Bonesupport Holding AB

STO:BONEX

Earnings Call Analysis

Strong Sales Growth Reflects Robust Demand

In Q3 2024, Bonesupport reported sales of SEK 238 million, representing a remarkable year-over-year growth of over 50%. When adjusted for constant currency, the growth was slightly higher at 54%. This surge in sales can be attributed primarily to the strong performance of CERAMENT G, which grew by 114% year-over-year in the U.S., now accounting for 50% of total sales for the quarter. Such momentum indicates a solid market acceptance and demand for their products, especially in the orthopedic segments.

Record Operating Results and Cash Flow

The company achieved an operating profit of SEK 41 million, an increase of SEK 26.1 million compared to the same quarter last year, showcasing the impact of heightened sales on profitability. Furthermore, Bonesupport enhanced its cash position by SEK 39 million, leading to a total cash balance of SEK 153 million, which is vital for supporting ongoing operations and future growth initiatives.

SOLARIO Study: A Game-Changer in Antibiotic Treatment Protocols

A breakthrough highlight during the quarter was the announcement of positive results from the SOLARIO study, which has shown that using CERAMENT G can significantly reduce systemic antibiotic treatment duration from over a month to less than a week, without increasing the reinfection rate. This represents a potential shift in treatment protocols, with implications for patient care and antibiotic resistance—a pressing public health issue. The study is expected to foster wider clinical acceptance and adoption, leading to increased product usage.

Market Penetration and Future Growth Strategies

Bonesupport is gearing up for further expansion in the spinal fusion market. Insights indicate that 57% of spinal surgeons see infection as a significant issue, presenting Bonesupport with a substantial opportunity. The anticipated market entry for CERAMENT in this segment aligns with the company’s strategy to broaden its product offering and capitalize on unmet clinical needs. Discussions on the timelines for market entry are in progress, promising additional revenue streams in the near future.

Increased Sales and Marketing Expenses Reflective of Growth Initiatives

Sales and marketing expenses rose to SEK 102 million from SEK 67.6 million the previous year, driven by increased commissions and efforts to expand market reach. This investment is viewed as essential for sustaining growth in sales and maintaining competitive advantages in the fast-evolving market landscape. Hence, these expenses, while elevating costs in the short term, are expected to yield significant long-term benefits.

Optimistic Outlook on Continued Growth

While Bonesupport refrained from providing specific revenue forecasts, the management expressed confidence based on observed trends. The company noted that all three quarters of 2024 recorded sales growth in excess of 50%, and they foresee ongoing strong demand driven by the successful integration of CERAMENT G into broader surgical applications, particularly trauma and outpatient settings. The positive surgeon feedback and ongoing training initiatives signal further sales uplifts in the coming quarters.

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to Bonesupport Q3 Report 2024. [Operator Instructions]

Now I will hand the conference over to CEO, Emil Billback; and CFO, Hakan Johansson, please.

[Emil Billbäck, executive]

Thank you, operator, and welcome everyone to Bonesupport's quarter 3 2024 results call. My name is Emil Billback, and I'm making this broadcast as always together with Hakan Johansson, our CFO by my side. So we will use the next 25 minutes to guide you through the presentation of the third quarter results, and then we will open up the line for question and answers. But before going through the presentation, we would like to draw your attention to the disclaimers covering any forward-looking statements that we will be making today.

So let's start the presentation and go to Slide 3. I would like to start the entire presentation with some condensed highlights from the report that we released this morning. So overall, quarter 3 results sales were at SEK 238 million, which corresponds to a reported growth of over 50% year-over-year. In constant exchange rate, the growth was 54%.

The strong sales resulted in a record operating results. Before incentive provisions, the operating results was SEK 48 million. The reported EBIT was at SEK 41 million. The positive development resulted in a strong organic cash boost of SEK 39 million to SEK 153 million.

