Xvivo Perfusion AB

STO:XVIVO

Earnings Call Transcript 2022-Q2

[Operator]

Ladies and gentlemen, welcome to the XVIVO Group's Interim Report Q2 2020. I will now hand over to Dag Andersson, CEO. Sir, please go ahead.

[Dag Andersson, executive]

Thank you very much. So Dag Andersson and Kristoffer Nordstrom here in Gothenburg to present the Q2 numbers and our main event. You can see here on the front page of the interim report, you can see a picture actually over Gothenburg with a lady or woman named [ Frederica ], who just received a new liver. And she is, of course, very happy with that. And she's actually featuring in several of our media and communications right now.

So we will then start by talking a little bit about Q2 financials at a glance as we call it. We have delivered a strong quarter or let's say, yet another strong quarter. And when I say strong, I refer to both sales, gross margins and profitability. We are actually getting closer to delivering our first quarter with SEK 100 million in sales. We're not far away from that, which is very, very nice. We presented a growth of almost 60% in -- versus same quarter last year. Organic growth of 28% and acquired growth of 16%.

And if we look at the business areas, we can then present all the numbers. When it comes to Thoracic, organic growth of 24%, and Abdominal 51% in local currencies. And gross margin disposables Thoracic of 82%, which is an increase of -- from 79% same quarter last year. And Abdominal showed an even stronger increase 56% versus 50% last year. We also delivered an adjusted EBITDA margin of 12% and Kristoffer will talk more about the detail later, but rolling 12-month trend continues to show increasing EBITDA. And we are particularly happy about the Abdominal growth in quarter 2. Disposables increased by 57% -- sorry, yes, disposals increased by 57%. And limited currency effects, this is many European as well. So a very strong and dominant quarter and strong Thoracic quarter.

When it comes to the second quarter, I would like to focus a little bit on the EVLP performance. And we can here see that we have performed very well when it comes to EVLP disposable sales, both when comparing with last year, but also when comparing with first quarter this year. And I'm particularly pleased to see Europe growing at really fast pace. We are talking about 60% growth versus first 2 quarters last year. And this is actually an excellent performance by the European phases.

Two XPS machines were delivered in the quarter, which means that we have actually delivered 5 so far this year. In quarter 2, we delivered XPS machines to Prague and Toulouse. And if you might not remember, just to tell you that in the first quarter, we also delivered to Cleveland, the second machine, and to [indiscernible].

The challenge for our organization has been managed all 4 major congresses in the second quarter. For some reason, 4 major congresses 2022 ended up in the same quarter. And all of them in the U.S, actually, with the exception of ILTS, which took place in Istanbul, Turkey.

When we look at the lung transplant activity in the U.S., we can here see that the numbers are rather stable, let's say, last 3 years. Q2 numbers were a little bit above Q2 2019 and '20, but slightly below 2021. European data is harder to get and the only thing I can say right now is that we are still looking at 2021 data, which actually showed a 12% increase in Europe versus 2020, but we don't have any data yet for Q1 or Q2 this year 2021. In May, we released a press release where we informed about the partnership between XVIVO and Cleveland Clinic in the U.S. And the partnership means that data is collected from the EVLP sessions on our XPS machines. And the expectation will this partnership is that we would be able to show aggregated data to support decision-making when evaluating the possibility to transfer more marginal lungs. I cannot yet say when we will be able to present this. But the study and the work is ongoing.

Another important development is, of course, the launch of Kidney Assist Transport. And as you all know, probably kidney is the most transplanted organ in the world. 2/3 of all organs transplanted are kidneys. So we have launched in the U.S., and I will call it a soft launch, since we are actually ensuring that the customers are not only happy with the product itself, but also happy with the service and support provided by our U.S. team. And this is why we have not delivered too many Kidney Assist Transports yet. We have a couple of large customers using the device and ordering disposables Mayo Clinic, Northwestern and Revivicor. Several devices will now be placed with customers during July. So for 2022, focus is 99% on the U.S. and Europe to follow in 2023. We have promised to deliver truck loads Kidney Assist Transport to Europe this year, but our main focus is U.S.

