Straumann Holding AG

SIX:STMN

Earnings Call Transcript 2018-Q1

[Operator]

Ladies and gentlemen, good morning or good afternoon. Welcome to the Straumann's First Quarter 2018 Results Conference Call and Live Webcast. I'm Merun. I'm the Chorus Call operator. [Operator Instructions] The conference call is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.At this time, it's my pleasure to hand over to Mr. Marco Gadola, CEO. Please go ahead, sir.

[Marco Gadola, CEO & Member of Executive Management Board]

Good morning, everyone, and welcome to this Conference Call on Straumann's 2018 First Quarter Revenue. Thank you for taking time to be with us today. We will be referring to the presentation slides that were published on our website early this morning. And before we begin, I have to inform you that our discussion will include forward-looking statements. So please take careful note of the disclaimer on Slide 2 of the presentation and at the end of our press release. As usual, I will run through the highlights; and then Peter Hackel, our CFO, will share the business and regional performances with you. I will conclude with an update on our strategic initiatives together with the full year outlook and then we will be glad to answer your questions. As you can see in Slide 4, we have made a very good start to the year and have succeeded in maintaining the energetic pace that we achieved last year. In the first quarter of 2018, our underlying growth exceeded 15% driven by strong performances across all regions and all businesses. Recent acquisitions and a favorable currency effect lifted growth in Swiss francs to 22% bringing revenue to CHF 324 million. Our 2 largest regions; Europe, the Middle East and Africa and North America continued to be the main growth power houses. Also both were [ clinched ] by dynamic revenue gains in Asia Pacific and Latin America. The latter posted its best quarter in 4 years and is a good example of how our efforts to invest in emerging growth markets are bearing fruit. At the same time; innovation, service excellence and the ability to provide total solutions that cover both premium and non-premium requirements has enabled us to outperform the market. From a brand perspective, our Straumann Bone Level Tapered implant range continued to fuel premium sales expansion while our non-premium business benefited from significant increases in demand for Neodent and Medentika solutions.With regards to strategic M&A activity, we seized the unique opportunity to invest in and partner with Dental Monitoring, a young entrepreneurial company based in Paris that has pioneered the remote monitoring system using smartphones and artificial intelligence. This adds another game changing technology to our portfolio. Looking ahead to the rest of the year, our good first quarter results provide further assurance that we will deliver the organic growth and profitability targets that we have communicated in February. Putting the first quarter in a sequential context, you can see in Slide 5 that we sustained last year's very strong momentum both at group level and in the regions.For the details on how we achieved this and for the financials, I will now hand over to Peter.

[Peter Hackel, CFO & Member of Executive Management Board]

