Bonesupport Holding AB

STO:BONEX

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the BoneSupport Q3 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Emil Billback, CEO of BoneSupport. Please go ahead.

[Emil Billbäck, executive]

Good morning, everyone. Thank you, operator, and welcome to BoneSupport's Quarter 3 2022 Results Call. My name is Emil Billback, and sitting next to me is Hakan Johansson, our CFO. We will use the next 25 minutes to guide you through the presentation of the third quarter results, and then we will open the line for a question-and-answer session. Before starting the presentation, I would like to draw your attention to disclaimers covering any forward-looking statements that we might do today, which is on Slide 2.

Let's go to Slide 3, please. So we would like to begin this presentation with some condensed highlights from the report that we released this morning. Overall, quarter 1 sales -- sorry, overall quarter 3 sales was SEK 85 million, which corresponds to a reported growth of 54% growth year-over-year. Currency movements continues to be quite significant and growth at constant exchange rate was plus 39%.

The operating profit, before incentive provisions, was a negative SEK 4.4 million, which is SEK 11.3 million profit improvement versus quarter 3 2021. The reported EBIT was SEK 13.9 million minus. From a business operations perspective, the focus in the quarter was, of course, the launch preparations of CERAMENT G in the U.S. The quarter also had some substantial contribution to our strong foundation of clinical evidence.

So what will we focus on in this quarterly report? We will talk about the acceleration in sales growth, the strong underlying profit improvement, CERAMENT G in the U.S., and the long-term clinical data that just published.

So let's start with the next slide covering a graphical overview of the top line development. This is Slide 4, please. So I trust that most of you recognize this slide. We have shown this at most of the previous quarterly reports. The bar chart shows LTM, last 12 months, sales every quarter and its split on regions and on products. The chart was getting actually a bit cluttered, so we set a new starting point at quarter 3 2015. And going forward, we will display moving intervals.

So the customer recruitment has been strong in the last 2 quarters. We are seeing growth fueled by new customer sales but also increased usage from existing customers, both by elective surgeries somewhat taking up and from CERAMENT being used in more indications within the existing clinics. The chart reads out quite nicely with line consecutive all-time highs and an acceleration in growth rates. And the strong growth that we saw in quarter 3 comes despite a bit of pandemic implants in the beginning of the quarter, and even more impactful, the staff shortages, which have hampered the recovery rate of elective surgeries, mainly in Europe. We can conclude that CERAMENT is gaining significant market shares in both regions.

So let's turn to the next slide and talk a bit more about the regional performance, Slide 5, please. Sales in the quarter for North America grew with 72% to SEK 56 million. As you all are aware, the U.S. dollar has appreciated strongly versus the Swedish krona, and organic growth was nevertheless close to 50%. So the sequential growth quarter-over-quarter was 24%. New hospital and high-volume surgeons have been added to the customer list over the last 2 quarters. And we've also seen increased order value from the existing customers. The highlight was, of course, the launch preparations for CERAMENT G.

Let me cover this a little bit in further detail on the next slide, Slide 6, please. So looking at the CERAMENT G launch and the launch preparations in the U.S., a majority of the work from our account managers from June to October of this year has been to secure contract presence and listing for CERAMENT G. While adding a new breakthrough technology to a contract is a quite tedious and demanding process, we have progressed this topic above our internal expectations. CERAMENT G is already listed with approximately 4 out of 10 in the existing customer base contracts. The remainder is pending. Well that means that we have not been rejected on any contracts, but securing full listing takes time and will only be completed during 2023.

In addition to Premier and HealthTrust GPO inclusion, CERAMENT G has been approved at the Cleveland Clinic and several other major hospital systems that operate independently. Once the contract and listing is in place, our sales team go from hospital to hospital, surgeon to surgeon to promote the product. So there are no surgeons or hospitals that will buy a bulk of product and put it on the shelves. Sales is only recorded once the product has been used in a surgery.

We can conclude that we see strong interest both from existing customers and new customers. And I'm pleased to say that the first partial shipments of products arrived in the second half of October. And just a few days later, the first surgeries took place. There is no sales of CERAMENT G recorded in the quarter 3 results.

