that you can follow the slides live here on the webcast while it's going on. You can, of course, still download the PDF for the presentation either/or from the website. So with this, let me go on to the update on the business on the next page. The agenda today is very straightforward. I will start out with the Q1 highlights and key figures, then I'll give you a business update with focus on our new products, and then Michael will go through the financials as normal. I will touch upon the outlook for the current year and the coming year at the end of the presentation, and then we'll open up for questions before we schedule or conclude the conference call.It is a pleasure to report another solid quarter with 15% organic revenue growth. The EBIT margin is at 17.1%, which is also a great start to the year. Our Core business grew 5%, and the endoscopy product was up 43%, measured in units compared to Q1 last year. We have launched the first of 2 single-use ENT scopes, and we have prepared approval of the aScope BronchoSampler, which were launched last week. Our launch of the first single-use colonoscope is on track, and we'll still plan to launch the full endoscopy product line by 2020, as we have announced previously. We have, this year, lifted both our gross and EBITDA expectations for our Big Five strategic period significantly, which show that we are able to both manage strong growth and high earnings expectations. So all in all, the first quarter of 2018/'19 means that we are on track to deliver on our full year financial as well as our commercial targets, as per the increased expectation we communicated in conjunction with the Q4 results. Our key figures are well aligned with our full year guidance.On the next slide, you can see our key figures for the past 9 quarters and our Big Five strategic plan. The organic growth increases from 14% to 15% compared to Q1 a year ago. The reported revenue growth is 19%, which leads to a revenue of DKK 656 million in our Q1, which is DKK 103 million up compared to Q1 last year. Our gross margin is up with -- from 58% in Q1 last year to 59.9% this quarter, and we continue to manage our pricing well, optimize our production and supply chain in general. And as this graph show, our gross margin hit a high point in Q2 last year of 60.5% to be exact, and then it fell slightly from Q3 to Q4. This was primarily related to the shift from aScope 3 to aScope 4, because the first units of aScope 4 were more costly to produce. But now I can tell you that we have levered our production costs and we see an increase in gross margin from Q4 to Q1. And when we look 2 years back, it is clear that we have lifted our gross margin to a new level.I'm also pleased to see that the EBIT margin lifted from 16.5% in Q1 last year to 17.1% this year. This, despite the fact that we have more expenditures from Invendo, more expenditures from sales, and of course, also a high investment level on our R&D.Let's go to the next slide. This slide, we show the split and the growth in our 3 business areas for the quarter. In Q1, our Patient Monitoring & Diagnostics sales were up 1% in local currency and 3% in Danish kroner, totaling a revenue of DKK 194 million. We see satisfactory growth in the main categories of cardiology and urology with electrodes, while a number of minor product lines aimed at local markets reduced the overall growth rate of this business area. We see some seasonality in PMD, and I expect the business area to show increased growth the coming quarters. PMD now represent 30% of the revenue in Q1, which is less than Q1 last year, where PMD comprises about 34% of our total revenue.When we talk about sales in Visualisation, we increased by 42% in local currency and 46% in Danish kroner, reaching DKK 231 million. And Visualisation accounted for 35% of our revenue in -- compared to Q1 last year. It's up from 29%, same period. We continue to see strong growth in the pulmonary endoscopy market. We have previously stated that we expect that in 10 years, 80% of all endoscopy procedures will be performed with single-use devices. But if you look at pulmonary endoscopy as it is, isolated, we expect the conversion to single-use to happen much faster, maybe in 5 or 6 years. Growth in Anaesthesia was 8% in our local currency and 12% in Danish kroner, with a revenue of DKK 231 million in Q1. We see strong growth in this business area, and in U.S., we continue to see the advantage of a split sales force. The relative share of revenue is now 35% against 37% in the prior quarter. So the overall picture is that we have had another good Q1 with solid growth.On Slide 6, we have the geographical distribution of the quarter's revenue and growth. The 3 sales regions post double-digit growth for the quarter, and you can read the revenue and revenue split on this slide. I'm very pleased with the way we are growing above our sales in all regions and the motivation and desire to take market share from our competition. North America really stands out this quarter with organic growth of 20%, a very positive development and a sign that our investments in the U.S. sales force are paying off. We are all on major GPO contracts and independent network hospitals and continue to strengthen our partnership with the key customers. In Europe, growth came in at 11%. We continue to see strong market penetration in EMEA. In some countries, we have more than 50% market share in OR and ICU. The growth in Q1 for Visualisation in Europe was 32%, and I see both the penetration and growth getting even stronger for the remainder of the year. Growth in the Rest of World was up 10% in Q1. Asia Pacific posted growth of 19%, while the Middle East and Latin America in general are challenging markets, characterized by project orders and low economic growth.Let's turn to Slide #7. The sales of our single-use endoscopy products continue to increase. In Q1, we sold 149,000 units, corresponding to an increase of 43% compared to Q1 last year, and we see continued high growth in all markets. On the basis of these figures, we are on track to sell more than 750,000 endoscopy products during the financial year 2018 and '19. We have a market share of more than 20% if we look at the OR and ICU segments, and we see great further business over time in the bronchoscopy suite. We do not see any price reduction or price pressure from competition on the aScope right now, and we have fully converted our customers in Europe and U.S. all to the aScope 4 platform. Our production cost for the aScope 4 is slightly below the cost of aScope 3 due to the better manufacturing setup as well as better procurement due to volume.Please turn to Slide #8. From here, I want to put some highlights for the quarter, give some more detailed update on the Visualisation area and how we see the road towards 2020. As you know already, we're currently developing new types of single-use endoscopy products for procedures for urology, ENT and the GI system. For pulmonary endoscopy, we now have our full range, including the BronchoSampler, which were launched recently in Europe and the U.S. I'll get back to this product in a moment. Within urology, we have the Isiris product on the market, produced by Ambu and sold by Coloplast. In addition, we will launch a cystoscope before our financial year-end in 2020. For nose and throat, we will launch 2 new ENT products: a slim version and an interventional version. In Q1, we launched the interventional version in Europe and in Australia. And remember that this product only cover 5% of the total addressable market in this segment. And for the gastro-endoscopy market, which is far the biggest market for endoscopy, we are about to launch the SC210 colonoscope in the U.S. And we will