Thank you, Marco, and good afternoon or good morning, everybody. As you can see in Slide 7, our top line increased 21.7% on a reported basis to CHF 324 million. On the left of the chart, you can see that our first quarter revenue in 2017 would have been CHF 3 million higher at this year's currency rate. This is due mainly to the appreciation of the euro, which more than offset the depreciation of the U.S. dollar and the Brazilian real. The effect of acquisitions added CHF 11.5 million bringing the adjusted 2017 revenue to CHF 281 million. Using this as a like-for-like comparison base, our revenue increased 15% in organic terms in the first quarter of 2018. As mentioned earlier, North America and EMEA were the main regional contributors to growth posting organic increases of 17% and 10% respectively. They each contributed 31% to the group's organic growth as you can see on the right. Asia Pacific was our fastest growing region with organic revenue climbing 25%.A current update on the overall market development is not yet available, but we are confident of 2 things. First, that the market is stable and second, that we are continuing to outperform it significantly. Slides 8 and 9 provide some details of the regional performances and the quarterly trend. Our traditional strong house EMEA grew robustly despite the timing of the Easter holiday, which resulted in fewer business days for customers in Central Europe. The region generated organic growth of almost 10% with an additional 3 percentage points coming from acquisitions. This was mainly due to the consolidation of Dental Wings and Batigroup, the distribution company we recently acquired in Turkey. Demand for our products was generally strong especially in the Middle East, Russia, the U.K. and Turkey. Across the Atlantic, North America reported the fifth consecutive quarter of growth above 17% following an exceptional Q4.The performance was driven by both the U.S. and Canada. Our premium BLT implant as well as our Neodent range and the roll-out of Medentika's cost-effective prosthetic solutions were the key growth contributors. Since their launch 3.5 years ago, Straumann has sold more than 600,000 BLT implants in North America and there is still considerable potential to unlock. Each of the solutions also performed well lifted by the launch of Straumann-branded Trios3 intra-oral scanners in January. In biomaterials, robust sales of bone graft and membrane product offset a temporary shortfall in regenerative sales, which I will explain in a moment. Asia Pacific reported a sequential increase despite the high base line achieved in Q1 last year. Organic growth topped 25% driven by strong performances in all subsidiaries especially in China, which is benefiting from sales force expansion and intensified training and education activity.There are 3 other highlights that I would like to mention briefly. Our CADCAM milling center in Shenzhen went into operation. We rolled out the Anthogyr Axiom PX fully-tapered implant, which is important for the fast-growing non-premium segment in China. And we entered the Australian non-premium segment by launching Neodent. Across the globe, in Latin America, we continued to grow strongly in Brazil thanks to our differentiated offering, integrated supply chain and dual price model. 2 of the key growth contributors were Neodent's new Grand Morse implant system and the very successful launch of our botiss range marking our full entry into the Brazilian biomaterials market. Elsewhere, Columbia grew dynamically while Argentina, Chile, Mexico; all continued to deliver strong growth. Looking at our overall growth from a business perspective, implants were the main contributor with sales climbing more than 10% in both the premium and non-premium segment.Tapered implants grew faster than our other designs and accounted for approximately a third of the premium implants we sold in Q1, a trend that we expect to continue. Our restorative business also achieved double-digit growth with both standard and custom prosthetics developing very positively in the [ split stream ] of strong implant growth and meaningful product launches while our digital business benefited from strong intra-oral scanner sales. And finally, biomaterials reported strong growth in bone graft and membrane products, but softer regenerative sales due to a temporary halt in supplies of Emdogain to the U.S. due to changes in the manufacturing process that require additional documentation for the FDA. The interruption is temporary and we expect to resume a regular supply in Q3.And with that, I'll hand back to Marco.

[Marco Gadola, CEO & Member of Executive Management Board]

Thank you very much, Peter. Before we come to the Q&A, I would like to share some of our strategic highlights with you beginning with Slide 12 and our investment in Dental Monitoring. Dental Monitoring is a highly innovative company that has developed and successfully commercialized the world's first dental monitoring system using smartphones and artificial intelligence. It enables dentists to check the progress of treatment without the patient having to visit the practice. Dental Monitoring already opens the system in several markets and have developed it further to detect tooth decay, fracture, restoration defects, gum recession, inflammation, infections and other oral health conditions. In return for an injection of capital, we have obtained a small stake in the company together with global distribution rights. We have also won a partner that is specialized in artificial intelligence and can develop additional applications for instance to monitor implant treatment outcomes.1 interesting application is to combine Dental Monitoring's algorithm with intra-oral scanners to increase check-up efficiency in the dental practice. This will support our goal of providing comprehensive digital solutions in addition to equipment. The full potential of intra-oral scanners can only be realized with the corresponding software, which is why we have worked hard to develop our existing CARES Visual platform to support the Straumann-branded Trios3 scanner that we are also rolling out in the U.S. The new Trios Design Studio software has just entered the limited market release. It connects the scanner with our compact C series mill to provide a seamless chairside workflow from impression taking to prosthetic design and milling enabling Trios users to offer high quality milled restorations quickly in a single session. Moving to Slide 14. Peter mentioned our CADCAM milling center in Shenzhen, which went into operation in March.I had the privilege of joining a number of key opinion leaders and customers for the inauguration and I'm convinced that this will differentiate us further as the market leader in China. Shenzhen will initially serve the domestic market for implant bone prosthetics and strengthen our global CAD/CAM milling network, which is shown in the chart. As you can see on Slide 15, we have made good progress in bringing our premium and non-premium activities closer together in order to create selling opportunities and to reduce complexity both internally and for customers. In Q1 we converged the respective activities in no fewer than 15 countries and expect to complete the initiative in all remaining countries by the end of Q3. The initiative has accelerated the roll-out of our non-premium brands and in Q1 we launched Neodent in Australia, France, Germany and the Nordic countries.A major undertaking has been to create and launch a new combined eShop that covers all our brands and all our markets with the German example pictured in this slide. The big advantage is that customers now have 1 account and can order everything together with 1 invoice. WithNeodent's geographic footprint expanding rapidly, we have been able to roll-out the new Grand Morse implant system in a number of markets. As you can see in Slide 16, the full market release is already on the way in most European countries with the important North American market to follow around mid-year. GM is an extremely attractive fully-tapered implant with [indiscernible] and a comprehensive easy to use prosthetics portfolio covering all clinical needs. It has been very well received in the lead market Brazil and we expect it to become the preferred choice of Neodent customers within the next 2 years.And finally, let me add a few words on our ortho business, which is progressing well. Since the acquisition, ClearCorrect has increased its customer base by 10%, which shows that it is gaining recognition and endorsement in the established orthodontist community in addition to attracting general practitioner customers. The number of cases grew significantly in Q1 and the portion in international markets rose to 15%. We are leveraging our sales teams in North America and have increased territory coverage both in the U.S. and Canada. In addition, pilot programs are on the way in Europe and Japan. These have been positive and we are adding more countries with the aim of moving to a full market release in Europe, Latin America and Asia Pacific next year. In parallel, we have also begun a treat and pilot program with Geniova in Spain.That brings me to Slide 18, and our outlook for the rest of the year, which as always is barring unforeseeable events and circumstances. Our guidance for 2018 remains unchanged. We expect the global implant market to grow at approximately 4% and we are confident that we'll continue to outperform its organic revenue growth in the low double-digit percentage range. Operational leverage should lead to further improvements in our underlying EBITDA margin and despite continuing high levels of CapEx investments and a raise in amortization charges, we expect to achieve a stable EBIT margin.And now I would like to open the question-and-answer session. [Operator Instructions] As usual, I would kindly ask you to limit the number of your questions to 2 and return to queue in order to give everyone else a chance to put their questions. Webcast participants who wish to ask questions anonymously can use the tool in the audio webcast, which you can find in the bottom left corner. So Chorus Call, can we have the first question please?

