Thank you for standing by, and welcome to the Nanosonics Limited 2021 Full Year Results and Investor Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the conference over to Mr. Michael Kavanagh, Managing Director and CEO. Please go ahead.
Thank you very much and a very good morning, everybody, and thank you all for joining the call this morning. I am joined remotely by MacGregor Grant, our CFO. Well, by now you would have seen The FY 'twenty one results announcements, which I believe demonstrates how the company has successfully adapted to the challenges of COVID-nineteen And overall, it delivered an excellent set of results, and particularly in the second half of the year as the market conditions improved. There are really 3 key takeaway messages I'd like to convey from the comprehensive set of results And information contained in the release and you'll find the investor presentation, annual report and sustainability report, which were all And the first message really is around how the organization did experience a significant recovery in the second half of the year over the first half as market conditions improved. And this recovery was experienced across All key measures of the business, including installed base growth, total revenue growth, capital revenue growth and consumables and service revenue growth.
And that revenue growth was even more pronounced when you look at it on a constant currency basis. The second message I want to leave you with is that there is still a significant opportunity for growth in the TROFON business. And indeed, the opportunity in North America is larger than our original estimate with the total addressable market In that market now estimated to have increased by 50% to 60,000 units. In addition, the fundamentals for adoption in Europe have strengthened where coupled with our investments in the region, We witnessed excellent growth for the year despite the region essentially being in lockdown for the full year, and that's very encouraging for the future. And the third message is in addition to the significant trofin opportunity, Nanosonics has an Exciting pipeline of new products.
We've just launched Audit Pro, which brings significant benefits to customers as well as opportunity for Nanosonics as we enter the new and important space of digital connectivity and data in infection prevention. And of course, in addition, this morning, we announced the next platform technology for the company that the company is working on, which is addressing what is probably recognized as the most significant issue in instrument reprocessing today, and that's endoscope reprocessing. And in particular, addressing the significant technical challenges associated with the cleaning phase of endoscope reprocessing
I'll talk
about a little bit later. So what I'd like to do is just provide a bit more detail on each of these Three areas and then I'll hand over for questions. So as I mentioned, the first key message is really around the significant call. And as you will have seen, full year revenue for the year was 103 $400,000 That was up 3% on prior corresponding period. In constant currency, however, total revenue was up 12%.
But more importantly, looking at the revenue outcome in both halves, it does provide very important insights. And as market conditions improved in the second half and particularly in North America where access to hospitals improved and ultrasound Seadrill volumes trended back to pre COVID levels. We saw revenue growth 39% over the first half to 60,000,000 And if you look at that on a constant currency basis, that growth was actually up 50%.
And as you
all know, installed base is Probably one of the most important metrics for the business. And despite the impacts of COVID-nineteen, the global installed base increased 13% To 26,750 units. So that's an increase of over 3,000 units for the year with all regions, I might say, Performing very well in that growth. Again, the second half of the year saw a significant recovery in new installed base adoption as the market Conditions did improve, particularly in North America, with 16 50 new units installed. So that was a growth of 20% on the first half.
So back to a very positive growth momentum trend indeed in the second half. And if I look at that by region, in North America, the installed base increased 12% or Just under 2,500 units for the year, where we now have 23000 nearly 23,500 Units installed across over 5,000 institutions. And the second half installed base was up 20% over the first half with 1360 units installed in that second half. And that second half run rate annualizes just over 2,700 units, which is getting back close to the pre COVID annual installations we've always been aiming for, Which as you know is between 2,700 and 3,000 units per annum. Indeed, when I look at the second half installed base in FY 'twenty one, It was actually greater than the first half of FY 2020 where there was no COVID impact.
So again, demonstrating the underlying strong fundamentals for adoption in the North American market. In our European region, our EMEA region, Despite COVID related restrictions really prevailing for the full financial year, the installed base grew 35% for the year, where the total installed base now reaching just over 1500 units across the region. And this growth, I believe, reflects the strengthening fundamentals for adoption of Tropfen across the region. And in the investor presentation, you'll We find some details around all those guidelines that now exist. We're supporting automated high level Confection and they continue to emerge.
Obviously, there's now a growing understanding of the risks of cross contamination. And of course, we're continuing to increase our investments in our infrastructure across the region. And both halves actually not just H H2 over H1. Both halves of the year in the EMEA region demonstrated excellent growth compared to Our corresponding periods where H1, the first half, for example, was up 54% On the PCP and H2 was actually up 73% on PCP. So certainly, we're beginning to gain Fair enough, very positive traction over in the European region.
