Vitrolife AB

STO:VITR

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and thank you for standing by. Welcome to today's interim report January-March 2021 conference call. [Operator Instructions] I'm must advise you that this conference is being recorded today on the 22nd of April, 2021. I would now like to hand the conference over to your first speaker today, Thomas Axelsson, please go ahead.

[Thomas Axelsson, Chief Executive Officer]

Thank you very much, and welcome to Vitrolife Interim Report January to March 2021. And as mentioned today, it is the 22nd of April. The speakers for today will be Mikael Engblom, the CFO of Vitrolife; and myself, Thomas Axelsson, that is the CEO of Vitrolife. Please change page to number two, and let's get into the presentation. What Mikael and I would like to go through today is, first, I would like to go through recovery, the global recovery within the IVF market, and that could be expressed easily. So summary of Q1 that our sales was SEK 379 million, and that is a growth of 14%. If we're looking at local currency, then the sales increased by 20%. After that, when I've gone through the sales for the regions and also for the divisions, Mikael will go into the key financials. And I can just mention one thing, and that is that the EBITDA was SEK 163 million, and that was on margin of 43%. Let's go into the situation then in different markets and on Page #3. As you can see, the growth in local currencies was 20%, and that is organic growth, nonacquisition. If we are starting from the right side and look on the region, Japan and Pacific, it was an extremely good quarter. It was a growth of 42%. That sales is coming from a good situation in Japan and also in Australia for the Time-lapse equipment. And there has also been a good pickup on our -- introduced for a year ago, our Media in Japan. But overall, it's as mentioned a 42% growth, in the region is something that are quite satisfied with. When we are then going out into region Asia, then it is a little bit more different to compare to last year because it was in the region of Asia and especially in China, where the COVID first was impacting Vitrolife. The growth for the region in this quarter compared to last year is 50%. The total sales was SEK 85 million. I would like to mention that when looking into this region, China, and China is our biggest market and it was also in China where we could see the first decline last year, that China is back to more or less 100% on pre-COVID procedures. Last weekend, it was the CSRM, which is the Chinese Society for Reproduction Medicine. And discussions at that meeting and their view was that the Chinese market is back to 100%, and that's going to be the situation likely for the next coming quarters. So there is not any large pent-up demand in the China region. There are still a challenge for the IVF tourist, and we still see consequences of the COVID in Thailand. We see those consequences in India. And the last information and also that was impacting Q1 is that the number of sites that's been done in, for instance, India is maybe 2/3 of a normal year. It has been a great development of both Time-lapse and Media within the region and then especially in China. As mentioned also at the last presentation that was Q4 last year, that we see that our Media is well accepted and we are taking market shares in that region. Going into the 100 segment or actual region, which is the EMEA region, there the growth was 6%. It is a mixed picture within the EMEA region. It is more or less back to normal situation in, for instance, the Nordic countries. We see the same in the DACH region. It is a mixed picture between those territories that has some private and also public clinics, where the private clinics are performing more than what they did in 2019 or even in 2020. [ Republics ] are still behind. The territories or regions and clinics that are depending upon IVF tourists are also within this region behind normal numbers, and that is for Spain and Turkey and especially for Middle East. But overall, good growth within the region, 6%. And the time -- and the growth were coming from Time-lapse and Disposable Devices as well as Media. Then the last region for today we'll go through is the Americas. There, we see growth of 7%. So every region did grow organically and in local currency this -- in the quarter. We believe and we do see with our contracts with the U.S. clinics that they have a higher demand than normal. There is some pent-up demand, but it's also a situation where they see growth currently that is not due to the pent-up demand. One of the explanations that we have got is that remote work has helped the clinics to get new business. It's easier for them to communicate and get in contact and do the consultation and also start the treatment. Americas, as I mentioned, there is good growth in U.S. while there's still a situation with challenges in South America. Okay. If we go to the Page #4, we'll go through a little bit more about the current situation about COVID, and see how that is impacting us and how it could impact Vitrolife in the next coming quarters. As I said, we believe that globally, if we are considering all the IVF cycles being done, it is an overperformance, let's say, than to normal situation in some territories like in U.S. And there are some territory that are still behind. So overall, in total, we believe that the market is almost back to normal in cycle numbers. We see that an uncertainty for the clinics to plan for the cycles and especially for those that are traveling into their clinics is still a challenge. And before all of the markets has opened up, we will see some challenges for those markets and that especially the IVF tourist markets. Talking about the pent-up demand. Yes, there can be a pent-up demand, and we probably will see that for the market I mentioned that currently has some problems, which is Thailand, Turkey, Spain, for instance, and also for the Middle East. What we see also within our production is that there can be a situation where some suppliers will have a problem in supplying us with the products that we need for the production. It is not yet a reality, but I will like to take the opportunity or, let's say, the opportunity to inform you that it could be a risk for the next coming quarters regarding the supply of products. The reason for that challenge is that the pharma companies that are involved or [ genomic ] companies that are involved in vaccine production, the demand from them has, of course, increased. And there is a priority from the suppliers to supply those companies first. But just once again, it is not a reality, but I would like to mention the risk. During the last couple of quarters, we've seen an increased profitability. And we also see that due to the COVID, we have changed some working processes and one of the reasons for our very good profitability. When the business is coming back to, let say, a normal situation with ability for us to travel, we expect, of course, that the expenses will increase because we are a little bit behind in meeting customers. We are a little bit behind in some product development where we will need to do clinical trials. However, the consequence of this situation is that we most likely will come into a situation where some processes will be more cost effective, for instance, through [ merger ] meeting with customers. If we are then leaving that situation and go into Page #5 and are looking into divisions. We start with our largest division, which is the consumables, that is Media, Disposable Devices, and the sales there was SEK 193 million. Between the different product lines, it is a good mix and an even growth. So a situation that the consumables are growing with 15%, shows that the market are back where we have a good market share. Technology, which is more or less only Time-lapse, we see good, good growth there with 36% and the sales was SEK 136 million. The growth there is a combination of that some clinics was holding their orders. And now when they see that the market is coming back, they are willing to invest in hardware. Another situation is that we are launching -- and we have launched in April our software that is supporting the Time-lapse and -- called iDAScore, which is then making the usage of Time-lapse and how to use morphology as a selection tool a lot easier. So we can see that the introduction of that has increased the trend and also motivated some customers to go into the use of Time-lapse. Genomics, it is a decline with minus 7%. And that is, as we said before, due to that we have lost customer, and that was done at the end of Q1 last year. So that's why we are still seeing that decline. The sales there in our smallest division was SEK 27 million. If we are then going into more about the key financials, I would like to hand over to Mikael and Page #6.

