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Ladies and gentlemen, welcome to the Ambu Q2 report for 2018/'19. Today, I'm pleased to present CEO, Lars Marcher; and CFO, Michael Højgaard. [Operator Instructions] I will now hand you over to Lars. Please begin.
Thank you very much, operator, and welcome to the conference call and announcement of Ambu's second quarter 2018 and '19. On Slide #2, you can see the agenda for the call, which is very straightforward. With the announcement today, we are 1.5 years into our Big Five 2020 strategy, so exactly midway into the 2-year strategic period. So in many ways, a perfect time for a status update. The agenda starts out with Q2 highlights and key figures. And then we'll give you a business update on both existing business and products that are in development. Michael will go through the financials. And I will touch upon the outlook for the year and for the remainder of the strategy. As always, we will open up for questions before we conclude the conference call. So let's take a look at the Q2 highlights on our Slide #3. Ambu continues the high growth, which has been a trend lately. This quarter, we saw 14% organic revenue growth and we are 15% growth for the half year. The EBIT margin is now 24.8% for the quarter, which is an increase of 0.8 percentage points. And the half year, we posted 21.3% EBIT margin, which is also up 0.8 points compared to H1 last year. Our Core business grows 8% and the endoscopy sales is up 26% measured in units compared to Q2 last year. We have launched the aScope BronchoSampler, which is an accessory to our single-use bronchoscope. And we have also launched a second of our 2 single-use ENT scopes in Europe and Australia with the release for sale in U.S. expected in this quarter we are beginning in. The SC210 single-use colonoscope is part of a clinical study in the U.S. and we will launch it in U.S. during our H2. We are on track to reach the full year financial targets. And all in all, the Q2 results show that we have kept growing our business and increasing the earnings. Let's go to Slide 4 to take a look at the development of our figures. On this slide, you can see our key figures for the past 9 quarters. As you can see, we are on a solid double-digit growth and a strong financial development on all parameters. Our reported revenue growth in Q2 is 21%, which give us a revenue of DKK 785 million, which is DKK 135 million up compared to Q2 last year. Our gross margin is up at a high level at 60.1% compared to 60.5% in Q2 this year. This minor change is caused by the effect of renegotiation of a GPO contract in the U.S., expected marginal price change in Anaesthesia and PMD as well as the cost of starting up production of new endoscopy products. Looking 2 years back, we clearly see that we have lifted our gross margin to a new level. On the earnings side, the trend is also positive with a steady increase over the past 2 years. We have beaten our previous record from Q2 last year and now post an all-time high EBIT margin of 24.8%. EBIT for the quarter was DKK 195 million, which is up DKK 39 million on Q2 last year or 25%. For the half year, EBIT is at DKK 307 million. Now we will turn to Slide #5 and look at the splits of our business areas. On Slide 5, you see that our 3 business areas for the quarter. It's a very satisfactory growth that Ambu is posting also this quarter across all business lines. In Q2, Visualization sales were up 27% in local currency and 34% in Danish kroner, totaling a revenue of DKK 283 million for the quarter. On the half year, the growth is 33%. And for the first time, Visualization is our largest business area and account for 36% of the revenue in this quarter. I can't help but feel proud that Ambu has been able to create completely new kind of medical devices that has grown from nothing to more than 1/3 of our business in a matter of years. This has only been possible because our single-use endoscopy address some significant issues for doctors and patients. Growth in Anaesthesia was 5% in local currency and 14% in Danish kroner with a revenue of DKK 260 million in Q2. This result in a half-year growth of 6%. The relative share of revenue is now 32% against 35% in the prior year and the prior quarter. Our business in PMD saw a 10% growth in local currency and 14% growth in Danish kroner. Seeing the relation to the logos in Q1, this clearly indicates the fluctuation we have in our Core business quarter-by-quarter. That being said, I'm very satisfied with the strong development across our Core product portfolio. And PMD is now 31% of our business overall. Let's turn to Slide #6. On this slide, we have the geographical distribution of this quarter revenue and growth. North America grew the business 16% in Q2 and continued to show great momentum. Visualization has strong growth. And the gross figures of minus 1% in Anaesthesia and 30% in PMD showed that our quarterly sales have natural periodic variation when it is subdivided into markets and business areas. Europe showed growth in Q2 with 9% organic. Growth in Visualization and Anaesthesia is satisfactory and PMD is on the low side of the long-term growth potential. As we have said at the beginning of the year, our Core business will be around 5% growth and that we continue to take market share. Rest of the world growth was high in Q2 at 24% organic growth. During Q2, we have seen an uptake in aScope sales in China after we have received price codes for the majority cities, which are prerequisite for sales, along