And in Asia Pacific, despite the Australia, New Zealand market Being highly penetrated. We still had installed base grew by 9% or 150 units for the year. Well, in that region now there's 1760 units installed. And that majority of that growth was actually experienced in Australia, New Zealand as Japan was effectively in a state Emergency and lockdown for the majority of the year. So back to revenue for a moment.
And if I Split the total revenue down to capital and consumables, despite a 13% increase in new installed base, The actual capital revenue for the year was down 11% to $26,700,000 This Reduction was primarily associated with a reduction in the number of units sold to GE Healthcare in the first half of the financial year, which we reported during our first half results. And from that, you remember that that reduction was really just due to a decrease in the installed base growth as a result of COVID-nineteen, particularly in Q4 of FY 2020 And Q1 of FY 2021 and then the corresponding impact that had on GE's inventory levels. So they didn't need to purchase capital When the amount going out to customers was down. But importantly, the capital revenue increased 84% In H2 compared with H1, as market conditions improved, the installed base growth recovered And of course, then GE resumed their normal capital purchasing patterns. So that was really a one off impact due to inventory, and we saw a nice return That's a normal patterns of purchase in the second half.
Of course, this impact of GE Capital purchases was Only felt in our North American region. For Europe and Middle East, total capital revenue for the year was up 91% to $2,700,000 And what's important to note here is as the majority of units placed in the UK, which is our largest market in The European region are under the managed equipment service model where no capital revenue is actually recognized. This increase in capital revenue in EMEA does reflect the growth in the markets outside of the UK. So again, strong indications for very positive growth momentum emerging in our European region. And of course, in the Asia Pacific, the total capital revenue for the year was up 143 percent to 2,700,000 Now if I exclude the capital revenue that was associated with upgrades, the overall capital revenue for the year in Asia was up 36%.
But of
course, upgrades are an important part of our capital revenue growth moving forward. So it was good to see Upgrades come through in ANSADE in the last financial year. From a consumables and service perspective, Revenue increased 9% to $76,400,000 And here, I think it's really important to look at this On a constant currency basis as it better reflects the actual volume growth. And in constant currency, that revenue would actually have been $84,000,000 or up 20%, which I think is important to understand. And as you all know, the first half consumable sales, they were impacted due to the effect of COVID on ultrasound procedure volumes.
However, the second half saw a positive trend towards pre COVID Procedure levels with revenue for the consumables and service up 27% in H2 compared with H1 That will be 39% in constant currency. And what is important, I guess, also is that towards the end of The financial year, all indications for that ultrasound procedure volumes were definitely approaching pre COVID levels across most markets. And details on all the regional splits with respect to those revenue numbers are provided in the release and in the investor So moving on to the second key takeaway or message, and that is there's a significant opportunity And ongoing opportunity for growth in the Tropoins business. And indeed, the opportunity is larger than our No estimates. At the half year, we said that we were going to examine the North American market to get a better understanding of the total addressable And for many years, we've been quoting a 40,000 units opportunity, which is certainly out of date.
And the ultrasound market has not stood still and indeed has grown strongly. And we did commission work in the United States to better understand the current state of ultrasound installed base in the USA. And as a result of that work, the estimated total addressable market for TROFRONT units in North America has been revised Up from 40,000 units to 60,000 units. And this takes into account the growth in the ultrasound markets over Really, the last 8 years or so since we've been quoting that 40,000 unit number. What this means, of course, is there's an opportunity for strong Ongoing growth in North America.
Indeed, rather than being 59% penetrated, if we were still Quoting 40,000 units, we are only 39% penetrated, which provides excellent runway for ongoing growth. We've not done a similar exercise for Europe and Asia Pacific at this stage as the same level of granular detail is not readily available. But we do acknowledge that the 40,000 units opportunity in each of these regions is out of date And it's likely higher just like in the U. S. As ultrasounds has certainly grown in those markets as well.
But getting to a specific number, To be honest, it's not a big priority for us at the moment as you all know that there's still a large runway to go even with the 40,000 opportunity, But we'll look at that at a later date. And speaking of growth in these regions, You've seen the growth being experienced in Europe. And certainly, we aim to continue to invest in that market to further stimulate growth On the back of the strengthening fundamentals, we know from our North American business that Troll Film can be a very successful business delivering Significant contribution margin, and our aim is to replicate what we have achieved in North America in the other two regions. In Asia Pacific, despite the challenges associated with Japan being in a state of emergency for the majority of the year, We did continue our market development work there with virtual education and training with relevant specialists, societies and of course our distributors. We did expand our local infrastructure over there, and we continue with our market development activities In partnership with our distributors, including GE Healthcare.
