Ambu A/S
CSE:AMBU B
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
71.52
153.05
|
Price Target |
|
We'll email you a reminder when the closing price reaches DKK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
So welcome to our Q2 earnings. I'm going to talk a little bit about the market, our performance, our strategic priorities, and then Michael will provide a more detailed financial view. So there are 3 key messages from this -- for these key to our earnings. Number one is that the market continues to grow very rapidly. And all the trends that we have discussed about, they continue to accelerate and that's driving the transition from producible into single use. The second thing is that against a higher record comparables from last year, we were able to grow 6% in Q2 as a total company, driven by digitalization, growing 17%. That's a 17%, on top of that 69% we grew last year, which basically means that we have grown in the first half 50% on top of that 50% that we grew last year. I'm going to talk a little bit about platform by platform, what are the main highlights, where it is in terms of how we are competing or how our new launches are going and what does it mean in terms of the future growth of the company. And then what does it mean in terms of our ability to compete. And what type of company we are becoming and what type of capabilities we have to make sure that we remain a leading player within this single-use category. So let's start with the market. And we have discussed this in every call. This is a market that is going to go from $0.5 billion today to $2.5 billion in 2025. There are very few a new metric market that grow this far and at this scale. And that's because the main driver for this transition are actually accelerating. There is more focus on contamination. There is a higher focus on infection control. The technology advancements are making single-use products become more powerful and improving their clinical performance. And finally, if they are priced correctly, they have an attractive economic offering and give significant operational flexibility. And that's basically what we are saying. Now let me just give you an example on the first point around focus on contamination. We said that urology and GI were important new market for Ambu. So let me just show you what are some of the recent developments in that area. So first of all, I think, most of you might have seen that the FDA issue a letter to all health care systems in the U.S., warning about the infection risk with reduceable urology endoscopes on the back of 450 reports since 2017. And basically, giving guidelines around reprocessing, but also asking all healthcare systems to start reporting and launching an investigation regarding this issue. We also -- if we look at the -- that's urology, basically. If we look at GI, which is a market that accounts for more than half of the total procedure volume. If you look at the last 15 months, there have been 35 peer review GI studies on contamination, 35. If I look at the previous 4 years, it was less than 35. It's a significant increase in terms of the focus. And because of that, there was a GI task force that basically represented the most important GI Endoscopy Associations in the country, coming together and publishing a guideline, supporting single-use endoscopy as a new innovative solution to deal with these issues around contamination. And we also have seen CMS filing for a new reimbursement pole for single-use endoscopy using inpatient hospital, for that to be effective October 1 this year. Just to give you a sense of what does it mean, it basically means that as of October 1, in close to 50% of all ERCP procedures, health care system will see an economic advantage for using Ambu versus using reducible to endoscope. And this is just an example in terms of what we have seen quarter-over-quarter, a higher focus on contamination a realization that single-use can play an important role in terms of infection control. And all of this is, of course, powering the creation of the market. Now with that as a context, let's talk about our performance. And let me start with our core business. And as you have seen, that our core business actually declined 5% in Q2. Our core business is mainly driven by elective procedures. So similar to all other hospital meta companies supporting, our performance has been affected by elective procedures being depressed. This is especially the case in Europe. And like most of the hospital MedTech companies, we have seen that as vaccines are being rolled out, the business is stabilized, and we expect that when we [indiscernible] from this COVID-19 pandemic, we should be able to go back to a normal performance. Now putting our core business aside, let's talk about Visualization. And in the case of Visualization, again, we grew double digits on top of what was a very high comparable. Just to give you a sense, we have sold in volume in this quarter more than the entire annual volume 4 years ago, just in one quarter, basically. And it is reflecting the strong growth we are seeing across all the regions. In terms of the key highlights, Europe growing 25% on top of 103% growth last year. And then the U.S. growing 20% quarter-over-quarter. It's just a very good indication in terms of the level of momentum that we have. Now let's look at each of our platforms. And let's start with what today represents the large portion of our Visualization cell pulmonology. And today, we have our aScope 4 Broncho, and we have about 30% penetration. And within single-use, we have 95% plus market share. And of course, we announced before the introduction of our new generation of monitors were able to advance. You have seen this morning that we announced introduction of our viva [indiscernible] and this is one lane Visualization technology that basically allows to do that procedure while being able to see to make sure that a camera is placed in the right way. Now the important thing of this launch is not just that in the U.S. alone, there are 500,000 procedures that will benefit from this type of technology. The important thing is that we are going to introduce our aScope 5 into the Broncho Suite, and that will take our addressable market from $3 million in pulmonology to an incremental $2 million. It also means that then we are going to introduce our video laryngoscope, which we believe that total market potential is about 10 million procedures. And all of this is integrated with our review to advance. It's a very good example in terms of what we mean by an ecosystem. It means that when we go into a pulmonology department. We are able to offer the most comprehensive portfolio across multiple procedures with significant flexibility, and they don't need to buy more capital to do this different type of procedures. So that's in