[Mikael Engblom, CFO & Investor Relations]

Thank you. So looking into the gross margin, it was 65% in the first quarter compared to 62% in the first quarter last year. And the reason for the improvement is the higher sales that brings economies of scale. We have also seen a positive development in the product mix as more sales are done for Media and that's in relation to Genomics. And we have also reduced our scrapping cost, which we took some scrapping costs in the first quarter last year that impacted the margin negatively. Looking at the EBITDA margin. It was 43% compared to 35% last year. And besides the improved gross margin that I just mentioned, we have lower operating expenses in relation to sales, so about 28% compared to 33% last year. That is primarily related to marketing and sales, what Thomas mentioned, we are seeing less cost of traveling exhibitions, marketing activities and also reduced costs for staffs. So all in all, that brings the increase from last year to this year. Looking at the net debt. We have net debt in relation to EBITDA of minus 2.2, and we had a strong cash flow during the first quarter of SEK 129 million. So adding to the money in the bank. So at the end of the first quarter, we have SEK 1.180 billion in the bank and no financial loans. And as before, our ambition is to use this money for value-adding acquisitions. Please change to #7 for long-term outlook. We continue to see the long-term market growth of 5% to 10% in monetary terms. And as before, we expect that to be driven by the growing middle class and the trend that parents to wait longer with having children, including the increased social acceptance of IVF. When it comes to Vitrolife's ambitions, we are targeting sales and broadening the product offering. And that will be done both through organic development and sales expansion as well as through acquisitions. With that, operator, we are ready to take questions.

[Operator]

[Operator Instructions] The first question comes from the line of Ulrik Trattner.

[Ulrik Trattner, Research Analyst]

Thomas and Mikael, if I could just start off with the development in North America, seeing that it's growing 7% organically. We have talked previously about pent-up demand effects abating, but it seems like they're rather being quite stable. But if you can just help in deciphering the strong development in the quarter in the North American market as well as if you could provide some more granularity on the split between your exposure in North America between U.S., Canada as well as to South America, that would be very helpful. That's the first question.