develop a duodenoscope and a gastroscope as well before the finish of our financial year in 2020.Let's go to Slide 10 for a closer look into our SC210 plans. The status for our SC210 colonoscope is that we have finished the clinical trials period with 2 hospitals. We have learned what we need from those trials. Now we will go into the next phase, which is a larger clinical study in the U.S. We have an agreement with a big hospital that will do more than 200 patient study starting in the mid-February, so starting only a few weeks from now. In Malaysia, our low-volume production is up and running and the ramp-up plan is confirmed. As always, when Ambu are launching new significant products, the clinical studies will be the foundation for our sales to all the hospitals, both including health economy as well as solid clinical analysis of how well the products performed against our current systems.Regarding the first phase, we have performed a double-digit number of clinical trials with the hospitals and the feedback is positive. The product worked as expected. However, as with all new technology, training and frequent use is key. Our high-definition image quality is great and is as expected, and the learning curve is significant the more we use the product. We have learned a lot from those procedures, and we feel we have a good handle on optimizing both the procedure itself and the training of our new physicians. We decided to focus on clinical trials on only 2 hospitals to ensure that we could deliver enough products from our low-volume production out of Malaysia. The clinical trials provided Ambu with valuable information about how our product is perceived by trained doctors, and it provides a solid platform for our own technicians and clinical people to further learn how the real procedures and operation is in the colonoscope area. Even with 2 hospitals, we're comfortable to go into the next phase, and doing a clinical study as a feedback from clinical trials has been positive. The focus is now to start the 200-patient clinical study, and we expect to be able to report the outcome from this study in May 2019. As mentioned, our SC210 production is up and running and the ramp-up plans will support the clinical study. And sales activities have been confirmed, and we will start to see the expected volume coming out of the factory. We still expect to start the sales early our Q3, and we already see a high demand and interest for our SC210 product. We have more than 30 hospitals in line waiting for this product. We are conservative when it comes to the number of units sold in 2018/'19, however, we are doing what we believe is necessary and what makes best sense sales-wise, going forward. I'm confident that the first single-use colonoscope will justify a good market position over time and a good alternative to the multiuse systems available today.We'll now turn to Slide #11. As I've just said, we have good positive feedback from doctors on the product itself as well as on the value and single-use in general can bring to this market. It is worth mentioning that the contamination debate is intensifying regarding the colon area, as we have seen in -- for years on the subject of duodenoscope, and the GI doctors from our trials have experienced a large increase in patients who are concerned about cross-contamination with colonoscope procedures. And the doctors indicate that patients would choose a single-use scope 100% of the times if they had the choice. Many hospitals are moving more towards high-level disinfection, the step before sterilization, which require more investment and also longer reprocessing time. And more hospitals have a general concern what future guidelines will be and what the impact will be for themselves in the day-to-day procedures. The increased reprocessing is not only costly to set up and run, but it also increases the wear and tear on the scopes. The doctors in our study indicate that wear and tear starts to affect performance of scopes after around 2 years, and since scopes cycles are 4 to 7 years and identical performance between procedures are key to GI doctors, the wear and tear is an issue for them. Overall, we are very encouraged with the feedback from our single-use entry into the GI world. And the single-use concept will add a lot of value, and we're confident that the first single-use colonoscope would justify a good market position over time and be a good alternative associated to the multiuse established systems we have today.Now let's go to Slide #12. Ambu is the pioneer in the single-use endoscopy world. For the last several years, we are more or less the only supplier. Obviously, we expect more competition due to the significant market and relevance of single-use technology. With the recent competitive announcement, we believe that more vendors can help Ambu to achieve our vision, about -- that 80% conversion to single-use product will happen within the next 10 years.Here you see the current competitive landscape. In the pulmonary segment, we see 2 players, Karl Storz and Verathon, beside Ambu. For now, none of them have products for sale in the segment. We will, of course, follow them closely and we believe it will be -- further speed up the conversion from reusable to single-use in the pulmonary segment, which will be the first segment to reach 80% single-use market share. If you look at the GI segment, we only see Boston Scientific as the serious single-use provider. Overall, we believe we are in a unique position to win the single-use market, but we are aware of increasing competition as single-use scopes become more and more accepted within the hospital.Let me now give you some insight into our new products, and this is on Slide #13. For our ENT business, we will have 2 products: an intervention and a slim version. The intervention version is for specialty procedures and the slim version will be more for routine procedures. Currently, we have launched the interventional version in Europe and Australia and we expect to launch the product in the U.S. before summer 2019. The slim version will be launched in Europe, Australia and the U.S. also before summer 2019. In addition, we will be, in 2018/'19, build solid ENT knowledge in our sales team, create references sites in each of our sales territories and expand awareness of the benefits of single-use in the ENT segments. Our wave 1 would be to address hospitals and clinics that have doctors from hospitals [ higher ]. This segment represent around 30% of the total market of 11 million procedures, so we will address a market that is approximately the same size as the pulmonary today in OR and ICU.Let me turn to Slide #14 for a look at the BronchoSampler product. This product is one-of-a-kind system that simplifies the entire bronchoscopy sampling workflow. The system makes the entire procedure smoother from system assembly to sample procurement. We are particularly proud of 2 of the goals we have achieved with the launch of this product. First, we wanted to ensure quality and simplicity in clinical procedures with intensive care settings. Next, we wanted to help clinicals and doctors in the ICU to achieve a more efficient workflow. With the BronchoSampler, we don't -- we do both. It's a good example of user-focused innovation. The market we will target is mainly procedures in the ICU segment, where there are around 1 million procedures. Currently, we have launched the BronchoSampler in the U.S. and in Europe, and Australia will follow very soon.With this update on our Q1 performance and also an update on our general business, we will now give the word to you, Michael, for you to give a more in-depth view on our financial results for the quarter. Over to you, Michael.