Now before moving into the details of the report, let me quickly cover the highlights of the quarter. The SOLARIO study has been running for more than 4 years, and hearing the positive outcome at a packed auditorium at the European Bone and Joint Infection Society's annual meeting was a personal milestone highlight. Several leading representatives for the EBJIS proclaimed that this is a game changing study that will lead to modified treatment protocols. I will come back to SOLARIO later in the presentation.

We're making good progress in our preparation for this Spinal Fusion market entry, and we will provide a short update and stages in today's call.

Finally, I would like to highlight that CERAMENT G in the U.S. is taking significant market shares, reaching sales of SEK 134 million in the quarter. We continue to see that existing customers continuously increase their use, and in addition, new users are constantly being added. So let's go into the presentation.

I will go to next slide where we will look at sales development. So this chart shows last 12 month sales in Swedish currency every quarter since early 2017 in stacked bars per region and product category. In this slide, the strong launch momentum for CERAMENT G in the U.S. is becoming very graphically visible. CERAMENT G in the U.S. grew 114% year-over-year in the quarter, and the sales value of CERAMENT G in the U.S. is actually now making up 50% of the total sales in the quarter.

As we are broadcasting this, we are at the North American Orthopedic Trauma Association meeting in Montreal, which is also coinciding with our launch conference for the Open Trauma Indication.

As CERAMENT G has only been market authorized for open trauma in the U.S. since March of this year, we have not had close interactions with orthopedic trauma surgeon before. There are between 9,000 and 10,000 orthopedic trauma surgeons in the U.S., and we expect to establish many new relationships at this congress. For those interested in listening to some early experiences from CERAMENT G in trauma, I would recommend the podcast on Bonesupport's LinkedIn with 3 very prominent traumatologists sharing firsthand experiences of CERAMENT G.

All in all, our top-line is advancing with a solid and steep trajectory as CERAMENT is rapidly taking market shares from other treatment options and seemingly is even expanding the market. It is mainly the antibiotic diluting CERAMENT that is driving the development with, in total, 81% sales growth across the 2 regions in quarter 3 2024 versus quarter 3 2023.

Let's now go to North America on the next slide. So sales of SEK 192 million in the quarter corresponds to a reported growth of 59% year-over-year and 63% at constant exchange rate.

Now there were many highlights in the quarter. So in September, the NTAP reimbursement request for CERAMENT G in open trauma was submitted to the CMS. The combination of easy handling, ability to do a 1 stage procedure, ability to mimic natural bone healing, and the illusion of local gentamicin over more than 30 days appeals strongly to the U.S. surgeons and the orthopedic clinics. These key points are the main reasons for the fast and strong sales ramp up.

In addition, though, the avoidance of bone infection and the avoidance of amputations are also incentivized through the regular U.S. reimbursement system, which penalizes failed procedures, also called modifier 78. That's the code for a failed procedure.

The number of surgeons and nurses being trained on and using CERAMENT G is constantly increasing. We are progressing well with hospital system approvals with a total of 145 listings for CERAMENT G at the end of quarter 3.

Our focus right now is actually to strike a balance between adding hospital system approvals and training the surgeons and nurses in the hospitals where a listing has been accomplished. We have to train surgeon by surgeon and nurse by nurse ahead of using the product.

A positive dynamic, though, is that surgeons that use CERAMENT G in 2023 and early 2024 have followed-up on their patients and are sharing positive feedback and testimonials that they see the same positive outcome as have previously been displayed in many published clinical studies on CERAMENT G. This gives a very positive endorsement, and we are receiving an increasing amount of surgeon-to-surgeon referrals for CERAMENT G. So while we have been busy trading surgeons for the last 23 months on CERAMENT G, we have only scratched the surface of the full opportunity. As an example, we have just surpassed 1,000 surgeons trained on CERAMENT G, and there are over 20,000 orthopedic surgeons in the U.S.