[Thomas Axelsson, Chief Executive Officer]

Okay. Let's look into the Americas. And for us, the main business in Americas is U.S. And we have not -- I don't think we have gone out with exactly how the split is, but the main business for us is in the U.S. The pent-up demand there is what we believe, what we see the numbers in North America, it is difficult to do an exact estimate. But if I would say like this, that we believe that the cycle numbers in Q1 compared to last year in U.S., and this is confirmed from some other places, is 10%, 15%. But that's just a guess. With then the growth that we had in North America and, let's say, in Americas and we are comparing them, the growth for the region, we are in line. I wouldn't say that we are taking any market share in U.S. We are not losing any market share. We are just within the market in U.S. While we are not then growing 10% to 15% in Americas is due to that, there is less [ safe ] they are behind in South America. That's the first question.

[Ulrik Trattner, Research Analyst]

Yes. But before turning on to China, and you're talking about Media and Consumables gaining market share. I would guess it's mainly within Media. How much do you -- would you call that to be sustainable? Is it due to the fact that your Media products are favored? Or is it due to the fact that competitors have a hard time supplying the market right now?

[Thomas Axelsson, Chief Executive Officer]

I don't see that there is any major problem with the supply. There are always small problems with supply from all companies, but that is not changing the market shares. If we are then looking into the Chinese market, what -- the growth there is coming from all product lines. What I mentioned regarding the growth in Media specifically is that we do feel -- and I don't feel, I can say that we know that just from the conference this weekend, that customers are very satisfied with our products. And that's why we are still gaining small market share even if we are the biggest supplier in that field. If I would go do a long-term perspective, we will get more domestic competition. But I don't see that around the corner. That is more of a projection within a couple years on the Media side, and that is for all product ranges. The growth also in China is coming from the Time-lapse situation, where the investments and what we have done in Time-lapse and working together with key opinion leaders has right now shown that, that will probably pay off.

[Ulrik Trattner, Research Analyst]

Great. And if we were to stay on the topic of Time-lapse and technology development because obviously, it was really strong this quarter, at least quite a quicker recovery than I anticipated. Just your thoughts on how important it has been that you're now launching or finished developing the iDAScore since it was finalized in April. But how much impact have that served launch or development had on Time-lapse in the specific quarter of Q1?

[Thomas Axelsson, Chief Executive Officer]

There, Q1 and then looking into the technology business, you mentioned then Time-lapse. There is always ups and downs between the quarters. So the projections regarding Time-lapse and sales of Time-lapse can go up and down. And we had a good, good quarter in Q1. Going into the situation regarding iDAScore, yes, I do see that it has an impact. The customers know that something is coming. They've seen presentations on it. And there's also been clinics that has been involved in our validation and clinical testing, and it is a small market. So some of those clinics, of course, will then directly start to buy some extra. And our projections is that iDAScore will be of a huge help for the growth of Time-lapse overall. And especially in clinics where they will buy Time-lapse due to workflow and maybe not so much due to the selection to it itself.

[Ulrik Trattner, Research Analyst]

And do you have any targets or projections or ambition in terms of where do you believe Time-lapse will go penetration-wise, if we were to look long term, long, long term?

[Thomas Axelsson, Chief Executive Officer]

Yes. We are not changing our ambition and what we believe that Time-lapse slowly will get into and be a standard product. Today, probably around 20% of all the cycles are being done with Time-lapse. The challenge here has been the cost and also the situation regarding the easiness of use. And with more software, so it gets easier and with more precision-wise software and also with larger, let's say, purchase orders and IVF clinics. When IVF clinics are expanding and they're go into clinic chain, they -- one of the reasons for doing it is to standardize the business. And the growth are coming from those clinic chains and those that are interested in doing standardized professional IVF laboratories. So I definitely believe that it is going to continue to grow. The question is how quick and then what's going to happen with the smaller clinics. Because there is a difficulty to sell hardware as well as software to clinics that is performing, let's say, less 250 cycles.

[Ulrik Trattner, Research Analyst]

Great. I have 2 more questions, if I may, and this might be directed to Mikael. Margins are very high in the quarter and have been so over the last few quarters. Just looking specifically to SG&A being 30% of sales might not be sustainable long term. However, as with the current traveling restrictions, are we to expect any near-term changes? Are there any trade shows that will take place in person for 2021, for example? And when are you to expect it to filling up vacancies from last year?

[Mikael Engblom, CFO & Investor Relations]

Yes. So we have initiated a number of recruitments in the company. So we're looking to fill up vacancies and strengthen the organization in the selected areas as well. So we are expecting personnel costs to gradually increase over the year. When it comes to the kind of external activities such as exhibitions and customer events and traveling, we are still in a situation where travel restrictions like everyone knows, so that is limited. And of course, we can only guess when those activities can become physical again. But most likely, in the second quarter, we will have a relatively few customer events, physical customer events, which should impact the cost in a positive way. But then during the second half of the year, we could probably expect more of physical meetings to occur. But that's depending on what happens with the COVID situation, of course.