[Michael Højgaard]

Thank you, Lars. We are now on Slide 16. For Q1, we post 15% organic growth, which is on par with our financial expectations as well as our long-term financial expectations, as announced on the Capital Markets Day back in October. Currency impacts grows positive by 3 percentage points, and the accounting impact regarding GPO fees adds another 1 percentage point to the growth, whereafter DKK growth sums up to 19%. Reported revenue numbers from previous quarters remain unchanged from GPO effects. Overall, prices are stable, including endoscopes, and the reason for the fluctuations in the margins over quarters are mainly due to product and customer mix, combined with reduced manufacturing costs. Q1 gross margin was up 1.9 percentage point to 59.9% compared to last year, where 0.4 percentage point stems from the effects from grossing up revenue with the GPO fees. Total capacity cost for Q1 ends at DKK 281 million, equal to a cost percentage of 43%. The increase in cost percentage is due to the expansion of the U.S. sales force, where we only saw limited effects in the Q1 last year; corporate overheads related to Invendo that was acquired in Q1 last year as well; and the impact from the GPO fees, which now are reported as a cost item rather than a reduction of revenue. Cleaned for effects of the above, we -- the underlying run rate of costs at fixed currency rate are up by 13%. In Q1, we have hired additional 20 people in sales, which I included in the 13% cost increase. We also posted an EBIT of DKK 112 million in the quarter, which is 23% up over Q1 last year, and an EBIT margin of 17.1%, which is up 0.6 percentage point over last year. All in all, a very satisfactory result. Please note that the effects from the GPO fees are neutral to the EBIT but dilutive to the EBIT margin by 0.2 percentage point, which are absorbed in the reported numbers. Net financial cost of DKK 30 million were posted versus DKK 29 million in Q1 last year. The bulk part of the financing cost relates to the Invendo acquisition as noncash items, and out of the DKK 30 million posted, only DKK 5 million have cash effect. Cash tax percent was 23%. Our tax percent going forward will be stable around 23% to 24%. Net profits end at DKK 63 million. Cash flow from operating activities totaled DKK 93 million for the quarter, corresponding to 14% of revenue versus 16% last year, mainly due to higher inventories. Investment in noncurrent assets totaled DKK 48 million and equal to 7% of revenue. Most investments in Q1 relates to R&D, whereas in Q1 last year, this also included investments into buildings. Our full year investment target is in the level of DKK 0.25 billion, out of which R&D is estimated to be 80%.When looking into the total R&D spending, cash impact from OpEx must be added, which on a full year basis are estimated to be between DKK 50 million to DKK 60 million and are unchanged to previous years. We expect the full year OpEx impact from R&D activities to be unchanged versus last year. The increase in R&D activities relate entirely to more project -- project-related activities that go into the CapEx. Free cash flow before acquisition ends at DKK 45 million in the quarter, equal to 7% of revenue. Net working capital ends at 21% of revenue, compared to 19% last year. The increase is caused by higher inventories to support growth and mitigation of risks in the supply community.The equity rate for the quarter ends at 44% compared to 49% in Q1 last year due to the share buyback. Total net interest-bearing debt by end of the quarter was DKK 1.2 billion, with a multiple of 1.8. We expect the gearing to come down to the level of 1.0 by the end of the year. With this financial status, Lars will go through the financial outlook and the summary. Lars, back to you.