We are currently finalizing It may be finalized. The registration of our wholly owned foreign enterprise in China or would be in China. And we are now preparing for regulatory submission to approve TROFON2 for commercialization in that market. I think it'll probably be an FY 'twenty three market introduction, but there's a lot of work going on behind the scenes as we prepare for that. And of course, growth in capital equipment is only one dimension.
There's also the opportunity for growth in Consumables, I mean, we did see, especially on a constant currency basis, very, very strong growth in consumables this year. And Also in the investor presentation, there's a slide in there that I think is quite informative and that highlights that there is over 150 different types of Procedures that use ultrasound probes across many departments that risk contact with mucous membranes, non intact Skin or Sterile tissue, therefore, necessitating the requirement for high level disinfection. And as education on this Creates greater awareness. There's certainly the possibility that the usage of TROFONs will also increase, Driving increases in consumable usage. And of course, another important aspect related to the significant growth opportunity for Trowform is upgrades.
And for obvious reasons, upgrades were they weren't a big focus in FY 2021 because Where we did have hospital access, we were very much focused on new installed base. But now that hospital access is back, There will be more of a focus in FY 2022 on upgrades. Customers have been notified about the End of life notifications for the original trophon EPRs, which is just a normal part of the product life cycle. And there are now over 6,500 trophon EPRs. I believe That's our 7 years and older in the market.
And considering the value proposition of T2, the 12.2 over the EPR, the original device, together what I believe is a solid economic rationale, You'll certainly be informing customers of the upgrade opportunity over the next 12 months. And just a note here, As upgrades do kick in, so will the mix between capital and consumables, which, Of course, they can have an impact on gross margin depending on the volumes of upgrades we get in FY 'twenty two. We expect the gross margin to rebalance closer to the historical levels of about 75%, seventy 5 Plus percent that was experienced in the prior years. So that's important to note. So considering there then the increased TAM in North America, the Europe growth kicking in as fundamentals have improved, Opportunities through our expansion in Asia Pacific, the potential for increased usage of each trophon due to a wide range of ultrasound procedure And of course, upgrades, I think that there is definitely a significant opportunity for the TROCON business alone moving forward.
Of course, this leads to the 3rd and final key message I wanted everybody to leave with and that is that Nanosonics, we have an Exciting pipeline really of new products. And as you all know, product expansion is a core aspect of our strategic growth agenda. And in FY 'twenty one, the company invested $17,200,000 in R and D. So that's up 11% on the prior year. In June, we announced the launch of Nanosonics Audit Pro, which is an infection control workflow compliance management And it's a result of a number of years of research and development and really opens up a significant opportunity To market a unique solution that really integrates infection prevention, decision making, track and trace And compliance into a single digital solution.
And that product now is being rolled out in the United States with Plans to introduce us into other regions over time. The Autoprol solution, It comprises of a mobile scanning device, coupled with a subscription to a browser based application for users. And the first application focuses on ultrasound procedures where the new handheld scanning device is actually designed to be Coupled with every ultrasound console at point of care. So with over 270,000 ultrasound units in the United States alone, You can imagine that Audit Pro represents a significant new opportunity for an Anosonics. And it's important, I guess, one takeaway on this is important that Some people were thinking about Audit Pro.
The ratio of Audit Pro would be associated with the ratio of Trowform. We're very much looking at AuditPro as a ratio to ultrasound consoles, not as a ratio to the number of tropon units that are in the marketplace. So over time, we're not expecting significant revenue. It's like a service model, a subscription model We generate revenue over a 5 year subscription model and recognize that revenue over the 5 year period. But obviously, as the installed base Grows with Autopro, then the revenue can become quite significant.
In addition to Autopro, there is our new next new technology platform, the Nanosonics Chorus platform. And this new technology platform is directed at solving what is probably the most important and significant problem In instrument reprocessing today, and that's the cleaning of flexible endoscopes. Indeed, more healthcare associated outbreaks have been linked to contaminated endoscopes than any other medical device. And it's a highly, highly complex Problem solved that has existed for many years. So a bit of detail around this, if I may.
