Bonesupport Holding AB

STO:BONEX

Earnings Call Transcript 2022-Q1

[Operator]

Welcome to BONESUPPORT audiocast with teleconference first quarter call. [Operator Instructions] Today, I'm pleased to present Emil Billback, CEO; and Hakan Johansson, CFO. Speakers, please begin.

[Emil Billbäck, executive]

Thank you very much, operator, and welcome, everyone, to BONESUPPORT's Quarter 1 2022 Results Call. My name is Emil Billback and sitting opposite to me here at the desk is Hakan Johansson, our CFO. So we will use the next 20 minutes to guide you through the presentation of the first quarter results, and then we will open the line for a question-and-answer session.

So moderator, if you please, help me go to Slide #2. I hope you recognize that there are some disclaimers covering forward-looking statements that we might do today. Let's go to Slide #3, please. So I would like to begin the presentation with some condensed highlights from the report that we released this morning. So overall, quarter 1 sales were SEK 66 million, which corresponds to a reported growth of 48% year-over-year. Currency movement versus last year have been quite significant, and growth at constant rate was 36%.

EBIT was at negative SEK 16.5 million, which is SEK 7.3 million profit improvement versus quarter 1 2021 before the incentive provisions. From a business operations perspective, we have seen a gradual ramp-up of surgeries during the quarter. In certain regions, the ramp-up has been restricted by a shortage of staff as the healthcare system have tried to recover from the Omicron surge that we saw from December 2021 to January 2022.

During the quarter, OrthoPediatrics placed the first order with BONESUPPORT and started selling CERAMENT BVF to its network of 250 children's hospitals. All in all, we have seen diverse and varying market conditions in the quarter, but with continued strong growth for CERAMENT across all markets. The results in the quarter are a confirmation of BONESUPPORT's strong commercial model.

And with that opening, let's go to the next slide, where, hopefully, it will be the last time that we will give a COVID update in a quarterly report. I think, right now, there are many different theories as to if additional waves of COVID will come back and at what time and possibly what kind of severity, but it is clear that a page has been turned and that the healthcare system has adapted and learned to live with the pandemic influence -- sorry, I meant adopted influence.

There are a couple of market surveys covering how the numbers of surgical procedures have developed in quarter 1, 2022 versus last year. The average of this report would imply a few percent growth in procedures in this quarter versus last year. We saw clearly low volumes in January as an influence of Omicron and then a rather strong recovery in February and March.

The recovery and procedures have been much faster in the U.S. compared to EU. In Germany, the restrictions have remained at the high level throughout the entire first quarter with no visible real market recovery. In the U.K., strong and increasing sales have been recorded as extra funding is distributed to increase capacity for surgical procedures.

From the NHS, while we have good availability and transparency in data, you can see that in the green matrix to the left, we can see that the pace at which the backlog was previously increasing has now tampered off. It also reports from many parts of Europe and particularly from the U.S., where orthopedic surgeons are extending the time in the surgical theaters, about 2 to 3 times a week, also reports of surgeons working weekends to address the backlog. So the headwinds faced by the entire orthopedic community over the most recent 2 years is likely to turn into tailwinds as the large backlog is being addressed.

So now let's turn to the next slide and look at how the recent quarter stand out in accelerated growth trend. So Slide 5, please. So I trust that most of you recognize this slide, which we have shown at all previous quarterly report presentation. The bar charts show the LTM sales every quarter since quarter 1, 2014. So the result of CERAMENT's advancing market positions is visible with a major jump in sales quarter-over-quarter in the most recent period. Europe and Rest of the World is back on a growth trajectory, showing 3 consecutive all-time highs.

Now let's turn to the next slide and talk a bit more about what is driving these results. So Slide 6, please. We start with the U.S. As I mentioned on the update on COVID, January was an Omicron suppressed month with February and March recovering faster than we and the rest of the industry had anticipated.

Market share gains due within pandemic is now providing strong growth as surgical volumes start to come back. Sales grew with 64% in the quarter and 18% sequentially over quarter 4, 2021. The sales team at OrthoPediatrics are fully up and running. And in January, they placed the first order.