with product approvals. We are positive with the regards to the sale of aScope in China in the quarters to come. However, it's too early to comment specifically on the expectation for the Visualization product range in China. Now let's move to the next slide on the Q2 highlights. This is on Slide #8. As stated in our Big Five 2020 strategy, we will build on our strong position in Core and add new products and partnership that complement our offering for operating rooms and expand our presence into critical care settings. In Q2, we have added a new product line into our Anaesthesia business. The aFlow, which is a full circuit portfolio for the European market. With the aFlow, we are one step closer to providing a complete airway portfolio to the hospitals in Europe as we are already doing in U.S. A full Anaesthesia portfolio in key -- is key in the European tender-driven market because the more product we can bundle into a contract, the better it is. The aFlow will also protect our other products and this will be difficult for new competitors to enter the markets. And also we believe circuits will strengthen our overall position in Anaesthesia going forward. We have launched the aFlow in Europe. And we expect the sale to start from Q3 this financial year. On Slide 9, I'll try to give you an update on our aScope business. The sales of our single-use endoscopy continues to increase. In Q2, we sold 182,000 units, corresponding to an increase of 26% compared to Q2 last year. And we see continuing high growth in all markets. In our H1 2018/'19, we have had 33% unit growth. And we are on track to convert the pulmonary market to single-use and to hit our target of 750,000-plus endoscopy products sold within this financial year. It is great to see that the product is widely accepted as the standard of care and that we, in some countries, have more than 50% penetration. Single-use in pulmonary is getting more and more the preferred choice for endoscopy procedures in pulmonary. We still do not see any price pressure on the aScope and our selling price is on the same level as previous quarters. In addition, we don't see any real impact from competition yet. And we have not seen their products in the market yet. We're now on Slide 10. Overall, we have a strong market share of 20% looking into the OR and ICU segment. We have started selling aScope for the bronchoscope suite, which accounts for additional 2 million procedures. And we see a great further business over time in this segment. Because the aScope was launched later in U.S., we are less penetrated in U.S. with a market share of 21% compared to Europe, where we have a market share of 26%. In some European countries, as I said before, I'm referring to Nordic countries, we have a market share of around 50%. But also large market like U.K. and France, the aScope is doing fantastic. Looking at the Pacific region, we have a market share of plus 50%. And as I mentioned earlier, we see positive development in aScope sales in China. For your information, the market size in China in operating room and ICU procedures is about 1 million a year, so a significant opportunity going forward for Ambu in this particular market. Today, we sell around -- we sell aScope to around 3,500 hospitals globally. And more than 500 hospitals have gone single-use, meaning that they're using our aScope at least 8 out of 10 procedures. This is a great accomplishment for Ambu after pioneering the concept for 10 years. There is still a significant and large potential for aScope globally. And we expect that 80% of the pulmonary market to be single-use in only 4 years from now. We see no competition and price pressure. And the potential entry by new companies we don't believe will impact our long-term objectives for the pulmonary. Let's go to Slide #11. Ambu is on track to a full range of single-use flexible endoscope as the first med tech company in the world. For pulmonary endoscopy, we now have a full range, including the BronchoSampler, which we launched globally in our Q2. Within urology, we have the Isiris product on the market produced by Ambu and sold by Coloplast. In addition, we are developing a cystoscope, which will be launched before the end of our financial year 2019/'20. For nose and throat, we have now launched 2 products in Europe and in Australia. And we are expecting FDA approval this quarter. In gastroendoscopy, which is far the biggest market for endoscopy, we're about to launch the SC210 colonoscope in U.S. And I'll get back to that in a moment. And we're also developing a duodenoscope and a gastroscope as well, which will be launched before the end of our financial year 2019/'20. On the follow-on slides, I will try to expand a little bit on our ENT business and the BronchoSampler and then the GI business. For our ENT business, we have 2 scopes: an interventional one and a Slim one. The interventional version is for specific procedures and the Slim version is for routine procedures. In Q2, we have launched the Slim version also into Europe and Australia. We expect to launch both the intervention and the Slim product in U.S. during the Q2 -- Q3, sorry, this financial year. We have adjusted the price to be around USD 135 for the Slim and USD 250 for the intervention scope. We believe that with this price, we can fast-track the penetration and provide a very strong cost/benefit value proposition for all hospitals. Within this financial year 2018/'19, we aim to build solid ENT knowledge in our sales team, create reference side in