Vimian Group AB
STO:VIMIAN
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Earnings Call Analysis
Q2-2024 Analysis
Vimian Group AB
In the second quarter of 2024, Vimian Group reported impressive financial results highlighted by an 11% organic growth, outpacing most expectations. Notably, all three main segments—Specialty Pharma, MedTech, and Veterinary Services—demonstrated double-digit growth. The adjusted EBITA margin rose from 25% to 27.2%, reflecting a 220-basis-point improvement, driven primarily by strong execution in Specialty Pharma and MedTech.
Specialty Pharma stood out with a 13% organic growth and remarkable margin improvements, particularly due to cross-selling initiatives contributing to 33% of its revenue. This segment's adjusted EBITA grew by 27%, indicating that margin expansion exceeded revenue growth. MedTech achieved 10% organic growth as well, bouncing back from expected annual sales, although it faces some headwinds from a slowdown in the U.S. surgical market. The Veterinary Services segment grew by 18%, further illustrating the company’s diverse and robust growth across its services.
Despite the overall success, Vimian acknowledged softness in the U.S. surgical market, particularly for high-end procedures. This trend sparked concerns regarding consumer spending, as veterinary care is primarily out-of-pocket, given the low insurance penetration—only 3% to 4% of dogs are insured. To counteract this downturn, Vimian is ramping up its commercial activities and targeted education efforts to enhance customer engagement and drive growth in existing relationships.
Vimian's financial structure has strengthened significantly. Following a successful capital raise, the company's leverage decreased to 1.4x, offering a strong position for future acquisitions. For the remainder of the year, Vimian anticipates maintaining high single-digit organic growth across its segments which includes a focus on capitalizing on market opportunities through strategic acquisitions. Additionally, the company projects an improvement in cash flow generation efforts to enhance operational efficiency.
The management expressed optimism about the overall market environment, expecting sustainable growth trends over the long term. With strategic plans to expand product portfolios, enter new geographic markets, and develop new therapies, Vimian is well-positioned to leverage its strengths in an evolving industry landscape. The increased commercial intensity in MedTech serves as a key strategy to capture a larger market share amid existing challenges.
Vimian’s Diagnostics segment struggled with a 9% decline in revenue, attributed to broader market challenges. This segment currently represents only 5% of total business, with efforts focused on rolling out a new parasitology test aimed at the companion animal market. Analysts expect minimal revenue impact from this segment until at least 2025, prompting management to closely monitor progress and investment returns.
In conclusion, Vimian Group reported a strong quarter marked by substantial revenue and margin growth in most segments, solidifying its market position. Facing challenges in specific areas, especially within the U.S. surgical market, it is actively implementing strategies to mitigate negative impacts. The focus remains on driving organic growth, enhancing cash flow efficiency, and identifying value-creative acquisition opportunities to sustain long-term growth trajectories.
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Welcome to the Vimian Group Q2 Report 2024. [Operator Instructions]
Now I will hand the conference over to the speakers: CEO, Patrik Eriksson; and CFO, Carl-Johan Zetterberg Boudrie. Please go ahead.
Good morning, and welcome to our earnings call today. I'm here with Carl-Johan, and we're going to jump straight into it. Thank you for joining us.
We have a strong quarter, great organic growth with margin expansion, and the profit that we are delivering is in line with our financial targets. Our 3 main segments, which makes up about 95% of the business, all delivered very strong performance, and all made good progress on our strategic priorities and execution. We finalized the capital raise in April. So our leverage is now down to about 1.4x, which puts us in a really good position for further acquisitions. We're continuing to develop our M&A pipeline, and we have several ongoing dialogues there. So all in all, a good quarter for us.
Let's jump into some of the details here. We reported 11% organic growth, double-digit growth in all of the 3 largest segments. Our adjusted EBITA improved by 220 basis points from 25% to 27.2%. This was driven mainly by our Specialty Pharma and our MedTech business.