So when it comes to -- I also want to talk a little bit about the Liver Assist, actually, we haven't talked too much about Liver Assist in our course, but we have a great product. And you know that Liver Assist will feature in New England Journal of Medicine in the February 2021 and we have seen exceptional high sales growth in disposable sales in Europe during the second quarter. We actually talked about 140% versus last year, and 45% versus the first quarter this year. I would say that this is an exceptional performance. And we were later in the summer or September to take a decision on how to approach the U.S. market with Liver Assist, but this is truly a success product in Europe.

A few words on Brazil. You all know that we established a legal entity last year. We have also initiated a partnership with Contatti Medical and we have hired a regional business manager in Brazil. And what is also very positive now is that we actually have all product, not only PERFADEX Plus, but we have all products with regulatory approval with the exception of STEEN Solution and the perfusion therapies. All other products are regulatory approved. And we are actually planning our first machine sales to Brazil in this quarter.

A few words on the R&D pipeline, and I will focus on the Heart project. The European heart trials are progressing well, actually a little bit better than I would have sort of thought for. We have included already at least 115 patients. And we are now including 10 to 15 patients per month, which is a high rate, and therefore, we should be done by December with the European trials. And the same thing with Australia and New Zealand, where we have 3 centers activated in this investor -- investigator initiated study in Australia.

When it comes to the U.S., we are in constant interaction with FDA. We have submitted some additional critical data and information to FDA and the new [indiscernible] with FDA next week. I cannot say anything else regarding the IDE submission or exact dates or anything right now. So this is just to give you an update on this.

Then PrimECC, which we do not talk too much about that. It is an important study. We now have 3 centers activated in Sweden, Norway and Germany and might also include 2 more centers. And we will, in September, October, get some mid-term feedback on the performance of PrimECC. So I'm looking forward to this. And hopefully, I'll let then be able to talk more about PrimECC in the next quarterly call.

So I will then hand over to my CFO, Kristoffer Nordstrom.

[Kristoffer Nordstrom, executive]

Thank you, Dag. Next slide. Hi, everyone. I will talk a little bit about the financials here for a couple of slides. We are very satisfied with this quarter. I'll start with the company as a whole and then go through the highlights for each business area, which is more important for them to understand. So XVIVO, we followed up Q1 with a stable second quarter proving that there is a good momentum for us at the moment for all organs actually. Net sales amounted to SEK 94 million, and that's a 59% increase versus somewhat the comparison quarter. But however, disposable sales, as Dag had mentioned, for both Thoracic and Abdominal show strong trend and good growth also versus the first quarter.

Organic growth in local currencies was 28% in total. This is usually 10% price for us, and 20% is all about volume. Acquired growth, meaning STAR Teams was 16%. Gross margin 72%. I will comment more on this for each business area because there is -- the margin varies between the business areas. Both EBIT and EBITDA was strengthened versus last year. EBITDA SEK 5 million better and a margin of 12%. So in the summer, we are pleased with the quarter, and we continue to deliver good growth and profitability in, as you know, a very turbulent world out there.

Next slide please. Moving over to Thoracic. It was a strong quarter. Net sales amounted to SEK 69 million, organic growth was 24% in local currency. And since -- as we said, the global transplant activity is rather flat, which means that the growth becomes more or less strong, what's more important, which is our EVLP activities. So and EVLP grew 32% versus last year.

Yes, two machines sold to Prague and Toulouse. So we have a good margin and we're also looking forward to future statements this year for the sale of machines. Very important to mention, gross margin, we continue to see an improvement there, driven by our successful price increases that we have been [indiscernible] now 2 years in a row, and we also have some U.S. dollar effect in there as well, but mostly it's all about the price increases.