each of our sales territories and expand awareness of the benefits of single-use in the ENT segment as well. We have very high expectation for the ENT segment. And the first feedback from the hospitals is very positive. We will target hospital and we will target clinics that employ doctors from hospitals. This segment represent around 3 million procedures, which is similar in size to the current aScope market in OR and ICU. So far, we have sold a few thousand of the ENT scopes. And we are getting really good feedback on the product and the value proposition. Let's just talk about the BronchoSampler on Page 13. The BronchoSampler is one-of-a-kind system that simplifies the entire bronchoscopy sampling workflow. We target especially the ICU, where we have a solid footprint, because we sell our aScope Bronco here. There are around plus 1 million procedures within this ICU segment. In Q2, we have launched the sampler in U.S., Europe and in Australia. We have initial sales in Q2 and have also seen the first combined sales with aScope and the BroncoSamplers. In parallel with the global launch, we have received some initial customer reaction. And the feedback here is very positive, which you can see on the left side of this slide. For example, 7 out of 10 say that it will be an every time use when it becomes available for them. On the next slides, I would like to give you some update on our SC210 and our study in the U.S. On the SC210 colonoscope, we continue to learn a lot about the market, customer needs and the product performance. And we also see a huge uplift of hospital researching the colon application. We now clearly see that the cost level of today's colon procedures will be well above USD 400 million using a reusable scope. In parallel, with our clinical study in the U.S., we have conducted a 500-patient survey because we believe that the patient pool and the stakeholders surrounding the patient, such as insurance companies, will have a tremendous impact on the market once a single-use option becomes broadly available. The findings from the survey, which you can see on the left side of the slide are quite interesting. The agency conducted 20-minute interview with a representative group of 500 people in the U.S. all over the age of 50 and who either have had or was planning to have a colonoscope procedure. 75% of the respondent did not know that endoscopy use for their procedure was used in other people. Their reaction once they were made aware of this was that 90% said that they would want to have a single-use scope if it was available. This show clearly that once the product becomes broadly known, the pressure on the hospital system will be enormous. Regarding the SC210 clinical study in the U.S., we are progressing well, however, at a slower pace than we had hoped for. At this time, we have about 1 month behind schedule to complete the 200 procedure patient study. We want to do this right rather than rush it through as this study and our learnings will be the basis for bringing single-use colonoscope to the U.S. market. The delay has been caused by a combination of product shipment delays due to packaging issues that meant the first week of the scheduled patients had to be canceled and some smaller technical challenges with a few other products from our first batch coming from our new production setup in our Malaysian facility. All issues have been resolved and we are now back on track, running at a high, consistent output. We remain confident that we'll see the similar procedure learning curves as witnessed in our clinical trials. We still expect to start the sales activities with this -- in this financial year and we already see a high demand and interest for our SC210 product. As mentioned at the Q1 conference call, we have plus-30 hospitals in line waiting to start our products and trials of our product. Let's go to Slide #15. The duodenoscope is the most-talked-about endoscopy product at the moment. And Ambu is pushing hard to accelerate the development and ramp up production to bring the world's first single-use duodenoscope to our customer as soon as we can. Let me provide you with an update on our duodenoscope process. We're working full speed on the duodenoscope and the product is on track for launch, as we have said all time, before 30th of September, 2020. The duodenoscope are complicated instruments with multiple issues, where biofilm can remain after cleaning, especially under so-called elevator at the tip of the scope. Even if the duodenoscope are probably clean, reprocessed and undergo high-level disinfection, certain bacteria may still survive. In the U.S., FDA continues to apply pressure on reusable duodenoscopes provided due to the continuous contamination issues. A few weeks ago, the FDA issued as a safety communication regarding the scope reprocessing. Preliminary result of this FDA report indicate a higher-than-expected level of contamination. Up to 5.4% of sample tested positive for organism of high concern, such as E. coli and multidrug-resistant pathogens. There is a strong need for a solution within this segment. And our duodenoscope will provide hospitals with 100% safe solution. On the world's largest GI conference, so-called the DDW conference in U.S. in mid-May, Ambu will demonstrate our aScope duodenoscope. With this update on our Q2 performance and our general update on our business activities, I would like to give the word to you, Michael, for more in-depth view on the financial results for the quarter. Over to you, Michael.