Go and jump into MedTech -- sorry, to Specialty Pharma. Strong performance here of 13% growth, very solid execution of growth from all the therapeutic areas in Specialty Pharma. It was exceptional of 22 -- 24% in the Specialty Pharmaceuticals part. About 1/3 of our revenue in this and the growth in this area came from our key strategic initiative in terms of cross-selling and internationalization. This is where we take products from companies that we bought in one part of the world and sell it somewhere else. It's good to see 1/3, it's about the right balance, and that continues to be very positive and good momentum there.
The margin development is also strong in the business here. It's driven by a positive mix, and we continue to see benefits from the integration work we're doing with the acquired businesses. Growth of the adjusted EBITA was 27%, so significantly higher than our organic growth. And I'm pleased to see the momentum, very positive momentum here in the Spec Pharma business.
If you take a closer look to our MedTech business, we delivered a 10% organic growth here. We recovered the sales that we expected from the annual order program as planned in the second quarter. The margin improvement we see in this business is mainly driven by the evening out of revenue throughout the year, which has a positive effect on our earnings overall. And we have nice growth here in adjusted EBITA of 24%, again, significantly higher than our organic growth. Both our U.S., EMEA, APAC regions continued to deliver good organic growth in the quarter.
As we flagged earlier here in the report, we're seeing a softness and a slowdown in the U.S. surgical market that started in the beginning of the summer. We're countering that with an increased commercial activity. We go to our existing customers and try to gain share on those and cross-sell more of our product portfolio into them. We already have a relationship. And we also intensify and add a number of new education events to bring new doctors in and also training the ones that are doing surgeries to do more procedures and different procedures. Overall, we have a strong global position here, and we're a leading provider of veterinary orthopedics across the globe.
We then turn to Veterinary Services, 18% growth here with good and positive development across all of our key geographies. We continue to add new memberships here. 400 new member clinics were recruited during the quarter. Our co-owned clinics that we have accelerated their growth in the quarter and are now double digit, which we believe is ahead of the veterinary clinic market, so very pleased about that development.
The improved profitability in this segment is driven by the -- obviously the growth in revenue, but also we're getting good leverage on our scale here. And the adjusted EBITA grew 25%, again, well over our organic growth. We've seen stability in the trends here in the Veterinary Services businesses for many quarters. We expect that to continue, and we're very pleased with the momentum we have in this business.
And then turning to Diagnostics, this is now 5% of our total business, so the smallest segment that we have. Our revenue here declined by 9%. The market we operate in here continues to be challenging, and our performance here is a reflection of that. As you might recall from our Q1 conversation, we decided to invest and reallocate some of our earnings from the livestock market to roll out our new parasitology test device and solution into the companion animal market. So that's what's driving the lower earnings in the segment here.
So with that, I want to conclude the summary of the quarter. Overall, a strong quarter. I want to hand over to Carl-Johan, who will walk us through some of the details.
Thank you very much, Patrik, and let us take a more detailed view on the financials for the second quarter.
The adjusted EBITA in the second quarter was EUR 24.7 million at a margin of 27.2%. This is a clear improvement from 25.0% for the same quarter last year, supported by positive margin development in all of our 3 largest segments as we see effects from integration, economies of scale as well as mix in the quarter.
We report operating profit of EUR 13.2 million, a year-over-year growth of 30%, well outpacing our double-digit revenue growth. The nonrecurring items of EUR 5.8 million continues to be on a higher level in the quarter, with more than half of the total amount relating to legal costs for the U.S. patent litigation as we have been in intense phase in that process during the quarter.
The net financial items of minus EUR 5.5 million consists of 3 main elements: finance expense of minus EUR 5.0 million with an average interest rate of 6.3% during the quarter, offset by EUR 0.8 million interest income on cash; quarterly discounting impact of minus EUR 1.5 million and no impact on probability adjustments on contingent considerations; and lastly, a positive impact of EUR 0.2 million from exchange rates.
The income tax expense for the quarter amounted to EUR 2.7 million. And in total, this results in a net profit for the quarter of EUR 5.1 million, an increase of 57% from EUR 3.2 million in the same period last year.
Cash flow from operating activities reached EUR 5.9 million in the second quarter with net working capital impacting negatively. Going forward, working capital is an area we are increasing our efforts in to ensure we drive more efficient operations and cash generation.