terms of pulmonology. And now let's look at our recent expansions. So the first expansion we did after pulmonology was in ENT. And it was very important because it's 11 million procedures, and because there is no real risk of contamination. That basically means that the only drivers of adoption in ENT is clinical performance, convenience and economics. And what you can see on the right-hand side is the evolution of our ENT launch. We have grown in quarter 2, 70% in units versus last year, and we continue to expand our global customer base. We actually were able to surpass the record peak we saw when the COVID-19 pandemic started. Now we decide to go from ENT into urology and into GI. So let's see how our urology bet is going. And of course, I'm referring to the launch of our aScope system into what is a 6 million procedure market. And what you can see in the left-hand side is basically our global unit sales since the launch. And the most important thing to say is that system is the most rapidly adopted product ever launched by Ambu globally. This is driven not just by the U.S. or by U.K., but it's driven by Germany, Italy, Spain, France, Australia. It's a very good example in terms of what happened when you bring a technologically advanced single-use product that is able to go head-to-head with a reusable scope and guarantee contamination and guarantee flexibility and of course, it's pricing in a way that ensures that the migration is neutral for a health care system. Do you think that is interesting for us is what has been the rapid penetration in Europe. Typically, when you introduce a medical device product, you see that U.S. being an earlier and faster adopter. And then you see a slower pace of penetration in Europe. But actually, in the case of cysto, we have seen a strong penetration in the U.S. and even faster penetration in Europe. In the right-hand side, you have a comparison of how we penetrated aScope 3 in Europe compared with our aScope 4 Cysto. And these are the first 4 months of launch, and we are already at 3 point -- I think, it's 3.3x bigger than what was aScope 3. Now this is in terms of urology, let's talk about duodenoscopy. And basically, we continue our commercialization. We have 55 ERCP accounts, 13 of them are within the top 100 ERCP centers in the U.S. This actually reflects our strategy to go against the highest volume ERCP center. Our objective is not actually to sell. [Technical Difficulty] All right. My apologies for the delay that there are some problems with NASDAQ network. I'm going to assume that you were able to hear about our performance on the cystoscope, and then I'm going to start talking about our duodenoscope. So what I was saying is we have continued progressing our commercial launch. And in terms of our commercial launch, the tunning highlights are, we have secured 55 ERCP accounts, 13 of them are within the top 100 ERCP centers in the U.S. And this reflect our strategy to go against the highest volume ERCP centers in the country. Now there are a couple of things, which are important to know. Number one, we've seen 2 events in this market. One is CMS, as I mentioned before, expanding reimbursement to inpatient procedures. And by that, basically doubling the number of procedures that will benefit from a special reimbursement if they use single-use to endoscopy, and that is about 50% of the entire volume. And we also have seen competitors announcing that they are going to bring 1.5 million generation for their single-use to endoscope. So because of this, it is a priority for us to make sure that ahead of October 1, we continue to have a product that is technically competitive and that it has the most attractive economic offering. So we have decided to bring forward our technology from 2.0 and introduce aScope Duo 1.5. We are about 50% complete in terms of the improvements, and we should have everything in place by August and September. Now a year after we introduced aScope Duo 1.5, we are going to introduce aScope Duo 2.0. And you can assume that there is going to be a 3.0. It just reflects the fact that although in duodenoscopy, we believe that the penetration is going to be more gradual than in the case of cysto-oriented because it's a more complicated procedure. We believe by 2025, when you look at this $2.5 billion market, single-use endoscopy is going to be one of the biggest ones. And that's why it is a key priority for us. And that's why we will always have an innovation edge against competitors. Now this is in terms of the duodenoscopy. Now let's talk about the company and what type of company we are becoming. And there have been 2 important highlights. Number one, we consolidated our additives restructure into a dedicated GI R&D center in Germany. It's about an hour from Munich, and these dedicated R&D center is going to drive all of our GI innovation. And we also have officially started our -- the construction of our manufacturing plant in Mexico. And this reflects 2 things: our expectations in terms of the volume potential of the company, and also the importance of the U.S. and have a dual sourcing network. Now a lot has been said regarding competitors coming into the market. And this is very important for vacuation of a single-use market. The penetration today is 1% to 2%. So for us, having Boston Scientific, welcoming officially Olympus into the single-use market, having PENTAX coming in, getting all the commercial infrastructure, talking about the benefits of single-use endoscopy and why single-use endoscopy, it's an option for health care system as they do endoscopy is going to accelerate the penetration. And the number one objective for Ambu is that as this market is being created, that we continue to lead the creation and take significant share. And the way we're going to do it is with our innovation. Our aspiration to be the most innovative single-use endoscopy player. We are in line to introduce 20 new products in the next 3 years, that basically means that we have more innovation than the next 3 players combined. If you look at the innovation, for example, we start to show the potential of single-use endoscopy. We have an ENT fees, for example, that helps to -- helps to use our ENT product in vocal core procedures, which have higher levels of reimbursement. It shows, for example, the fact that we are developing pediatric scopes, scopes that then has the potential to be used in surgery. It shows really the flexibility that we start with this product. And as you can imagine, all the learnings and technology that we are incorporating in our aScope Duo 1.5, are being incorporating all of our GI launches. That will ensure that when we launch, we'll be able to get a faster traction and more rapid penetration. So that's what I wanted to share with you. And now we move into the financial section with Michael.