First of all, reusable flexible endoscopes and there's a range of types of flexible endoscopes. They are highly sophisticated medical devices That's enabled advanced diagnostic and therapeutic interventions across a range of conditions. And these reusable endoscopes, they incorporate advanced technologies that give physicians really a sophisticated level of control And carrying out very complex and minimally invasive procedures and the ability to navigate challenging Anatomical situations to deliver the highest level of patient care. And as I mentioned, there are many types of flexible endoscopes, Including colonoscopes and gastroscopes, genoscopes, bronchoscopes, etcetera. And from a reprocessing or a decontamination The cleaning stage of the reprocessing or decontamination process, it's a critical step And has significant implications for the outcomes of the subsequent high level disinfection stage of the process.
Indeed, the father of decontamination, Aaron Spalding, a famous quote from him is You can clean without disinfecting, but you cannot disinfect without cleaning. So people talk a lot about moving towards sterilization, And even still, with our very effective cleaning, that don't make as much of a difference. So but there are lots of challenges associated with manual cleaning combined with reports of Perceptive contamination from biofilm, which is really a very difficult contaminants to remove despite that routine cleaning. And this does represent a significant unmet need that's well recognized by regulators and customers. Now addressing this problem, which has existed for many years, it's a very, very complex issue.
You are dealing with trying to automate what today has anywhere between 5,200 manual cleaning steps. You're dealing with sophisticated endoscope design and architecture that has multiple interconnected channels and complex ports. You're dealing with channels with diameters that can be less than a millimeter. And of course, you're dealing with very complex And difficult soils to remove such as biofilm. So as you can imagine, it is a very, very complex technology development program.
The Nanosonics team, they focused on the significant technical challenges for a number of years now with the aim of developing a novel automation Technology designed to really revolutionize the cleaning process of flexible endoscopes. And our new Nanoxonics Corus Platform technology like Trowfon, it will comprise both capital equipment and consumables. And in testing to date, this new automated platform has demonstrated the ability to deliver significant superiority In cleaning efficacy over the requirements of the current standards, including those modes there are some new recent standards That are even stricter and we can significant superiority even over those. In addition, testing demonstrates Pure efficacy over manual cleaning against these difficult bar film contamination, including in the smallest channels of an endoscope, So down to less than a millimeter in diameter. So a big technical challenge to overcome, and the R and D team has done an absolutely amazing So the potential to address this, of course, represents a significant opportunity for the company.
There are over 60,000,000 flexible endoscope procedures being conducted across the United States and the largest 5 markets in Europe alone every year, And that number is growing at about 6% per annum. And we're very pleased with our progress in the product Development. There's still some more development work to do, which will be followed by external clinical assessment to support the regulatory submission. We continue to engage with the FDA to determine the necessary requirements to support a successful regulatory submission, But all of that is going well. And the timing for initial commercial launch previously indicated, That is being revised and will be determined in due course, dependent on, of course, those technical, regulatory and operational milestones being met.
And at the moment, we're currently targeting the 1st commercial launch in calendar 2023. There are some impacts of COVID at the moment with lockdowns here in Australia, but we're doing our best to try and manage those. And we'll keep the market informed as material new information becomes available. But needless to say, it's a very exciting development, and we remain Highly confident in bringing what we believe can be a transformational product to market that does address The most significant unmet need in instrument reprocessing today and indeed we believe lytofon can become a new standard of care. So all around some very, very exciting things ahead for the business from a product portfolio perspective.
In terms of outlook for 2022, first of all, we do have to acknowledge that there is still uncertainty in the marketplace, especially with the Delta variant of COVID. However, assuming that positive market recovery Trends do continue and we're seeing that with vaccinations increasing around the world, etcetera. We do Anticipate a return to double digit growth, and I think you saw what our second half number was of $60,000,000 So we're expecting double digit growth in total revenue in FY 2022, and that will be driven by Ongoing increase in the installed base globally, increased usage of consumables across all regions As ultrasound procedures return to pre COVID levels. And in addition, of course, it's anticipated we'll see new capital revenue coming in From TROFR to TROFR2 during FY 2022 as well. I did mention earlier on just on depending on the upgrades and From new IB and upgrades that the mix between capital revenue consumables will likely change And that will result in gross profit margin more aligned to what it was in FY 2020, but remain Our estimates are remaining above 75%.