[Operator]

The first question from the phone comes from Markus Gola from MainFirst.

[Markus Gola, Vice President]

So my first question is on China. I believe you received the regulatory approval for the Straumann premium BLT in Q3. Have you already started to roll out this product and if so, is it already available in all regions there or have you decided for a gradual introduction in this country? And my second question is on your business unit for dental service organizations. I think it was already fully operational in Q1 '18. So are you happy with the start in this market segment and have you already signed new clients here and also do you see a strong focus on pricing in negotiations with these customer group? Thank you.

[Marco Gadola, CEO & Member of Executive Management Board]

Yes, BLT was actually launched in Q4 2017 in China. And the dynamic development of our Asia Pacific region in Q1 2018 is obviously also reflecting the fact that we have now this BLT, an aptly tapered solution for our customers in China. And I would also like to add that we also launched in Q4 of 2017 the Axiom PX implant, which is a fully-tapered implant and this one is actually also driving the Anthogyr sales. When it comes to DSOs, yes, we have some significant gains on both. I guess you understand that I cannot actually name you concretely who we gained, but we had very interesting gains. The numbers in Q1 are not yet fully reflecting the potential of these gains because we gained the business during the course of the quarter and we will actually now implement the corresponding processes. We'll actually make sure that the clinics are trained and then we'll start to purchase products from us switching from competitive products to competitive products during the course of the year. And the pricing, it's clear. DSO pricing is obviously lower priced business compared to a normal dental practice clearly, but we are also not crazy when it comes to pricing. So whenever we accept to do business with DSOs, I can assure you it's actually profitable business for us.

[Operator]

The next question comes from Michael Jungling from Morgan Stanley.

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

I have 2 questions. Firstly, on ClearCorrect, can you comment on the organic sales growth development in Q1 not just the case starts, but -- and total organic sales growth in the quarter? And then secondly, on the premium and the non-premium implant sort of conversion, can you explain how you prevent the risk also of cannibalization taking place and eventually impacting your Straumann implants in favor of the cheaper alternatives?