Thank you, Juan. As mentioned, we posted an organic growth of 6% in the quarter. And this quarter is, therefore, the same quarter in a row where Ambu surpass -- where Ambu revenue surpasses DKK 1 billion. The growth for the half year ended at 10%. In the second quarter, our growth is driven by Visualization with 17% growth on top of 6% to 9% growth last year. This year, the growth was led by Europe, posting 25% on the back of 100% last year while core posted a negative growth of minus 5%. The negative growth in core is set by Europe, that has been significantly hit by the second and third waves of COVID. In the second quarter and combined for all regions, we sold 379,000 units of the endoscopes and 749,000 units for the half year. For anesthesia in the second quarter, revenue declined by 4%, also driven by Europe, while anesthesia revenue in North America and Rest of World picked up showing signs of post-COVID recovery. GI revenue declined by 7%, and especially the markets in Europe were negatively hit by the slowdown in elective procedures across the region. In North America and Rest of World, we saw positive trends of revenue slightly recovering during the quarter. And finally, our EBIT earnings ended at DKK 100 million for the quarter with a margin of 10%, and almost DKK 250 million and 12.3% for the half year. On Slide 16, you can see the geographical distribution of this quarter's revenue and growth rates. North America accounted for 44% of revenue in the quarter based on an organic growth of 6%. Visualization grew by 9% with the growth from Q1 to Q2 this year of 19%. Anesthesia and PFD both posted organic growth of 4% over last year, reflecting improvements in electric procedures but still not back at the pre-COVID activity levels. For the half year, North America posts an organic growth of 9%. Europe as well accounted for 44% of revenue with a growth of 2%. The high demand for Visualization products continued, leading to a growth of 25% on top of 103% last year. Our core business was significantly impacted by the lockdowns and cancellations across Europe, resulting in negative growth rate, 33% in anesthesia and 15% in PMD. For the half year, Europe reported an organic growth rate of 34%. Rest of World contributed a growth of 18% with Visualization at 16%. Anesthesia grew 27%, and PMD 9%. Overall, the markets and Rest of World has developed positively in the quarter despite the COVID environment. For the half year, Rest of World posted a growth of 14%. Now let me go through the key numbers in our P&L. Revenue for the quarter came in at 1 million -- DKK 1 billion, equal to the mentioned 6% growth and a reported growth of 1%. For the half year, revenue was just above DKK 2 billion, corresponding to reported growth of 15% and an organic growth of 20%. The growth is driven by strong results in visualization, which grew 48% in the first half of the year on the back of 49% in Q2 last year. The 5% gap in reported versus organic growth is mainly caused by the depreciation of the U.S. dollar versus the DKK. The gross margin for the quarter was 62.2%, slightly up over last year. As in previous quarters, negative effects from reduced average selling prices are minimal. Total capacity costs for the quarter were DKK 523 million, corresponding to a 14% increase compared to Q2 last year. We continue to air freight endoscopes caused by harms and disruptions in the global supply chain, and this has contributed to the higher level of cost and higher-than-expected inventory levels. For the second half over the first half, we expect capacity costs to increase further, driven by the line, selling and distribution, as we have now completed our commercial expansion and the run rate going forward is going to reflect this. EBIT ended at DKK 100 million in the quarter with an EBIT margin of 10% for the quarter. For the half year, EBIT came in at DKK 250 billion and with a margin of 12%. 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 half year were negative at minus 25 million, corresponding to roughly 1 percentage point of revenue. This reflects the high level of investments into innovation as well as a proportional increase in net working capital relative to the growth and including the effects from the disruption of the global supply chain, as previously mentioned, with aim to secure our delivery performance out to the customer. Net working capital ends at DKK 728 million, corresponding to 19% of running 12 months revenue, which is a stable performance in line with previous quarters. Equity totaled DKK 3.9 billion, corresponding to a ratio of 73 of total assets. And lastly, net interest-bearing debt ended at DKK 466 million, with a gearing of 0.7x EBITDA. The decrease in debt is driven by the capital increase and sale of treasury shares as we performed in connection with our Q1 back in January. And lastly, the outlook for 2021 financial year, as announced in the '19/'20 annual report is unchanged and remains as follows. The organic growth will be in the range 17% to 20%; EBIT margin in the range of 11% to 12%; and lastly, sale of units of single-use endoscopes in the range 1.3 million to 1.4 million units. As we said in previous quarters, the quarterly development of the growth will be impacted by the high comparables from last year. And the buildup of the margin across products will be sensitive to the scale that we will achieve from the product launches. Please read my comments to how the year is expected to play out. Thank you, and back to you, Juan.
Thank you very much, Michael. And let's just open for the Q&A.
[Operator Instructions] Our first question comes from the line of Christian Ryom from Nordea Markets.
I have 3, please. So my first question is to how your bronchoscope sales have developed here over the last couple of months, so in March and April? And whether you're seeing any slowdown in -- as we are fortunately seeing COVID cases diminishing across the western economies? My second question is to what explains the lower gross margin that we're seeing here in the second quarter relative to what we saw in Q1. And then my third question is whether you can elaborate a bit on what are the main changes that you are implementing to the 1.5 version of the duodenoscope and whether this update to the design has any bearing on the timing of the readout of the clinical trial on whether a new clinical trial will be required?
Sure. Thank you very much, Christian. And so let's get Michael to comment on the bronchoscopy sales and the gross margin, and then I will talk about the Duo upgrade.