Net working capital amounted to EUR 82 million at the end of the quarter, equal to 24% of revenue. That's an increase from EUR 75.3 million at the end of March, which equal 22% of revenue. The increase of EUR 6.7 million compared to the end of the first quarter is driven by an increase in inventory of EUR 4.6 million with equal contribution from MedTech, Specialty Pharma and Diagnostics.
Accounts receivables declined EUR 2.1 million as MedTech AOP customers pay their monthly installments, offset by higher accrued revenues in Veterinary Services. The lower current liabilities is primarily reflecting a timing effect of tax payments in Specialty Pharma.
Cash flow from investing activities was minus EUR 11.2 million, primarily reflecting earn-out payments of EUR 13 million and capital expenditures of EUR 2 million. The capital expenditure is a split between EUR 1.6 million investments in intangible assets and EUR 1.4 million investments in property, plants and equipment. The main areas for the investments are capitalization of R&D and expansion of laboratory capacity in Specialty Pharma. Cash flow from financing activities of EUR 8 million where the proceeds of the rights issue of EUR 142.7 million has been used to repay EUR 133.5 million of debt in the quarter.
At the end of the period, net debt amounted to EUR 144.1 million, which is down from EUR 287.4 million at the end of the first quarter. External lending is also down to EUR 169.7 million following the repayment using the proceeds from the rights issue. Our leverage, as a consequence, in combination with the increased profit, has now gone down to 1.4x compared to 3x at the end of the first quarter, putting us in a strong position to pursue value-creative acquisitions.
With this financial review of the quarter, I would like to hand the word back to Patrik for concluding remarks before we open up for the Q&A session.
Thank you, Carl-Johan.
So how do we summarize this? I think the maybe best way to do it is to do the following. I'm satisfied with the second quarter from a growth and an earnings performance perspective. I think we have work to do when it comes to our cash flow generation. I'm encouraged to see how we're making progress on our strategic initiatives and priorities across the different segments of our business.
I look at the market overall, it's a very healthy market that we operate in with great underlying trends for growth that is sustainable for many, many years to come. I see that we have significant runway for growth in the business. We captured some of it through cross-selling this quarter. We have immense white space to continue to go after and capture as a result.
If we look at our key priorities going forward, it's driving organic growth and continue to do that in the pace that we have today and do it at healthy margins. I think we demonstrated this quarter that we have good organic growth and we have the ability to deliver a better margin profile. We have firepower to do acquisitions. When we think about those, we think about them as being strong in terms of strategic fit and also acquire them at defendable multiples.
Just as a reminder, so what is it that we're really looking for here? Well, first, we're looking for product portfolio expansion opportunities, adding capabilities to our existing Specialty Pharma, Vet Services or MedTech businesses to expand the portfolio and be a more attractive partner to our customers. We are also looking at opportunities for geographic expansion, either into a new territory that has an attractive marketplace that we don't operate in, or doubling down in geographies where we already exist but have higher and better coverage there. We're also looking for new therapy areas, particularly in MedTech and Specialty Pharma, to further expand and branch into new areas there.
So when we look at operational improvements, we've acquired over 50 companies since the company was founded. And we have great opportunities here to continue to operationally be much more lean. We're introducing lean principles in different parts of the business. We're doing that with a mindset of continuous improvement. And that's going to be a long-term plan, play, and it's going to be a drive.
And then lastly, it's important for us to attract, develop and retain top talent in this industry. And we're doing that by creating the best place to work and make sure it's something that you are attracted to come and work for Vimian, and we can do great things together.
With that, I want to thank you for joining our call with this segment so far, and I'd like to open up for the Q&A at this point. Thank you very much.
[Operator Instructions] The next question comes from Adela Dashian from Jefferies.
A couple of questions from me. First, if we start on the margin improvement, I mean this is a good development in the quarter, better than at least I had anticipated. And I appreciate all the color on the driving mechanisms of that. But if you look further ahead, is there any areas specific that you feel like this is where we could leverage up and drive further upside to current levels? Any divisions in particular? Is it going to be integration efforts? Yes, any color on what you can do additionally to get it further higher than what it currently is would be great.