Another interesting market dynamic that we would like to share with you is that approximately 10% to 15% of the surgeons that have started to use CERAMENT G in the last 12 months have previously not used any local antibiotics in their bone graft surgeries for extremities as, historically, there were no FDA approved alternatives. This is an early-stage observation, but an interesting one pointing towards CERAMENT G as a driver also of market expansion. Several market investigations have shown that the use of local antibiotics in Europe is estimated at almost 10 percentage point higher than in the U.S. But possibly, we see some first tendencies of the U.S. moving in the European direction.

And finally, a few mentions on our preparations for the future entry in the Spinal Fusion segment. So in preparing for the market entry into the Spinal Fusion, we have conducted several different activities to further map the market dynamics and determining factors for surgeons' choice of technique and material. Overall, what we see is that from the market insight is that a large part of the surgeons have concerns for infection among and after a Spinal Infusion. 57% of the surgeons regard infection following the fusion surgery as a significant clinical problem.

The use of local antibiotics has become an unregulated and off label standard of care used in between 35% to 40% of all the Spinal Fusion procedures. And we are making good progress in running several preclinical studies to build applications, instructions, and handling manuals for the various different techniques in Spinal Fusion, and we hope to share some first data from these at the quarter 4 report in February next year.

But now let's turn to Europe and rest of the world. So for the quarter, we saw sales of SEK 46 million corresponding to a reported growth of 22% year-over-year and 21% at constant exchange rate. We're seeing good progress in EUROW where CERAMENT is capturing market shares in more or less all markets for present. However, there was a higher than expected negative seasonality impact in quarter 3, which was exacerbated by healthcare staffing disruptions in many areas. This resulted in fewer surgeries in general compared to the previous quarter as well as slightly challenging market access for our sales representatives.

Looking at this quarter's highlight, CERAMENT V was approved for market introduction in Canada. And CERAMENT BVF and CERAMENT G are already being sold in Canada through distributors, and the business is developing well. With the addition next year of CERAMENT V, we believe that the market potential will increase further, and we have therefore decided to mirror the successful implementation in Spain and Italy. And we're now recruiting to also make Canada into a hybrid market with both distributor reps and old staff on the ground.

The largest highlight is, of course, that SOLARIO study met its primary endpoint, showing that bone substitutes with local antibiotics enables reduced systemic antibiotic treatment. Let's go a bit more in detail into this SOLARIO study. So being able to reduce systemic antibiotic by using CERAMENT G or V could have a profound effect on the fight against antibiotic resistance as well as significantly reduce the challenging side effects associated with systemic antibiotic treatment. This is why this study is so important.

Only top-line results from SOLARIO has been released so far, so we should expect the full length article to publish sometime during next year, upon which we will have more data and details about adverse events and the full cost analysis. However, based on what we've learned from the top-line results, these results are indeed spectacular.

The standard protocol around the world in a patient with bone infection is to ordinate more than 4 weeks of systemic antibiotic. And in many times, this treatment will last and continue for 6 to 8 weeks. The healthcare practitioners are well aware of the difficult side effects and the high cost of this treatment, but it has been seen as a necessary evil to manage the bone infection.

The SOLARIO study challenges the existing protocols as it shows that antibiotic eluting bone fillers enables a systemic antibiotic treatment for less than a week without any increase in reinfection rate. This has significant and material effect on the side effect as visible on the graph to the right. It should be mentioned that these adverse events and side effects are in no way trivial. They're causing a large amount of patients suffering in [ cost for ] society.

Severe events in -- severe adverse events in the study were classified as life threatening or requiring hospitalization or resulting in persistent or significant disability. To further understand the seriousness of the adverse events to treat an episode of nephrotoxicity, which is influencing between 5% up to 20% of patients on a long-term Vancomycin treatment, could easily cost up to 15,000 USD. We know also from protocol and available data that 1 week of intravenous antibiotic combination treatment cost up to 3,500 USD in the U.S. and around GBP 1,600 in the UK.

If we take a U.S. reimbursement perspective on treatment failures and adverse events, so if these happens within 30 days after the index surgery, they are categorized as failures, which is also called modifier 78. The reimbursement for the follow-on treatment of the patient then drops with 20% to 30%.