Thank you. I think we look into how our sale of drug is evolving. It has been fluctuating over the quarters, also impacted by the overall demand resulting from the COVID. As we said on our walk-through of the presentation, we see that the markets are opening up. That's a very positive but of course, we also see fluctuations from, as we talked about at the Q1, the demand from the U.K. market. So I would say those 2 effects are the most important for you to understand. And going forward, the most important is that we see markets are slightly opening up. And I think that's a good intake into your second question about the margin because -- and I understand that it's a very significant change from the first to the second quarter, but that also reflects the overall composition of our product mix among core, but also the mix within our Visualization products. I think that is the best I can get to. There are no extraordinary items from Q1 to Q2 that you should really be aware of.
All right. Thank you, Michael. And listen, let me just have -- it's a very volatile environment. And of course, COVID-19, as we discussed before, it has been a positive effect in Europe, and it has been a negative effect in the U.S. So as we move kind of out of the pandemic, we can see that, that will be a positive effect in the U.S. And of course, in the case of Europe, it's going to settle. Now I think it's important to step back from the volatility of quarter-over-quarter and look at our bronchoscopy franchise. And basically, we are going to emerge from this COVID-19 pandemic with a much higher penetration and we're still basically a leading share position within that and that's going to be important because as we move forward, as we introduce more new products and so forth, there is still a lot of penetration to go for. Now in terms of the main changes, I mean, basically, a scope has 3 main components. You are looking at [ immersolution ] solution, you are looking at maneuverability, you are looking at the functionality. And what we have done is we are looking at upgrading the 3 of them. And as I mentioned before, 50% are already in market. And this is something which is different to some other medical devices launches. In the case of single-use, we have the ability to rapidly iterate which basically means that as we are introducing the product and looking at the technical performance, we can very quickly adapt and upgrade the product. And that's basically what we have done. For us, what is critical is to make sure that ahead of October 1, again, we have the most compelling economic value proposition, which we have. But we also have a competitive technical performance of our product. And our [indiscernible] to a year later, introduced or Duo 2.0. It continues to reflect the fact that we believe duodenoscopy is a key battleground for us to win. Now the implications in terms of clinical is very straightforward. We started a clinical. We expanded a number of sites. We have learned now that we have decided to introduce our aScope Duo 1.5, we will continue the clinical with that technology, and you can assume that we are going to share that 60-patient data at that time. We are sharing our first quarter results and you can assume that at DDW conference, we are also going to have a presentation regarding the performance of our Duo 1.5.
Just to make sure I understood you correct. You said the 60-patient trial will be presented with the first quarter results or the third quarter results?
It is going to be presented with our first quarter results.
First quarter results. Okay. And you're talking about DDW next year then?
Exactly.
Our next question comes from the line of Thomas Bowers from Danske Bank.
I have a couple of questions on the Duo duodenoscope. So first question, have you had any hospitals or clinics that have actually terminated the commercial testing based on the first evaluation of, you can say, version 1.0? And then last question -- so last quarter, you had around 30 accounts testing, and I think it was total of 370 lined up. So can you maybe just elaborate on what is the current status here? And then I guess, you might have seen some negative feedback on version 1, given that you only now see a gradual uptake this year. So I guess it's fair to assume that we should not have expected any guidance changes if you were just doing an upgraded version in parallel with the launch. So maybe the question is, so is this commercial launch here this year, is it basically on hold now until you have version 1.5? Or where are you here? I think I'll stop there.
Yes. Thank you for the question. I mean let's maybe just to step back in terms of how a commercial launch looks like in a procedure like an ERCP procedure. You basically go, you meet with accounts. Some of them says yes, we are comfortable with the problem. Let's do it. Someone say, well, actually, we love to see some different iterations. Some say, no, we prefer to get -- to stay with the usable. And that's basically what we have seen when we came with our aScope 1 in pulmonology or with our aScope for ENT and for system. There are some third mover, someone that actually want to wait for the next generations and then some ones that want to stay in the use of our land. And that's why the penetration is what it is today. The most important thing is that from a commercial point of view, we have secured 55 accounts and 13 of them are within the top 100 hospitals, which basically means that some has said yes, some has said, no. Now in terms of the current status of our commercialization, we continue to commercializing the product. It's just that we are upgrading it much faster because of the size of opportunity that we see in front of us. What we did, one, is actually find ourselves October 1 with a competitor bringing a new generation of products, we're sitting on more advanced technology and not having brought them into the market in time to make sure that we continue to be the best choice for any ERCP center wanting to do single-use. And that's basically -- and the last question in terms of the update, maybe let me just refer to the guidance because when you look at our performance, we have a very strong performance. And most people who have expected for us to raise our guidance. And the reason why we haven't done is for 2 things. One is we have a very healthy guidance out there. And although we are comfortable in terms of our performance, we see a lot of volatility. We see volatility in terms of our core business, and we see volatility in terms of the speed of a vaccine rollout. And of course, as we are more comfortable in terms of seeing how the market cuts back, then, of course, we will make a decision regarding our guidance. But at this point, we are comfortable where we are.