Let's turn to Europe on the next page, please. The Europe business grew with 28%, or 23% in constant currencies. Quarter 3 is usually the European holiday period, and there is overall a reduced surgical volume compared to quarter 2 and quarter 4. That is the season variability that we see. There has been a general increase in surgical procedures compared to quarter 3 2021, despite the impact from the pandemic at the onset of the quarter. The staffing shortage continues to be a challenge for the entire hospital system as they are trying to increase their surgical capacity.

Many hospitals in Germany still have visiting restrictions, which has led to customer recruitment slightly below our expectations. Our view is, based on reports and own estimates, that capacity remains at between 5% and 15% below the pre-pandemic level, with Germany in the lower part of this interval and U.K. in the upper part of that interval.

Moving then to the highlights. As we're getting more and more present and relevant in the treatment protocol for bone injuries, there are also more studies -- clinical studies being completed on CERAMENT. We will continue to highlight the ones that are of significant importance and of high quality and published in reputable journals. There's especially 2 recent studies in the quarter that have been published. And one of them is a long-term study with 100 patients with bone infection, showing an infection eradication in about 94% of the cases after CERAMENT G treatment. The other study -- so 2 different studies. The other study was conducted on 47 patients with diabetic foot infection. The patients that received treatment with CERAMENT G had an amputation incidence of 6% versus the literature reference of 23% to 29% for a matched population.

Let's go to the next slide and look a little bit more in detail on the long-term study, so that will be Slide 8. So this study was published in the Bone & Joint Journal. It's a prospective case series studies with an extended follow-up and, as I mentioned, on 100 patients with bone infection. But why had such a study been done? Well, there are conservative hospital systems that are claiming that they need to see long-term studies before they can assign confidence to new therapies and breakthrough technologies.

In this study, the patients were treated with CERAMENT G in a single-stage protocol and then followed in a mean of 6.05 years. 71% of the patients entering the study had an infection caused by a previous trauma. So the study population fits very well to the priorities that we have from a business perspective. This is the first and only long-term study on an orthobiologics product, so we decided also to press release these results during September.

The conclusion of the study is as follows. The very positive results shown in previous studies with much shorter follow-up time have now been validated to remain also in the long-term follow-up. The 6 patients that had infection recurrence had surgical intervention and then remained infection free for the rest of the study period. 16 patients were identified to have infection with bacteria resistant to gentamicin, but this did not trigger any increase in infection recurrence after the CERAMENT G. This is quite remarkable and would indicate that CERAMENT G will be a powerful tool in the antibiotic stewardship and battle against resistant bacteria as some researchers already have suggested. Some more research, though, along these lines is needed to arrive at a final conclusion.

Finally, the study showed a 3% fracture rate. This is a low number. This is about 80% to 30% lower than what has been seen in similar studies previously published on other treatments. We know that CERAMENT remodels into native bone within 6 to 12 months, and this study validates the bone ingrowth.

And with that, I hand over to Hakan to please lead us through the financial part of the report.

[Håkan Johansson, executive]

Thank you, Emil. Let us go to Slide 10, please. So net sales improved from SEK 54.9 million to SEK 84.6 million, equaling a growth of 54%, or 39% in constant exchange rates. The organic growth in the segment North America measured in fixed currency was SEK 16.1 million, or 49%, confirming a continued strong growth trend, and the organic growth in Europe and Rest of World was SEK 5.2 million, or 23%. Changes in currencies, measured in [ GS year-to-date ] averages in 2022 versus 2021, had a positive impact in comparison with the second quarter last year of in total SEK 8.4 million, of which SEK 7.5 million relates to a stronger U.S. dollar. The strong sales in the quarter stemmed both from new customers, but also from expanded use of CERAMENT among existing customers.

Next slide, please. The contribution from the segment North America improved with SEK 9.9 million and [ was reported to a regional ] contribution of SEK 11.2 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 38.7 million compared with SEK 25.5 million previous year, of which sales commissions to distributors were included with SEK 17.8 million this year compared with SEK 10 million in the same period last year. The increase of SEK 5.4 million, excluding sales commissions, was driven by currency effects of SEK 2.8 million and an increased level of marketing activities. The contribution was also [ charged ] by R&D costs related to studies. These decreased from SEK 3.8 million last year to SEK 3.2 million this reported quarter.