The first procedures in the pediatric hospitals were down the same week as the orders were expedited. We are still in waiting mode for final notification from FDA -- and I want to emphasize that waiting mode is not the same as discussion mode or debating mode. During autumn last year, we had a very close dialog with FDA regarding the supplementary data that we submitted. The interactive review is in fact still open. But since December and since early December actually 2021, FDA has not had any further inquiries, but rather focused their internal work on the final report.

I will share some further insights on FDA's workload at later slides. But first, let's go to Europe and Rest of the World, which is on Slide 7. Our Europe Rest of the World business grew with 28% or 22% in constant exchange rates. The quarter was very much about getting started and again, ramping up activities and businesses after the shutdowns that Omicron created. Despite Omicron seemingly causing less symptoms versus previous virus versions, the high transmissibility caused as many COVID patients in hospitals in January as back in April 2020. And it was actually the second highest peak level of hospitalization since the pandemic started.

The plans announced by the government and implemented in U.K. and France to increase surgical capacity are likely to follow suit in 7 more European countries. In the U.K., we already saw a positive effect on sales in the quarter from these programs, even though capacity is still not at pre-pandemic levels.

I would like also to comment on the global supply situation and cost variations in raw materials that we have seen across several industries. BONESUPPORT is not immune to potential disruption or cost increases, but we have long-term contracts with our partners, and we have not had any material influence in the first quarter. Regardless of this, we have executed a price increase of just about 5% in March for our direct markets, which is anticipated to influence all our direct business over the next 6 months.

Over the next 2 slides, I would like to cover a few other events that we would like to share insights on. So if you please go to Slide 8. I would like to inform you that we decided to transition Switzerland to a distributor service model. The Swiss market is very demanding in terms of having the representative participate at surgery. The expectations on service is very high and frequent visits are required with existing customers and new customers alike.

We had previously won [indiscernible] in Switzerland, and as we're expecting to grow further and more into regional hospitals as the pandemic is receding. We need a stronger geographic reach to match the market dynamics. The Swiss market is attractive, but it's not our top priority. We have decided not to go with a hybrid model in this case, but rather a distributor setup.

Next to report on is that we are building continuously resources, data documentation for the future pursuit of the osteoporosis indications. So about 6 months ago, we reported on favorable outcome in pre-clinical studies where the combination of zoledronic acid and CERAMENT achieved very strong results.

In March of this year, a biomechanical study was published, showing the positive results of using CERAMENT to improve anchoring strength in treatment of osteoporotic fractures. There are about 1.25 million osteoporotic femoral factors a year. So entering in this market, which is our long-term objective, would increase our total accessible market with about USD 600 million.

On the next slide, I have some good news to report on. So Slide 9, please. The application for new technology add-on payment takes place in October each year. Approved devices hold the NTAP status for 2 to 3 years after the FDA approval. BONESUPPORT submitted updated documentation to CMS in October and received the message on April 18 that NTAP has been granted and that the add-on amount is USD4,900. This means that the regular diagnostic-related group, DRG, the reimbursement here is increased or extended with USD4,900 when CERAMENT is used for one of the indications for which NTAP has been approved.

The CERAMENT G NTAP covers 13 DRGs that means that all the DRGs that we applied for was approved to our great satisfaction. The NTAP becomes effective on October 1. If the prerequisite of market approval from FDA has been given latest July 1 in the same year. So with that short update on the different segments and 3 additional information, I would like now to hand over to Hakan, who will cover the financials.

[Håkan Johansson, executive]

Thank you, Emil. So let us go to Slide 11, please. Net sales improved from SEK 44.8 million to SEK 66.3 million, equaling a growth of 48% or 36% in constant exchange rate. The organic growth in the segment North America measured in fixed currencies was SEK 11.7 million or 47%, confirming a continued strong growth trend and the organic growth in Europe and Rest of World was SEK 4.4 million or 22%. Changes in currencies measured at the year-to-date averages in 2022 and 2021 had a positive impact in comparison with the first quarter last year of in total SEK 5.5 million, of which SEK 4.4 million relates to a stronger U.S. dollar.