The antimicrobial resistance is one of the greatest public health and development threats. The misuse and overuse of antimicrobials in humans, animals, and agriculture are the main contributors to the rise of drug resistant pathogens. According to the antimicrobial resistant review report, in 2050, as many as 10 people could die each year due to antimicrobial resistant. And the World Bank has estimated that enormous cost will be associated with the antimicrobial resistant.

So on that rather apocalyptic and dramatic note, I would like to hand over to Hakan.

[Håkan Johansson, executive]

Thank you, Emil. So let's move to Slide number 9. Net sales improved from SEK 158.2 million to SEK 237.5 million equaling a growth of 50%, or 54% in constant exchange rates. Emil has already spoken about strong performance and the major drivers behind the sales acceleration.

The contribution from the North America segment improved with SEK 32.8 million and amounted to SEK 79.3 million. The improved contribution relates to increased sales after effect from increased costs.

Sales and marketing expenses during the quarter amounted to SEK 102 million compared with SEK 67.6 million previous year, of which sales commissions to distributors and fees amounted to SEK 65 million compared with SEK 42.2 million the same quarter last year. From the lower graph, showing net sales as bars and gross margin as the orange marker, it can be noted that the gross margin remains strong and amounted to 94.7%. The drop from the second quarter this year, all in all, relates to a weaker U.S. stock.

In Europe and rest of the world, a contribution of SEK 15.6 million was reported to be compared with SEK 9.3 million previous year. Sales and marketing expenses increased with a minor SEK 0.3 million, dropping compared with the second quarter this year and following seasonality. From the lower graph and orange marker, you can see the gross margin remaining stable.

The increase in selling expenses reflects investments in the organization, but also investments in systems to improve customer handling and inventory management to stay ahead of the increasing demand. The slight reduction compared with the second quarter this year follows normal seasonality. As presented at our Capital Markets Day in November, R&D is focused on the execution of strategic initiatives such as Spinal Fusion and the planned market authorization submission for CERAMENT V in the U.S. These initiatives have been progressing well during the quarter, which also explains an increasing spend. And administration expenses, excluding the effect from the long-term incentive program remain on a stable level, however, impacted in the period by temporary resources.

To sum up then the financials, the reported operating profit amounted to SEK 41 million an improvement of SEK 26.1 million compared with the same quarter previous year. This follows the strong sales performance despite unfavorable currency effects in the period and despite the investments made in our commercial platform and in innovation.

The difference between the adjusted EBIT and reported EBIT operating result are cost regarding our long-term incentive programs, amounting to an expense of SEK 7.3 million in the quarter compared with SEK 9.7 million previous year, as you could see from the previous slide. With a total cost of SEK 7.3 million in the period, only SEK 1.9 million was cash flow impact.

With strong momentum in our sales, increase in our safe to stock of raw materials and semi-finished products were made during the first half of this year. As we have now reached satisfactory levels of inventories, we see a strong cash flow returning, improving cash balance with SEK 39 million during the quarter.

So with this, I hand back to Emil.

[Emil Billbäck, executive]

Yes, thank you very much, Hakan, and We're going to wrap this presentation up. We're of course very pleased with the quarterly performance and the continuous solid trend. All 3 quarters in 2024 have shown sales growth well above 50%, and we see solid and robust sales trending over the past 24 months.

The current market penetration is strong and anticipate -- we anticipate further future sales enablers to play out with a milestone SOLARIO study, the entry of CERAMENT G in open trauma, and the future entry into the Spinal Fusion segment. Thanks to its clinical superiority over standard of care, CERAMENT is constantly increasing its user base and enabling surgeons to achieve a better patient outcome.

With that, we close our presentation, and we'd like to open the line for questions.

[Operator]

[Operator Instructions] The next question comes from Mattias Vadsten from SEB.

