Apologies for the delay. It looks like there was a problem with the transmission. Welcome to our Q2 earnings. I'm going to talk a little bit about the market, our performance, our strategic priorities, and then Michael will provide a more detailed financial view. There are three key messages for this Q2 earnings. Number one is that the market continues to grow very rapidly. All the trends that we have discussed about, they continue to accelerate, and that's driving the transition from reusable into single-use. The second thing is that against high record comparable from last year, we were able to grow 6% in Q2 as a total company, driven by visualization growing 17%.
That's a 17% on top of the 69% we grew last year, which basically means that we have grown in the first half 50% on top of the 50% that we grew last year. I'm going to talk a little bit about platform by platform. What are the main highlights, whether it is in terms of how we are competing or how our new launches are going, and what does it mean in terms of the future growth of the company. What does it mean in terms of our ability to compete and what type of company we are becoming and what type of capabilities we have to make sure that we remain the leading player within this single-use category. Let's start with the market. We have discussed this in every call.
This is a market that is going to go from $0.5 billion today to $2.5 billion in 2025. There are very few new MedTech markets that grow this fast and at this scale. That's because the main drivers for this transition are actually accelerating. There is more focus on contamination. There is a higher focus on infection control. The technology advancements are making single-use products become more powerful and improving their clinical performance. Finally, if they are priced correctly, they have an attractive economic offering and give significant operational flexibility. That's basically what we are seeing. Now, let me just give you an example on the first point around focus on contamination. We said that urology and GI were important new markets for Ambu. Let me just show you what are some of the recent developments in that area.
First of all, I think most of you might have seen that the FDA issued a letter to all healthcare systems in the U.S. warning about the infection risk with reusable urology endoscopes on the back of 450 reports since 2017. Basically giving guidelines around reprocessing, but also asking all healthcare systems to start reporting and launching an investigation regarding this issue. That's in urology, basically. If we look at GI, which is a market that accounts for more than half of the total procedure volume. If you look at the last 15 months, there have been 35 peer-reviewed GI studies on contamination. 35. If I look at the previous four years, it was less than 35. It's a significant increase in terms of the focus.
Because of that, there was a GI task force that basically represented the most important GI endoscopy associations in the country, coming together and publishing a guideline supporting single-use endoscopy as a new innovative solution to deal with these issues around contamination. We also have seen CMS filing for a new reimbursement code for single-use duodenoscopy use in inpatient hospitals. For that to be effective October the 1st this year. Just to give you a sense, what does it mean? It basically means that as of October the 1st, in close to 50% of all ERCP procedures, healthcare system will see an economic advantage for using Ambu versus using reusable duodenoscope. This is just example in terms of what we have seen quarter-over-quarter.
A higher focus on contamination, a realization that single-use can play an important role in terms of infection control, all of this is, of course, powering the creation of the market. With that as a context, let's talk about our performance. Let me start with our core business. As you have seen that our core business actually declined 5% in Q2. Our core business is mainly driven by elective procedures. Similar to all other hospital MedTech companies reporting, our performance has been affected by elective procedures being depressed. This is especially the case in Europe.
Like most other hospital MedTech companies, we are seeing that as vaccines are being rolled out, the business is stabilized, and we expect that when we emerge from this COVID-19 pandemic, we should be able to go back to a normal performance. Now, putting our core business aside, let's talk about visualization. In the case of visualization, again, we grew double digits on top of what was a very high comparable. Just to give you a sense, we have sold in volume in this quarter, more than the entire annual volume four years ago, just in one quarter, basically. It is reflecting the strong growth we are seeing across all the regions.
In terms of the key highlights, Europe growing 25% on top of 103% growth last year, then the U.S. growing 20% quarter-over-quarter is just a very good indication in terms of the level of momentum that we have. Let's look at each of our platforms, let's start with what today represents the largest portion of our visualization sales, pulmonology. Today, we have our aScope 4 Broncho, we have about 30% penetration, within single-use, we have 95% + market share. Of course, we announced before the introduction of our new generation of monitors, our aView 2 Advance. You have seen this morning that we announced the introduction of our VivaSight 2, this is a one-lung ventilation that basically allows to do that procedure while being able to see to make sure that the camera is placed in the right way.