So with the exciting growth opportunities outlined For the trofin franchise as well as opportunities in the broader infection prevention markets, we are going to maintaining our commitment We continue to invest in the long term strategic growth agenda, with an emphasis, of course, on continuing investments Growth in our regional operations and R and D. The operating expenses in FY 2021 In the Q4 were $20,300,000 Has the business returned to its intended investment run rate? As you know, We originally at the beginning of the year were guiding towards $75,000,000 to $78,000,000 of course with impacts of COVID, etcetera, That had come down. But in the Q4, we got back to that intended run rate of $20,300,000 So that annualized alone is about $82,000,000 And Of course, we expect some growth on top of that. So we are expecting our investments in the ongoing growth of the business to Approximate $90,000,000 for the year.
So with that overview, I'm happy to hand over for any questions.
Thank Your first question comes from Josh Tanalakis with Berenjoey. Please go ahead.
Hi, Michael and MacGregor. Can you hear me okay?
Yes. Good morning, Josh.
Good morning. Well done on the results. Firstly, just a question about the Core, Troy from Business and with regard to your outlook. Can we talk a little bit about what you're seeing in terms of trends this year in Access into hospitals and just how that's been tracking in terms of your workforce and sales funnel?
Yes. Look, a good question. It's obviously something we're monitoring very, very closely. In the U. S, what we're seeing is Access to hospitals has certainly improved a lot as vaccinations have increased.
There's pockets In North America, the southern states like Florida and Texas, where the delta strain and the hospitals are under a bit Applications people are getting in. And even in those Southern states at the moment, we're still seeing the ultrasound procedural levels Back towards pre COVID levels. So we're not seeing those big drops that we had seen originally. But ultimately, I think what's happening out there as vaccines are rolling out is also an acknowledgment that there are Many other health care issues over and above COVID that have to be addressed. And so the hospitals are, I believe, better Quick.
I mean, this time last year, it was all around getting access to PPE and ventilators. They are A lot better equipped to manage it at the moment. So with that in mind, our access has certainly improved a lot. And it's similar sort of story in Europe. Our German field force are out there now.
Our U. K. Field force are out there. Yes, there are new guidelines with respect to visiting hospitals, but these guys are able to get into the hospitals now.
Got it. No, that's great.
And just in terms of upgrades, and
you mentioned you do expect some of those to start happening into FY 'twenty two and some good granularity there.
Can you just talk a little bit through the implementation of
the EPR end of life strategy and also how Audit Pro could potentially Play into accelerating that upgrade cycle.
Yes. So normal part of product life cycle when you are always going to, at Some stage obsolete products and when you do go through an obsolescence strategy, you notify customers with respect to an end of life And then more recently, notifying them with respect to end of life. And now what end of life means is not that We're no longer going to support customers who have EPRs, but there could be limitations For older devices in terms of being able to service devices because of obsolete parts and things. And that is very, very that's the normal process medical device companies follow. So customers have been notified.
So and I think then when we look at the upgrades, the EPR, the T2 over EPR is Certainly, some very strong value proposition there. And economically as well, I think it makes sense to upgrade Because remember, many of these EPRs are under service contract. Then when they get a new T2, That's warranted for the 1st year. So it's almost like they've got a discount to the value of 1 year of service contracts from the T2 already. To your point on AuditPro, I think AuditPro can even though it's a discrete product in of itself, But its first application is in ultrasound.
The connectivity, Autopro does not connect with the EPR, And but it does with the T2. So it can certainly be a driver for upgrades as well when the teams are out there talking to existing customers about Audit Pro. But not just a driver for the upgrades, would say the other aspect that Autopro could potentially impact over time is that this product, It has been built in the product, in that handheld is it almost ensures that as part of the clinical work So that the customer is taking on board the necessary infection prevention requirements. So and it educates them and helps them understand what they need to be doing with the probe and whether or not it Required high level disinfection, etcetera. So I think it can drive continue to drive that education.
And of course, with over 150 different types of procedures, ultrasound procedures that require high level disinfection, There's a possibility that Audit Pro could actually drive increased consumable usage as well as
Great. And an extremely quick one in the essence of time on the new product. Can we assume that because you've Release or discuss it now that the major technical challenges are overcome. I know you mentioned there's a couple of additional product enhancements to come, but are the major technical Issues that you've dealt with, can we assume they're overdone? They're overdone?
Yes. The big thing here, we it is a very it's In one sense, it sounds easy, the cleaning of flexible endoscopes. But when you look at the architecture of endoscopes, and it's a purposeful That enables the physician to have extreme control and be able to navigate internally into very, very small areas. That complex architecture is actually required, but you're dealing with endoscopes that have many different channels and those channels of different diameters There's bifurcations in there and connectors and over 9 different ports and all of these other things. And so you can imagine The process and that's why the current cleaning process can have anywhere from 50 to 200 different sets.