[Marco Gadola, CEO & Member of Executive Management Board]

On your first question on the ortho business, what I can tell you is that the development of ClearCorrect has been in line with our expectations. The growth has been overproportionate to the -- to growth of the rest of our business. I guess you appreciate that I will not give you a concrete number, but the development in Q1 when it comes to top line has been very busy. When it comes to cannibalization and we have been selling premium and non- premium dental implant solutions in our main markets now for 4, even 5 years. We started in Spain and Portugal in 2013, added the U.S. in 2015, then U.K. and Canada came along, we have obviously China we have the premium and the non-premium franchise, Italy came onboard in 2014. So we have now long year experience with actually selling in the same market to the same organization, the Straumann organization, despite the fact that actually we had separate legal entities in a corresponding market and the experience has been that cannibalization has been minimum. What we have not achieved yet and that's why we actually decided to amalgamate the Instradent legal entities, which were selling in the past a non-premium offering to the corresponding customers in a corresponding market. To amalgamate the Instradent companies into a strong group company in the relevant market has been the fact that we believe there are huge synergy potentials when it comes to gain additional share of wallet with existing customers, on one hand premium customers and on the other hand non-premium customers. We know based on market research that more than 2/3 of our customers are actually using a premium and a non-premium offering in their practice. And now we see opportunity to share customer data between the premium and the non-premium organization through having a common CRM system in place, we are convinced that we can actually gain share of wallet for us too and that we can actually exploit commercial synergies faster than which to say that we had in place before.

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

Okay. But Marco, can I just ask on when you say the convergence of premium and non-premium activities, does that mean that eventually we'll also combine sales forces or are we only talking here about back office mergers and sharing of customer data?

[Marco Gadola, CEO & Member of Executive Management Board]

Good question. The merging of customer -- of back office functions, that has been in place since the very beginning. So we have always been leveraging our premium back office structure to also build our non-premium business. We are now adding the data sharing so the exchange of potentials when it comes to premium and non-premium customers. So this is new. When it comes to the go-to-market approach, we have different models in place and we have these models actually in place with a specific situation in each one of the individual markets. I give you an example. In the U.S. we still have 2 separate sales forces with 2 dedicated national sales managers, 1 for the non-premium and 1 for the premium franchise. We have -- for example in Spain, we have all the territory sales managers and area sales managers reporting to 1 national sales manager who is in charge of the premium and the non-premium business. But at the regional level within Spain, we still have the segregation between premium and non-premium. In other markets, we even have -- within a specific regional organization, we have dedicated premium and non-premium reps on the road. So we do this based on the specifics of a corresponding market because not all markets are the same.

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

Okay. So just to confirm, so the idea going forward will -- to continue for most markets to have separate sales forces that will not be merged in most markets. Is that correct?

[Marco Gadola, CEO & Member of Executive Management Board]

Yes and no. We have -- I give you another example. In our largest market in Europe and I guess you know what I'm talking about, which market I'm talking about, we have also so-called key account managers in place. So these key account managers, they carry the Straumann and the Neodent range and they are actually more [indiscernible] who open up large competitive accounts. So I cannot give you a clear answer on this. We are taking a very pragmatic and market orientated stand and we are actually fine-tuning our go-to market model in line with what our customers want.

[Operator]

The next question comes from Carla Bänziger from Vontobel.

[Carla Bänziger, Analyst]

My question is also related to ClearCorrect and I was wondering whether you could -- because I was actually surprised by the strong sales that you reported. Could you comment a bit how this limited market release is already going and in which countries it's active, is it only Darss or have you already other countries where you are selling it? And also your comment about the specialists, can you comment a bit on what you are seeing there?

[Marco Gadola, CEO & Member of Executive Management Board]

The impact on the ortho business from the pilots we are currently running in the European countries and in Japan has been insignificant to be honest. This is actually not driving the 51% additional case stock. So the majority of that is coming from the U.S. obviously and we have also seen a very nice development in Australia and in the U.K. where we have actually distributors in place selling the ClearCorrect franchise. So the European pilots and the Japanese pilots, the contribution to the growth of the business again has been insignificant. What we have been pleased about because up to now the perception in the dental community has been that ClearCorrect is just a product for GPs because it is limited when it comes to treatment so the range of indication. And we have now seen also orthodontists so specialists in the U.S. converting to ClearCorrect, which is obviously for us a very positive signal that the quality of the product portfolio is compelling and is actually competitive.

[Carla Bänziger, Analyst]

Maybe a follow-up here. Or do you think it's also related to the Iparo issue in the U.S. and the 3Shape Scanner? That line is not allowing the 3Shape Scanner to be used for that treatment?

[Marco Gadola, CEO & Member of Executive Management Board]

Yes, to a certain degree. We -- actually obviously what we did already in Q4 of last year, we started a promotion campaign for 3Shape users, especially the ones who were actually working with Invisalign and we actually we put some interesting conversion packages to the market and yes, that has been a successful campaign.

[Operator]

The next question comes from Sebastian Walker from UBS.