Okay. And then maybe just a last question, just on the bronchoscopy area. So you're launching the aScope 5 here in relative near term. And as you also said in your prepared remarks that you were going to launch into the Broncho Suite. And I think that's well known. But now also with all the competitors also moving into the ICU operating room, so should we see the aScope 5 as a premium product going into the Broncho Suite? Or are you considering this to be just a next generation where you can enter the Broncho Suite but will also take over from aScope 4. So actually being launched in, you would say, all 2 free settings?
Sure. Yes. A couple of things. One is most of the key competitors are actually not coming into the ICU, they are coming into the Broncho Suite. So the launch of Boston for [ XLVB ] the and the launch of Olympus, I believe they are targeted for the Broncho Suite. The Broncho Suite single-use market doesn't exist today. So actually, what we are going to have is 3 companies that together are going to create a single-use Broncho Suite market. And all that is going to be incremental for us. Our aScope 5 was designed specifically for the Broncho Suite. Now there will be hospitals and surges in the ICU that would like to upgrade to the aScope 5. And we expect to see that as well, and that will be an additional benefit. But the primary purpose of aScope 5 is to create this new single-use Broncho Suite market.
Okay. So -- but do you see this as a premium-priced product or in line with the aScope 4?
I mean we haven't talked about pricing yet. But if we go back to our pricing strategy. Our pricing strategy is always to be at parity versus the produceable endoscopy calls in any case that we compete. So if you look at that, you can actually guess what pricing we're going to have.
Our next question comes from the line of Benjamin Silverstone from ABG.
Juan and Michael, I hope you're both well. My question is in regards to the mid-term market opportunities. So we know that with COVID-19 there has been a push for regulatory recommendation towards eliminating cross contamination and also highlighting the benefits of single-use endoscopes. And I think that the general perception is that COVID has accelerated the potential single-use market. However, I note that in your presentation, you see an expected single-use market opportunity in 2025 of around USD 2.5 billion. But looking back to your Q1 in 2019, 2020, in the quarter prior to COVID, you stated that you saw a similar market potential, but in 2024. I was just wondering what the underlying reasons for this, I would say, implied 0% market growth from 2024 to 2025 could cause?
No. I think it's mainly driven by the fact that we don't want to confuse the audience because we have -- let's say, our fiscal year goes across 2 years. So we look at -- you should assume that it is 2024, this last 2025 for Ambu when we talk about $2.5 billion. So that has not changed. And listen, in terms of the market, of course, we are creating the market. We enter into segments where the market doesn't exist. In some cases, we are going to do with competitors, and that will make things easier. In some cases, we are doing it alone. So there will always be uncertainty in terms of how the developments of all these launches is going to go through. The critical thing is that based on our experience today, based on what we know in terms of our technology and based on the innovation, we believe that, that market is going to be created. And the second thing is that we believe that as long as we bring our innovation, as long as we continue to upgrade rapidly into the next generations, we should be able to make sure that the market is created, and the [indiscernible] is successful on that. But there is going to be, I would say, a lot of volatility quarter-over-quarter and year-over-year until the market is created.
Just to clarify to make sure I understood correctly, the presentation from Q1 last year, where is this market in 2024, plus $2.5 billion versus the presentation today, which is market expected in 2025, around $2.5 billion are roughly the same estimates. They're based on the same estimates.
Yes. It's the same estimate, and you can assume it's because our fiscal year is 2024, '25 now. We start during COVID and [indiscernible] in September.
Our next question comes from the line of Neil Leth from Carnegie.
On the duodenoscope, as far as I understand your answer right before to Thomas, the 550 patient trials has effectively been holded. By -- why would you not begin all over when you have the 1.5 version ready mixing the first poor results with hopefully better results would kind of mix up the results in the trial? And also, have you received confirmation from the 8 centers in the trial that they will stay in the trial when the 1.5 version is ready?
Yes. I mean I would say that, that's a bit of a technical question. The 2 things that are important for you guys to know are the following: number one, we are going to present the clinical data with our aScope Duo 1.5. And we will do that for our Q1 results, and we will do that at DDW. And the second thing is that basically the relationship that we have in terms of -- in terms of the clinical trials and so forth will be the ones contacting it. Now whether we stop or do it and how do we do it and so forth, that's really -- definitely not material. But you can count on the things I just said.
Okay. So the 550 patient trial will contain results from both the 1.0 version and the 1.5 version.
Yes. But basically, you have to have -- that's why it's a bit more technical. Maybe you and I can talk separately in our analyst meeting, but it really doesn't matter.
Okay. And then just finally, it seems like you are delaying the launch of your colonoscope by 1 year. Is that solely related to the delay of the duodenoscope? Or is it a delay related to the colonoscope itself?
Yes. I think I have mentioned before that when we introduced our aScope Duo, we are 70% in terms of the development of gastro and colon. Because a lot of the technology is leveraged in terms of a gastro and colon. So this is actually not related with the development of colon, it's just related with our [indiscernible] to integrate aScope Duo 1.5 technology into our launch. And it's not really a 1 year delay. It's just that we don't give quarterly target because it's a competitive environment. But again, what you can assume is that we are going to enter into colonoscopy in that year.
Our next question comes from the line of Yiwei Zhou from SEB.