Next slide, please. The contribution from the segment North America improved with SEK 8.6 million and was reported to a segment profit of SEK 6.6 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 30.1 million compared with SEK 21.6 million previous year, of which sales commissions to distributors increased with SEK 5 million to SEK 12.9 million. The increase in sales and marketing expenses is mainly due to a higher level of activity, but it's also including currency effects with SEK 1.7 million. The contribution was also charged by R&D costs related to studies, decreased from SEK 3.7 million last year to SEK 1.9 million this reported quarter.

From the lower graph showing net sales as bars and gross margin as an orange marker, it can be noted that the gross margin remained stable and in line with previous quarters. In Europe and Rest of the World, the contribution of SEK 5.6 million was reported to be compared with SEK 2.2 million previous year. The improved contribution explained by the increase in sales.

Sales and marketing expenses increased by SEK 1.6 million compared with previous year. The increase is mainly explained by a lower activity level previous year because of the COVID-19 pandemic. From the lower graph, it can be noted that the sales is slightly down compared to Q4 in 2021. This is following normal seasonality as the first and the third quarter is weaker than the second and the fourth quarter. In Europe and Rest of the World, an improved gross margin was reported following the market mix during the aborted quarter.

Next slide, please. The operating profit was reported to a negative SEK 16.5 million, an improvement with SEK 3.2 million compared with a loss of SEK 19.7 million for the same period previous year. The lower loss included expenses regarding long-term incentive programs, a cost of SEK 3.9 million this year compared with a positive effect of SEK 0.2 million previous year, a difference of SEK 4.1 million.

The increased cost was due to regular provisions, approximately SEK 3 million at unchanged circumstances as well as revaluation following the 8% appreciation in the share price from the end of last year. The positive effect in the first quarter last year giving the positive effect of SEK 0.2 million related to the drop in sharp price last year following the announcement that FDA required additional data and clarifications in our De Novo submission.

Profit improvement before the cost for the long-term incentive programs was SEK 7.3 million. Cash at period end was reported to SEK 195.6 million and remaining with a substantial headroom in funding until we can reach the point of cash flow breakeven.

Next slide, please. Selling expenses increased with SEK 6.3 million, of which SEK 2.5 million relates to currency effects. The higher cost level, partially related to the investments in hybrid markets, Italy and Spain, the high cost also relates to a gradual normalization of market activities this year, albeit with regional differences compared with a lower activity level last year due to COVID restrictions.

R&D expenses reported in line with previous year. The phasing out of the FORTIFY study has gradually reduced the quarterly run rate. Administration remaining on a stable level if we exclude the effects from the long-term incentive program, equaling SEK 10.6 million this year compared with SEK 10.1 million previous year.

And with this, I hand back over back to Emil.

[Emil Billbäck, executive]

Thank you, Hakan. So let's then go to Slide 16. And before wrapping up this quarterly report, if I can make a few comments on our time line of milestones and significant demand. Well, as you are aware, I think all of you, we are in waiting mode for the decision from FDA. And the date when the final report was supposed to be received from FDA has passed, that was in quarter 1 of this year.

FDA has published data showing that they were delayed on about 35% on all the De Novo applications. And FDA has further openly communicated that the reason for the delay is the overwhelmingly many emergency use authorizations that have been sent to the agency related to COVID.

Now while we are a bit frustrated about the delay of approval on CERAMENT G, we have some full sympathy for the prioritization aligned to save lives of COVID patients and quickly reduce the pandemic burden on the healthcare system. We have anticipated a launch of CERAMENT G in the U.S. in the third quarter and the submission filing for extended indication sometime in the first half of 2023. These timings were connected to getting a potential approval during quarter 1. Once we have a clear understanding on the decision timing, we might need to revisit these timings. From final decision to launch, we anticipate around 4 months.

So finally, on this slide, I will comment also that the SOLARIO study finalization was previously placed in the wrong slot in the time line. And it was shown -- the finalization was shown at the time of the last patient in. We have accidentally done so, and this has now been corrected. The study is designed for a 12-month follow-up. So after the last patient has been included in quarter 1, 2023, this study will be completed in quarter 1, 2024.