From the lower graph showing net sales as bars and gross margin as the 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 7.3 million was reported to compare with SEK 2.4 million previous year. The improved contribution is explained by the increase in sales. [Technical Difficulty] increasing with a minor [ SEK 0.6 million ]. From the lower graph, you can see improvement in gross margin from the second quarter this year, mainly following the market mix.

Next slide, please. The operating profit was reported to a negative SEK 13.9 million compared with a loss of SEK 13.3 million for the same period previous year. The slightly larger loss is driven by expense provisions regarding long-term incentive programs amounting to an expense of SEK 9.5 million this year compared with a positive effect of SEK 2.4 million previous year. The increased cost related to the appreciation in share price compared with the third quarter previous year, but also expenses for the incentive program, LTI 2021 that was included for the first time in the fourth quarter previous year. Of the total cost for incentive programs of SEK 9.5 million in the period, only SEK 3.8 million is cash flow impacting. The operating profit improvement before the expense for the long-term incentive programs was SEK 11.3 million, confirming an underlying positive trend. In line with the AGM mandate from May this year, the share swap entered in the third quarter previous year has been settled during the period, resulting in a SEK 51 million cash contribution.

Next slide, please. Selling expenses increased with SEK 7.5 million, of which SEK 2.4 million related to currency effect. The higher cost mainly relates to a gradual normalization of market activities. R&D remains largely in line with previous quarters. Also administration remained on a stable level, excluding the effect from the long-term incentive programs equaling SEK 11.3 million, with an increase compared to last year, mainly driven by increased provision for variable remuneration as an effect of the reported sales growth and large volumes improvements.

And with that, I hand over back to Emil.

[Emil Billbäck, executive]

Thank you very much, Hakan. So let's wrap up this presentation. We'll go to Slide 15, please. So CERAMENT G has now launched in the U.S. It's the only FDA-authorized product in the category, addressing a market opportunity of USD780 million. I would say that we have a very well-functioning, far-reaching, and effective commercial organization and operation in the U.S., which I believe the year-to-date growth number of 65% for the U.S. is showing. And this is even before we have launched CERAMENT G.

CERAMENT G is clinically superior to the standard-of-care and is the only solution to enable a single-stage procedure, which we have seen in market research is clearly preferred by the surgeons. We're steaming ahead and full speed forward with our built-out European structure and expect to capitalize from the tailwinds from an all-time high pandemic-caused orthopedic backlog. There's a continuous addition of solid evidence, validating the benefits of CERAMENT technology, giving us the opportunity to further reinforce the positioning and strengthen the market penetration. At the recent Capital Markets Day, we shared our confidence on the annual sales target growth of 40% until 2025.

And with that, I would like to conclude this presentation and open for a question-and-answer session.

[Operator]

[Operator Instructions] We take the first question from Erik Cassel from ABG.

[Erik Cassel, analyst]

So U.S., obviously, stands out as very strong this quarter. And you've mentioned several times, both the inflow of new customers and more use from previous ones as well. But I was hoping that we could delve into the dynamics of this a bit more. Could you potentially quantify how much of the growth that was driven by new customers in the U.S. this quarter?

[Emil Billbäck, executive]

Erik, yes. Thank you so much for your question. Indeed, we're seeing a strong momentum right now in the U.S. And as you concluded also, referring to what we expressed in the report this morning, it comes from new customers gained and more usage within existing customers. We have chosen not to go down to that detail in the information we released. We can just conclude that the recruitment of customer has been greater in quarters 2 and 3 than it was during quarters 4 and quarter 1, when the market access was hampered by the Omicron pandemic. And we can also conclude that we see a slightly better uptake in elective procedures in the U.S. than what we have seen in Europe. So I think with that explanation, we give a little bit more flavor to the strong growth that we have seen. But we will not go down to the individual single KPIs of the business.

[Erik Cassel, analyst]

Okay. But is it possible to say if new customers was a bigger factor than existing ones when it comes to growth? Is that too much as well?

[Emil Billbäck, executive]

Yes. We prefer not to go down to that level because we don't want to set a precedent where we, at every quarterly report, will go into those discussions. So maybe at a future Capital Markets Day, we will have that detail, but not now.

[Erik Cassel, analyst]

Okay. Understand. But just as a follow-up, considering the buzz around CERAMENT G now in the U.S., do you think these added BVF users have started using BVF in the interim temporarily before making the switch over to CERAMENT G before that's available to them? Or do you think there's something else?