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you very much, Michael. Let me just repeat the presentation here. We are on track for the full year targets after a solid Q1 growth and solid earnings. In other words, the day-to-day business is truly streamlined and profitable, and we see real result from the investment in sales from the past year. In the past years, we have also invested in our research and development and we're beginning to see the positive results. We have launched new innovative products and we are in the process of developing new devices to achieve our vision of converting flexible endoscopes from reusable to single-use solutions. We have noted the positive development in the community surrounding single-use endoscopy products, as the competitive landscape is starting to see more providers than just Ambu. As I've said on other occasions, we believe that it is healthy to be in competition and we believe that the endoscopy market would only truly convert to single-use if there are several strong suppliers for the hospitals to choose from. The potential market is huge, and Ambu will not and could not be the only global monopoly of the single-use endoscopy products. As earlier said, we significantly upgraded our financial targets for our Big Five 2020 strategy period back in October. We maintain that strong financial outlook for the full year of '18/'19. The outlook for the organic growth in local currency is for 2018/'19, 15% to 16%, while the EBIT margin is expected to be in the range of 22% to 24%. The free cash flow, excluding acquisition, is expected to be in the level of DKK 400 million to DKK 475 million; and the outlook for endoscopy products sold in 2018/'19 remains a plus of 750,000 pieces. We also maintain our ambitious outlook for 2019/'20. Here, we have an organic growth rate target of 18% to 23% and an EBIT margin target of 26% to 28%. Our cash flow will be around 18% of revenue in 2020, and then we expect to sell more than 1 million endoscopy products in 2020. We are rather comfortable to be in that area regarding all targets, as we are off to a strong start for the year. For this briefing on our commercial as well as our financial performance in Q1, I would like to open up for questions. And back to you, operator.

[Operator]

[Operator Instructions] The first question comes from the line of Thomas Bowers from Danske Bank.