So you can imagine trying to automate that. And all our testing today is now consistently demonstrating that we are achieving significant superiority over the required standards today and very, very importantly, the ability to Very, very effectively clean those very small lumens, which are considered to be the most difficult aspect Auto cleaning and potentially one of the biggest contributors to decontamination and our ability to be able to get rid of biofilm in those channels Has proven to be very, very successful. So we are feeling very, very comfortable. Yes, there's some more work to do. It's not in the product.
You got it. Remember, a product like this then got to be Manufacturing, there's many test systems that have to be developed, etcetera. So there's a whole suite of elements associated with the Development over and above just the product itself, but we feel very comfortable with the product that we have and that indeed it can be transformational when launched.
Great. Well done, guys.
Thank you.
Thank you. Your next question comes from Martin Jacobs with Canaccord Genuity. Please go ahead.
Good morning, guys. Congratulations on a strong result. I thought I'd just start with just asking what percentage of sales are represented by GE now, If you
can share that with us.
That, I don't have it off the top of my head. I think it's probably in the order about 55%, 60% and you'll find that in the annual report under the significant customers. What I will say when thinking about that is remember the consumables that we now effectively Sell the consumables close to the ASP of what we sell directly to customers. But GE, They continue to provide consumables to their customers. So in one sense, you almost have to Count that percentage by the volume of consumables because if they were not selling those consumables, we would be selling those consumables to those customers.
But ultimately, today, including consumables, it would be in the order of about 60%.
Right. Thank you. And on the OpEx, You're shadowing quite a big jump in the cost there. And I was just wondering if you can Split that out between SG and A and R and D, firstly. And secondly, you've notified a 9% increase in Can you just talk to sort of where that's being attributed?
Yes. That's a good question. As I say, Originally, for FY 'twenty one, even with the COVID, we were looking to Invest upwards of $75,000,000 to $78,000,000 Obviously, we came in underneath that. But importantly, in the 4th quarter, We were able to get back on track as markets began to open up and with our investment strategy And exited the 4th quarter on a run rate of about $20,500,000 So annualized that, you're at $82,000,000 straight away. Now the going into this year, we are looking to continue to invest out in the regions.
There's more investment going out into the U. S. There's more investment going into the European region. We're doing investments as we're Expanding our Asia Pacific infrastructure. Yes, there is more going to go into R and D as well this year over last year.
The other thing I'll flag is we will very likely move To a new premises, we're close to signing a new lease on a new premises that is a larger premises That will support the next phase of the growth, so giving us a lot more capacity from a laboratory perspective And office perspective as well. So that will start coming in from the accounting perspective in FY 'twenty two as well.
Okay. And on the upsides for the market, so it's good to see you've adjusted that. But you also noted that pre COVID new units were sort of 2,700 to 3,000. That's what you want to get back to. But in the past you have talked about 3,000 as a sort of, I guess, a baseline that you can go year in, year out.
So is there a Subtle softening in your expectations going forward? Or is that just being casual with us?
No, I think we'd like to think I think I've always said there's not many pieces of medical technology getting out there with about Annually, 3,000 new units going in and then generating a new revenue from it. And we'd like to think in North America Yes. We'll be able to get back to that run rate of 3,000 and then we start seeing an accelerated growth in Europe. So really what the $60,000 shows is there's still good run rate for ongoing growth as opposed to we'll get to now A shift in growth from 3,000 to 3,500 or 4,000 units. Okay.
And just finally for me, in terms of the new Endoscope product, so pleased to say that you're Acknowledging the problem of biosome as a seems to factor in infections. And I was just wondering, If someone had developed a biofilm disrupting agent and could coat it on endoscopes, etcetera, Would that have an impact on your potential? And have you thought about that technology?
I'm sure many people are thinking about those types of technology. Biofilm, we could go into hours of lectures on biofilm and We could see some biofilm, but coating products to minimize biofilm formation, I think Nobody has been able to crack that, and it's a big, big area. At the moment, I think, Martin, we feel very, very comfortable In the opportunity in this technology that we have going and we feel very comfortable that it will become a new standard of care.
Okay. Thanks very much, guys.
Thank you.
Thank you. Your next question comes from Chris Cooper with Goldman Sachs. Please go ahead.
Hi, good morning. Thanks very much. Michael, if you don't mind just first on the revenue guidance for double digit. I mean, I don't know whether I mean clearly the second half, there's a recovery that's played out as foreshadowed. But For the year as a whole, I think it's fair to say that it's still a little bit below where you'd normally expect to be.