[Emil Billbäck, executive]

Yes, that's a good thought. I believe there's some merits to it. I believe that when we announced the approval of CERAMENT G in May, and our presence -- our very self-confident presence, I would say, at exhibitions and events during the entire summer has probably increased the awareness for the technology in total. We can see that there are customers that have noticed us because we are the first ever to get such a market authorization and some of these customers have started using the Bone Void Filler. And I'm confident also that in due time, we will have the chance to visit these customers and also make a proposition of CERAMENT G to them.

[Erik Cassel, analyst]

Okay. And then first, procedures with CERAMENT G in the U.S. about a week ago. I know this is still early days, but could you perhaps comment on the current run rate of procedures using CERAMENT G and how that's ramping up? And potentially, do you think it's feasible that you sell more than 150 units in Q4, or what sort of run rate do you think we should be looking at?

[Emil Billbäck, executive]

I think this is the million-dollar question in many aspects. We're trying also to look at how the product has been used and make conclusions out of it. It's way too early. What I can comment on and what I'll share is we have seen use in several different hospitals in several different states. So it's not just one hospital that has started using CERAMENT G. The product has been wanted. There were a handful of surgeons that were specifically requesting to get the product for specific surgeries that they were undertaking.

All the procedures have gone very well. And when I say that, I refer to how the product was applied and the experience that the surgeon had with the product. Comments that we received was that it was easy to handle, that it was a very neat and effective application, that the product performed well in the patient. But then, of course, we need to see on a more long-term, 6 to 8 weeks follow-up, to see that also the patients are doing well. At this stage, it's way too early to make any conclusions on the ramp-up as we've seen a few days have had many surgeries, and then the next day, there could be maybe none.

So our promotion work now is to go from clinic to clinic, hospital to hospital, and surgeon to surgeon and introduce the product. I want to emphasize there is no surgeon that's going to start using CERAMENT G before they have met their representatives. That is somehow the dynamic in the orthopedic industry. They would like to have an instruction on the product, they would like to sit down with the sales representative, and go through how the product is mixed and applied. And after that, the surgery takes place maybe within a couple of days, and that's when we can invoice the product and see the sales.

So let me come back on this, Erik. We are as eager as you are to interpret the observations. Unfortunately, it's a little bit too early still.

[Operator]

The next question comes from the line of Mattias Vadsten from SEB.

[Mattias Vadsten, analyst]

The early days with CERAMENT in the U.S. And many [ thoughts ] already asked before. But have you had many interactions would you say with potential customers around CERAMENT G that currently are not using CERAMENT BVF? And then through that, can you please remind us here on the dynamics around the NTAP in the U.S., which, of course, is encouraging. How much of -- which share of patients is this attributable to and the duration of it, that would be my first one.

[Emil Billbäck, executive]

Yes. So early October, I was in Tampa, Florida. It was the Orthopaedic Trauma Association. We had a breakfast seminar with one very well-known European surgeon and one U.S. surgeon, and we had a full house. The meeting room was full. So the answer is, yes. There were a lot of surgeons interested in CERAMENT G that we have not met before, that we had not had contact with before. So it was a very good meeting. And CERAMENT BVF is a unique technology in itself. But understandably, when you add gentamycin, and it's the only one with market authorization, it renders a new level of excitement and interest. And exactly how many new customers this could generate, yes, all of that, let's say, in terms of KPIs, it's too early to have a view on.

On the second, you asked about the NTAP. So the NTAP is the CMS incremental reimbursement for new technology that applies to Medicare. It doesn't apply to Medicaid, but it applies to Medicare. And it's difficult to say how big part of the population it covers because it all depends on how many of the private payer providers that would acknowledge it. We already have several of the private payers, insurance companies, that have reached out and in written have confirmed that they will follow the same guidelines as CMS and apply the NTAP.

So I think one could say that it's anywhere between 20% and 33%, 34% of the U.S. population that could be covered. But I don't think there's any really good data on it. The population covered, though, are usually the ones with the highest need of care. So this group of the population consumes significantly more health care than the rest of the population. But admittedly, it's difficult to find good data on it. I think we can just conclude right now that CMS has given a very favorable reimbursement for CERAMENT G for those patients that have the worst conditions, the poor and the elderly population.