Thanks, Adela. It's a good question. We've had a good mix and scale and then the strategic initiatives started to take fold, and that's why we're seeing margin improvement. There's more to do there. I think we actually have more to do across the board, but I don't want to call out a specific area for us because it's a number of streams that -- where we're just going after. The cross-selling opportunity is great. We have high-margin products in our Specialty Pharma business, and we can sell those and leverage those in existing sales channels. That gets a very good scale leverage.
The same is true in Veterinary Services, we get more customers in there. To add the 400 customers, the cost structure associated with adding those 400 is not that big, and we immediately get scale advantages of it. So those things kind of tie together with driving growth, I think, is how you're going to see this. There's also a talk whereas I don't want us to think about margin improvements continuing forever. There's a point where we would want to invest and overinvest in further growth to accelerate our growth instead of maybe delivering further margin improvements. But we have a little bit more we can do, for sure.
Yes, that was going to be my follow-up. I mean it's a good level currently, but as you continue to grow and then obviously need to service the overall business and then as you make acquisitions, I mean, acquisitions have sort of been somewhat margin-dilutive, right, in the past, so do you feel like that's a threat to current levels, [ making it ] sustainable?
No, it's a great question. So we're debating where we think this level is, and we haven't come to a firm conclusion yet. We'll keep improving the margin until we feel like we're making some bad trade-offs. Our priority, and that's why we want to talk about our priorities, organic growth is our #1 priority. That drives a lot of goodness through the whole business. So you have good organic growth, let's invest in that while we're doing at decent margins.
We look back at the acquisitions we've made, most of the acquisitions we've made have come at a lower margin than when they operate today, actually, I think, in fact, almost every single one of them. So when we buy a company today, I would expect them to have lower margins, and then we'll put them into our program and we'll gradually improve margins in that business both through scale and through operational improvements.
And how long does it typically take until you see the full effect from synergies?
I think it depends a little bit on what you buy. Some companies that we have bought have been very well run, but maybe didn't have the scale, then you can actually fairly quickly get the margin improvement when you unlock the cross-selling opportunity. Other businesses have been maybe fairly complicated and complex in its structure, and that takes a little bit longer if you need to replace ERP systems, you need to streamline their supply chain, warehouse structure and all those other things, there's a little bit more heavy lift that takes a little bit longer to get through your P&L.
Okay. And then on the surgical market, is it -- I mean, what's really driving the weakness here? Is it the macroeconomic conditions that are still challenging? Or is there anything else? And the educational efforts and the commercial efforts that you're currently putting into place to improve at least your ability to capture more share in the market, how long does it typically take for that to really come through as you're educating -- yes, bringing up awareness within that segment?
Yes. So in the beginning of the summer, we started to see a decline in softness in the market for surgeries. So this is for knees and hips and those, which typically is one of the most expensive treatments you can go and ask your vet to do for your -- on your companion animal. And there's probably a little bit of a hesitancy, do I wait or do I save a little bit more money before I go ahead and do this? Or do I choose an alternative treatment or maybe not treat my pet at all?
So we think that's the kind of driving dynamics in the clinics. So from time to time, we have all been operating in markets that show softness. You can respond differently to that scenario. Our response in this case is that we already have -- we talk to hundreds of customers every week. Every time we speak with them now, we're making sure that they get a larger portion of our product portfolio offered to them very deliberately to expand our share of wallet, if you like. And that's a very dedicated deliberate kind of intensity from a commercial stand. That can take fold very quickly. We have hundreds of those calls every week. We can move the dial relatively quickly.
On the education piece, it's a longer play. And we try to attract 2 different participants there. We're trying to attract existing surgeons that may not be able to treat all kinds of cases to teach them to treat more cases, to actually enable them to treat more animals in the clinic, which is good for them and good for us and good for the animal. And then we also want to attract and continue to unlock the white space. In MedTech, we talked about before, white space is a really big area, and we want to unlock that.