Next slide on Abdominal. So Abdominal was the rising star of the quarter, but very interesting of the growth of the Disposable. If you look into the details of the numbers, you could see there were no machine sales in the quarter. That does not mean that we didn't place the machines. So we actually had 7 machine placements this quarter. As we have communicated before, the Kidney Assist Transport, that is the strategy that we will have on all markets. We will place machines, and we will have volume commitment from the customers driving Disposable sales.

But specific for this quarter and that is not very usual is that we also have that model for a couple of liver placements as well. And that drove the -- was one of the real drivers for the strong Disposable sales. So over 100% growth on the disposables versus last year, but also worth mentioning 35% increase against Q1 this year. So the trend is very, very good there.

Gross margin also very, very content with that. So 56% versus 50% last year. Here, we don't see any foreign exchange rate effect at all. This is mostly European sales. So maybe some of it, but mostly, mostly it's all about price increase.

Next slide, please. Services, the STAR Teams. So Services as a recap consists of STAR Teams and their recovery business in the U.S. solely and they were acquired by us last year in November. So this was the second quarter where we can present full sales, so to say, 3 months per quarter of this business. Net sales were SEK 11 million, and that was a growth of 40% versus last year, but also a growth of 13% versus Q1 this year. And the number of cases continues to grow this time at 2% versus last year's quarter.

We had 1 new contract secured this quarter, and that will come to effect in Q4. And there is also a handful of other leads being discussed at the moment. In parallel, we also focus on investing in the organization in order to ensure the future growth, of course. Gross margin for the quarter was 55%, a bit of an increase there as well.

Next slide please, thank you. So EBITDA and P&L. We continue to see an improved EBITDA on a rolling 12 months number basis, so SEK 41 million now. So the trend is positive. For the quarter, we ended up on 12%, but that's 1% this unit lower than last quarter. One of the main reasons here was that we had a very, very intense quarter in terms of commercial activities, as Dag mentioned. So all this congresses that we invested heavily in will, of course, lead to future opportunities for us in the next quarters and years here. So these, of course, that we will not see in the quarter -- next quarter.

At other companies, we do experience higher costs in general. For us it's mostly about we are a traveling company. It's important to meet the customers. So of course, we're seeing increased travel costs. It's about freight, since we ship our goods and also we have a strong U.S. dollar leading to increased costs. However, we do believe that we will be able to handle this in a good way. For example, talking about freight, the majority of our freight costs are passed on to our customers. So we are in a quite good position there, I would say. And we also have a very good possibility to continue with our price increases. So we'll touch upon that a little bit in the end here as well.

So overall, I think we will come out very good here, and we will be able to see the strength in our profitability even though there is a high inflation as everyone knows.

Next slide, please. So cash flow, last slide from my side here. So the operating cash flow for the quarter was minus SEK 2 million. This was affected by a bonus payment for employees outside of Sweden participating in our warrant program. So that's a little bit of an abnormal transaction, I would say, which we have a little bit where I would say about. So excluding these items, the operating cash flow was actually positive, SEK 3 million. And also good to communicate, I think from my side is that this was the last quarter where you will see this effect. So in the future and the future incentive program that we have does not have this component disturbing the analysis to do that.

There was a significant increase in our accounts receivable this quarter, but that was more of a timing effect. So nowhere is there. We have a very healthy accounts receivable ledger and we already see some big payment sharing in the third quarter. Total cash flow was SEK 37 million, and that's mainly due to our investment in our capital projects and, of course, primarily our heart projects.

That's all I have to share here, Dag. [indiscernible] an opportunity again.

[Dag Andersson, executive]

Thank you, Kristoffer. Then let's talk a little bit about the outlook for the remainder of the year. And when I say the remainder of the year, we actually have the investment of the year less, now we are in the middle of July. But I would just like to talk about a couple of things here. One is that we see a very strong momentum when it comes to machine perfusion. Everyone has talked about machines perfusion and everybody knows and understands that for organ transportation and valuation, this is the way forward, and we are well placed since we are focusing on machines of the future with our devices.