So a double digit revenue growth wouldn't necessarily be A big surprise for people. Could you help to just narrow that slightly? I mean clearly it's a very broad range. I mean consensus, I believe, is currently Something in the high 20s. Is that something you feel comfortable with at this stage?
Yes. Look, we Chris, we've traditionally not given any guidance with respect to revenue. And I think a lot of companies actually at the moment are not giving much guidance with respect to revenue with the uncertainties that are out there. What we'd like to think is that, I mean, everybody's seeing what our second half revenue has been, and You would like to think that that's the run rate going into FY 'twenty 2. And as long as the conditions continue to improve Based on what I've covered this morning with respect to the opportunities that are out there for Troughton, we would like think that run rate is certainly achievable, which gives some indication of what the first digit is on that double Gross.
But really, we certainly have to I can't give any more granular information than that.
Okay. So just to clarify that comment, approximate doubling of the exit rate in Fiscal 2021 wouldn't be a bad starting point when we're thinking about 2022?
Yes.
Okay. Thank you. And Andrew, on the relationship with you, there's a couple of sort of smaller questions within this. So up to 60% of revenue now, it's Very big increase in the amount of revenue generated through that relationship. Is that now the new normal or does that begin to fall back down again as the rest of the customer base Continues to recover through fiscal 2022.
And the reason I ask is, it doesn't appear that there's been a material sort of pricing impact Negative as we've seen those GE orders come back through the second half?
Yes. The orders came back in the second half. But again, I want People to GE are and continue to be a very important partner for Nanophonics, and we've got a close working With all our colleagues with GE. But I don't want people to get fixated on this 60% associated with GE, remember, a lot of that is associated with consumables. And as you know, the contract with GE A number of years ago changed where effectively we were taking the consumables back, But GE decided that they would continue to provide the consumables to their customers So they can offer the holistic solution and it'd be easier from a customer experience perspective, etcetera.
But what we sell the Consumables to GE at close to the price of what we would sell them to the customer. So in one sense, you've got to discount the consumable volume when you look at that 60% being associated with GE. But without a doubt, as our direct business continues to grow, But more importantly, how we look at things moving forward, particularly in North America, internally, we talk about our demand generation strategy We've got a field force that are out there that are generating a lot of demand that can either be filled through us direct, Can either be filled. If we notice that it is a customer that's predominantly using GE equipment, We'll make sure that, that customer is aware. They always have the choice, but we'll make sure that the customer is aware that they can get the equipment through GE because They may be able to bundle it into a contract they already have with GE, etcetera.
So we're more focused on ensuring that the market installed base grows As opposed to whether it grows directly or indirectly, because ultimately, the consumables comes close through to
Okay. And is the plan at this stage for GE to help with the commercialization of Corus?
We've made no statements around the commercialization model that we're going to go forward with the Corus Technology. But as you can imagine, GE don't have anything to do with endoscopy.
Okay. And very final question, just on OpEx quickly. The $90,000,000 that you're guiding to for fiscal It sounds as though from your comments earlier that maybe we should be assuming this to be sort of a new sort of base run rate With perhaps a little bit of growth year over year from 2022, would that be reasonable?
Yes, I think so. Because when you look at it, Chris, the opportunities Growth in the business in infection prevention alone are really great. So at this stage, we're still going to continue to invest For growth, obviously, when you got markets like North America now that are well established And whilst we haven't broken it down out here for the markets, we're delivering excellent contribution margin out of North America in the tropon business and Demonstrating excellent operating leverage in North America as well, and that's where we want we believe we can get to that in the other markets as well. But a lot of those other markets are highly underpenetrated. We still believe we are we're not going to stop with Autopro and Nanasonics Chorus.
We are growth is underpinned by continuing to invest in R and D and bring more and more new infection So without the doubt, I would say, yes, it is a new baseline, and there will be growth year on year on that baseline.
Got it. Thanks very much.
Thank you. Your next question comes from Leanne Harrison with Bank of Please go ahead.
Hello, Michael. Hello, Gregor, and congratulations on a good second half recovery. I would start with the total addressable market for the Trofon. And we had an estimate of about 50 1,000 units and the 60,000 units obviously 20% higher than our estimate. Can you give us some color on the Do you use to or the assumptions that we used in the study to arrive at that number?