Thank you, Lars. We are now on Slide 17. For Q4, we posted 14% organic growth, which is on par with our expectation. FX impacts growth positively by 5 percentage points and accounting impact regarding GPO fees add another 2 percentage points to the growth. And therefore, growth measured in DKK sums up to 21%. Reported revenue numbers from previous quarters remain unchanged from these GPO effects. Overall, prices are stable, including endoscopes. And the reason for the Q2 gross margin being reduced by 0.4 percentage point to 60.1% compared to Q2 last year are due to renegotiations of the significant GPO contract on circuits and facemasks in the U.S.; some very marginal price reductions in Anaesthesia and PMD; startup cost in manufacturing of the new endoscopes; and lastly, impact from the FX. The gross margin for first half was 60.0% against 59.4% in H1 last year. Total capacity cost for the quarter ends at DKK 277 million, equal to a cost percentage of 35%. Total capacity costs have increased by 16% for the quarter and 19% for the half year. When cleaned for the impact of cost relating to R&D of our GI portfolio, expansion of the sales force in U.S. last year and change accounting treatment of GPO fees, which all had limited or no impact in first half last year, the comparable increase in total cost for the first half is 9% measured at fixed currency rates. We also posted an EBIT of DKK 195 million in the second quarter, which is 25% up over Q2 last year, and an EBIT margin of 24.8%, which is up 0.8 percentage point over Q2 last year. For the half year, the EBIT is DKK 307 million with an EBIT margin of 21.3%, which is, all in all, a strong earning and a testament to our increased scale. Net financial cost were DKK 25 million and were posted compared to DKK 38 million in Q2 last year. For the first half, the net financials were DKK 55 million versus DKK 67 million last year. Tax percent for 24% for the quarter and 23% for the first half. Net profit consequently ends at DKK 130 million for the quarter and DKK 193 million for the first half. Please turn to Slide 18. Cash flow from operating activities totaled DKK 63 million for the quarter, corresponding to 8% of revenue versus 11% last year, mainly due to higher increased investment in accounts receivable and inventories. The overall quality of outstanding AR balances are sound and unchanged. Investments in noncurrent assets totaled DKK 52 million and equate to 7% of revenue. The bulk part of investments are related to R&D. Our full year investment target is at the level of DKK 250 million, out of which R&D is estimated to be at the level of 80%. When looking into the R&D spending, cash impact from OpEx must be added, which on a full year basis are estimated around DKK 60 million and unchanged versus last year. The increase in R&D activities relates entirely to more project activities that go to the CapEx. Free cash flow before acquisition ends at DKK 11 million in the quarter, equal to 7% of revenue. Net working capital ends at 25% of revenue at Q2 compared to 22% at Q2 last year. The increase in net working capital is caused by higher inventories to support growth and mitigation of risk in the supply community, combined with higher AR balances, as already explained. The equity rate for the quarter ends at 47% compared to 43% at Q2 last year. Total net interest-bearing debt by the end of the quarter was DKK 1.3 billion with a multiple of 1.7. We expect the gearing to come down to the level of 1.0 by end of the year. With this financial status, Lars will go through the financial outlook and the summary of our Q2. Lars, back to you.