[Sebastian Walker, Associate Analyst]

Seb Walker from UBS. I have 2, if I could. One is on the guidance for the full year. So given that you're tracking ahead of Q1, I mean the reason for not upgrading the guidance for the full year, is that conservatism or is there something else there that you'd like to flag? And then my second question so on the non-premium, premium split. Could you give us the sales for the quarter, the sales split there? And then would it be possible to comment on margin progression for the quarter or for -- even the expectations for the full year just directionally? That would be great. Thanks.

[Marco Gadola, CEO & Member of Executive Management Board]

The comment is always the same when it comes to changing the guidance. It's Q1, it's 3 months into the year. We have April obviously also almost through. The adjusted EBITDA is still too early to actually change the guidance. We don't have visibility into Q3 and Q4. So once we will have 2 quarters behind us and we know how these 2 quarters developed, then I think we can with much more confidence also talk about changing the guidance for the full year. When it comes to your question on the margins, Peter, maybe you want to say something there.

[Peter Hackel, CFO & Member of Executive Management Board]

I mean the margin expectation for the full year is also reflected in our guidance. And as Marco has already commented, we are fully on track to reach our full year guidance where we guided that we achieve a stable EBIT margin development due to the rise in the higher depreciation and amortization that will be a stable development whereas we expect a further improvement of the underlying EBITDA margin for the full year.

[Marco Gadola, CEO & Member of Executive Management Board]

And your question on premium versus non-premium. What I can tell you is that actually the non-premium business is actually continuing to over-proportionately grow compared to the premium business. We are happy with the development of the non-premium business, but also with the premium business. But then I want you to appreciate that we are not disclosing the split between how much is premium and how much is non-premium. Again I can tell you that obviously the percentage of non-premium is steadily increasing because we have -- we are growing over-proportionately with our non-premium business compared to the premium one.

[Sebastian Walker, Associate Analyst]

And maybe just one more separate question on ClearCorrect, if you could talk about ASP trends and maybe an ASP compassion with the line, that would be helpful as well.

[Marco Gadola, CEO & Member of Executive Management Board]

A good question. If you look at these new cases and that's actually the stronghold of ClearCorrect, the ASP of ClearCorrect is considerably lower than the ASP of Invisalign. When it comes to bigger users and especially we're talking about the specialists, the orthodontists, Invisalign has a very compelling WIT program, discount program in place for these larger users. So the larger the user is, the less the price gap between ClearCorrect and Invisalign is. Or in other words, we are extremely price competitive when it comes to GPs, when it comes to smaller or medium size users. The bigger the users get, the less prominent the price gap is.

[Operator]

The next question comes from Maja Pataki from Kepler Cheuvreux.

[Maja Pataki, Head of Med Tech Devices Sector]

I have -- my first question is about the roll-out or the distribution of Dental Monitoring. How are you going to introduce that in your client base and which are the countries that you're targeting first? And my second question with regards to combining the eShop basically for Straumann instruments. Can you tell us how much the online shopping actually represent of your revenues roughly and whether you see this as an opportunity to convert some customers that are as you say like increase the share of wallet because they're using different kind of value brands? Thank you.

[Marco Gadola, CEO & Member of Executive Management Board]

On Dental Monitoring, Maja, it's -- this is important in the future for our ortho business so treatment progress of ortho cases can actually be monitored with this application, this device avoiding that patients have to see a dentist on a frequent basis. So they only go to the dental office and see the dentist in case of a deviation between the plant, progress of the treatment versus the actual. We talked about preventive dentistry and I think we also mentioned during the last call that we would actually launch some pilots during the course of this year to test what could be a compelling portfolio to general practitioners when it comes to preventive dentistry. And obviously also there Dental Monitoring could play a role because that application is not only allowing to monitor the progress of an ortho treatment, it can also be used to actually identify for example white spots so early carriers, gum recession. So actually indications which are typical for GP practices. So to answer your question concretely, once we're going to start this -- the roll out in the European markets of ortho and we are still in a market acceptance test phase in Europe, we will then also start with commercializing Dental monitoring and we also will actually include this in the upcoming preventive pilot. Your question on the e-shop. Our e-shop rate is roughly 30%, I think we can state this number. However, it is -- the 30% actually applies to our Straumann premium business. As you -- as we pointed out up to the beginning of this year, we had the premium and the non-premium businesses separated. The non-premium business e-shop penetration rate has been significantly lower and what you are pointing at is correct. We obviously hope that now with the new e-shop, we can actually convince existing customers that they also buy the non-premium business from us. And through being able to actually offer them 1 web shop and to being able to actually deliver them all the products in 1 shipment and sending them 1 invoice for premium and non-premium products, we believe we have a compelling proposition.