[Ulrik Trattner, Research Analyst]

Great, Mikael. Last question, you highlighted a potential problem in the supply chain. Is there any specific products that would be affected more than other? Or -- and is it the same for the entire industry or more related to Vitrolife? As well as when would you sort of really know if these effects will come into play?

[Thomas Axelsson, Chief Executive Officer]

It will impact the industry. I mean it's not only Vitrolife because some of them -- more or less all of us are -- is having supply from the companies that are also supplying due to the pharma industry. So that is an overall concern. We don't know if it is going to be a problem. We are having contacts, and we are working with those suppliers, and they are doing their best. But we don't know if it's going to happen. And if it's going to happen, the main reason or say the main area in that case would be the Media because that's closest to the biotech industry.

[Ulrik Trattner, Research Analyst]

And do you know when you will get a more clear picture on the supply chain?

[Thomas Axelsson, Chief Executive Officer]

We are working on it, and we don't see any immediately risk. But it is a concern and that will probably then be -- if nothing is not going to change within the next coming 2 quarters, something like that. They are also increasing the production and the supply and -- but there's always a risk in times like this.

[Ulrik Trattner, Research Analyst]

Thomas, Mikael, and congratulation on a stellar report.

[Operator]

The next question comes from the line of Patrik Ling.

[Patrik Ling, Senior Analyst Healthcare]

Yes. I have a few additional questions. First of all, just one more question on the AI systems for Time-lapse. If you could elaborate a little bit on pricing per system, if it's one software license per machine? And can all already installed systems be upgraded without any hardware reconfigurations?

[Thomas Axelsson, Chief Executive Officer]

Okay. I can start first. Every machine that are working or we are calling the plus system, EmbryoScope+, they can use the iDAScore. So the old EmbryoScope can't use the new software. The business model is that the ones that are buying new equipment is having a special offer on the software the first year. But our business is that we are having a subscription on the software, and it's going to be annual based. And then, of course, it's always also a discussion depending upon number of products that they are buying, the new EmbryoScopes. But the idea is to have hardware sales and combine that with, of course, then the consumable products that are the [ dishes ] and then the software

[Patrik Ling, Senior Analyst Healthcare]

Can you say anything about what you would expect a normal user to pay annually for those type of software licenses?

[Thomas Axelsson, Chief Executive Officer]

It is -- currently, the initial price will be, if they are only buying the software, around $10,000 a year.

[Patrik Ling, Senior Analyst Healthcare]

So if the client already has an EmbryoScope+ system without the iDAScore, they can just pay $10,000 per year to get the license to use that?

[Thomas Axelsson, Chief Executive Officer]

Depending upon the number of EmbryoScopes that they have because it's also a situation about that we -- we want customers to have the system so they can get used to it and they can see the advantages of changing the clinic to only a Time-lapse clinic.

[Patrik Ling, Senior Analyst Healthcare]

Okay. Great. Then I had a follow-up question on the, say, the marketing expenses. I mean going back and looking at your history, I mean, you've been, on a quarterly basis, a little bit north of SEK 60 million per quarter. But given what you said about also trying to retain some of the savings from the change in working process that we've seen across basically all industries, would you say it's fair that it would still take quite a long time before you reach sort of historical peaks on sales and marketing? Or is there -- even if you change your working practices to some extent, such a large pent-up demand that we will actually rather quickly see costs coming up to old highs despite having an underlying change in the way you operate?

[Mikael Engblom, CFO & Investor Relations]

I mean we expect cost to -- I mean, we expect cost to increase in the sales and marketing, both through personnel and as well as the external activities. At the moment, there is a kind of pent-up demand to organize the customer meetings and exhibitions and to get in contact with customers. So we can expect cost to increase in those areas when we are able to travel again. The long-term effects of savings of conducting some meetings through digital channels instead of physical is something we'll have to evaluate over time the exact effect of that. I think it's difficult to address that today.

[Patrik Ling, Senior Analyst Healthcare]

Okay. Could I also ask about administrative costs this quarter, which jumped up a little bit more what I had expected. Are there any particular items in that? I saw in the report that you mentioned that you had some legal processes going on and that you were taking legal costs directly. So is that something that impacts administration?