[Thomas Schultz Bowers, Analyst]

A couple of questions from me. Just to kick off, with SC210, can you maybe just tell me what differs from the initial test at that 2 first hospitals and then going into a 200-patient study to start the next month, other than maybe, of course, the sample size? So what do you need to learn before you go commercial later this year? And then just a question on the Visualisation factory and production capacity. In the report, you highlight that the third floor is ready in Q4. So this wording, does it really mean that you have a potential commercial scale run rate of maybe up to 100,000 or 200,000 units on that floor already? And then secondly, on this third floor, is this going to be a GI production only? And then thirdly, again on the SC210, I mean, if all testing goes as planned, how much would actually be needed, capacity-wise, for you to go commercial later this fiscal year? Are we talking 20,000, 30,000 units? Or do you need actually to go to an annual production run rate of plus-100,000 already from day 1 to be able to make sure that you can only cover only maybe a few accounts?

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you, Thomas. I'll try to answer those 3 questions on the SC210 and the clinical tests. What I would normally do when we introduce a new application is to, first of all, go out and test it on real patients when we get the FDA and the CE mark. And this is exactly what we have done with the latest version of the colonoscope SC210. We were mainly looking for 3 areas. We were looking for is the image quality satisfactory for the doctors to do the screening? We were also, of course, interested in finding out what the functionality of the product was, is it capable of doing what an Olympus product can do today? And last but not least, with our alternative interface, would the productivity of our product come close to where the productivity of the Olympus product is today? So that was the number one purpose. The second purpose was really to fly in, if -- in Europe and the U.S. to the hospital, our clinical people and our service technicians, for them to experience how doctors are using our products in real operations. And that's why, based on those operations, we feel comfortable that we can start to go into what I will call the real world, which is the clinical study we're going to do in U.S. in a few weeks from now. The feedback, as we also talked about here on the call, is that the product do what we expect. The monitor and the resolution is good. The functionality is as expected. It can do the job. And we also see that the more time you use the product, the less time you need to do the operation. So we come very close to the productivity that Olympus also have. In terms of the product ramp-up, let me just repeat what the real flow is. We expect that the factory we have in Malaysia will take us through 2020. That means we don't see that we're running out of capacity in this strategic period. But we do know that we need to expand the facility outside Penang in Malaysia, and we will look at that when we get to the end of this financial year. We will look at where we are and then we'll make a decision of where and how quickly we want to expand our facility. So what I also said at the Capital Markets Day, it will take about 16, 18, 19 months to do a factory. So if we make a decision end of this financial year, we will see that factory potentially be up and running at the beginning of the next strategic period. In terms of the volume of the SC210, what is really important for us is to do this right. So we are very conservative in terms of making sure that our product is also accepted from one of the large hospitals, that we have the clinical documentation, that we know exactly what patients that it's working better in than others. And also, we have the health economy, that will be significant for making decisions in the hospitals. And then we have roughly about 30 hospitals in the first wave that our salespeople will be focusing on. And because a normal volume in a hospital could be between 30,000, 40,000, 50,000, 60,000 procedures a year, then it's important you understand what -- that we can do a very focused launch. We're not prepared to talk about how many we're going to sell this financial year and we are not ready to talk to you about what the production capacity will be, but we will try to update you on this as we progress in the quarters, and of course, when we finish this year. So that's the answer I have for you, Thomas.

[Operator]

And the next question comes from the line of Ole Bang from ABG.

[Ole Henrik Bang-Andreasen]

Lars and Michael, solid quarter. Just 3 quick questions from me. So on the BronchoSampler launch, how many of the aScope 4s are supplemented by a BronchoSampler? And then two, on the aScope 4, how many of the customers are new customers and how many are existing customers? And of the DKK 80 million increase in inventory, should we assume most of that inventory is the SC210 colonoscope?

[Lars Marcher, President, CEO & Member of Executive Board]

Okay, thank you, Ole. I'll take the first 2 questions and then Michael will give you an update on the net working capital and inventory. In terms of the BronchoSampler, the total market for this is around 1.9 million procedures. So you can say that there is kind of a connect rate to the pulmonary market of 1:3, roughly. We target the -- upfront, we target the ICU area, where we see around 500,000 immediate opportunity for the bronchoscopy products and the Sampler. The feedback we have got so far is that the doctors are really appreciating the simplicity of the product. They fully understand that the sample process today is also a risky process, where they basically have to dress themselves up in clothes, so if there's some spillover from the sampler, that they are not contaminated. And they appreciate that this is a plug-and-play to the already used aScope device. So that's why we see that this product is a unique product and position Ambu in the pulmonary area as a unique solution for the doctors. So we'll see how it goes in the next quarters. Of course, doctors will have to test and trial the product as soon as they possibly can. In terms of the new -- the next question was about...?

[Michael Højgaard]

Ascope 4.