[Mattias Vadsten, analyst]

I have some questions here relating to SOLARIO to begin with. I think there are all reasons there is to lower the use of systemic antibiotics and instead use the CERAMENT G and V. We also know changes are slow out there, especially in Europe. And I think you talked about treatment protocol changes here in the presentation, Emil. But what can you share in terms of speed at which behaviors will change? And maybe also comment some -- on some of the dynamics in the U.S. for a bit as well. That's the first one.

[Emil Billbäck, executive]

Thank you. Thank you, Mattias. And thanks for joining us today. Yes, unfortunately, I'm probably not well positioned to speak about speed as when I joined Bonesupport and I discovered this great technology, I thought the success would come even faster. But eventually, results came, and it's difficult to predict how long time will it take this time to actually change old behaviors at a rather conservative customer group.

You mentioned also, U.S., and possibly there's a difference between U.S. and Europe. I think that this change will be facilitated over the fact that the study is not our study. It is the study of the European Bone and Joint Infection Society, who has members all across Europe and also some in the U.S.

The second point, I think there's a general trend which is communicated also as an advanced direction by the United Nations, WHO, to have a more balanced use of antibiotics as the current path is unsustainable. So a change is demanded.

And lastly, what we see, Mattias, many times in the U.S. is that they're slightly faster to jump on topics with strong clinical and scientific evidence if it also has financial impact on the healthcare system. So they're more -- of course, they care most about the patient, but they also have a more monetary consciousness. And I believe that there's not a single orthopedic surgeon that have not experienced the patient suffering and also the financial impact of a patient coming back with nephrotoxicity or hearing loss or red man syndrome, which has also costed large amounts to treat these adverse events.

No one has taken really the strong initiative to reduce the systemic antibiotics before because there was no data, and no one wanted to be first to do it and have the risk of setbacks. Now there is data in one of the biggest published studies in this domain. So hopefully, these are levers that will be justifying a faster change of protocols than what we have seen historically. Because historically, it's been a bit discouraging on how quickly or rather how slow it is to change these protocols.

[Mattias Vadsten, analyst]

I appreciate it. It's a difficult question, but good flavor. And I think secondly then to this topic as well, local antibiotics use, let's just say 38% of extremity surgery with bone graft in the U.S., or 47% in Europe according to this analysis.

And even tougher question than what share in your world should use local orthodontics, let's say, long-term?

[Emil Billbäck, executive]

I think this, the number is going to rise both in Europe and in the U.S. We see that there's constantly a trend away from autograft, allograft to more [ as ] to synthetic graft. And given the overwhelming evidence available, now including SOLARIO, I wouldn't be surprised if the use of local antibiotics as a first step will go up to 60% of the procedures, but could potentially continue after that.

[Mattias Vadsten, analyst]

I will limit myself to one more before jumping back to the queue. It would be great to hear you talk a bit about the performance of early adopters and the initial customers in the U.S.? And if and if you could give a feel for how sticky the customer base is, it seems very sticky, and how much of stop and go you're experiencing right now? And also, maybe the typical question of commenting a little bit on growth that you see coming from previous customers and the share that is coming from incrementally new customers. That's my last one for now.

[Emil Billbäck, executive]

Yes. So we are fortunate to work with a fantastic product. We are unfortunate that we are in a dynamic that the surgeon, first of all, when using the product in a surgery, can only assess the handling and the applicability capabilities of the product. It takes 3 to 6 months before we get the final verdict and we get the SMSs or WhatsApp messages or emails from the surgeon saying, wow, I have I have achieved great results. So there's a time lag and we know that if we lose a surgeon that have started to use CERAMENT and they stop using it, it is in the 1st 6 months before they have seen the final results of the bone remodeling, and they've seen that the patient is infection free for the entire treatment period.

What is also an interesting dynamic here now is that those surgeons that are very meticulous and have followed up their patients and also documented it, they see almost the same results as these very well controlled studies that have been made both in the U.S. and Europe. So the product works. It doesn't only work in the hands of prominent surgeons in university hospitals. It also works with the common orthopedic surgeon struggling with challenging indications day to day.