Thank you, Michael. We are now on Slide #19. And let me just recap what we have been talking about the last minutes. We are on track for the full year targets after we believe a strong Q2 and H1 growth and solid earnings. In other words, the day-to-day business is truly streamlined and profitable, and we see real result from the investments we have made in the past years. We have been also invested in our research and development. And we begin to see the positive result. We have launched new, innovative products. And we are in the process of developing new devices to achieve our vision on converting flexible endoscopy from reusable to single-use solution. Also medical community and the regulatory authorities are becoming increasingly aware of the problem associated with reusable endoscopes. And the push from patients is the next wave. For us at Ambu, it is exciting times to be able to shape the future of healthcare. We maintain a strong financial outlook for the full year of 2018/'19. The outlook for organic growth in local currency is 15% to 16% while the EBIT margin expected to be in the range of 24% to -- 22% to 24%. The free cash flow, excluding acquisition, is still expected to be in the level of DKK 400 million to DKK 475 million. And the outlook for endoscopy sold in 2018/'19 is still 750,000-plus. We also maintain our business outlook for 2019/'20 or the last year of our Big Five strategy. Here, we have an organic growth rate ambition of 18% to 23% and an EBIT margin target of 26% to 28%. Also our cash flow in the last year will be around 18% of our revenue in 2020. And our very ambitious goal a few years back of selling 1 million endoscopy product in 2020, we feel really confident that, that is going to happen. And with this briefing on our commercial and financial performance in Q2, I would like to give the word back to you, operator, for questions.
[Operator Instructions] Our first question comes from the line of Thomas Bowers from Danske Bank.
A couple of questions for me here. I'd just key off with the duodenoscope. You say that you now plan to showcase at DDW. So how far would you say you are on the design of the product? Are you potentially already ready for or close to be ready for a commercial production ramp-up as we speak? And then secondly, on the duodenoscope, your competitor, Boston, is doing a small clinical study currently. And I'm just wondering, do you see the need for a similar trial based on the current feedback you have from the FDA on this one? And then just moving to China, you finally got the price codes, took a while. So how should we now see the impact going forward and in the next few years' time? And secondly to that, do you see any spillover to these price code time lines for other potential products that you plan to launch, I mean, the ENT and then sampler and then also the GI area? And then just lastly, before I jump back into queue, when looking at the aScope sales, you seem extremely confident in the 750,000 number for the full year. But I'm just wondering, if you decide to make a big push in Q4 for -- with the launch of the new product, the ENT and SC210, could this number actually be at risk? Or how should we look at that strategy?
Thank you, Thomas. I should just mention here that Michael is sitting in Denmark and I'm sitting in London. So we'll try to share those questions between us if it's available or if it makes sense. On the first question, Thomas, on the duodenoscope, what we are planning to do is to, what we call, demonstrate or showcase the duodenoscope at the DDW. And that means that we feel pretty confident that the product's, the technical product and everything else, is what it has to be. That means that it's design-frozen is the word we are using. And from thereon, obviously it's about to ramp up and validate the components and make sure the supply chain is in place as we normally do. The question you have about trials, FDA do not require Ambu to do trials at all, which means that they feel confident about the concept and the product that we are developing. So that's a very positive thing. And they're also working with us biweekly to make sure that all the questions they may have, that we have a chance to answer them [ fully ].On the China thing, it's very positive that we have the regulatory approval for the aScope. And we already start to see, compared to previous time, a good run-up in terms of the hospitals using our products. As I said in my notes, it's a 1 million procedure market, so it's more or less the size of the entire U.S. And we see no reason long-term why the Chinese hospitals should not see the same benefits in our product as we see in all the countries we are announcing the aScope. So we look forward to report the progress on China as we go. We feel pretty confident, as your question 4, we feel pretty confident that the aScope sales for this year is going to turn a milestone of 750,000-plus devices. We don't have much kind of numbers from ENT in that. So the majority of that ambition and that target is with the aScope platform, as you know it already.
Our next question comes from the line of Christian Ryom from Nordea Markets.
I have three, please. So my first question is also to the duodenoscope. You mentioned in your prepared remarks that you hope to be the first company to introduce a single-use duodenoscope. One of your peers have, of course, announced that they intend to launch in 2019. Do you feel comfortable with an expectation in the market that the duodenoscope could potentially launch already this year? That's my first question. And my second question is to the ENT portfolio. Can you comment on the contribution that it may have had here in Q2 and your expectations for the second half of the year for that portfolio? And then my third question is to the approvals or the reimbursement that you've now obtained in China. Can you comment on your sales force presence in China today and to what extent you need to build out the sales force there?