[Lars Marcher, President, CEO & Member of Executive Board]

AScope 4 penetration, that's right.

[Ole Henrik Bang-Andreasen]

Yes, how many are new customers and how many are existing?

[Lars Marcher, President, CEO & Member of Executive Board]

Yes, exactly, Ole. What we see here is that we still are tracking around across the world with about 100 new hospitals as an average basis. We have a lot of new customers, potential customers, lined up in the kind of process of evaluation and determination of what they want to do and how quickly they want to do it. But we also see a majority of our growth coming from a further penetration into our current accounts, and we see more and more of our hospitals standardizing 100% on the aScope 4 product. So what I'll also mention here is that we see the pulmonary market on its own converting much faster to a significant part of single-use than we anticipated. We see countries in Europe where we have more than 50% market share. And this is a very, very good indication, because U.S. right now is the market we are less penetrated in, and therefore, the growth of 52% in U.S. is a very promising growth rate that will continue to drive the pulmonary segment for quite some time. And then back to Michael for the net working capital.

[Michael Højgaard]

And Ole, with respect to the inventory, which I believe was your question, the overall increase stems from mostly raw materials. And I cannot give you the details on the finished goods, but roughly 30% to 40% of that comes from finished goods. But the overall turn is unchanged. I'm sure the SC210 is having some impact, but I cannot detail it out.

[Ole Henrik Bang-Andreasen]

Okay. And just one more question, if I'm allowed to. So just with the recent -- the CRA link to the colonoscope, did you get any more feedback or any more -- do you feel any more demand on the colonoscope to push it out there, versus before that link was made? Or is it just business as usual?

[Lars Marcher, President, CEO & Member of Executive Board]

Are you talking about if we have more interest out there, Ole? Or are you...?

[Ole Henrik Bang-Andreasen]

Yes.

[Lars Marcher, President, CEO & Member of Executive Board]

Yes, I mean, I also talked a little bit about it during the conference here. We see, just in the last 3 or 4 months, that doctors that previously were maybe a little bit kind of biased around the fact that the contamination in the colon was not an issue, when we talked to those doctors again, they're certainly a little bit more cautious about this and start to accept that maybe the contamination issue is bigger than what they thought. We see also the FDA activity helping this case. FDA been, as you also saw recently, very aggressive on the duodenoscope. And the doctors and the hospital management that read that kind of statement, of course, are looking into the other endoscopy procedure and ask the question, "Is this a one-off or is it something that will also be significant in other areas?" And also, we see hospitals, one you know, the Johns Hopkins Hospital, recently coming out saying that the colonoscope contamination rate were much, much higher than what they anticipated. So what we're doing here is, obviously, that we are -- we're just doing whatever we can to bring the product to market. We don't see that we will have any issues in terms of having hospitals to test our product, trial the product and be comfortable about the product in the real production. And therefore, we can justify just to focus on few hospitals. We don't have to talk to 3,000 hospitals out of the gate. We can concentrate, because the volume is so great, on each hospital.

[Operator]

And the next question comes from the line of Christian Ryom from Nordea.

[Christian Sørup Ryom, Senior Analyst]

Lars and Michael, this is Christian from Nordea. I have 3, please. My first is to the trials for the colonoscope. You mentioned that when doctors are trained, they can achieve productivity with the SC210 close to that of the Olympus product. Can you be a little bit more specific here about what's the difference in procedure time? And then my second question is to the aScope where, as you also highlighted, you've now seen the first couple of announcements from competition in terms of Karl Storz and Verathon. How do you see those products and how do you see the aScope? What will you sort of be emphasizing and differentiating the aScope versus this competition? And then my final question is to your newly launched ENT aScope, can you comment anything on how many hospitals you've sold this into, and potentially, also, how much volume the scope has contributed with here in the first quarter? I appreciate that it's only the intervention scope that you've launched at this point.