The NTAP is validated for 2 to 3 years, and it depends on negotiations with CMS and what impressions are given by the surgeons that have used it for treatment. So that's why also we are very pleased to get started with the post-market surveillance study to connect the solid evidence on what are the outcomes of treating patients with CERAMENT G in the U.S. So we feel we have a good basis of collecting evidence and then it will be a matter of discussion and negotiations. Sorry for the long answer, but I hope I addressed your questions.

[Mattias Vadsten, analyst]

I think that's helpful. And then I heard your comment on U.S. doing better in terms of market recovery, but how would you say the number of orthopedic procedures in the U.S. stack up versus prior to the pandemic, given the comments you do on Europe? And you saw a strong momentum and that it increased also somewhat maybe in Europe, but to which regions do you see this being most attributable? I understand this question may be tricky, but some flavors anyway would be good I think.

[Emil Billbäck, executive]

Yes, sure. No, I don't have a problem to speak about that. But I want to emphasize that the sources I have are most of it in public domain and then our own estimate. So while Europe is between 5% and 15% below pre-pandemic levels, where we have seen the strongest leaps towards a post-pandemic, more normalized stage is U.K. and the Nordics and less so in the -- in Germany, and also a bit staggering in Spain. And it coincides a bit with how the authorities have responded to the incidence rates jumping up and down -- moving up and down during the quarter.

I would say that the U.S. is more or less back on pre-pandemic plus/minus maybe 2%, 3%. The U.S. has a much stronger financial incentive to find ways around staff shortages and pandemic limitations, while the labor market in Europe is a little bit more [ sclerotic ]. So there's been a greater momentum in the U.S. clearly.

[Operator]

Our next question is from the line of Kristofer Liljeberg with Carnegie.

[Kristofer Liljeberg-Svensson, analyst]

On the sales commission terms, are they different in anyway for CERAMENT G versus the BVF in the U.S.?

[Emil Billbäck, executive]

No, they're the same. It's around 30% on sales, given -- and it can fluctuate a bit on performance. So the range should be somewhere between 28% and 33%. Those distributors performing very well can reach up to 33%, and it's the same structure for the BVF as well as CERAMENT G.

[Kristofer Liljeberg-Svensson, analyst]

Okay. And do you think it has been rather stable around 31% of U.S. sales lately? Do you think that will change with this launch, that more of those sales reps will be more successful as they have 2 products to sell or anything like that?

[Emil Billbäck, executive]

I don't know really. It's difficult to answer. I see a lot of excitement from the distributor reps in the U.S. So I think the one effect we will see is probably not on the commission moving so much. I think it will be rather stable around 30%, 31%. Every year we set new quotas. So we're also raising the ambitions, of course. I think the biggest change we'll see is that probably more distributor sales reps will be actively selling. That's also what we're pushing for. So before, we had around 375, and I think this number will increase. And hopefully, in the next quarterly reports, I can come back to a higher number and also share with the market.

[Kristofer Liljeberg-Svensson, analyst]

Okay. That's very clear. A lot of focus on the U.S., of course. But what about Europe? Is there anything you could do here in the next, let's say, 12 months to try to support growth? Or are you more dependent on the overall market development, hospital access, et cetera?

[Emil Billbäck, executive]

So we -- thank you. It's a good question. We're quite known also for being innovative when we are finding ways of getting to the market. So when the pandemic broke out, we were very quick on arranging webinars and digital communication. So the activity level is high in Europe. We are contemplating also ways of boosting our performance further in the U.K. and other markets where we see that the market has opened up a bit. When it comes to the most restrictive market in Europe right now, which is around, say, Switzerland and Germany, the activity level is high, but the access to the decision-makers remain impaired due to the restrictions. And here, we will continue to push with high pressure, but I think the interactions with those opinion leaders and decision-makers will only come to an increased status once we also see the restrictions being further lifted.

[Operator]

Our next question is from the line of Sten Westerberg from Analysguiden.

[Sten Westerberg;Analysguiden;Analyst, analyst]

Yes. A question on the osteomyelitis study that you released recently and the fact that gentamicin-resistant patients did not suffer compared to non-resistant. Is this a chance finding, or is it a claim that you actually can go after in future studies? Another question related to the studies. You mentioned the conservative hospitals looking for more evidence now. To what extent do you see a nonrandomized study leading up to their expectations? How do you rate the evidence of this kind of nonrandomized study at the conservative hospitals that you were referring to?