And that's just continued to double down on education to bring more surgeons into play here. That takes a little bit longer to -- some can go to a couple of trainings and they're ready to go, others will go for a full year before they feel comfortable placing their first implant. So it's a little bit different depending on who's there.
The next question comes from Rickard Anderkrans from Handelsbanken.
I was following up a bit on the MedTech business. Can you elaborate a bit on where you think you will shake out in terms of growth going forward here for the remainder of the year for the MedTech business? I mean you had a nice bounce back in Q2, you're still down 3% year-to-date. It seems like surgical volumes in the U.S. are trending sort of negative low-single digits so far this year. So maybe if you could give any indications of where you think you're going to shake out in this dynamic. I'll start there.
Yes, thank you for your question. We think of MedTech as a growth business in 2024. The softness in the market that we talked about is isolated to North America or to U.S. very specifically. Europe and APAC are progressing very well. We're countering it with the things I just mentioned from a commercial intensity standpoint. So we're trying to mitigate any potential backdrop or backlash that can come from the softness.
All right. And a follow-up on sort of the growth expectations for the year. Do you think you're going to reach high single-digit organic growth for the group for the full year? Is that sort of a reasonable range for full year?
So if we look at -- and Patrik gave some color on MedTech. If we look for the group for the full year and as we presented here, we see good momentum in the business looking at the first half. We have very good momentum both in Specialty Pharma, growing in all our therapeutical areas. We also have seen very good momentum in Veterinary Services.
MedTech have continued to have a good pace in the quarter even though, as you said, there's some slowdown in -- or we see some sort of slowdown in the U.S. market that we are counting, as Patrik said. All in all, with the good momentum that we see in our largest segment, we are confident for a solid full year for 2024.
All right. And on Diagnostics side, how long should we expect the sort of single-digit EBITA margin profile? And can you give us any form of indications or data points on how the Ovacyte launch is progressing?
Yes. So we're building a new kind of capability in that business to go after companion animals. And you should think about it and I -- the way I look at this thing, we're investing in that this year. So I expect the margin profile to be about what you see now for the remainder of the year. And as we ramp up, which it's a ramp stage, I don't anticipate to see a whole lot of kind of groundbreaking revenue this year, but that's for 2025.
Okay. So limited top line impact this year, clear. Yes. And finally, just to get a final point in, should we expect items affecting comparability at similar levels for the remainder of the year? I think it's been standing out relatively high versus expectations at least in the market. So maybe just a quick note on that one would be helpful as a final question.
Yes, absolutely. One first comment to that, as you say, it's been a little bit higher than consensus. One note on that, there's a number of analysts that sort of doesn't model nonrecurring items. So I would say, from that perspective, you could say it stands out a little bit because it's not modeled in.
Having that said and as we highlighted, it's been slightly higher in the quarter. That's primarily driven by continued high legal fees in the U.S. litigation case. And that's a consequence of the second quarter being a very intense phase in the process. And as you know, we also settled with 2 other parties in the second quarter. So the costs for that legal case have been relatively high in the quarter.
We do expect the nonrecurring items to go down and be a little bit lower for H2 than what we've seen in H1, one, as a consequence of the legal process sort of going into a different phase; and there's a few other elements where we expect the nonrecurring items to be slightly lower in the second quarter -- or sorry, second half of the year than first half of the year.
The next question comes from Kavya from UBS.
I had 2, please. The first one is around Specialty Pharma, obviously, it was a great quarter. Are there any stocking effects that we should be aware of here? And also mix-wise, do you continue to expect a mix benefit in this division to driving continued margin expansion throughout the year, specifically for Specialty Pharma? And is this really coming from sort of Bova or [ dermatology ] or the allergy segment, I suppose, because nutrition is quite a bit lower in terms of its margin profile, I understand?
And my second question was around the MedTech division. Just in terms of scrapping or downsizing the annual ordering program rather, so that used to give you visibility. That's now gone away. I was just wondering as to whether forecasting internally for this MedTech business is becoming easier or more difficult? And what's the kind of ongoing revenue visibility you get for MedTech versus revenue progression in your other businesses?