The dynamic also is such that no one will use a new product like this before they have been trained. So even though a lot of people have read now about SOLARIO, so SOLARIO is sending some shock waves, I would say, around the world, and people are aware of it. People are still not going to start using CERAMENT G until they have had the training. So it's a rather tiresome work. And I mentioned in the call that we've trained a bit more than 1,000 surgeons of 20,000. So it can feel like an endless journey almost. But we know that the ones that have been trained and are using it, the loyalty to the product and the loyalty to producing better patient outcome is very high. So we feel very confident and energetic on this journey going forward.

[Operator]

The next question comes from Kristofer Liljeberg from Carnegie Investment Bank.

[Kristofer Liljeberg-Svensson, analyst]

I have 4 questions for it to be shorter. But first one -- first to be on SOLARIO. So of the patients receiving antibiotic or systemic antibiotic treatments, is that typically intravenous or could it also be oral because you mentioned that the cost of treating intravenous?

And then on proportion of patients that we see local antibiotic or treated in local antibiotic, was that for extremities oral one? Do you know what figures for bone infection specifically? So those 2 related to SOLARIO.

And then, just a question for working capital as a percentage of sales, where you think that will be over time? It has fluctuated a bit here up and down early in the launch. And then I just wonder about the MCAP and -- or actually, the outpatient segment, how much is that contributing to growth now?

[Emil Billbäck, executive]

Yes. Thank you very much, Kristofer. So there was a little bit of distortion on the line on the first question. I actually could not hear the full context. I don't know if you heard it, Hakan. Could you help me? Or otherwise, I have to hear it...

[Håkan Johansson, executive]

The first question was on how the antibiotics was distributed to the patients. I mean, if it was all intravenous or...

[Emil Billbäck, executive]

In the SOLARIO study?

[Håkan Johansson, executive]

In the SOLARIO study.

[Emil Billbäck, executive]

Yes. No. We don't know that yet, actually. We have specifically asked the group on how much was intravenous and how much was peroral. And the team doing the study have let us know that this is data that will come in the full-length presentation. So we don't have the data. We know that Vancomycin was one of the most used antibiotics, and Vancomycin is given almost always intravenously. We also know that there's a higher degree of intravenous treatment in the first couple of weeks, in the [ no harm ]. And we also know that with the severe side effects, and some of those failures that the patient has been hospitalized and received intravenous. But more than that, we don't know. So this will have to be for further and future analysis.

The next question was regarding the use of antibiotic, local antibiotic in extremities. So I presume here that you referred to Slide 5 in the presentation, the 38% that we...

[Kristofer Liljeberg-Svensson, analyst]

Sorry, Emil. Yes. Sorry. The -- so the question was actually in patients with the bone infection. I guess that figure is higher than for all extremities.

[Emil Billbäck, executive]

Yes. Yes.

[Kristofer Liljeberg-Svensson, analyst]

Do you know what that figure is today?

[Emil Billbäck, executive]

I will say it's close to a 100%. It could be a few -- yes, a few percentage point deviating, but almost 100% with patients with bone infection. An active bone infection are receiving local antibiotics today.

[Kristofer Liljeberg-Svensson, analyst]

Okay. But if that is the case, how will SOLARIO study then increase use of CERAMENT if all patients are already today receiving local antibiotics?

[Emil Billbäck, executive]

I think SOLARIO is a great study in that it shows one of the most difficult conditions of bone infection, and an antibiotic course, which, if you would believe, SOLARIO is too long, meaning more than 4 weeks. So the greatest effect of SOLARIO is that the systemic antibiotic can be shortened with the regular use of an antibiotic eluting bone graft. But in many of these patients, I would say, specifically in the U.S., what is being used is Vancomycin powder sprinkled right into the bone infection. None such patients were included in the SOLARIO. There's also a lot of off-label mixing with very dubious results. None of those were included in the SOLARIO study.

So if you want to make sure that you treat the patient in the best possible way, you want to make sure that you follow the scrutiny of the FDA, and you would like to then have the ability to reduce your systemic antibiotic, then you should need to use a product that has been regulatory approved and has been part of the biggest clinical study. So that is how I see that more patients will receive CERAMENT G and V going forward.