We have corrected this information, and I would like to emphasize there is no further delays on SOLARIO, but just a correction in our reporting, which is now in line with the public record, which it wasn't before.

Let's go now to the last slide of the deck and wrap up some of the findings from the presentation where I can also give you a bit of outlook into the near-term future. So on Slide 17, I would say that, in short, despite the post -- the variable post pandemic market dynamics, we saw strong commercial acceleration. We have seen strong leverage from the strategic investments done in key markets. So in the U.S., for example, growth momentum is very strong, and we continue to drive market penetration with an important GPO contract and with strategic partnerships.

Our U.S. distribution model is clearly working. It has shown exact -- sorry, it has shown exceptionally good reach and market access. With our strong sales team in the Nordics, in the U.K. and Germany as well as the investment done in Netherlands, the hybrid setup market in Southern Europe and the established foothold we have in new markets, we are in better foundation positioned than ever before to drive market penetration in a post-pandemic environment.

As you well know, our most important upcoming path is taking 7G to the U.S. market. This will be done in 2 steps, in the De Novo pathway, which we're waiting now for the final approval. And once we have that, we are -- for bone infection, we are looking to secure market access for a broader indication of a broader label.

The raised NTAP, the new technology add-on payment for CERAMENT G USD4,900 awarded by the CMS is an important encroachment ahead of our anticipated launch. When we expanded and solidified customer base as well as progressed distribution model in the U.S., we are eager to move to the next level with an impactful and broad potential launch of CERAMENT G.

All in all, in a post-pandemic market, we will truly be leveraging the value of our clinical and health economic evidence. At a growth rate of 48% in the quarter, we are continuing to drive traction well above market growth rate and hence, we are taking strong market shares. Our corporate target is to grow top line with 40% per year.

And with that, I conclude my presentation and would like to open up for questions.

[Operator]

[Operator Instructions] Your first question comes from Erik Cassel from ABG Sundal Collier.

[Erik Cassel, analyst]

So you said that the expected price increase that would take full effect in all markets in the coming 6 months, if I heard you correctly. But just so I understand, I mean, the implemented price increase of 5%, that does not come into full effect directly, but rather gradually over Q2 and Q3, right?

[Emil Billbäck, executive]

Erik, yes, that is correct. So we have communicated to the customers that there will be a price increase. This was sent out in March and the customers without a contract, they received that price increase immediately, but most of our customers in the direct markets have contracts. So this will also -- it will bleed in over the next 6 months to be fully executed at the end of the year.

[Erik Cassel, analyst]

Okay. How much of an impact would you say that have on Q2? How large a share of the customers will that take effect on?

[Emil Billbäck, executive]

I actually couldn't say, Erik. I apologize for that. But I can tell you that by the end of the year, the impact will be on all customers. So I think if you estimate maybe a 50% impact, I think you're on the safe side.

[Erik Cassel, analyst]

Okay. And then what happens to the NTAP if FDA delays the response past the 1st of July? Would that most likely basically postpone the effective date of the NTAP by 1 year? Or is there a worst implication that I might miss here?

[Emil Billbäck, executive]

No, you're correct. And I think that is severe enough in a way. If the approval for CERAMENT G has not come by July 1st of this year, we will have to reapply for the NTAP. And the earliest that it could then come into effect will be 1st of October 2023. So of course, we're hoping to secure the approval before July 1. And in such case, the effective date is 1st of October this year.

[Erik Cassel, analyst]

Okay. And I guess this is a hard question, of course, but I know that you speak to industry participants, but how likely would you say that it is that you get the answer from FDA before the 1st of July?

[Emil Billbäck, executive]

I couldn't say, unfortunately, because if it would be my organization and something we have control over, I could give a firm answer. But I don't dare to speculate in how FDA are meeting their commitments. I'm hoping that they are coming now at the very end of the review. As a matter of fact, they have communicated that they are at the very end of the review. And we can only try to also assert a certain amount of pressure to secure that we get a final notification before the date. But for the FDA as in many times, it's difficult to predict how they respond timing wise.