Great. And let me start with the margin question, and Patrik can give you some more color on sort of the MedTech, you say, outlook and forecast ability. Looking at the margin, and as you say, we -- it was a very good quarter from a margin perspective. We delivered higher profitability growth in all our 3 larger segments than revenue growth. Seeing a margin expansion, as we said, that's a consequence of scale, operational efficiencies and also mix.
And especially if we look at Specialty Pharma from a mix perspective, we saw solid growth from all therapeutical areas in Specialty Pharma. But as you say, there are some effects from mix as specialized nutrition continued to grow at a solid pace in the quarter, but came down from, call it, extraordinary growth, especially during 2023 where we saw growth in most of the quarters in sort of 30%, 40% range.
And just as you pointed out, they have slightly lower margins than the other therapeutical areas within Specialty Pharma. So that had a mix impact on the margins. We also saw, as we highlighted, very strong growth in specialized pharmaceuticals being a high-margin area. So yes, there are some mix -- positive mix effects in Specialty Pharma, but the majority of the margin improvement in Specialty Pharma is a consequence of, you could say, internal margin improvement because of the internalization and integration and cross-selling across our entities.
And then maybe I can cover your question around the annual order program in MedTech. So the reduction of that AOP program is giving us much better visibility. When you think about it this way, the AOP program was an annual order program, so we had one order point per year with a customer. That has now moved to be either a quarterly or a monthly order point. So we have a tighter connection with the customers and a better visibility.
The result of this, which is I think your second part of your question is, what kind of visibility do we have? We now have very predictable daily run rates we can look at. And of course, it changes day to day. But if you take an average over a number of days, that is a very stable number now, and that's thanks to not having like very large onetime orders coming in and kind of disturbing a little bit of the pace.
So that helps us be much more predictable with this. It also allows us to much sooner identify customers that have maybe weakness in their business, and we can then countermeasure that and act more intensely to help them with their business and also help us deploy further countermeasures to drive growth.
And is that similar visibility to what you get in Specialty Pharma and Vet Services and Diagnostics? Or is it better in terms of...
It's -- we have good visibility across those 3 segments. Everywhere where we sell directly to customers, which we do in most of these segments, we have very good visibility. Some of our business go through the distribution channel. And obviously, that becomes a little bit more lumpy, and we look at sellout with them instead of our own sales in -- yes, feel good about the opportunity we have here to better follow and understand the business on the MedTech side as a result of the change in AOP.
And sorry, just maybe coming back to your first question to make sure we cover all your questions, in terms of stocking effects, we haven't seen any and been sort of made aware of any stocking effects in the quarter. We see a continued good momentum in our business.
The next question comes from Patrik Ling from DNB Markets.
Just a couple of short questions. First of all, could you remind us a little bit about the earn-outs going forward? I mean they were, as you had talked about before, they were pretty high this quarter. What should we expect for the coming quarters?
Yes, sure. I think in total, the earn-outs were, call it, higher in the quarter due to a number of -- some of the acquisitions with an earnout component is based on the full financial year for 2024. And as a consequence, when sort of everything is ironed out for previous year and we see where we stand, earn-outs are paid. And majority of the earnout paid in the quarter is relating to specialized nutrition in the U.S. in the acquisition of Global One.
If we look in total on the contingent considerations that we have, we currently have around EUR 44 million. If we compare it to the same period last year, that's down with EUR 10 million compared to the last year. Of this -- of the continued considerations of in total EUR 44 million, it's roughly, not completely, but roughly, you can say, half is current and half is noncurrent on the continued considerations that we have left.
Okay. Great. And then I also had a question on Veterinary Services. I mean you continue to recruit new members at a good pace there. Are you considering moving into new markets in that area? Or should we expect you to continue to build volume in the markets where you are active as of now?
Yes. I think we continue -- we see great opportunities to continue to gain membership in most of the markets that we operate in today. So there is a lot of growth opportunity left there. But we are also looking at what is the next geography that we should consider moving into. And that's a process that the team in Vet Services have and have been going on for a long period of time. We've recently moved into Brazil and Belgium and other places. So that is an ongoing consideration as well. So you should expect to see growth from existing markets. And one day, we'll announce that we have opened a new market as well.