[Kristofer Liljeberg-Svensson, analyst]

Okay, that makes a lot of sense.

[Emil Billbäck, executive]

So just to follow-up there, Kristofer, we saw that as an example of all the patients in the U.S. that where local antibiotics was used in bone infections 40% used PMMA beads, where we know that the reinfection rate is around 13%. With Serum CERAMENT G and V it's down to 5%. So, yes, it's local antibiotics, but there are big differences in results.

[Håkan Johansson, executive]

And your next question, I guess, Kristofer, was on the working capital. It's correct now. Reporting a plus 50% growth and a strong sales momentum, et cetera, it tends to create a certain volatility in working capital ratios to sales, and we haven't set a firm target long-term. But just looking from the numbers and how big looks all the time, it is reasonable to believe that it should be able to land somewhere between 22%, 24% in relation to annualized sales.

[Emil Billbäck, executive]

Okay. Any further questions?

[Operator]

The next question comes from Maria Vara from Bryan Garnier & Co.

[Maria Vara Fernández, analyst]

Congratulations for the great traction in the U.S. with CERAMENT G. I just want to touch upon a bit the development on Spinal Fusion and sort of remarks and insights on CERAMENT G is gaining traction in the U.S. because of the need for same way in Spinal Fusion. Wouldn't it be more strategic or actually needed to accelerate antibiotics approval for a spine? It's my belief that first you will go to market with BVF, which of course will be of use for bone graft alone use, but if you could give a bit of an insight into how you're going to plan to bring it?

[Emil Billbäck, executive]

Yes. Thank you, Maria. Thanks for being with us. So also, again, a little bit of disruption on the line, but we'll try to provide a good answer. Yes. Of course, when we discuss, CERAMENT with spinal surgeons or neurologists, the first question that comes up is, when can we have CERAMENT G? So you picked the dynamics perfectly there, Maria. The data that we have on CERAMENT BVF in this perspective is more extensive. So we will have to start the data development to apply for CERAMENT G to get approved indication for Spinal Fusion. When that happens, we will announce to the market. We will let the market know when we have made the decision to go forward.

The work we're doing now on CERAMENT BVF is putting also the foundation for CERAMENT G in spine. We are learning valuable insights on how the product should be applied. As an example, the most common procedure on spine is interbody fusion. It represent between 75% and 80% of all the spinal fusions. And for interbody fusions, there are 5 different techniques that can be used and several different variants. So we are now testing how could CERAMENT as one of the very few injectable products be applied with a convincing technique. We're also monitoring and tracking bone remodeling, bone growth, and how is the product [ resorb ] in this new indication. So all that data can also be used for our ultimate project, which is, of course, to bring CERAMENT G into Spinal Fusion. That's all I can say now. We will come back with the timing. We're working hard on it. That is what I can promise.

[Operator]

The next question comes from Sten Gustafsson from ABG Sundal Collier.

[Sten Gustafsson, analyst]

First question, CERAMENT G in the U.S, it's a pretty significant step change in sort of sequential uplift in sales in the third quarter. So my first question is, are you aware of any some sort of inventory buildup among customers? Or are there any extraordinary sales reported during the quarter? Or is this just a change in the trajectory?

[Emil Billbäck, executive]

Yes. Thank you, Sten. We're very pleased, of course, for the strong performance in the quarter. And we have analyzed and gone through the numbers. And I can confirm There are no inventory build. There are no one off orders. There are no bulking orders that is behind these sales. The end -- well, the extraordinary that I can mention is hard work. And we have had especially strong success in California. We're making great inroads in Florida, both which are notoriously big orthopedic markets. And in regions where we've had lower penetration before, such as New Jersey, New York, sales is taking off very nicely.