[Mikael Engblom, CFO & Investor Relations]

Yes, that's correct. So we have the patent litigation ongoing. And we have charged legal costs for the support of that process against the administration. So that's correct.

[Patrik Ling, Senior Analyst Healthcare]

And approximately how much was it in this quarter?

[Mikael Engblom, CFO & Investor Relations]

It was a little bit less than SEK 2 million.

[Patrik Ling, Senior Analyst Healthcare]

Okay. So it's not the majority of the uptick that we saw from Q4 then. And going forward, is SEK 2 million per quarter, is that a reasonable assumption for the legal costs?

[Mikael Engblom, CFO & Investor Relations]

I think it's difficult to assess that. It depends on how the process will develop

[Patrik Ling, Senior Analyst Healthcare]

Okay. Then last question, Genomics. What can you say there regarding that operation, which was weaker than what I had hoped for the quarter? Is it -- what's your outlook and take on when Genomics will start to come back? Is that sort of second half of this year event? Or is it even longer term?

[Thomas Axelsson, Chief Executive Officer]

It will come back with, as I believe, 2 things. One is what we are trying to do is always to convert customers to the Illumina equipment if they have gone to another platform. Another situation is our development that we will launch this year. We are calling it [ Embryo Map ] it is our own product. And I do hope that those 2 things will benefit the Genomic business.

[Patrik Ling, Senior Analyst Healthcare]

Okay. And when during this year will you launch [ Embryo Map ]?

[Thomas Axelsson, Chief Executive Officer]

It will depend upon one of the things that you have -- we had a question about how can we go out and do all the kind of validation and clinical studies. Some of the things is tricky to do when you are restricted to travel. And the situation is that we are doing the development of this team, this situation, mainly with the team in the U.K. And the situation right for those to travel to U.S. or to travel to other places has been tricky. Hopefully, it's going to open up quite soon.

[Operator]

The next question comes from the line of Bjorn Olander.

[Björn Eric Olander, Founder & Equity Research Analyst]

Yes. Great presentation as always, and there are many questions. But I have some follow-up starting with the last one, actually, with Genomics. That seems to be -- I mean we have seen declining sales for some 6 quarters in that area right now. I suppose it's primarily U.S. Could you shed some more details on what has happened except for the pandemic, of course. Is it sort of a saturated market or losing market share or pricing? And anything that would shed some light on that dynamic would be helpful.

[Thomas Axelsson, Chief Executive Officer]

I see mainly 2 things. The U.S. are currently the biggest market for us. We don't have the Asian market. And in U.S., there has been a centralization within the laboratories. And that will mean that they are going to -- they're using other solutions. And another thing is that we have, since we are distributing the products, we are working with our own kits, is that it has been a price erosion out in the market.

[Björn Eric Olander, Founder & Equity Research Analyst]

Okay. Is this sort of in line with your expectation when you acquired this or when you entered into the agreement with Illumina? Or has it been a bit of disappointment?

[Thomas Axelsson, Chief Executive Officer]

I wouldn't say a disappointment. What I am disappointed about is the time to get the new product out to the market. We have had a development team. And we have been more or less standing ready for a long, long time to do the final things. We want to have a very, very good validated product. And it's been very tricky the last year to continue with all those processes. So it is just a delay within our ability to do our own launch. That is one of -- that's my biggest disappointment.

[Björn Eric Olander, Founder & Equity Research Analyst]

Could you mention some more about what that kit is going to sort of add to the current offering in your current markets?

[Thomas Axelsson, Chief Executive Officer]

It's going to be -- it's going to open up for the customers to increase their production. It is -- and it's also going to have an improved software. So it's 2 things. It is then capacity and also user friendliness.

[Björn Eric Olander, Founder & Equity Research Analyst]

Okay. And the other thing is that product will enable is the launch in Asia, excluding China, right?

[Thomas Axelsson, Chief Executive Officer]

Correct.

[Björn Eric Olander, Founder & Equity Research Analyst]

So do you have any expectations from that? Is it going to be sort of 50-50 between Asia and North America? Or any indications about...

[Thomas Axelsson, Chief Executive Officer]

No. I mean -- no, I mean, we can look on the global market on Genomics overall. And it is U.S. that is the biggest market, for sure. And it is -- the market is growing in other regions. I mean we have a very, very good in Spain, for instance. A good market in U.K. and some Middle East. But overall, if we are comparing different markets, there are very few cycles being done with Genomics in some markets. So there is a growth potential for sure in Asia. But they're coming from a lower level.

[Björn Eric Olander, Founder & Equity Research Analyst]

Yes. Okay. So -- and you don't know when you will launch that?