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you for your question. I'll try to work by -- go through the 3. In terms of the trials, what we have found out or actually got confirmed is that there's really not one colon screening that are the same. When you start a screening, you don't really know how long time it's going to take. We see Olympus being used in screenings that take 45 minutes and we see them being used in things that take 10 minutes. What we can tell you is that we see several of our procedures where we are looking into 10- to 15-minutes procedures, which is more than adequate in terms of the productivity. We also see that the doctors are really liking our interface. As you remember, this is an interface where you can detach, the kind of Nintendo handle. They seem to like that very much, that they can detach the device rather than being locked with the hands or the shoulder on the conventional ones. So they feel more flexible and more agile when they are doing the screening. So productivity, we feel that learning, going forward, will bring us to the level where doctors are satisfied with what they're used to. On the aScope competition, it's worth mentioning that we have seen Karl Storz announcing potential products for quite some time. We have not seen any product activity in the market. We have not seen any hospitals using it. We still believe that the announcement of FDA approved is not even there. But we also see that the company are a little bit confused themselves in terms of what do they really want to do with the endoscopy product because most of their products, of course, are in reusable. So I think they have a difficulty even themselves to find out what they really want to do with this product. On Verathon, we have also known that Verathon would be working on a flexible scope. Verathon's current revenue in Visualisation, mainly in what we call video laryngoscopy, is about $100 million worldwide. So it's a relatively small company. They have announced the first version. It's not ready to sell. There are some pieces of the device that are not single-use, that we believe is going to cause some problems, that it's not a 100% single-use product. They have a very expensive monitor connected to that, that we also believe will get some pushback. And last but not least, they only have one version. So that means that the ICU or the OR cannot do all the operations that they can do with aScope. So we expect that we will continue to have no pushback on our growth in aScope for the time being. And whenever they come out with a full portfolio, back to your question #3 -- or 2 or 3, is that our competitive advantage in the pulmonary, I think, is obvious. We are first mover. We have high-scale manufacturing. We have extremely low cost. We're talking about less than $40 to produce that product right now. And at the same time, we have no quality issues. We have no customers or hospitals that are saying that, "We don't want to use your product anymore." So you really have to come out with a product that is so significant better than our current product -- and we also continue to develop ours, by the way -- that the doctors have no kind of issue switching. So we don't see that happening. But again, we welcome the competition because it will just convert this segment even faster. On the ENT that you mentioned, we have only launched the interventional one, which is 5% of the market. We have only launched that in Europe and in Australia as such. And it's very, very early days. And I can tell you that we have not sold many of those products in Q1, but of course, we will start to see progress in the next quarters because hospitals also need time to evaluate this product before they decide if this is a better option for them, as we normally see it with all our products.

[Operator]

The next question comes from the line of Niels Leth from Carnegie.

[Niels Granholm-Leth]

So my first question would be on your sales organization. You mentioned that you added 20 sales reps in this quarter. Could you just briefly talk about how many sales reps that you would employ globally by now? And also, how many extra sales reps would be needed to meet your targets for 2020? And a second question would be on those 2 hospitals testing your colonoscope. So have those 2 hospitals continued to use your colonoscope after they completed the testing?

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you, Niels. On the sales force, it's correct that we have 2 divided sales forces now in U.S. And we have had that for quite some time in Europe. And it's also correct that we have invested a lot in sales compared to the same quarter last year. They are all fully onboard. They're fully trained. If you look at the global sales force, and I'm now talking about direct sales people, I guess that's your question, we have about 450 global salespeople selling our products. We don't believe that we need to expand our sales force significantly from now on to 2020, simply because, for example, our Visualisation sales force have much broader shoulders right now because they're only focusing on the endoscopy products we have now and the ones that we'll get. So we believe that they will be able to continue to carry the products into the hospitals. In this perspective, it's important that the way we go about our SC2 (sic) [ SC210 ] launch in U.S. is that we are basically focusing on 5 large hospitals in each of our 6 sales territory. So if you put that into context, that means that the salespeople we have selling Visualisation are not asked to go out and address thousands of hospitals but be very selective. So no significant further investment. Of course, we will continue to add here and there, but we're not talking about something that you will be able to see on the expenses. In terms of the 2 hospitals, we're continuing to test. We are -- basically, every week, we are in the hospitals to further see what the productivity, especially the productivity, how they continue to improve while they're using it more and more times and getting more and more comfortable. So that will continue to run as we go into what I will call real mode in a couple of weeks in this last hospital in the U.S.

[Niels Granholm-Leth]

But there is no unsupported use of the colonoscope at this point in those 2 hospitals?

[Lars Marcher, President, CEO & Member of Executive Board]

If you say unsupported, you'll need to clarify that for me.

[Niels Granholm-Leth]

Without the support of your trainers?

[Lars Marcher, President, CEO & Member of Executive Board]

No.

[Niels Granholm-Leth]

And then another question, so this clinical study that you're going to do, has this clinical study, has it been filed in FDA? And are the doctors doing this study, are they expected to publish an independent paper with the results of this study?