A couple of questions are limited to 2 moments. Firstly, you said in the report, you had a meaningful revenue from duodenoscope in Q2. So how should we understand the meaningful revenue here? And maybe comment a little bit on the contribution to the 17% organic growth? And secondly, you said 55 accounts ordered your product already. Is it fair to assume those orders have not converted to the sales yet? And certainly, it's still on the duodenoscope. So would you please elaborate a bit on the -- what are the main sort of feedback that you have heard from the physicians on the aScope, duodenoscope? Question one. And where do you see the need for further improvement with the new version? And is it fair to understand that there will be a redesigning of certain components with the version 1.1 -- sorry, 1.5.
Sure. Thank you. So let me take the last 2 and then maybe Michael can comment in terms of the modality of Duo and the contribution to the growth in Q2. First of all, when you say 50 accounts order, basically mean that we have sold to 50 accounts. And 13 of them are within the top 100 hospitals. I would say that level of traction is a good traction, taking into account how complex is EFCP. And this is very important. I believe a competitor talk about the adoption expectations in terms of duodenoscopy, saying that it's going to be gradual year-over-year, and we see it in a similar way, basically. The procedure last longer, they are more complicated. There is more patient risk during the procedure. So surgeons want to be very confident before they adopt new technology. That's different to what we see in ENT and cysto. Now you cannot launch in December. And then in May report that 50% of the uprates are already in market and that you are going to have a generation 1.5 by September, if you actually have to completely already signed a product. That is basically telling you that the upgrades we are doing are minor, but the core of the performance of a product is good. And we are just basically refining it to make sure that we get to the performance that we want to get. Now in terms of the materiality, Michael?
Yes. No, thank you for that question also. I think the reason why we chose to food language like we did was to follow-up on the comments that we shared with you at our Q1, where we said that we to invoice on this deal. So what we're saying now is that we have continued. And the size of the revenue that we have invoiced is meaningful revenue relative to the growth that we are reporting. I think that's the closest I can get. But I think it's fair for you to get the information that we're actually reporting a meaningful revenue that is having impact on the growth of [indiscernible]
Okay. And then can I just follow-up on the duodenoscope? So you're saying -- so -- I mean, could you be a little bit more specific on the new version, I mean, major quality or maneuverability? Or is the elevator system a [ guidewear ]? Where do you see the need here for a further improvement?
Yes. And again, we're adding a competitive environment. So it's not good for me to go into detail regarding our next generation. But as I mentioned before, typically, in single-use endoscopy, you are looking at 3 things. You are looking at [indiscernible] solution. You are looking at maneuverability and you are looking at functionality. And we are basically strengthening all 3 of them. And again, it really reflects 2 things. Our rapid R&D engine is very difficult for a company to iterate at this level of speed, while at passing other 20 launches to bring to market. And the second thing is the fact that within duodenoscopy, at any point of time, we are committed to make sure that we have our most advanced technology with the most attractive economic offering that data basis that we have to be able to compete in the market, and we want to have all of that in the case of duodenoscope before that reimbursement is expanded because we consider that's going to be an important event to drive adoption.
Our next question comes from the line of David Adlington from JPMorgan.
So just maybe first as [indiscernible] elective has started and a lot of focus there. As electives come back, do you expect to see some benefit from pent-up demand for procedures? I'm just wondering if you had any ideas in terms of what the inventory levels are like in the channel. And therefore, could we see any restocking? And then just on the bronchoscope, obviously, Olympus launching a suite of products into the space. Just wondered if you have any thoughts around pricing there, whether you had any on how the pricing relative to your offering.
Yes. In terms of electives coming back, I think like most hospital MedTech companies, we believe there is a pent-up demand. And we believe there will be a benefit from that pent-up demand. Maybe what is different from Ambu to other companies is that we don't have a calendar year, our year finished in September. We believe that the benefit of the pent-up demand for Ambu this year is going to be minimal. And of course, it depends on the COVID vaccine rollout, and there are different developments right now, and that's basically kind of a source of uncertainty for Ambu, but we believe that there is pent-up demand. And outside of the United Kingdom, we don't believe there is a stock out there, and therefore, we should see a benefit from it. In terms of Olympus and PENTAX, let me, first of all, say that for the creation of a single-use endoscopy market, having the largest reducible player, having their commercial infrastructure talk about the benefits of single-use endoscopy and the occasions where they think single-use can play at all is very positive. That's really going to help us to create the segments where they are going to introduce products at a faster rate than what it would have been if they were to be on the other side, trying to stop the creation of single-use -- of a single-use market. In terms of pricing, we don't have visibility in terms of the pricing. Of course, we have a significant volume advantage against any of those players in single-use. I mean we have probably 7x more volume this year than the next competitor. And because of the modularity, we have a cost structure that allow us to price competitively in pretty much every segment where we want to participate. Again, our pricing is not really relative to competitors. So even if they have higher pricing, we will steal pricing based on how much it costs a hospital to use reducible endoscopy to be able to facilitate the migration to single-use. But that's how we are thinking in terms of pricing.
Perfect. And then maybe just a follow-up, your price per scope came down this quarter. Is that just a reflection of the mix? Or is there some pricing pressure out there?
David, this is Michael. Yes, it is entirely a reflection of the mix. So there's nothing that you should really figure out there. It is the bronchoscopes versus that serve other scopes.
Next question comes from the line of Annette Lykke from Handlesbanken.