Thank you, Christian. I'll try to answer those three questions as good as I can. You're absolutely right that from the beginning, we have said that we have an ambition to be the first with the duodenoscope. And we also know that the only other competitor that are talking about a duodenoscope is Boston Scientific. And they have some indication about launching this year. So we'll see if they can hold that launch plan themselves or we can improve ours. We're not prepared to say at this point of time anything else. And we have said all the time, and that is we expect to launch this product before the end of the next year's financial year. In terms of just understanding first to market, we still believe that, of course, this is an ambition. But we also believe that even if it's Ambu or Boston that this market, nobody will be able to fulfill the initial demand. So competition with respect to the hospitals is a good one. The second question on the ENT, we have had more or less 0 impact on the Q2, actually no impact on Q2 on ENT. And that's because that product in Europe and Australia was launched for the sales team very late in this quarter. So we are -- we're not going to see any impact before Q3 and Q4, as I started talking about when Thomas asked the question. In China, we have a team of around 25 salespeople. And the way they are being used in China is to work with partners. We're not selling direct to the hospitals. We have not decided to sell direct because we don't want to sell direct. So we are working with partners. So we are basically addressing the biggest hospitals in the 5 largest cities in China. And this is where we will see the first major impact.
Now our next question comes from the line of Yiwei Zhou from SEB.
This is Wei coming from SEB. I have three. Firstly, just regarding your duodenoscope, to our knowledge, the company needed a CE mark to demonstrate the product in the European conference. Is it fair to assume you will also need some kind of FDA approval to show in the U.S.? And secondly, could you provide the underlying gross margin when adjusted for the impact of GPO contracts? And then my third question is could you please specify the technical issues you had in colonoscope?
Okay. Let me ask the -- answer the first question. I mean we have what is required to show the products at the DDW, so we are fine with that. On the trial, and then I'll let Michael talk about the GPO fee, but on the trial, the technical issues we talk about is that, first of all, the first product we shipped over to the hospital was somewhat damaged in shipment. So the packaging was slightly opened up, which means that, of course, they would not be classified as sterile. So that's a shame that we have to go through that, but that's the facts. And the second was that there was a few scopes where you connected them to the CPU that we got [indiscernible]. And we found out that, that problem also was due to the first initial batch of manufacturing in Malaysia and we have corrected that issue. Both of them led to a delay of about a month of the clinical study, which, of course, is a shame but will not have any major impact for our financial year. And we're still on track to launch the product into the selected U.S. hospitals, as we had said all the time. Michael, on the GPO fee, maybe you can just comment on that?
Yes, I'll sure do that. You're completely right that measured on the gross margin, we get a benefit from the change, whereas on the EBIT margin, we get a disadvantage. So on the gross margin, it's roughly 0.5 percentage point advantage that we are getting, whereas on the bottom line, it's roughly 0.25 or 0.2 percentage point of disadvantage that we are getting. And I think we also described that in the report. Thank you.
Our next question comes from the line of David Adlington from JPMorgan.
And a few questions actually. So firstly, just on the aScope, just wondered if any sort of further color around the competition. You don't sound like you're seeing very much. But I just wonder how they're trying to compete and how you're counter-detailing their products. Secondly, on both the ENT, particularly the Slim and also the BroncoSampler, pricing is significantly lower than you're detailing back at the Capital Markets Day back in October. I just wondered if that was in response to customer pushback and how that impacts your views around profitability of those products. And following on from that, given there's reduced price points for the ENT products and the BronchoSampler, are you still confident in the $350 price point you set out there for the colonoscope?
David, I didn't get your last question. Could you just repeat that, sorry?
Yes, so given as how you've seen reduced pricing for ENT and the sampler, I just wanted to continue to be confident in the $350 price point for the colonoscope.
Oh, okay. I got that. So let me talk about the aScope competition. I mean the fact is that we have not seen any competition in either current accounts or new accounts. We have seen that -- and we're talking about Verathon here, that's basically the only one. We have seen that they are talking about the product, but we have not seen any product in the market. We have not got any customer feedback from the market about it. So the short answer is that there's no news for us on that. We, on the ENT pricing, what we decided to do, which is an aggressive decision, was really to not have a big issue in terms of arguing if a $200-and-something price point was too expensive for hospitals. And at the same time, we have also been able to drive down the cost of the production for the ENT. So we are now at a range of less than 20 -- $35 for the manufacturing of an ENT Slim device, which means that our gross margin and our contribution will be very, very interesting for us going forward. So penetration for us will lead to absolute higher margin and also maintain the gross margin ambitions we have across the board. And that include also the sampler. On the colonoscope, it's interesting what we have seen in recent time. And you will probably see some reports coming up from big hospitals that the kind of perception of the cost of a procedure in colon before we started to talk about this was all over the map. We've heard people talking about $60 per procedure, $80 per procedure. And we are confident that the hospital will start to show that the procedure is more than $400 per procedure. So that's why the $350 to $400 price point is still what we are talking about.