We will continue to be [indiscernible] Kidney Assist Transports, we keep leading Kidney Assist Transports sales in the U.S. and prepare for the commercial launch in Europe 2023. But as I've said, I don't want to rush Kidney Assist Transport, there is no need to rush it. We want to learn because this is a new area for us in the U.S., and we have to make sure that the organization is sort of teamed up for it, and we also really increased the organization by 1 or 2 individuals as volumes increase in the U.S. during the second half of the year.

When it comes to price increases, we have shown increase prices in the U.S. almost on October or November 1 with up to 15%. And in Europe, these prices have increased January 1 by 5% to 10%, sometimes a little bit more. We will continue the price increases and we might actually aim for higher increases possibly. I haven't sort of thought that through yet actually how a higher means. So there is no point in asking question about what actually does higher price increase means. But we will ensure that gross margins continue to increase. We are committed to that, and we will continue to be able to raise price enough for margins to increase.

The work with the heart trials continues. As mentioned before, great momentum in Europe and Australia. We also filing our [indiscernible] there very happy [indiscernible] talk to the [indiscernible] which is one of the trial sites. And they really want to continue using the heart box after the trials are finished and they believe that the heart box should be [indiscernible] recovery situations as long as the donor and recipient on heart in the same [ hospital ] otherwise they want to use the heart for every recovery. So that was quite interesting to hear. We are, as I said, also in continuous discussions with FDA to secure the IDE submission needed to start U.S. trials eventually.

So yes, looking forward to an exciting [indiscernible] and looking forward to an exciting future as CEO. And as Mahatma Gandhi, who is a very, I think you all know, he was an Indian lawyer and politician. He once said that the future depends on what you do today. And I actually believe that we have created and we are creating daily the foundation for future success. We have great products. We have strong R&D and commercial teams and we have people who are prepared to walk the extra mile to deliver great results.

So I think this is all from Kristoffer and my side, and I leave over to the audience to ask questions, and we'll try to answer as well as we can. Thank you.

[Operator]

[Operator Instructions] And the first question is coming from Ulrik Trattner of Carnegie.

[Ulrik Trattner, analyst]

I know the strong development, and you mentioned it in Europe, and it looks quite exceptional. But can you shed some more color on what's driving the current sales for the Liver Assist? There must be something that's changed year-over-year over or at least over Q1 to Q2 that explains the strong development for Liver in the quarter?

[Dag Andersson, executive]

Absolutely. It's so nice to hear your voice, and you are always for some reason able to ask the first question, which we always expected that it comes from you. So Ulrik, when it comes to Liver Assist, as you said, remarkably good performance in Q2. And I would say the main -- there were several reasons, one reason is that we had some machine installations in the first quarter that sort of paid off in the second quarter. And so that I think is one explanation for it. Then I would also say that if you look at the European sales team, we have reorganized a little bit in Europe. We have a new head of Europe. And she has a great team working together, we heard.

So we have changed the European organization, clarified new roles and responsibilities between the business managers and the clinical specialists. And I think we have clearly seen we have many Liver Assists devices in stores, which, of course, leads to more disposal sales. There also been some changes in the reimbursement in certain countries, more generous reimbursement in Netherlands in machine perfusion and also in Belgium. And also great momentum in Italy, which is a big Abdominal market in Europe, where we have a fantastic distributor, performing very well with Liver Assists and Liver is actually big organ in Italy, significantly bigger than kidney for some reason. So that's another reason for that success. So Ulrik, that sort of partly answers your questions.

[Ulrik Trattner, analyst]

Yes, absolutely. And if we stay on the Abdominal segment, and just what you mentioned, the soft launch of Kidney Transport system. What does that sort of entail? And when should we expect a broader launch for the transport system as well as what has been the initial feedback? If you can give us some more color on that and what remains before we see a higher replacement of the [indiscernible] system versus the Kidney Assist Transport system? Is there something lacking that or holding back sales or it's just sort of a gradual step up towards?