[Emil Billbäck, executive]

Thanks, Sten. Yes, good questions. So let me comment on that. The long-term study on bone infection was not released by us. It's an investigator-led study. We have not sponsored it. So this has been triggered by the hospital and the [ Science Foundation ] by itself. Just want to make that clarification. It's not our study. It's the study independently derived at by the centers.

We cannot use claims, I think, until further data and studies have validated and somehow confirmed how should we position ourselves towards this highly-interesting fact that the patients with gentamycin-resistant bacteria had an equally good outcome as other patients. So this is very intriguing, of course. And I do believe that there are a few clinical studies in the works that will provide further pieces of the puzzle here. So today and now, I think we just take it as a very intriguing finding. And exactly how we can use this, I think we have to come back to that when we have validating studies that gives a proper scope to this. But I agree, it's very interesting, of course.

And how do the conservative hospitals react to this? Well, the conservative hospitals, many of them are in the Continental Europe, of course, hospital systems that have long, long experience of using autograft and claiming that in order to switch to a synthetic product, they need to see long-term studies. I believe that even though this a prospective study but not randomized with a control group, it has significant value because you want to see that the positive effect continues over time. You don't -- there's no point really to compare it to another treatment over time because there's already plentiful of experience with the standard-of-care. So I think it actually holds high merits also to show that the infection eradication is long lasting and that the bone remodeling after 6 to 12 months is validated by the very low fracture rate. So I think the study will be quite important to some of those hard-to-convince hospital systems in Central Europe.

[Sten Westerberg;Analysguiden;Analyst, analyst]

Okay. A last follow-up. Regarding the 16 patients with gentamicin resistance, can we rule out that this is a chance finding?

[Emil Billbäck, executive]

It's not a chance finding. More data is required to make strong conclusions, but the study has been produced with statistical significance to prove the point that they're making.

[Operator]

[Operator Instructions] Our next question is from Oscar Bergman with Redeye.

[Oscar Bergman, analyst]

Congratulations on your report. You keep on beating my estimates, so it's getting more difficult to keep up. I have a few questions. First off, I'm wondering if you can give some information about the health economic model analysis in the U.S. and also on the SOLARIO trial, if the publication is still expected in the first quarter of 2024.

[Emil Billbäck, executive]

Yes. Thank you, Oscar. And yes, I guess I apologize for beating your estimates. When it comes to the health economic study in the U.S., we have been accepted for publication, which is very positive. We're very happy with that, but it also means that I cannot talk about the results until they have been published, unfortunately. So I will have to come back on this.

The SOLARIO is progressing as planned, and this study is managed, initiated, and executed by the EBJIS. So it's not under our control, even though we are -- this is one of the studies we're sponsoring. And everything is on plan to the time plan communicated. Everything is in line with the time plan communicated. So there's no deviation to what we have communicated before.

[Oscar Bergman, analyst]

Okay. And then in the EU, I'm wondering if you can give some ballpark figure of Germany sales and how hospital customer access has improved hopefully in the Q4.

[Emil Billbäck, executive]

There has been -- we're almost 1 month into quarter 4, and there is no change in customer access. So it remains in Germany, specifically on the same level as quarter 3. And yes, while sales is growing in Germany for us, for CERAMENT, the customer recruitment, getting new customers is slightly below expectations. And I must say I have a great sales team in Germany. It has nothing to do with them. It simply has to do with the difficulties of getting to visit the decision-makers. So as an example, most of the hospitals in Germany require a COVID test the same morning from our sales rep before they have the chance to come to the hospital. The sales reps are only allowed in if they have a special permission from the surgeon that is going to conduct the surgery. So the ability to meet with potential new customers is limited given also the model that we have where we arrange group meetings where experienced surgeon speaks to less experienced surgeons. And when I say experienced, I mean with CERAMENT, of course. So yes, the situation is still a bit constrained in Germany in terms of free access to the decision makers.

[Oscar Bergman, analyst]

Okay. And then the hybrid markets in Europe, are sales not yet there where you would wish them to be, or are things moving slowly, or what's your take on the hybrid markets?

[Emil Billbäck, executive]

I'm very pleased with the hybrid setup that we have in Southern Europe. And it shows that we have increased the activity level, we have increased the customer base, and also the interactions with the prominent surgeons. And then what we start to see now in those markets is more or less the same traction as we have in some of the direct markets when they were in early stage. So it's definitely a model that I feel pleased with.