[Thomas Axelsson, Chief Executive Officer]

Our aim is to do it this year.

[Björn Eric Olander, Founder & Equity Research Analyst]

Yes. Okay. Finally, a bit more about the supply and logistics. You mentioned more of former type of the supply could be at risk, which is Media then. Are there any risks for the others? I mean there's been a lot of talk about semiconductors and so on. And you have I mean more technology-oriented products as well. Do you see any cost rate [indiscernible]

[Thomas Axelsson, Chief Executive Officer]

I mean there is -- I would guide you wrong if I said that there is not any risk in any other products, but they are not yet seen. I can just mention a thing, that what we have done is that we have been taking scrap due to that we have Media on whole chains. And currently, it's so much vaccine that is being distributed. The cold chain from the global markets are under a lot of, let's say, challenges. So that's just an example where there can be on different level. It can be on the supply and raw material. It can be on electronic components. It's very, very little for us because we have a huge inventory on it because we have been taking action on it. But also a situation that if a vaccine shipment will be done from U.S., we can be -- that shipment can -- our shipment can be stopped for a day or 2. If that is stopped for a day or 2, the cold chain is under a lot of stress. So I mean it could be in different areas that you could never imagine.

[Björn Eric Olander, Founder & Equity Research Analyst]

Yes. It's a challenging environment, of course. I've heard some companies talking about much higher transportation costs and so on. I suppose that could potentially affect your gross margin. But -- I mean you have high gross margin, so I guess the impact will be quite low. But any views on that?

[Thomas Axelsson, Chief Executive Officer]

I mean you are correct. The costs for rights has for sure gone up and especially on the cold chains. And the cost on other products are increasing. But as you say, our gross margin is quite good. So it's not really going to impact the margin so much. But at the end, we will need to put it on to the consumer.

[Björn Eric Olander, Founder & Equity Research Analyst]

Exactly. Just one final observation in terms inventory. I mean you have lower inventory now than before the COVID crisis. And it seems like the market is recovering quite fast now. And then we have these challenges with the supply chains and so on. How confident are that your sort of situation will, I mean, not be a problem from that point? Or are you increasing your inventory as we speak?

[Thomas Axelsson, Chief Executive Officer]

If we see a risk, of course, we are increasing the inventory. What you are seeing with the decreased inventory is that we are -- we have been selling quite good. The biggest challenge for us on inventory is finished [ goods ] on the hardware products, if it's going to be a delay with a quarter or 2 for our customer. So part of it is that we have a good sales situation, of course. And the disposable devices is something that is also growing. So biggest items on the warehousing side are finished goods and also some of the disposable devices continues critical hardware.

[Björn Eric Olander, Founder & Equity Research Analyst]

And congratulations on another great quarter.

[Operator]

The next question comes from the line of Daniel Albin.

[Daniel Albin, Research Analyst]

Thomas, Mikael, I have 2 questions. And maybe we can take them one by one. So the first question being, if you could maybe give us some color regarding the lawsuit taking place in Germany, when is it expected to be settling? Or have there been any arguments that have been processed there in Q1? Could you just update me on that one, please?

[Mikael Engblom, CFO & Investor Relations]

Yes, I can give a short update. Yes, we did receive that lawsuit in the beginning of the quarter. And according to the time plan stipulated in Germany, we were supposed to do our defense filing by the beginning of April, and that was done. So during this quarter, we have gathered some evidence and documentation that we believe supports our view on the situation. And as noted, we haven't included any provisions for the lawsuit in the accounts, except for the running cost of the legal advisers. When it comes to the next steps, there will be some exchanges of information further. And based on our knowledge, there will be an oral hearing happening thereafter, most likely next year. So that's based on how we understand the situation.

[Daniel Albin, Research Analyst]

Okay. Thank you. And my second question is on the technology Time-lapse sales and especially APAC. I wonder since acquiring a facility back in 2014, you have sold quite some EmbryoScope. Is it possible to sort of break down if new sales are coming from new IVF labs? Or you're sort of replacing earlier ones?

[Thomas Axelsson, Chief Executive Officer]

Okay. If you talk about APAC, that's mainly new products.

[Operator]

[Operator Instructions] Dear speaker, there are no questions at this time, please continue.

[Thomas Axelsson, Chief Executive Officer]

Okay. If that's the case, thank you very much for listening in to the interim report January-March 2021. And thank you and bye.

[Operator]

That does conclude our conference for today. Thank you for participating. You may all disconnect.