Our next question comes from the line of Mathias Svensson from Keel Capital.
A year ago, you were incredibly confident in the development and the commercialization of the SC210. And on the Q2 conference call a year ago, you stated, and I quote, "We're basically in the process where we have selected about 6 of the major hospitals in the U.S. that could work with us in terms of evaluation of the colonoscope. And we're in the process of sending products over for that evaluation, so we'll be able to inform you and give you some feedback on that most likely in the second or next quarter." Now a year later, you're not still really there. So how can you guarantee us that you will not see similar delays of the duodenoscope?
Well, is that the only question you have?
Yes.
Okay. Well, I mean let me just repeat that we have said financially from the beginning that this year we would have limited impact from the SC210. We have also said that we would launch the products in U.S. in H2. And we have also said that we are confident that the products will be very attractive for hospitals, maybe not all hospitals, but that's the way it is but for hospitals that are good enough for us to be able to fill out the manufacturing capacity we have in Malaysia. So from what we have said and where we are today, everything is on schedule. The only smaller hiccup we have had is that the -- as I mentioned before, the clinical study is a little bit delayed in U.S. But it's not going to impact our confidence in the product, it's not going to impact the launch of the product and it's not going to impact our financial numbers as we have been talked about. At the same time, I can tell you that the product is also being used in Europe. And the feedback we get there is very, very positive. And the bottom line is that the more time you use the device, the more confident the doctor becomes and the more productivity we get out of it. So we are still very confident on the SC210 product. And we are on schedule as we have been communicating from the beginning.
Okay. So well, my question was rather if you can guarantee that will not be similar issues with the duodenoscope as you had for the colonoscope.
Well, I mean the issue with the colonoscope, we believe that, that's a minor issue. There's never any guarantee with medical equipment when we launch a pioneering product. But we do our best to make sure that our product is stable and high quality and can do the job. And that's our intention with the duodenoscope as well.
Our next question comes from the line of Niels Leth from Carnegie.
[Audio Gap] question about unit shipments in your Visualization division. So in quarter 2, we saw a growth deceleration to 25%, 26% year-on-year. And in order to make the 750,000 for the full year, we would need to see a growth acceleration to 35%, 40% in the second half. Could you elaborate which products are going to generate this growth acceleration in the second half? I understand that the ENT products will basically not contribute to unit shipments in quarter 3 because of the summer vacation. That would be my first question.
Thank you, Niels. I mean where we are sitting, we are coming out quite nicely on the first half. We are growing 33% of -- in terms of our aScope platform. And we are basically repeating the outlook that we are going to do 750,000-plus. You're right, that require about a 35% to 36% growth in the second year. And we believe that, that is doable and possible. And lastly, the number of ENT product is, in our model, a small part of that 750,000-plus. So obviously, if we get a fast success on the product, then that would help us, of course, to be even more sure that we're going to do 750,000-plus.
So the growth acceleration is going to be driven by the aScope in the second half?
That's right. Mainly by the products you know already.
Yes, okay. And then secondly, on your duodenoscope, would you be able to confirm that animal testing on your duodenoscope will first be initiated here in the coming weeks?
Well, I can tell you that we are not required to do animal testing, and therefore, we will not do animal testing. So FDA has allowed us to do another process in terms of testing. So we are not going to use the device in animal testing.
So it will be human testing that you will conduct here in May?
I cannot -- I will not and cannot tell you anything about that yet. But I'm -- I can say that we're not going to do animal testing.
Okay. Would you be able to share with us how many humans then you would test the duodenoscope in?
We're going to test the duodeno in a similar kind of number of patients as we normally do with our other products. But we are not required to do any clinical study as, for example, Boston is. We can do our own kind of number of testing as we feel confident about. So that's going to be very much the same process as when we are introducing an ENT or an SC210 product.