[Lars Marcher, President, CEO & Member of Executive Board]

Well, when we do clinical studies, and we have hundreds of studies already, as you know, in the pulmonary area, this is a study that do not need to be FDA-listed. This is not practiced to do that, because the product is already approved. So this is really what the FDA is interested in. So the clinical study, as we also had back when we introduced the aScope several clinical studies at that point of time, is simply for us to come out with a paper and also for the hospitals to publicize this paper, back to your question, so the potential new hospitals can get an insight in terms of where is the product applicable, how does it work, is it working satisfactory, what is the comparison with the existing scopes, what is the health economy working on, on single-use versus reusable? And all this very important information that we always require as a sales tool will be available at -- before summer, as we say, and will be a significant platform for the launch of the product into the 30-plus hospitals we're talking about.

[Niels Granholm-Leth]

But will the doctors publish an independent paper, like a scientific paper, as we usually see it in the medical world, on the study?

[Lars Marcher, President, CEO & Member of Executive Board]

Yes, yes. Yes, they will.

[Niels Granholm-Leth]

Okay. And that paper will be out before the summer?

[Lars Marcher, President, CEO & Member of Executive Board]

That paper will -- we can't say if it will be in April, May, or before the summer, but we expect that when we say end of May, that, that will be an appropriate time for them to go through all this.

[Niels Granholm-Leth]

Okay. And then just a final question from my side. So those U.S. doctors that did the animal tests with your SC210, have they retested the SC210 with a wheel-and-wire-based system?

[Lars Marcher, President, CEO & Member of Executive Board]

Are you talking about way back, Niels, you're talking about tests before our acquisition of Invendo, I assume? Because we have not used our SC210 in animals. So are you talking about the Invendo time?

[Niels Granholm-Leth]

Okay. So -- okay. Yes, so are there tests being conducted with the SC210 among U.S. doctors with a wheel-and-wire-based system?

[Lars Marcher, President, CEO & Member of Executive Board]

No, we don't have one.

[Operator]

And the next question comes from the line of David Adlington from JPMorgan.

[David James Adlington]

Really, just again, on the SC210 and the data from that, too, on the patient study. Do you think, firstly, that, that data will be presented at DDW in San Diego? And on the back of that, will you -- are you planning to have a commercial presence at DDW?

[Lars Marcher, President, CEO & Member of Executive Board]

E It will be appropriate for us to have those data ready for DDW, which is the world's largest conference for GI. So that will be a fair assumption, David.

[Operator]

And we have a follow-up question from Ole Bang from ABG.

[Ole Henrik Bang-Andreasen]

Just a follow-up here. So just on the 30-plus hospitals that are interested or looking forward to colonoscope, so you say these are large accounts. So that's 60 colonoscopic procedures a day. So if all of them fully convert, how big a percentage do you assume they're going to convert into single-use of the colonoscopy procedures? Because that would add up to quite a big number right away.

[Lars Marcher, President, CEO & Member of Executive Board]

Yes, so this is the important point, Ole, that is, that when we talk about sales expansion and when we talk about what salespeople can handle on a daily basis, that we can actually be pretty comfortable and happy with a few hospitals in the U.S. because they're doing so many operations every day. So that's the first premises. We don't expect, of course, that hospitals from one day to the other will switch all their 20,000, 40,000, whatever thousand procedures. So we, of course, is expecting that they will work with the colonoscope the same way as we have seen hospitals for the last years working with our aScope. And that means that we'll start out with maybe 1 operating room and then we will -- that will improve from there. So we see that the colonoscope penetration will be a kind of a steady increase over the next years. But we definitely see that the interest out there is very, very high. And we also see that doctors in U.S., as I mentioned in my call, are seeing a change in the community, and that this conversion, as I also mentioned at the Capital Markets Day, will be very much a patient-driven conversion, because the patients just want this to happen. And in pulmonary, the patient do not have anything to say because they don't know what's happening. But in the colonoscope, people are concerned about the contamination issue, and this is going to help us to convert this market as soon as we can.

[Operator]

[Operator Instructions] And as there are no further questions, I'll hand back to the speakers.

[Lars Marcher, President, CEO & Member of Executive Board]

Thank you very much. I would like to say thank you again to my entire Ambu team. You have delivered another fantastic performance. And also, of course, thank you to all of you participating and listening in today. We look forward to report our second quarter on May 1. So until then, thank you very much and talk to you soon.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.