[Erik Cassel, analyst]

Yes. Understandable. And then on the order from the OrthoPediatrics, would you say that, that was some sort of like first order inventory buildup from their end? Or is this more of a recurring number?

[Emil Billbäck, executive]

There is -- there's a big part of this, which is recurring, and a part of it is also putting the products for some of these pediatric hospitals that would likely to have at least 1 or 2 products on the shelf as well. So there will be more orders this year, maybe not to the same size we saw here, but that depends also on how quickly they can turn the products and how effective they will be in their sales. We were very encouraged that immediately after expediting the order, the first procedures started to take place.

[Erik Cassel, analyst]

Okay. Good. And then last question for me before I jump back in the queue. If you would have had the same run rate as in March throughout the quarter, where the surgical sort of activity seemed quite normalized, how much better would the quarter have been? I'm just trying to get a feel for the current activity level.

[Emil Billbäck, executive]

Okay. Let's say, Erik I understood your question right. You are trying -- did you ask if the whole first quarter would have been at the same pace as March, how much strong would it have been versus what we reported?

[Erik Cassel, analyst]

Exactly.

[Emil Billbäck, executive]

Okay. Well, I cannot disclose, let's say, details like that. March was our best month ever. So clearly, the traction is there. And January was as many of the other wholly -- or not wholly, but hard hit pandemic months. That's what I wanted to say. So January was similar to those months that you've seen during the outburst and strong weights of the pandemic and March was the best month ever. And then if you combine that, you can see that we came out anyhow with a very strong result.

[Erik Cassel, analyst]

All right. And I guess the activity level has continued on a similar level throughout April as well, right?

[Emil Billbäck, executive]

Yes, that is correct.

[Operator]

Your next question comes from Hans Bostrom from Trinity Delta.

[Hans Bjorn Bostrom, analyst]

2 questions, please. First, I would like for you to help us understand how the improvement in market growth rate would impact your own sales growth given that you are growing at such so much higher rate anyway than the market. I'm just wondering whether this -- if you say the market growth rate in orthopedic procedures go from 2%, 3% to 10%, obviously think that there should be a significantly greater impact than the 7% delta. I'm just curious as to how you think market growth rate would impact your own revenue growth rate?

And secondly, I'm curious also about your contribution margin development where the margin, as you disclosed in your report is still considerably stronger in Europe at 22% in Q1 versus 16% in the U.S., if I correct -- calculate that correctly, though there has been a stronger improvement in the U.S., but the U.S. has also benefited from the lower R&D expenses. How should we think about this contribution margin in the medium term? Is the U.S. still be catching up in Europe or even surpassing it? And what are the levers for that?

[Emil Billbäck, executive]

Yes. Thank you very much for your insightful questions. I will address the first one, and Hakan will take over. So during the pandemic, we have increased the number of customers. So despite the restrictions from the pandemic, we have converted some very high-value clinics to CERAMENT. But during the pandemic, the volume of surgeries at those clinics have still been quite low. So now then that the volumes are starting to pick up, we see the effect with our heritage customers having an increased volume. And we see these new clinics that we have won during the pandemic, also ramping up in volume. So it becomes a bit of a double kick on the top line.

If we look at the big orthopedic companies that have released their quarterly report just a couple of days ago, we see that they were growing somewhere between 2% and 4%. The market survey shows a market growth of about 2% to 3%. And as you can see, that has translated into a very strong top line growth for BONESUPPORT. So I think needless to say, if the market continues now to experience a tailwind and increases further to 4%, 5%, 6%, I think it's likely to believe that BONESUPPORT is going to be even stronger in growth given our extended distribution that we have seen over the last 18 months.

Hakan, would you like to comment on the margin?

[Håkan Johansson, executive]

Sure, sure. So Hans, the big difference between North America and Europe is that in North America, yes, we have a higher gross margin [indiscernible] 94%. But with the distributor setup, we're also paying a commission on all the sales. The commission is roughly around 30% of sales. So you could say that on sales, we have a net margin after commission of around 64% to be compared with the gross margin level in euro of the asset of 90% and no commission paid.