Most of them have been addressed, but I'd like to go back to the duodenoscope and Thomas' question, Benjamin's as well. Could you share some more color on where you would see the benefit? And can you confirm that where you saw the focus area was resolution functionality and then did you say viability? Or what did you say there, one, that would be very nice to hear a little bit more about that. Then also, we can see on clinal trial -- at a clinal trial that [indiscernible] that only 5 out of 8 sites are recruiting. Do you expect those to recruit soon those lacking free? And then finally, a question on the scope sales. You are -- I mean, if we stick to your mid-guidance of 1.35 million scopes for the full year, would that imply that we should see H2 sales on par with H1? And can you, Michael, say a little bit about this, why we should expect not to see any growth sequentially between H1 and H2?
So let me start talking about the improvements and then the clinical and then Michael can comment on the guidance and expectation for the second half. So what I said was maneuverability, so the ability for this scope to navigate inside the body. Now we actually believe that, that is a core strength of our product. But we have learned from the launch and most importantly, we have seen that we have technology available that we could bring forward faster to further strengthen the performance of the product. And I cannot comment on that, but you can imagine that, that basically means improving the [ immer ] solution, improving the functionality and improving the ability to navigate inside the body. And we are doing that ahead of October 1 because we want to make sure that when health care system says, well, now we have an even bigger economic incentive to move to single-use, the value proposition of Ambu is as attractive and competitive as it can be. Now in terms of the clinicals, I mean, we started with two, and then in the month, we expand in 5. Now we are basically going to restart with our aScope Duo 1.5. We want the clinical data to reflect the performance of the product that we will be commercializing. And we will continue to expand the number of sites. I think it's likely that by the time we finish, we'll probably be beyond -- we'll probably be beyond the 8 sensors.Now in terms of the mid-guidance, Michael?
Yes. Thank you for the question, Annette. And I know exactly what you mean. There is definitely when you model it out, and we end in the middle of the guidance scenarios for revenue being the way they are. I think as Juan was also saying what, the signal we would really like to send here is that despite the performance that we have for the quarter and for the half year, we are in a very volatile environment. We are seeing signs that we are moving out of the pandemic, but we're also seeing signs that Europe is not yet free up. And on top of that, we still have launches that will have a good impact or that are planned to have good impact for the second half of the year. So I think all those elements taken into consideration, is the reason why we have said we're there reiterate the guidance for this quarter here, and we will then take it as we move forward. But to your point on whether there's scenario for where we are being in the mid and revenue would be flat. I understand what you mean.
Our next question comes from the line of Niels Leth of Carnegie.
So if you're going to make material changes to your duodenoscope, so, for example, the elevator system, which some doctors have requested. Would that require a new FDA approval?
Yes, Neil, thank you for your question. As I mentioned before, you cannot do rapid upgrades if those require material changes. So basically, have a good work in prod that we could strengthen, and that's what we are doing, and the nature of the changes does not require any FDA approval -- a new FDA approval.
So what you're saying is that the changes you're making are immaterial changes?
What I'm saying is that the changes I'm making does not require a new FDA submission.
Okay. And then just a second question, perhaps more relevant for Michael. If we look across your 3 reporting segments and if we apply the -- an EBIT margin of say, 10%, 12% to your legacy businesses, the anesthesia and PMD division. So which used to be the case before the Visualization business became so big. It would indirectly -- it would imply that your endoscope business is loss-making if you adjust for R&D capitalization. Obviously, you're investing quite heavily into the GI business. And if I'm not -- if I'm correct, you must have invested like more than DKK 2.5 billion into the GI space by now. How far are you willing to take your investments in the GI space given the effect it has on your P&L?
Thank you for that question. I think just to get one thing right. I think when you are referring to that very big amount, you're, of course, including the inventory acquisition, which I think is a separate thing. And I would say, overall, our innovation costs, considering our modular approach when you look at it across the pipeline that we will be launching are very, very reasonable. That being said and when you're trying to do the profitability of the segment, which I cannot really comment on. But that's just one thing I would love to say is that -- and you know that within Visualization, we have 2 of the sales forces. And those products related to the sales forces are on very different lines on their life circle curve. So it's very natural that you have some of those products that are generating better profitability than others.
And could you just update us on the effect of R&D capitalization for the full year?
That's not really an information that we are sharing, but when you are building an R&D organization, it is something that is moving very slow. So the impact that you're going to see in the second half are not going to defer that significantly from what you have been seeing in the first half. It's going to be higher, maybe 10%, 15% or something like that, but it's going to be in the [ fold ]. But you're right. As we also disclosed in the presentation, we continue to build our innovation organization. We are expanding in our site in Germany. And in order to continue to have a -- to have an increasing loan plan in front of us, it is requiring that we commit to those investments.
So that also means that you -- your free cash flow for the full year will be negative.
I'm not saying that. In fact, we are not guiding on that, but I think that the takeaway is that the overall investments into our innovation is very much in accordance with the plans that we have been having.
Yes. Thank you, Niels. And as you can imagine, our assessment regarding the potential of Ambu in GI is such that we are building a new single-use endoscopy plant in Mexico, an R&D GI center, we are in -- right now in the midst of building our business in Duo. And in a few months, we are entering into gastro. So this is actually not a long-term bet. This is a bet we are doing now, and we expect to see the benefits as we have seen the benefits in any of the other launches.