Now, the important thing of this launch is not just that in the U.S. alone, there are 500,000 procedures that will benefit from this type of technology. The important thing is that we are going to introduce our aScope 5 into the broncho suite, that will take our addressable market from 3 million in pulmonology to an incremental 2 million. It also means that we are going to introduce our video laryngoscope, which we believe the total market potential is about 10 million procedures. All of this is integrated with our aView 2 Advance. It's a very good example in terms of what we mean by an ecosystem.
It means that when we go into a pulmonology department, we are able to offer the most comprehensive portfolio across multiple procedures with significant flexibility, as they don't need to buy more capital to do these different types of procedures. That's in terms of pulmonology. Now let's look at our recent expansions. The first expansion we did after pulmonology was in ENT. It was very important because it's 11 million procedures, and because there is no real risk of contamination. That basically means that the only drivers of adoption in ENT it's clinical performance, convenience, and economics. What you can see on the right-hand side is the evolution of our ENT launch. We have grown in quarter to 70% in units versus last year, and we continue to expand our global customer base.
We actually were able to surpass the record peak we saw when the COVID-19 pandemic started. We decided to go from ENT into urology and into GI. Let's see how our urology bet is going. Of course, I'm referring to the launch of our aScope Cysto into what is a 6 million procedure market. What you can see on the left-hand side is basically our global unit sales since the launch. The most important thing to say is that Cysto is the most rapidly adopted product ever launched by Ambu globally. This is driven not just by the U.S. or by U.K., but it's driven by Germany, Italy, Spain, France, Australia. It's a very good example in terms of what happens when you bring a technologically advanced single-use product that is able to go head-to-head with a reusable scope and guarantee contamination and guarantee flexibility.
Of course, it's pricing in a way that ensures that the migration is neutral for a healthcare system. The other thing that is interesting for us is what has been the rapid penetration in Europe. Typically, when you introduce a medical device product, you see the U.S. being an earlier and faster adopter, and then you see a slower pace of penetration in Europe. Actually, in the case of cysto, we are seeing a strong penetration in the U.S. and even faster penetration in Europe. In the right side, you have a comparison of how we penetrated aScope 3 in Europe compared with our aScope 4 Cysto. These are the first four months of launch. We are already at, I think, 3.3 times bigger than what was aScope 3. This is in terms of urology. Let's talk about duodenoscopy. Basically, we continue our commercialization.
We have 55 ERCP accounts. 13 of them are within the top 100 ERCP centers in the U.S. This actually reflects our strategy to go against the highest volume ERCP center. Our objective is not actually to sell-
Welcome to the Ambu Q2 2020/2021 conference.
All right. My apologies for the delay since there are some problems with Nasdaq network. I'm going to assume that you were able to hear about our performance on the cystoscope, and then I'm going to start talking about our duodenoscope. What I was saying is we have continued progressing our commercial launch. In terms of our commercial launch, the two main highlights are we have secured 55 ERCP accounts, 13 of them are within the top 100 ERCP centers in the U.S. This year reflect our strategy to go against the highest volume ERCP centers in the country. There are a couple of things which are important to know. Number one, we have seen two events in this market. One is CMS, as I mentioned before, expanding reimbursement to inpatient procedures.
By that, basically doubling the number of procedures that will benefit from a special reimbursement if they use single-use duodenoscopy, and that is about 50% of the entire volume. We also have seen competitors announcing data that they are going to bring a 1.5 generation for their single-use duodenoscope. Because of this, it is a priority for us to make sure that ahead of October the 1st, we continue to have a product that is technically competitive and that it has the most attractive economic offering. We have decided to bring forward our technology from 2.0 and introduce aScope Duo 1.5. We are about 50% complete in terms of the improvements, and we should have everything in place by August and September. A year after we introduce our aScope Duo 1.5, we are going to introduce our aScope Duo 2.0.