[Dag Andersson, executive]

Okay. There are certain different angles here in this. If you look at the overall interest, it is definitely huge. I mean at the latest Congress in Boston in June, I was in Boston myself. I mean there were customers who just came up and said, how can we get over this device. Can we please buy it? And so we sort of prepare at least for customers who desperately want to buy the device. And that's on the positive side.

On -- when it comes to reality check, I mean there is a certain capacity we have this year. We have talked about being able to produce 1 per week and then steeping up to 2 per week. There have been a little bit of a delay in sort of increasing capacity. So that's one part of being a little bit more cautious. Then we have also the oxygen cylinders that are used when the device is actually transported. So today, the customers are buying -- the Kidney Assist Transports are using them in the Hospital where there is oxygen in the walls system, in the wall sort to say. So the oxygen cylinders will not be delivered until September, October, for supply reasons.

So we have also focus on the customers, who are actually using the Kidney Assist Transported by more stationary for the time being. So there are a number of factors in the capacity of how they are used, prioritizing certain customers, who are very big and influentials. And also always it is important, as I said in my presentation, that if you just sell, sell, sell, but you don't have the back office structure, the support, I mean there is also the whole issue around servicing the machines. We need to build the infrastructure. We are doing that, but that's nothing to sort of happen overnight.

So we have never planned for 2022 to be a massive year for Kidney Assist Transport. So as in the device, yes, it's launched. We are selling it. We will increase sales each month this year, but they're not going to fill up the market with the devices this year. You will see it in the numbers, but 2023 will be, I won't call it the year of Kidney Assist Transports. But then we have the right sort of capacity there. We have the service organization. We have also launched it in the U.S. at that point in time. So I hope that answers your question, Ulrik.

[Ulrik Trattner, analyst]

It does. And just on the service side of the business, 40% growth, and it sounds like you're investing in that organization, represent -- it is solid growth, but it's quite a lot below what they've done historically. Can you give us some more sort of insight to what to expect from that segment? And given that you're investing, what are you specifically investing in? And is it to be expected that the margin side of STAR Teams or the service business, which was rather high last year, is that to come down in 2020?

[Dag Andersson, executive]

I mean when it comes to STAR Teams, of course, growth in 2021 and 2020 were higher numbers. But the larger you become, then, of course, it's hard to keep on doubling the numbers all the time. STAR Teams depends very much on the surgeons that are employing in STAR Teams. They have some excellent surgeons. They have -- unfortunately, they have issues with one surgeon being in hospital for a long time. One surgeon was down with COVID for a very long time, which means that they have actually had to say no, thank you, or no to customers, asking them to recover organ. So it's very much down to organizational, let's say capacity in the organization, which has been a little bit frustrating.

The promise that if a surgeon has an accident, if you don't have a surgeon waiting to move in next day. I mean it is quite a long process to hire a surgeon. I just got a message from [indiscernible] yesterday they formed a new team. So again, so it's all coming in, but it takes time to compensate for surgeons who are out of sick or have had accidents. So I think that is one of the reasons why we are not growing faster a bit. So we need to solve the surgeon capacity issue. And I cannot tell you exactly how that will impact the second half of this year. But we have a new contract, it will start in November. We are revising new contracts. We are changing the prices of some contracts. So there is a lot of activity going on within STAR Teams.

And I think what is also interesting with STAR Teams is that we haven't really used them yet to push our product in the U.S. And you can imagine earlier in the day, they won't need to Abdominal. I mean, today, we are focusing on heart and lung. And when they are moving to Abdominal everything combine STAR Teams with Kidney Assist Transport, for example, or later on with a heart box. These opportunities will come further down the road. So I see STAR Teams as a long-term investment and something that we get better and better over time, as we integrate STAR Teams closely that with you. Did that answer your question, Ulrik?