For both of you, North America and Europe, we have largely the organizational structure in place that we need. So the cost structure is there. As we've commented in the report, we've seen a normalization of marketing activities in the quarter. There are still some additional activity levels to add, but largely, the cost structure will remain stable. So the way of thinking is that U.S. growth will add the 64% in net contribution to profit. And in euro, the sales growth will add roughly 89% to the cost structure. That's the way to reason around that.

[Hans Bjorn Bostrom, analyst]

So just a follow-up on that last one, if I understand it correctly. You don't really foresee that much of an expansion of your U.S. footprint in terms of fixed cost for our sales force in the coming year.

[Emil Billbäck, executive]

That's the beauty of the structure that we have established that it's so highly scalable through the platform independent distribution. So largely, we have the foot power that we need also with the launch of CERAMENT G in the U.S.

[Hans Bjorn Bostrom, analyst]

Okay. That's very clear. And on my first question, I mean, obviously, I understand it's quite challenging to provide any guidance on this. But if I understand you correctly, you really have a significant backlog of customers that you would benefit considerably from with an improvement in market growth rate. So I'm deducing that we should expect your delta growth to be higher than the -- any type of increase in market growth rate. Is that a fair understanding?

[Emil Billbäck, executive]

Yes. Yes, that is indeed a fair understanding. We have seen throughout the entire pandemic that we have outgrown the market growth, which means we have taken significant market shares. We have done that on the merit of the unique value proposition, and that trend continues now that the market is starting to come back. The product is simply better and give a better outcome.

[Operator]

Your next question comes from Sten Westerberg from Analysguiden.

[Unknown]

Hope you can hear me right now. A couple of questions on the De Novo situation. And firstly, I understand that we made some changes -- general changes to the De Novo procedures by the FDA during the course of last year and that this came into effect early this year. Have these changes in any way made your process more complicated. That will be my first question.

Secondly, have you disclosed the classification of CERAMENT G, the Class III, II or I product in the De Novo procedure. And finally, as for the criterion of not substantially equivalent to marketed products, could you please remind us again, is this primarily based on the one-step procedure or the resorbable quality of the projects or any other insight to this criteria would be helpful.

[Emil Billbäck, executive]

Thank you so much, Sten. Yes, there have been changes to the logo process. Lots have been discussed between the industry and the agency, the FDA for about 2 years, I think, and some of the first changes were taken to execution beginning of this year. It hasn't influenced our process at all, I would say. Potentially the only influence that we have had is that the staff at FDA has been disrupted by participating in the meetings with the industry and also presenting the changes to Congress, which has taken time away from an already strained situation. But there are no changes in the process that have a direct effect on the application we have for CERAMENT G. The changes, #1 or not of that nature, and the changes are also being implemented gradually on new applications.

The second topic was regarding the classification. Well, clearly, CERAMENT G is an implant with a very sophisticated work mechanism and also includes antibiotic. So there is no doubt that CERAMENT G by default becomes a category -- sorry, a Class III product. CERAMENT G becomes a Class III product. But the whole purpose with De Novo is to share such extensive efficacy and safety data that the product could be considered safe and effective to the extent to fit within a Class II category. So that's the purpose.

An approval with De Novo would take the product into a completely new category. A new category would be created, which would then be a Class II. So reduced risk, reduced risk efficacy ratio.

And the final question, I have to see if I understood you right, correctly here, Sten, that what is it that separates the product so much from the market that it is going through these rather detailed process as well. It's the fact that it's a biocomposite product that also protects the healing from infection during the recovery period. So the antibiotic in addition to the biocomposite is, of course, completely revolutionary and to create an antibiotic elution over more than 30 days. And this, of course, is completely different to any other product that is existing on the market.

Did I understand your last question correctly? Otherwise, please help me and I will try again.

[Unknown]

Yes, I think so, actually. I mean, the -- you need to prove not being substantially or not substantially equivalent to marketed products. So I guess that answers my question, which features allows you to claim not being substantially equivalent to marketed products.