You can assume that there is going to be a 3.0. It just reflects the fact that although in duodenoscopy, we believe that the penetration is going to be more gradual than in the case of cysto or ENT because it's a more complicated procedure. We believe by 2025, when you look at this $2.5 billion market, single-use duodenoscopy is going to be one of the biggest ones. That's why it is a key priority for us, and that's why we will always have an innovation edge against competitors. This is in terms of duodenoscopy. Let's talk about the company and what type of company we are becoming. There have been two important highlights. Number one, we consolidated our R&D infrastructure into a dedicated GI R&D center in Germany.
It's about an hour from Munich, this dedicated R&D center is going to drive all of our GI innovation. We also have officially started the construction of our manufacturing plant in Mexico. This reflects two things: our expectations in terms of the volume potential of the company, and also the importance of the U.S. and have a dual sourcing network. Now, a lot has been said regarding competitors coming into the market. This is very important for the creation of the single-use market. The penetration today is 1%-2%. For us, having Boston Scientific, welcoming officially Olympus into the single-use market, having PENTAX coming in, getting all their commercial infrastructure, talking about the benefits of single-use endoscopy and why single-use endoscopy it's an option for healthcare system as they do endoscopy, is going to accelerate the penetration.
The number one objective for Ambu is that as this market is being created, that we continue to lead the creation and take significant share. The way we are going to do it is with our innovation. Our aspiration is to be the most innovative single-use endoscopy player. We are in line to introduce 20 new products in the next three years. That basically means that we have more innovation than the next three players combined. If you look at the innovation, for example, we start to show the potential of single-use endoscopy. We have an ENT FEES, for example, that helps to use our ENT product in vocal cord procedures which have higher levels of reimbursement. It shows, for example, the fact that we are developing pediatric scopes that then have the potential to be used in surgery.
It shows really the flexibility that we have with this product. As you can imagine, all the learnings and technology that we are incorporating in our aScope Duo 1.5 are being incorporated in all of our GI launches. That will ensure that when we launch, we'll be able to get a faster traction and more rapid penetration. That's what I wanted to share with you, and now we move into the financial section with Michael.
Thank you, Juan Jose. As mentioned, we posted an organic growth of 6% in the quarter, and this quarter is therefore the second quarter in a row where Ambu revenues surpasses the DKK 1 billion mark. The growth for the half year ended at 20%. In the second quarter, our growth is driven by visualization with 17% growth on top of 69% growth last year. This year, the growth was led by Europe, posting 25% on the back of 100% last year, while core posted a negative growth of -5%. The negative growth in core is led by Europe. That has been significantly hit by the second and third waves of COVID. In the second quarter and combined for all regions, we sold 379,000 units of endoscopes and 749,000 units for the half year.
For anesthesia in the second quarter, revenue declined by 4%, also driven by Europe, while anesthesia revenue in North America and rest of world picked up, showing signs of post-COVID recovery. GI revenue declined by 7%. Especially the markets in Europe were negatively hit by the slowdown in elective procedures across the region. In North America and rest of world, we saw positive trends of revenue slightly recovering during the quarter. Finally, our EBIT earnings ended at DKK 100 million for the quarter, with a margin of 10% and almost a DKK 0.25 billion And 12.3% for the half year. On slide 16, you can see the geographical distribution of this quarter's revenue and growth rates. North America accounted for 44% of revenue in the quarter, based on an organic growth of 6%.
Visualization grew by 9%, with a growth from Q1 to Q2 this year of 19%. Anesthesia and PMD both posted organic growth of 4% over last year, reflecting improvements in elective procedures, but still not back at the pre-COVID activity levels. For the half year, North America posts an organic growth of 9%. Europe as well accounted for 44% of revenue, with a growth of 2%. The high demand for visualization products continued, leading to a growth of 25% on top of 103% last year. Our core business was significantly impacted by the lockdowns and cancellations across Europe, resulting in negative growth rates of 33% in anesthesia and 15% in PMD. For the half year, Europe reports an organic growth rate of 34%. Rest of world contributed a growth of 18%, with visualization at 16%. Anesthesia grew 27% and PMD 9%.