Okay. Could you just explain to us then why is it that you're not required to do testing on -- with your duodenoscope when Boston is?
We believe that we have a -- [indiscernible] a solution and now completion and that's why.
Okay. And then just a final question on China. So one of your new competitors in the area of bronchoscopy, Mindhao, they are offering single-use bronchoscopes for the Chinese market at just about 1/4 of the aScope price. Would you be able to match that price on the Chinese market?
Well, we don't believe that we need to reduce our price to get our share of the Chinese market. As I said to you before, it is a pretty big market. And we address it more or less with the same kind of strategy as we have done in the other markets. I cannot tell you that, that's not going to change in the future. But so far, we've been doing the same as we have done in other markets.
Our next question comes from the line of Jannick Denholt from ABG.
I want to flip it over to the other part of the business, the Core business. It seems to be performing quite well. So can you give some flavor on your expectations for the two parts of the business for sort of the remainder of the year and even something verbally on how we should think about it also going forward?
Yes, on the -- as also mentioned in my call, our Core business this quarter performing really, really nice and actually better than we believe it will perform for the year. So this is a good indication of the fluctuation we have in different quarters. So therefore, our financial estimation that we have guided you on is still that we're going to do about a 5% Core growth overall for the 2 business units.
[Operator Instructions] Our next question is a follow-up from Christian Ryom from Nordea Markets.
Just a quick couple of follow-ups from me, both of them housekeeping questions. So the first, just to make sure that I've understood correctly, the BronchoSampler product does not count towards your unit count in the Visualization business. That's correctly understood, right?
That's correct.
And the second question is probably addressed to Michael. The free cash flow guidance of DKK 400 million to DKK 475 million, of course, require quite a bit of free cash flow generation in the second half, considering that you've delivered around DKK 50 million -- DKK 56 million in the first half. How much of that will be a reversal of net working capital? And what will be the other drivers of the improvement in cash flow for the second half?
That's a very broad question, Christian. But you have a point on the working capital. And we are working, I can assure you, a lot on the [ deficit ] situation but also on the inventory to really understand what kind of security inventories that are needed and which are not. We have a historical run rate, where the cash flow in the second half is much, much stronger compared to the first half. So we'll make it, but it looks a little uphill right now.
Our next question is a follow-up from Thomas Bowers from Danske Bank.
Just two short follow-ups from me. Just on the margins, you come up with a very strong EBIT for the quarter. So I'm just wondering, is there anything we should be aware of for the remainder of the year, I mean, sales force increase or other sort of one-off items there from product launches that could negatively impact your margins for the second half, given that you still maintain the 22% to 24% guidance? And then lastly, can you just confirm on the Visualization factory and the production capacity? In the Q1 report, you highlighted that the third floor would be ready in the Q4 fiscal year and then dedicated for GI production. Is that still on track?
Thomas, you were very long from my phone here. Could you repeat the second question again that was dropping out?
Yes. Is it better now or...
Yes. That's much better.
Okay. Well, it's just regarding the factory, the Visualization production. In the Q1 report, you stated that or highlighted that the third floor at the facility would be taken into use and operational in the Q4 this fiscal year. Is this still on track? And can you just again confirm that it's 100% focused on GI endoscope production?
Okay. Thank you. I mean on the margin side, if I can just take that quickly, I mean, we don't expect any significant change in terms of investment in sales force or marketing or anything like that. So we are very much on track in terms of our infrastructure and our OpEx and cap cost. On the factory, it's correct that we are expanding our factory in Malaysia as much as we can. And the objective is to have a full kind of up-and-running factory with all the 4 labels we have probably at the beginning of the next financial year. So the Q4 with this third level is spot on. But we're also going to go 1 floor more up.
Thank you. And as there are no further questions registered at this point, I will hand the word back to Lars for any closing comments.
Thank you, operator. And thank you to you all for participating and also coming with your questions and listening in today. And last but not least, thank you to all our Ambu employees around the world for working hard every day and delivering another fantastic result in our Q2. Our next earnings release will be on the 22nd of August, where we will report our Q3. And up until then, wish you a nice summer, and thank you very much. Have a good day.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.