But I should also be humble then and say that we have declared that there will be a goal stop goal behavior. And it's puzzling that we haven't seen any such disruption so far. The curve has been almost linear for CERAMENT G. We're very happy with that, of course, but we're also old in the game. And we know that one day there will be disruption when a larger hospital chain have the usage stopped by procurement, which is when we have to rush there with our health economic data, where we also now have SOLARIO, of course, which will be stronger.

There will come disruption, but I have to conclude also that so far, there's not a single hospital system or hospital that have post CERAMENT G that have not continued to use it after we have discussed the data. So there could be temporary disruptions back and forth, but the long-term trend, I think you should all feel very confident with.

[Sten Gustafsson, analyst]

And I mean, in theory, you could almost argue that the incremental growth in SEK should go up even more now with when you target a broader audience with the trauma surgeons going forward. So my question would be then, do you expect an even higher incremental sales growth going forward or?

[Emil Billbäck, executive]

So, yes. And I realized also I got a question before on the TPT and the outpatient setting, if we're seeing sales pick up there. So what we know, Sten and everyone else here is that the movements in orthopedics are slow. It's a handheld process. It's -- the ramp up takes time. We have started to see some outpatient setting sales in quarter 3. We have seen a few orthopedic surgeons come on board using the product for open trauma, but these are rather vectors for the future. So we don't give forecast for the next quarter or the quarter after, but I can tell you that all of you with the questions you're raising, you have fully understood the dynamic. And the open trauma, the outpatient settings, these are market segments that have opened themselves where we didn't have any sales before. And these will continue to increase going forward.

[Sten Gustafsson, analyst]

And then one question on the spine opportunity area. And you got questions earlier about CERAMENT G in spine. Have you considered going with CERAMENT V in spine? I'm not an expert on this, but someone told me that the kind of infections related to spine could be perhaps more relevant for CERAMENT v. Is that something you have considered?

[Emil Billbäck, executive]

Yes. We have also CERAMENT v in consideration for spine. There are different pathogens that can infect a wound and that can make it into the bone. And different antibiotics work for different pathogens, but Gentamicin is broad spectrum and has very good coverage of the potential microbials that would represent the infestation.

CERAMENT V is mainly used when there is [ metallocene ] resistant bacteria, so it's a good complement and supplement. And then there are different preferences around the world. So our position is not to try to make a distinction here, but rather say, we will have 2 products available in the case there are resistant bacteria, in the case there are certain preferences in some direction.

[Operator]

The next question comes from Kristofer Liljeberg from Carnegie Investment Bank.

[Kristofer Liljeberg-Svensson, analyst]

Yes. This was actually to remind you about my last question, but you answered that. But another thing I wonder is, now we're launching trauma, et cetera what capability do you have to train a larger number of surgeons? Do you continue to add sales reps through your external distributors? And how does that compare with the number of people on the ground versus a couple of quarters ago?

[Emil Billbäck, executive]

Yes. It's definitely a good question. We are increasing the number of distributors. We're increasing the number of salespeople. We have now around 430 sales reps on the ground. Many of the distributor reps that we're working with are very good and have relationships with all the different subspecialties at the orthopedic clinic. So when they come and visit the hospital, they might go to one orthopedic surgeon covering one part of the body, then they go to the next after that being a traumatologist. And then they -- before they leave the hospital, they might even go then to the spine surgeon. So many times, it can be covered with the same sales reps on the ground. But to be more specific, we have also signed up specific distributors that are focused on trauma and have specific trauma hardware in their portfolio. And they've been very pleased to add CERAMENT G to their value proposition.

[Operator]

[Operator Instructions]

[Emil Billbäck, executive]

Well, it doesn't look like there are more questions.

[Operator]

There are no more questions from the phone lines at this time, so I hand the conference back to the speakers for any written questions and closing comments. Please go ahead.

[Emil Billbäck, executive]

Yes. I just want to thank everyone for taking the time to listen to our presentation of the quarterly report. Hakan and I will now move out, have a quick breakfast with coffee before we head back into the congress area to spread the word about CERAMENT G with the orthopedic traumatologist. So thank you, everyone, and take care. Bye-bye.