The next question comes from Sten Gustafsson from ABG Sundal Collier.
Two questions or one question and one maybe a clarification. But if we start off with the MedTech division, you talked about a slowdown in the U.S. Could you give us a little bit more detail about the reasons about this slowdown? If it's -- where it's coming from? And yes, more background on the reason for the slowdown basically in the U.S. would be helpful.
Yes. So I'm happy to take that. So for quite some time, the number of clinic visits has been trending towards, say, low single digit. And we have not seen that impact the surgical portion of the business at all. The clinic revenue has, at the same time, been trending positive low single digit if you look at north -- or U.S.-based clinics. When -- but in the beginning of the summer, we started to see a decline of that trend when it comes to high-end surgical procedures.
And remember, our MedTech business is doing hips and knees. And if you look at the services a veterinary can supply to its customers, those are both on the top 10 most expensive procedures you can do. So with the disposable income economy and maybe some uncertainty, people are getting a little bit more hesitant to do big-ticket items.
And as a reminder as well, the insurance situation in the U.S. market is that probably 3% to 4% of dogs are insured in America, which is a really, really low insurance rate. So you don't get any help there. So this is all out-of-pocket costs. So we think that's the kind of core fundamental driver. That can change in the future when people get a better maybe view of their own personal economy or changes their point of view of the future and the outlook.
So we're monitoring this and [ thread it ] closely. And back to Adela's question, we track our daily sales, and we can see that when we talk to customers and get a kind of color on this all the time.
That's very clear. And interesting to hear about the low insurance level in the U.S. How is that different from Europe? Maybe there is not sort of a broad average, but I guess it differs massively between different countries, but...
Yes, it's very different. So you can -- I think Sweden, for instance, is one of the highest, if not the highest insurance rate, and the estimate is that about 2/3 of animals in Sweden is insured. I think the U.K. is very high, too, it's about 50-50 or so. So if you think about that and compare it with something where it's like low single-digit insurance rates, that's a significant different market dynamic from an insurance and coverage standpoint.
Yes. So the U.S. market then is very much dependent on the consumer confidence in their own economy, so to speak.
I think they get -- because I think that impacts the consumer behavior to a much lower degree because you get no help from anybody. You have to write that check for the full amount of the treatment.
Yes, that makes sense. Coming back to the Diagnostics business and maybe a clarification here, but did you say that you expected the rollout to have an impact on revenue in '25, but not in '24? Was it...
Yes, we -- it was in conjunction with the investment. We're continually investing in that. We're going to invest at similar levels to what you have seen in the second quarter. We'll do that for the remainder of the year. We will have a ramp of revenue, and that business grows every month. But it started from 0. So before it becomes like a meaningful amount that maybe its worth for us to talk about in calls, I don't think that's going to happen until sometime in 2025.
So unless there are any major outbreaks happening in the remainder of the year, we should expect a bit slow growth or negative growth in -- for Diagnostics in the second half as well?
We continue to see -- I think the livestock is still a sort of a challenging market, especially we've had some, call it, negative geographical mix impact given where we're stronger. We have a stronger base in Europe. There's other regions that have seen sort of less challenging market than Europe. So we have some negative mix impact from -- in that as well. But livestock is a challenging market. We haven't seen that, that market had turned a corner yet and expecting sort of a big boost from a market uptake.
Having that said, we do see opportunities to continue to grow. We think we have a good portfolio of products. Besides Ovacyte, we also launched a new solution within livestock diagnostics, a product called [ InoMag 2 ] that we started to roll out. And so we see positive things happening in our Diagnostics business.
Having that said, we don't foresee a -- we foresee sort of some, hopefully, some growth in the rest of the year, but in low numbers, low single digits for the remainder of the year in Diagnostics. From a margin perspective, as Patrik said, we are continuing to invest in our companion animal diagnostic solution, and that will continue to have a weight on margins while we expect to continue to have single-digit margins for the rest of the year in Diagnostics.