Yes. It's the foundation was looking at the total number of ultrasound that are out in the And in North America, it's in the order of greater than 270,000 ultrasounds out in the marketplace. Then we cut this off in a number of ways looking at by type of ultrasound, is it console, is it compact, is it handheld, Etcetera. And then we looked at ratios of trophon to the different types of ultrasound, And those ratios were based on our experience in hospitals and other segments of the market. And all of that came To a number that probably conservatively is in the order of about 60,000 units.
Okay. Thank you very much. And then if I think about, obviously, the new Corus product, With the work that you've done to date on looking at the market there, can you give us a sense of how large do you think that the market The line might be for the chorus.
So in the announcement, we did give a bit of a flavor as to the Number of endoscopy procedures, up over $60,000,000 or so annually, and that's just the U. S. And Europe top 5. And so if you include other parts of the world, Japan, etcetera, obviously, it will be a lot higher. It will be a capital and consumable model, so very, very similar to Trollope where we expect to similar sort of Margins, etcetera, on consumables, etcetera, that we're looking to generate potentially.
So I think the overall opportunity is very significant. The other thing that's probably worth mentioning is Unlike Tronfon, where you've got a lot of markets now that are still in the early phase, all in terms of adopting Certainly, in the majority of markets globally, for endoscopy, The reprocessing of endoscopes are a man basis and, of course, the cleaning stage. So there's elements like that, that Could have positive impact for us in terms of stage and rate of adoption internationally as well.
Okay. And lastly, obviously, you mentioned the capital and consumables model. Just so that we could probably get a sense of estimating the market size, Is the capital likely to be priced higher or lower than the Trofon 2?
Really today, we're not going into any details on Virtualization. Yes. In fullness of time, we come out with more details around all of that sort of information, which I know it's one step to now announce where the technology is. Of course, that leads to your next questions, which are all very, very valid questions. And but in the interest, I guess, in the fullness of time, we'll come out with a lot more information about it.
Okay. Absolutely. I understand that. And then on the consumables for the Chorus, are they likely to use same or similar consumables to the Tofon?
No, this is a one thing I will emphasize, this is a Totally, totally new product platform, new capital, new consumable.
Okay. Final question I have is on the Traphon. In terms of Or the new installed base, based on our calculations, the average ASP jumps up significantly in second half 'twenty one. Can you give us some color on what might be the reason for that?
I'm not sure what your calculations will be based on the Capital, but I don't think there has been significant increases in the Capital ASPs in the second half. It was primarily driven by volume.
Okay. Is there any mix In terms of more Trowfon II versus the EPR?
100% of all Trowfon that we're selling Now and have been for the last year are all TROFON2.
Okay. Thank you very much.
And I'll take one more question just in the interest of time, and I'm sure I'll be talking to many people who are on this call
Your final question is from John Deaton Bell with Citi. Please go ahead.
Thank you, Michael. Just to clarify on the Corus product, I know you appreciate you giving us a bit more detail. Can you just tell us where the patent position is currently for this product?
John, we expect we've been filing a lot of patents in a lot of areas and we fully expect that We will have strong patent protection like we have for Tropon for the system When it's launched.
So they're not granted at this point?
Some patents we have are granted. Others are going through the process.
Okay. Thank you. And just finally, I mean, I'm just intrigued really, you're talking about The patents are going through the process. You haven't started a clinical trial. You're talking about not launching the product for a couple of years.
Why have you Decided today to talk more about it.
I think, obviously, there's been a lot of questions Around this new product, I think it's just timely that we inform the market as To the one of the key areas we are focused on in our R and D spend, and there's been a lot of speculation out there. And by virtue of the fact that we've told the market today of what the product is, even its brand name that's registered, People should feel comfortable in the fact that we believe we can bring a transformational product to market.
Right. Thank you. And just finally, I'll pass it from Avedo or for you. The R and D Spending actually doing the clinical trials for this, is that going to be a kind of a material one off step up? Or is it you think you can cover that within the Current percent of sales that you're spending?
Yes. We'll be able to cover it, yes.
Okay. Thanks very much.
Thank you very much. All right. With that, I'd like to thank everybody again for joining the call this morning. Hopefully, you now have a better understanding of The results that have come out and understand the importance of what Was achieved in the second half of the year with that very, very strong growth. The fact that we've got excellent ongoing Opportunity for growth, which is probably even bigger than for Tropon than originally anticipated and an exciting new product pipeline.
So with that, I'll leave you all and thank you for your participation and undoubtedly I'll be speaking to many of you over the coming days. Thanks very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.