Our next question comes from the line of Michael Healy from Berenberg.
Juan, Michael. And not to lay that you spoke too much, but just in terms of your strategy for regulatory approval outside of the U.S., can you just share with us your thoughts on European and maybe Japanese approval? And which versions we should expect for those approvals? Secondly, I don't know if you can help here. Just in terms of the revenues you're generating from the aView 2 Advance, if you could just share a little bit of thought around that. Are you selling many screens? Or are they still heavily discounted? And perhaps what the margin profile is there? And then final question, just on semiconductors and maybe rising plastic costs, are you experiencing any impact on your business?
Thank you very much, Michael, excellent questions. So in terms of duodenoscopy, as you can imagine, this is a global launch. And we already submitted for regulatory approval for our aScope Duo in Europe, and that's going to be the 1.5 -- our aScope Duo 1.5. It's the same case in Australia. We have already submitted. And in the case of Japan, we are actually going to enter with our aScope Duo 2.0. And it's mainly driven by the fact that Japan just actually started the commercialization of our aScope 4 Broncho, and we are getting approvals of our aScope ENT and cysto. So they are actually building the company on those segments, and then they are going to get the aScope 2.0 and gastro, and then they will build a GI business. In terms of semiconductors, I think everybody reads the disruption and the fact that there are some product shortages. We haven't been impacted by that. We actually prioritized to make sure that we maintain our service levels. And that is a key priority and 10 of the pricing changes we are seeing are, to this point, immaterial for us. But of course, there is volatility in terms of the sensor market. And Michael, do you want to comment on the aView 2 Advance?
Yes. Thank you for the question, Michael. I think we've been talking about this in the past also that when we sell monitors, there are a variety of different models. Some monitors are being sold at full price, some are being sold at a rebated price and in some cases, we are bundling monitors together with a certain volume of scopes. It's clear now that when we are in a phase where we really want to place our monitors in order to -- for the customers to take better advantage of the full range of our technology, we have a larger incentive to get the monitors. And I think our behavior should be seen in that light. But even considering that we are taking healthy revenue streams from the monitors.
Our next question comes from the line of Alex Gibson from Morgan Stanley.
Most of them have been answered. But I guess just to narrow down on -- in the Visualization business. You're talking about flat revenues in Q3, and that just goes a bit counterintuitive to the momentum you're seeing, customers you're adding, and the product launches being rolled out. So I just wanted to check, what sort of level of growth are you actually seeing in April and May? And is it just based on a conservative assumption? Or have you seen a real step down in terms of momentum? And then lastly, on the GI launches in the gastroscope. Are we getting pretty close to the expected launches? How confident are you of having a product ready in the next 4 months that can be commercially sold? And what are your expectations for volumes relative to maybe prior launches in the first year for the gastroscope?
Thank you for the question. Let me check the first one. It's a tricky one because as you know, we have very high comparables, and we also have a very solid Q2 that we are now leaving out. So I think the signal we are just sending is that operating within the guidance that we have given you and considering the comparable from last year and considering a quite healthy Q2 here, we're just cautious that Q3 may be on the same level, which is actually a very, very solid and good level that we would be satisfied with.
Yes. Alex, let me talk about gastro because I would say, when I look at the launches in front of us, gastro is going to be a very important one. And unlike ERCP procedures and maybe more similar to cysto and ENT, a gastro procedure is more relatively straightforward. And of course, you are talking about a market, which is several times larger than the market that we are operating now, it's actually bigger than all the markets that we are commercializing today. We are basically in line to do our regulatory submission as planned. Of course, we need to wait to see the response from the authorities, and they have their own time line. But we are basically moving at plan. Now in terms of the uptake, it always takes time at the beginning when you introduce it. But as I just said, in the case of gastroscope, we are expecting to see a more rapid uptake than what we are seeing in the case of Duo. And we are confident that when we look at 2024, '25 that is going to be an important part of the market as well.
Okay. Great. And in terms of latest pricing dynamics for the gastroscope, have you come to any conclusion on where it should come out?
Yes. I mean we will share our pricing strategy as soon as we launch the product. Again, our pricing is very much grounded on health care economics. So if you look at how much it costs a hospital to use a reusable scope. If you take into account the cost of the tower, the scope, the repairs, the contamination and so forth. Whatever it costs a hospital, a high-volume hospital to do gastroscopy, that will be the pricing for our product.
What is that number there?
We will -- we share our pricing only for [ wind ] produced or products, Alex. So you are a few [ week ] early, but [indiscernible]
At this stage, we have no further questions. I will hand back to the speakers for any final remarks.
Okay. Thank you. And listen, thank you, everyone, for your patience with some of our technical issues and also for your interest in Ambu. Let me just take the opportunity to say one thing. And in these calls, we have investors. We have analysts, of course, but we also have hundreds of Ambu's employees. And this is a tradition that every time there is a quarterly earning, all of them join to listen the result. And everything we have shared, this is your work. All this progress, all these launches, everything that we are doing reflects all your efforts. And I know that in the midst of COVID-19 pandemic, it has not been very easy. But you guys are the biggest source of confidence we have in terms of the future outlook for the company. So thank you very much, and everybody, enjoy the rest of day.