The next question comes from Arvid Necander from Carnegie.
A couple, if I may. So as previously mentioned, I guess U.S. industry data remains on the softer side with clinical assets and revenue growth continuing to trend slightly down for clinics. With consensus expecting an uptick to slightly below 11% organic growth for 2025, is it fair to assume that we need to see a shift in the clinic activity fairly soon in order to realistically be able to meet this? I'll start there.
Yes. So if we -- and I can say, so I think we can all see the same data if we look there from that perspective and that's if we take the clinic visit data, that's something where we've seen sort of a softer trend in the U.S. for quite some time. So it's not something that is in the clinic visit side that's appeared in the last quarter, last few months. So that's actually a trend that we've seen.
Now specifically, we've seen maybe some more softness in the surgical data and what we see from a MedTech perspective in U.S. But coming back to we've seen clinic visits being softer for some time, but we've continued to drive a good growth in the U.S. in the last couple of quarters and last couple of years. So we are positive about the development we can achieve in the U.S. also going forward, even though maybe some softness in the market data and market statistics.
Okay. Fair enough. And secondly, on the increased marketing activities in MedTech, should we expect them to remain at similar levels? Or should we expect further ramp-up on the back of the weak surgical activity?
Sorry, Arvid, you'll have to repeat the beginning of the question there. I didn't quite catch that.
Okay. You mentioned the sort of increased marketing activities as a key driver for growth in MedTech. So should we expect investments to remain at similar levels going forward? Or could there be further ramp-up?
We will invest a little bit more, but it's not something that will impact the earnings profile or anything like that. And what we will -- we -- there's a way to be much more efficient. We are deploying a lot more seats into the trainings that we're currently doing. And we are also expanding the number of times and the number of trainings we're putting up. We have a very cost-efficient model for this. And part of this, participants also pay for it. So therefore, it doesn't have a big earnings impact to us when we turn this up. So I don't think you need to kind of think about it that way. It's a -- this is, call it, cost-neutral activities that will help drive and intensify our actions in the market.
The next question comes from Marco Pires-Cox from Barclays.
I just have one, please, just a follow-up on the U.S. MedTech business. Could you remind us of the size of this business versus your activities in Europe and other areas of the world? And then also as a follow-up to that, are there any differences we should be aware of on the margin profile here, again, versus Europe and APAC? And then finally, in a scenario where interest rates start to come down in the U.S. significantly, do you have a sense of the time line for this to start flowing through into clinic activity and softness in the MedTech business?
Okay. If we start with your first question in terms of the size and relevance of our North America business in relation to the rest of the world in MedTech. So for MedTech, if we look at the second quarter, of the total sales, EUR 16.5 million derived from North America of the total EUR 28 million. So if we look from a sort of last 12-months perspective, roughly 70% of our business derives from North America. We've seen continued good growth in APAC and Europe. So I think slowly but steadily, we're gaining market share outside of North America as well. And so that mix is shifting slightly.
From a margin perspective, I would say they're similar margin profiles in our different regions. So there's not a big impact from a margin mix perspective. But U.S. or North America is still the majority of our business in that area. And sorry, your second question?
So yes, my second question was just around the scenario where we start seeing an improving environment in the U.S. rates coming down. Do you have a sense on how long this will take to then flow through into the MedTech business there and start to see a recovery in the U.S. softness?
Yes. Thanks, Marco. That's a great question. It's not that easy to answer it. But I think what -- the dynamic here is that I think the general consumer is very keen to take good care of the health of their companion animals. We've seen that in many studies. And I also believe that when that consumer feels like the future is brighter and when they have a little bit more disposable income at hand, which would be the consequence of a rate decrease, et cetera, I think this can fairly quickly change the trajectory in their clinics, too. And the willingness to pay for more expensive treatment out of pocket, I think, can really take a turn as well. Yes.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay. Thank you so much for joining us in the conference call today. We delivered a strong quarter. We appreciate the questions and the chance to talk a little bit about Vimian. We're looking forward to seeing you again in October. Take care, and have a wonderful day.