[Ulrik Trattner, analyst]

Yes, yes, it did. It sounds like the main bottleneck in terms of number of surgeons. Could you give us some information on how the number of surgeons have changed sort of net effect if we were to talk about the ones active during Q2 versus Q2 last year?

[Dag Andersson, executive]

Kristoffer, you might know more, it is your base in the U.S. nowadays. Have you heard exact numbers?

[Kristoffer Nordstrom, executive]

Not specifically on that comparison, so to say. But they are -- I would say they are today -- there's also a difference between full-time employees and part-time employees. I would say there are 4 surgeons today, full-time employees and then they have a handful of surgeons that either step in case by case or are on part-time contracts. I can't really say exactly how it looked 1 year ago before we came in.

[Ulrik Trattner, analyst]

Okay. Now I was just trying to decide for the growth versus sort of the retainer fee that you received as well. So last question on my end, and then I will let you guys go. It is on the cost side and SG&A. And as you mentioned, quite a lot of trade activities during Q2, which is always a good thing. But could you help us give us some more numbers on this, because I'm guessing the SG&A ramp up is also related to the Kidney Assist Transports in the U.S. So just what level to expect and I'm just trying to extrapolate Q2?

[Dag Andersson, executive]

No, no. Kristoffer will talk in a little bit more detail related to the congresses. It relates to certain -- I mean, for example, investing in Brazil and the regional business managers. It is also related to some additional freight and distribution costs linked to shipping. The Kidney Assist Transport as soon as they have been produced, we have shipped them across the customers in the U.S. So all this amount together to a higher cost. Kristoffer, do you want to shed some light on?

[Kristoffer Nordstrom, executive]

No, I think you can be transparent to say that I think we had a budget of around or actual cost of around SEK 4 million on our conferences this quarter, and that contact we will not see, of course, in the upcoming quarters. We do not foresee any major investments in terms of headcount in the upcoming quarters, maybe 1 or 2 persons [indiscernible] towards that on the growth. But I think you will be able to do your calculation based on that.

[Ulrik Trattner, analyst]

Yes, that's great. And congratulations on a great quarter.

[Operator]

The next question is coming from Johan Unnerus at Redeye.

[Johan Unnerus, analyst]

And again, congratulations. Can you hear me okay?

[Dag Andersson, executive]

Absolutely, Johan.

[Johan Unnerus, analyst]

Excellent. Yes, on price increases, that's clearly supporting and not that you are clear that you are considering perhaps increasing prices at a slightly higher rate, which perhaps would be surprising given the general inflation. But could you please remind us about the -- your earlier expected timing. Can we expect around the same as the last 12 months, U.S. in the fall and Europe early '23?

[Kristoffer Nordstrom, executive]

I mean, Johan, we are looking at -- I mean, in general, my answer would be the sooner the better, but in the U.S., you always have to give the customer 1 month pre-notice, when we increase prices. So I'm not saying that it will not -- it could be little earlier than 1st of October, but it depends on how quickly we are ready to inform the customers about this, because we are already in the mid of July, and if we are going to increase it, let's say, months earlier, we also have to sell out this is earlier.

And I think Europe probably not before 1st of January, but we might look at the magnitude rather of price increasing. But as I said, I cannot give you any numbers because I haven't go through yet how to address it and how much the price increase possibly could increase with. I haven't given that enough thought yet, so I'm not going to answer that.

[Johan Unnerus, analyst]

Yes, of course. And just out of a clarity, this 1-month notice, would that also include the exact price increase when averaging out?

[Dag Andersson, executive]

Yes.

[Johan Unnerus, analyst]

Yes. Very good. And also some support, you clearly -- you said earlier, you gave a pretty positive view about Brazil and that been repeated. And also you had some progress in China. Could you give us any flavor of what to expect is clearly going to be visible anyway already in second half year?