Overall, the markets in rest of world has developed positively in the quarter, despite the COVID environment. For the half year, rest of world posted a growth of 14%. Now let me go through the key numbers in our P&L. Revenue for the quarter came in at DKK 1 billion , equal to the mentioned 6% growth and a reported growth of 1%. For the half year, revenue was just above DKK 2 billion , corresponding to reported growth of 15% and an organic growth of 20%. The growth is driven by strong results in visualization, which grew 48% in the first half of the year on the back of 49% in Q2 last year. The 5% gap in reported versus organic growth is mainly caused by the depreciation of the U.S. dollar versus the DKK. The gross margin for the quarter was 62.2%, slightly up over last year.
As in previous quarters, negative effects from reduced average selling prices are minimal. Total capacity costs for the quarter were DKK 523 million, corresponding to a 14% increase compared to Q2 last year. We have continued to air freight endoscopes caused by high demand and disruptions in the global supply chain, and this has contributed to the higher level of costs and higher than expected inventory levels. For the second half, over the first half, we expect capacity costs to increase further, driven by the line, selling, and distribution, as we have now completed our commercial expansion and the run rate going forward is going to reflect this. EBIT ended at DKK 100 million in the quarter, with an EBIT margin of 10% for the quarter. For the half year, EBIT came in at a quarter of a billion and with a margin of 12%.
On slide 18, I will just mention some of the highlights for our cash flow and balance sheet. Free cash flow before acquisitions for the half year were negative at DKK -25 million, corresponding to roughly one percentage point of revenue. This reflects the high level of investment into innovation, as well as a proportional increase in net working capital relative to the growth and including the effects from the disruption of the global supply chain, as previously mentioned, with aim to secure our delivery performance out to the customer. Net working capital ends at DKK 728 million, corresponding to 19% of running 12 months revenue, which is a stable performance in line with previous quarters. Equity total DKK 3.9 billion, corresponding to a ratio of 73% of total assets.
Lastly, net interest-bearing debt ended at DKK 466 million with a gearing of 0.7x EBITDA. The decrease in debt is driven by the capital increase and sale of treasury shares as we performed in connection with our Q1 back in January. Lastly, the outlook for 2021 financial year, as announced in the 2019/2020 annual report, is unchanged and remains as follows. The organic growth will be in the range 17%-20%. EBIT margin in the range of 11%-12%. Lastly, sale of units of single-use endoscopes in the range 1.3 million-1.4 million units. As we said in previous quarters, the quarterly development of the growth will be impacted by the high comparables from last year, and the build-up of the margin across quarters will be sensitive to the scale that we will achieve from the product launches.
These were my comments to how the year is expected to play out. Thank you, and back to you, Juan Jose.
Thank you very much, Michael. Let's just open for Q&A.
Our first question comes from the line of Christian [Nioron] from Nordea Markets. Please go ahead.
Hi. Good morning, and thank you for taking my questions. I have three, please. My first question is to how your bronchoscope sales have developed here over the last couple of months, so in March and April, and whether you're seeing any slowdown as we are fortunately seeing COVID cases diminishing across the Western economies. My second question is to what explains the lower gross margin that we're seeing here in the second quarter relative to what we saw in Q1. My third question is whether you can elaborate a bit on what are the main changes that you are implementing to the 1.5 version of the duodenoscope and whether this update to the design has any bearing on the timing of the readout of the clinical trial, or whether a new clinical trial will be required. Thank you.
Sure. Thank you very much, Christian. Let's get Michael to comment on the bronchoscopy sales and the gross margin, and then I will talk about the Duo upgrade.