[Maja Pataki, Head of Med Tech Devices Sector]

Marco, just to double check. Are you using Dental Monitoring already in your pilot project in Europe?

[Marco Gadola, CEO & Member of Executive Management Board]

No, we are not. Not yet, no.

[Operator]

The next question comes from Julien Dormois from Exane.

[Julien Dormois, Research Analyst]

I just start with 2 questions which relate to the impacts of Easter in Q1 and also to the impact on the regenerative shortfall and Emdogain delay that you mentioned. Just curious whether this has been a significant headwind for your Q1 sales growth, whether you could quantify that to give us an estimate of how much you would have grown without those 2?

[Marco Gadola, CEO & Member of Executive Management Board]

Do you want to take it?

[Peter Hackel, CFO & Member of Executive Management Board]

Coming back to the first question on the impact of the Easter. If you look it up from a pure technical point of view, there was 1 sales day less in the first quarter compared to previous year. But the more important factor is that Easter break in the previous year was in the second quarter and of course the dental practices are closed much, much longer than only the technical working day that we have the difference. So there will be bigger impact in the second year and higher growth rate in the second year because of the lower comparative pace in 2017. Coming to the second question on the impact of the Emdogain where we said we need to deliver further documentation to the FDA and it's a temporary hold of the Emdogain sales in the US market only. We expect to start it again in the third quarter of this year and the impact that I expect is a low million single-digit figure.

[Operator]

The next question comes from Tom Jones from Berenberg.

[Thomas M. Jones, Analyst of Healthcare]

The first, I just wanted to follow up on Michael's question about cannibalization with -- specifically with reference to fully tapered implants. I just wondered if you made some comment about the wisdom in your decision to launch a Neodent fully tapered implant in some big key markets some time ahead of when you're going to be launching a Straumann fully tapered. I can understand the risk of cannibalization is low when you've got a full portfolio on the Straumann side, but that's the 1 area where you will only have a competitive offering on the value side. So some comments there will be helpful. And then the second question is just about the general competitive environment really. And when you're clearly shooting [indiscernible] and making your competitive lives very, very difficult at the moment. But kind of wondering how they're responding in particular with respect to the value side of the business, the non-premium side. They've known you're going to be coming for a while and now you seem to be growing that business out much more aggressively. Would just be interested to see what the current pricing trends are, how the competitors are kind of responding to having you in that territory in a big way now?

[Marco Gadola, CEO & Member of Executive Management Board]

Your first question, it's interesting that this cannibalization question is now coming up again after we've been selling. We have been selling value and premium products in the same geography obviously to strong group companies now for many years. But then to be concrete when it comes to the fully tapered implant, there are premium users who use fully tapered premium implants and they use today either a NobelActive or they use the 3i implant. So these are actually the target groups that we go after. If you look at our premium business, we are still predominantly a single replacement premium player. That's our stronghold. Even with BLT, we are making inroads, but very slowly into fully [indiscernible] with BLT. But honestly when it comes to immediacy, when it comes to fully [ attention ] cases, when it comes to aesthetics despite the fact that we have now 2.9 millimeter, very compelling product. The leading company in this space is Noble to be honest and they are the dominating force. So with BLX, we are convinced that we have something extremely compelling not only from the implant design point of view, but actually also with the prosthetic component, with the full system behind it; core diagnostics, a 3D printing being able to actually print in the office surgical guides. All this together will make us a very fierce competitor to Nobel when it comes to these treatment protocols.

[Thomas M. Jones, Analyst of Healthcare]

I mean if I was being cynical I could read into that that with Nobel getting its act together having launched a whole bunch of new products over the last 12, 18 months. This is potentially a bit more of a defensive rather than offensive move. I mean would you strongly disagree with that or is there a level of truth there?

[Marco Gadola, CEO & Member of Executive Management Board]

You mean BLX is a defensive move?

[Thomas M. Jones, Analyst of Healthcare]

No, no. I mean the push to launch the mid and fully tapered implants into your...