[Dag Andersson, executive]

Yes. I mean in Brazil, I mean, Brazil is the third largest Abdominal market in the world. And we had -- we are planning now to sell the first devices in Q3 to Brazil. So we have orders from our distributors on it, and we will see Brazil in the numbers. We have earlier shown Brazil, I think Kristoffer, early [indiscernible] transplant, but now we will start selling devices as well to Brazil. So I am positive about Brazil. I think it is a very interesting market, and I have sort of good experience from Brazil.

When it comes to China, we have still not finalized the registration of XPS. We have [indiscernible] registered stared in China. We have employed or actually the second member of China team has started. We have 2 people now working in China and focus right now is to finalize the registration of XPS with STEEN Solution and everything. And we thought that will be done by Q2, which has not happened. And if you ask me on when do you think it will happen, I will probably answer Q3, but I cannot swear on anything right now when it comes to China. And the current sort of COVID lockdown situation in China doesn't help when it comes to speeding things out there. Did that answer your question, Johan?

[Johan Unnerus, analyst]

Yes, indeed. And remind us, you mentioned the capacity on Abdominal, Kidney Assist Transport, was it 1 or 2 per week or?

[Dag Andersson, executive]

Yes. I mean we have produced 1 per week, and now it's a little bit more certain weeks, but the problem is that it takes time to increase capacity. And we have planned to produce a certain number this year, and we are getting quite close to that number, I think, by the end of the year. And then, of course, we have to look at how do we manage capacity in the future. Do we bring in a second supplier, we are evaluating that? So a lot of time is spent now on supply chain and manufacturing, it was absolutely becoming much bigger so delivering many more devices.

I mean just don't forget you on that if you go back 2 years, we were solely an XPS manufacturer, and we have nothing else. Now we have steadily selling hundreds of devices across the world. So we need to have a little bit more of a professional outlook on manufacturing, I would say. So that will, I think, it impact also how we work in the organization in the coming months.

[Johan Unnerus, analyst]

That's useful. And approaching the end of the year, you should have the cylinders in place and obviously played some more solutions. What to expect time-wise between installation and disposables...

[Dag Andersson, executive]

If you look at -- yes, if you look at the customers like Mayo Clinic, Northwestern and really because they bought disposals quite quickly [indiscernible]

[Kristoffer Nordstrom, executive]

It's really part of the placement deal and I haven't heard that they are not moving forward with the program immediately. And I haven't heard that they do not do that.

[Johan Unnerus, analyst]

Yes. That's good. And to go back to the OpEx not that is extremely important, but it's any way useful. We should clearly expect sales and marketing to come down a bit in the second half of the year. Admin and R&D was rather modest. And should we -- what should we expect half year compared to second half of the year? Should we expect an increase or flat overall on OpEx?

[Dag Andersson, executive]

Yes. I think R&D, of course, when we start the U.S. trials, Kristoffer then R&D will increase. Yes. So that is a little bit dependent on the exact timing [indiscernible] which I cannot give you any more information today. And then when it comes to sales and marketing, as we talked about before and Kristoffer and I, we explained it quite well that, there were certain costs in this quarter or in the second quarter that will not be repeated in the third or fourth quarter. How much exactly will differ? We cannot really answer.

[Johan Unnerus, analyst]

I guess, a larger cost on the U.S. study would be very positive if that would happen in the second half of the year. But perhaps you would incur some related cost even if the actual study wouldn't start by the end of the year?

[Kristoffer Nordstrom, executive]

So to clarify on that type of cost, a U.S. parts trial in the U.S. that is a project and with associated costs that would be capitalized on our balance sheet. So that will not affect EBITDA, although it will be, of course, in the end a significant stand for us. I think one of the reasons for the -- also, in my view, a bit modest R&D cost in the P&L is that, we have people who go on to previous year worked with maintenance of products. They have more focus on certain development projects this year and also been capitalized.

So it's not that we have decreased our man force, so to say, in R&D. It's more a shift of allocation on what the projects they are working with.