[Oscar Bergman, analyst]

Okay. And my final question. U.S. surgeons, are they likely to wait maybe 8 weeks after first 100 patients have healed or are they more likely to start using it at a higher rate from the beginning?

[Emil Billbäck, executive]

That's a difficult question because it depends very much on surgeon by surgeon. What we can see is that some of the surgeons that use the product late last week have already used it again, and 1 or 2 of them have not used it again. So I don't know how to interpret that. I think they're less likely to wait for 6 to 8 weeks if they feel that the product performed really well, and there was good progress during the application. Then for sure, there will be surgeons who will be more cautious and do it more maybe in the European way, that you treat a patient, you wait for the follow-up, you look at the x-ray before you decide to use the product again. So you will find all kinds of variations here.

[Oscar Bergman, analyst]

Okay. And then it's a final question before I head back into the queue. I believe one of the other analysts talked about this as well. You said that some days, there are many surgeries and some days, there are no surgeries. Just wondering what you define as many surgeries in 1 day with CERAMENT G specifically then?

[Emil Billbäck, executive]

So I will not give such a number. I just used it as an example that when you start a launch of a product, it's in surgery, in orthopedic surgery. It doesn't come with big bulk orders. It comes with sales only when a patient had surgery on. And some of our most dedicated surgeons might be in the field of 1trauma. And you can't really control if patients are coming in from a car accident some days, which is very fortunate, people are staying on the right side of the road, and everything is fine. So that's more how this should be interpreted.

And regarding the detailed KPIs on CERAMENT G, it's something we have to come back to because there is a risk that we over interpret results in either direction right now. So when we report our quarter 4, hopefully, we can share a little bit more details also to provide input and insights.

[Oscar Bergman, analyst]

And once again, congratulations.

[Operator]

Our next question is from Mattias Vadsten from SEB.

[Mattias Vadsten, analyst]

2 more on hard-to-convince hospitals that want the long-term benefits and infection eradication is long-lasting. What timespans are we generally looking at here in your discussions, just to improve the understanding for us?

[Emil Billbäck, executive]

Do you mean what time -- sorry, explain again, which time are you asking for?

[Mattias Vadsten, analyst]

How long-lasting effect or how long data they want to see to be sure that the product makes sense to switch to, the conservative ones that have a hard time believing that it works.

[Emil Billbäck, executive]

Okay. Yes. So before the data that existed in well-published study had a 2-year follow-up. Then when we produced the material for FDA, this was extended to between 4 and 8 years. That data has now been cleansed even further and matched to make up the publication that was done last month -- sorry, last quarter. The last infection that took place in that study population was after 4.5 years. And after that, there was none. So I think this is very convincing data. And it has a mean follow-up of 6 years, and the patient followed the longest was 8 years. And this, I can tell you, is more than enough. So this is very strong data. And I think there's not even the most conservative doctor that can say I need even more long-term data because then I would simply ask, well, what do you compare to because such long-term data doesn't exist on anything else that that surgeon is using.

[Mattias Vadsten, analyst]

Understood. Good. And then maybe one on [ nitty-gritty one on ], working capital was positive here in Q3. Should we expect a negative development in Q4 as a result of CERAMENT G maybe on inventories or any other impacting factors that you can see in Q4 that we should think of?

[Emil Billbäck, executive]

Sorry, we had a little bit of technical difficulty now with a bad connection. I did not fully hear your question. I apologize. Could you please repeat it?

[Mattias Vadsten, analyst]

Yes, it was a nitty-gritty one on working capital changes that was positively impacting your quarter 3. How should we expect that to develop in quarter 4? If there are any driving factors that we should think of.

[Håkan Johansson, executive]

No, there are no specific factors. And again, and if you look somehow on working capital in relation to revenue over time, somehow it's keeping itself somehow around an average [ 15% ] with some volatility as is normal when you're in a business that has substantial growth. But again, there will be no specific factors impacting.

[Operator]

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Emil Billback for closing remarks.

[Emil Billbäck, executive]

So yes, for me, it only remains then to thank everyone for joining the third quarter presentation for BoneSupport, and I wish everyone a great time until we meet again. Thank you.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.