[Marco Gadola, CEO & Member of Executive Management Board]

Yes. But here too maybe there is a misconception. We have had the Neodent drive already in the market since 4 years. So this is not -- GM is not a new implant design, GM is a new prosthetic system. We have problems with the CM to convince referring GPs to switch from their existing system to actually Neodent. So we have been very successful with Neodent when it came to converting large GPs. So dentists who to do the surgical work and the prosthetic work, but we have been lagging behind in actually converting specialist referral networks because of the limitations of the CM prosthetic components. And with GM, we have now an extremely competitive and compelling prosthetic offering also to GPs. What we also did, we actually added an additional implant design to the Neodent range, it's called Helix and Helix is actually a combination between a fully tapered and a parallel bone implant and the reception of the market of this design has been overwhelming. If I look at the percentage of shapes or implants sold under the GM line, the vast majority of implants we have sold is the Helix implant. So I think that's a misconception. We have the CM the drive in the market for many, many years. GM is more a prosthetic play to be able to actually convert referral networks and we have added 1 additional shape, which we call Helix which is a state-of-the-art design and the reception of that one has been overwhelmingly positive.

[Thomas M. Jones, Analyst of Healthcare]

And then on the competitive environment?

[Marco Gadola, CEO & Member of Executive Management Board]

We have a little bit of insight into what our competitors did. And one of them, I don't want to name, who are talking about they have lowered prices significantly and they were actually trying to actually make up for their volume loss through reducing the prices and bringing volumes back. And if you look at the development of the sales of that specific company over the last quarter since they actually did the price cuts, nothing has actually happened on the volume side. And so to be honest and there are obviously efforts of some of the competitors to actually gain share back. The only recipe at hand is lowering prices. We have seen some of them lowering prices quite significantly, but actually the impact on our business or on their business in terms of gaining share back or reconverting customers has been minimal.

[Operator]

The next question comes from Kit Lee from Jefferies.

[Nyeok Lee, Equity Associate]

I just have a question on the DSO channel. So is your market share in DSO in line with your overall share in the implant market or are you still currently underweight in the channel? If you can just give us some more color on that.

[Marco Gadola, CEO & Member of Executive Management Board]

Our share in the DSO space is very low. That's actually why we decided to put this dedicated organization in place and to put significant focus behind us penetrating this space. You also have to keep in mind that to make inroads into DSOs, it's not only about pricing of implants. You need to be able to offer comprehensive solutions. More and more the digital work flow is top of mind of DSOs. They see that they can actually extract a lot of value by actually organizing their practice network more efficiently and that actually happens through digitizing the work flows. We have now a comprehensive and compelling digital offering at hand and also most of the DSOs, they actually offer premium and non-premium solutions. So now with this Neodent and with Straumann BLT and in the future BLX, we also have a compelling implant portfolio. So it's more than just the pricing on implant. You really need to play all the different parameters and at the end, they need -- they want you to be considered as a strategic partner helping them to make their network more efficient. And we have not been focusing on this in the past and we also did not have the whole product portfolio and solution portfolio at hand. And we have that now obviously and that's why we thought this is the right point in time to actually start putting more focus on the segment.

[Nyeok Lee, Equity Associate]

And can I just follow-up on the BLX. What's the expectation for the launch there? Is that a second half story? Are you expecting sometime sooner?

[Marco Gadola, CEO & Member of Executive Management Board]

No. We will actually go into a full market release at IDS in March of 2019. That's actually the target date. We already have CE mark for most of the diameters, but we have now only a limited prosthetic portfolio in place. So that's actually what we are working on. So we are obviously already doing cases with many doctors to document how does this system performs. But at IDS in March, we're going to enter the full market release and then we will also have all diameters and all the prosthetic components available.

[Operator]

The next question comes from Veronika Dubajova from Goldman Sachs.

[Veronika Dubajova, Equity Analyst]

I only have one actually. Just looking at the Align numbers last night and obviously it sounds like your ClearCorrect business is off to a very strong start as well. I'm just curious how you're thinking about the current growth in the Clear Aligner market and if we were to fast forward 4 to 5 years, where do you think the market potential sits based on the information that you now have? Thank you.