[Dag Andersson, executive]

But I think it's important to note that even if [indiscernible], once you start working in trials in the U.S., there will also be need for medical people to try to the U.S. So there will be more time spent from different parts of the organization. So of course, starting trials in the U.S., we have a certain cost implications, but we cannot say how much that would be at this point in time.

[Johan Unnerus, analyst]

Yes, of course. And finally, on more perhaps value-driving aspects. The gross margin on Disposable and especially Abdominal, it's increasing as you have set up your goal to be and to deliver on that. What about the outlook, partly it relates to the price increase, which we haven't really decided on fully, but -- but you [indiscernible] progress?

[Dag Andersson, executive]

Yes. But it's price increases. But it's also the mix between U.S. and Europe. As we sell more in the U.S. over time, the price level in the U.S. is higher -- significantly higher than the Europe. So when Kidney Assist Transport becomes, let's say, [indiscernible] product, then of course, this will also impact the gross margin in a very positive way.

[Johan Unnerus, analyst]

And if I may, are you still confident that you can match the 2 business lines, well you have the third as well in some -- by 2026 as a recollection from the Capital Market Day, that seems very positive?

[Dag Andersson, executive]

Yes. I mean let's see, you will hear more again in September. We are meeting now in August. We have to look at the strategy. And I think it has to do what we've got and what we can when it comes to deliberative and the U.S. go-to-market strategy deliberative, which we will then also talk a little about in September, not today. So where we could be 50:50 or 40:60 or 45:55, hard to say anything else right now. So we will come back to that in September at the Capital Markets Day.

[Johan Unnerus, analyst]

Any of these figures will be highly significant, I think.

[Operator]

The next question comes from Peter Östling of Pareto Securities.

[Peter Östling, analyst]

A couple of questions. Just a clarification. I believe that Kristoffer has said that over around 30% organic growth, 10% was price and 20% was volume. Did I hear you right, Kristoffer?

[Kristoffer Nordstrom, executive]

Yes.

[Peter Östling, analyst]

And for Thoracic, the 24% was mainly related to price increases as well. Maybe 15% price and the rest was -- could be volume?

[Kristoffer Nordstrom, executive]

For half of Thoracic, organic growth 24% in local currencies. Yes, that's correct. That also -- I mean that also applies to the what I would add, what I just said. So around 10% is price, and the rest is volume. It looks a little bit different on the different market.

[Peter Östling, analyst]

Okay. Great. And then can you say anything about how the pipeline for XPS deliveries look for the remainder of 2022?

[Dag Andersson, executive]

I mean we cannot talk about specific customers, but there will be further deliveries of XPS. We have done 5 so far. And there will be a few more this year, but I cannot name the customers. I know where they will be going, but I can't name the quantity or the customer names.

[Peter Östling, analyst]

Yes. Okay. I didn't want the name of the customers, just a figure, a number, a ballpark figure, if that...

[Dag Andersson, executive]

[indiscernible]

[Peter Östling, analyst]

Okay. And then now in the hindsight, when you have been facing this problem with the gas cylinder in the U.S., was this something that you could foresee?

[Dag Andersson, executive]

No. We could not have foreseen that.

[Peter Östling, analyst]

Okay. And then finally, on the capacity and the production side, what is the main problem there, when it comes to scaling up capacity?

[Dag Andersson, executive]

The main -- if you were scaling up with the housing, when we produce the Kidney Assist Transport we have 2 contract manufacturers. One is producing the housing, the shell of the box and one is producing the actual box with the component. And it's really the housing that is the limiting factors. We are starting a second supplier in the fourth quarter this year for housing, and that will improve capacity. I cannot give you any numbers on exactly how much it will improve capacity, but there is a limiting fact to the housing manufacturers.

[Operator]

[Operator Instructions] There are no further questions at the time. Please go ahead, speakers.

[Dag Andersson, executive]

Okay. Then I would like to thank all of you for listening, participating and for asking some excellent questions, and we look forward to presenting next quarter numbers or this quarter numbers to you in October this year. So thank you for listening and have a great summer. Bye.