[Emil Billbäck, executive]

Okay. Yes, yes, of course. If we look at the results of CERAMENT G and the clinical studies, and we compare it to all other treatment methods that is available in the clinical documentation, clearly CERAMENT G accomplishes things that no other product can do. And that's why there is nothing to compare with. And that's why we have to go through this rather tedious process with significant augmentation and creating a completely new category. If there would be product in the market performing the same way or similar, yes, then it will be a much easier process. But I guess that's the charm and beauty of having breakthrough innovations.

[Operator]

Your next question comes from Oscar Bergman from Redeye.

[Oscar Bergman, analyst]

Congratulations on the report. I really want to have 2 rather short questions. The first one relates to Italy and Spain. And I wonder if you can elaborate on the contribution to the sales of these hybrid markets? And secondly, you have previously stated that you expect to begin starting to sell CERAMENT G in Q3. And I'm wondering if you have any type of cutoff date for that assumption? And when it would be perhaps reasonably to consider Q4 or even early Q1 next year?

[Emil Billbäck, executive]

Thank you, Oscar. Yes, in terms of Italy and Spain, we think these are very attractive markets. And as you noted, the hybrid setup was completed mid last year. We have recruited a great talent, both in Italy and Spain. But as you can imagine, not the perfect time to start building new market penetrations where with constant lockdowns. The 2 people were hired just before the Delta wave came. And when the Delta started receiving, I proudly announced now it's time to go and then Omicron came.

So what we can see is that with the hybrid structure in these rather complex, big markets, it's a very strong value proposition because we can own the messaging, we can own the positioning, and we also have a close contact to key opinion leaders and customers. It's too early to speak about what sales results we have seen, but I can assure you that they are positive to the extent that we have decided for the same model now also in Canada. So we see this to be a success model for certain markets of certain size. But again, I cannot release the sales data. Maybe if we see ourselves in a Capital Markets Day later this year, hope we post an approval, maybe we have the chance of going a little bit more in detail.

Once we get the approval or at least once we get the final notification, hopefully potentially the approval on CERAMENT G, we need at least 4 months to ramp up for the launch. You see the FDA will most likely have in the final notification, some demand on labels and tickers and instruction for use. And that means that we haven't started the production of these products until we get the final notification that would be at an expensive process for us.

We also have to print material and apply for different systems. And that getting into the systems and also contracting previous customer contracts that we have takes a few months. So you can count backwards. The minimum for us is 4 months. So if the delay now continues to drive then we might have to revisit it. But we will not do it quarter-by-quarter, but rather month by month.

All the teams are ready in the BONESUPPORT head office and the sales team in the U.S. is also ready. And we're just waiting for this to happen before the machine will restart.

[Oscar Bergman, analyst]

I have a final question before I'll get back to the queue. And I think one of the other analysts touched on this question as well. OrthoPediatrics, I was wondering if you can say when the first order came from that customer. And perhaps maybe if you can give any sort of guidance as to what to expect in the coming quarters from OrthoPediatrics?

[Emil Billbäck, executive]

Yes. Thank you. The first order from OrthoPediatrics, as you saw was SEK 2.6 million. So it's not a very big order, I would say. But it gives them the product to get started. And starting the same way that we have done with the most important clinics, the most influential clinics. I couldn't give a beat rate here, actually, because we have to see how well they penetrate the market. There definitely will be more orders this year. But we don't know if it will be another order end of quarter 2 or beginning of quarter 3. I think we will just have to wait and see.

We see encouraging market penetration. And as you see from the rest of our U.S. sales, CERAMENT is doing very well on the U.S. market. So I don't expect anything else for the pediatric indication. But I'm sorry, I cannot give a clear indication that we will have to wait until the next quarterly report, then we have at least 2 quarters under the belt.

[Operator]

[Operator Instructions] There are no further questions at this time. Dear speakers, back to you.

[Emil Billbäck, executive]

Well, thank you very much. I would like to thank everyone that took the time to join our conference call this morning where we presented our quarter 1 2022 results. I wish you all a good day, and I wish also that we speak again. I wish that we speak again shortly and definitely before July 1. So with that, have a good day, everyone. Take care. Bye-bye.