[Marco Gadola, CEO & Member of Executive Management Board]

If you look at Align's numbers, they are actually the market. You can take the growth of Align and actually assume their share was roughly 75% of the total market. And so the market is extremely dynamic, it's still predominantly a U.S. play. 2/3 of the revenue Align generates in the U.S. There is still tons of untapped potential outside of the U.S. Their #2 market is already China. That's actually already the second largest Clear Aligner market worldwide. But if you look at markets like the large European markets; Germany, the Spains, Italys as well as U.K., France or even take Japan into consideration or Latin America, Brazil; it's a huge potential still ahead of us. And we also know that today only roughly 1 out of 8 cases -- ortho cases which could potentially be done with Clear Aligners are done with Clear Aligners. So there the majority is still done the conventional way. And if you have the choice as a patient between traditional values and brackets and Clear Aligners and you have to pay more or less the same price for a treatment, I guess the majority of the patients, they would actually go for a Clear Align solution. So we believe that this space, this segment still has tremendous growth potential.

[Veronika Dubajova, Equity Analyst]

You're not willing to speculate on whether the 30% plus growth rate that Align's reporting right now is sustainable for the medium term?

[Marco Gadola, CEO & Member of Executive Management Board]

That's just my personal view. And if you look at -- if you get from 1 to 8 to 1 to 4 over the next 5 to 6 years, you can do the calculation yourself and 30% is actually at the lower limit, the lower band. I personally believe yes, that market will continue to grow more than 30% over the next years.

[Operator]

The next question comes from Daniel Jelovcan of Bank Vontobel (sic) [ Mirabaud ].

[Daniel Jelovcan, Analyst]

Just 2 questions left. One is on book, you mentioned in the press release that the potential in Brazil is 500,000 treatments for biomaterials. So I wonder a bit how fast can you gain market share there? I mean I guess for products like the GM, it's easier to gain market share, easier in brackets of course than to gain market share with botiss, I guess Geistlich core is already there and also outside of Brazil is there also potential in let's say in Americas in general for botiss. And that's the first question. The second question is the China, you mentioned CADCAM the center, I mean how important will that be in the future compared to your other CADCAM centers in Japan, U.S., Europe. I mean the adaption there is that quicker or you'll see the point? Thank you.

[Marco Gadola, CEO & Member of Executive Management Board]

I agree with you that Geistlich is obviously the dominating force when it comes to biomaterials and also I openly admit that for example in Germany, it is quite a challenge for us to convert guys to use botiss. That's not something that happens overnight. In Brazil the situation is different and why is it different. In Brazil we have 50% market share with Neodent in the implant space. That also means that the majority of the key opinion leaders in the Brazilian market they work for Neodent. All of these key opinion leaders we have contracts and in these contracts, they are obliged to only use Neodent products. So the key opinion leaders in Brazil, they are already jumping as we speak on botiss and they are leaving Geistlich behind. So Brazil is a specific situation. So I'm convinced that the Geistlich will suffer a lot in the Brazilian market. I also agree with your statement that outside of Brazil, it's obviously a different ball game and it's much more difficult to actually convert Geistlich users to botiss. When it comes to the U.S., we are in the process of registering botiss also for the U.S. and during the course of this year, we are positive to get the registration through and then we will obviously also launch the botiss range in the U.S. market. Your second question on the Chinese CADCAM milling center, why did we do this? Yes, we have a CADCAM milling center in Japan, however, you need to have registration. If you do customize [indiscernible] problems, you do SOBBs you need registration for these products in China despite the fact that these are in a way lab products, they are sold to labs. But anyway, you need to have FDA registration for these products. So we could not send mill products in our Japanese milling center and send them into the Chinese territory. That's why we've decided to set up our own milling center in China and initially it will just serve the Chinese customers. We believe that actually the potential is obviously huge. The Chinese market is the fastest growing dental implant market worldwide and we are very well-positioned to actually support our customers and already non-customers this CADCAM manufactured prosthetics and restorative development. Just to mention, we will offer not only Straumann prosthetic solutions, we will also offer [ MPS ] solutions to competitive systems out of our Shenzhen milling center.

[Operator]

The last question is a follow-up question from Sebastian Walker from UBS.

[Sebastian Walker, Associate Analyst]

Just a quick one, an update on the ceramic -- new ceramic implant launches and how they're tracking.

[Marco Gadola, CEO & Member of Executive Management Board]

We have just recently launched our Straumann PURE 2-piece ceramic implants. We had until just recently only a mono type ceramic implant in the market. Now we have also a 2-piece ceramic implant available to our customers. We are working on an injection-molded base ceramic implant, which we will also launch during IDS in Q1 2019.So thank you for your interest and your questions. In closing, I would like to draw your attention to the Investor Relations calendar, which you can find on Slide 21 and on our website. Thank you again for joining us. Have a good day and goodbye.

[Operator]

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.