Thank you. Christian, I think when you look into how our sale of bronch is evolving, it clearly has been fluctuating over the quarters, also impacted by the overall demand resulting from the COVID. As we said on our walkthrough of the presentation, we see that the markets are opening up. That's very positive. Of course, we also see fluctuations from, as we talked about at the Q1, the demand from the U.K. market. I would say those two effects are the most important for you to understand. Going forward, the most important is that we see markets are slightly opening up.
I think that's a good intake into your second question about the margin because, and I understand that it's a very significant change from the first to the second quarter, but that also reflects the overall composition of our product mix among core, but also the mix within our visualization products. I think that is the best I can get to. There are no extraordinary items from Q1 to Q2 that you should really be aware of.
All right. Thank you. Thank you, Michael. Listen, let me just add, it's a very volatile environment. Of course, COVID-19, as we discussed before, has been a positive effect in Europe, and it has been a negative effect in the U.S. As we move kind of out of the pandemic, we can see that that will be a positive effect in the U.S. Of course, in the case of Europe, it's going to settle. Now, I think it's important to step back from the volatility of quarter-over-quarter and look at our bronchoscopy franchise. Basically, we are going to emerge from this COVID-19 pandemic with a much higher penetration, and we still basically are leading share position within that.
That's going to be important because as we move forward, as we introduce more new products and so forth, there is still a lot of penetration to go for. In terms of the main changes, basically aScope has three main components. You are looking at the image resolution, you are looking at the maneuverability, you are looking at the functionality. What we have done is we are looking at upgrading the three of them. As I mentioned before, 50% are already in market. This is something which is different to some other medical devices launches. In the case of single use, we have the ability to rapidly iterate, which basically means that as we are introducing the product and looking at the technical performance, we can very quickly adapt and upgrade the product. That's basically what we have done.
For us, what is critical is to make sure that ahead of October 1st, again, we have the most compelling economic value proposition which we have. We also have a competitive technical performance of the product. Our desire then to, a year later, introduce our Duo 2.0. It continues to reflect the fact that we believe duodenoscopy is a key battleground for us to win. The implications in terms of clinical is very straightforward. We started the clinical, we expanded a number of sites. We have learned now that we have decided to introduce our aScope Duo 1.5. We will continue the clinical with that technology, and you can assume that we are going to share the 60-patient data at the time we are sharing our first quarter results.
You can assume that at the DDW conference, we are also going to have a presentation regarding the performance of our Duo 1.5.
Thank you. Just to make sure I understood you correctly, you said the 60-patient trial will be presented with the first quarter results or the third quarter results?
It is going to be presented with our first quarter results.
First quarter results. Okay. You're talking about DDW next year then?
Exactly.
Okay. Thank you.
Thank you for listening.
Our next question comes from the line of Thomas Bowers from Danske Bank.
Great. Thank you. I hope you can hear me. I have a couple questions on the duodenoscope. First question, have you had any hospitals or clinics that have actually terminated the commercial testing based on the first evaluation of, you can say version 1.0? Last quarter, you had around 30 accounts testing, and I think it was total of 370 lined up. Can you maybe just elaborate on what the current status here? Then, I guess, you must have seen some negative feedback on version 1, given that you only now see a gradual uptake this year. I guess it's fair to assume that we should not have expected any guidance changes if you were just doing an upgraded version in parallel with the launch.
Maybe the question is, so is this commercial launch here this year, is this basically on hold now until you have version 1.5, or where are you here? I think I will stop there. Thanks.
Yeah. No, thank you for the question. Let's maybe just to step back in terms of how a commercial launch looks like in a procedure like an ERCP procedure. You basically go, you meet with accounts. Some of them says, "Yes, we are comfortable with the product. Let's do it." Someone say, "Well, actually, I would love to see some different iterations." Some say, "No, we prefer to stay with reusable." That's basically what we have seen when we came with our aScope 1 in pulmonology or with our aScope for ENT and for cysto. There are some first mover, some ones that actually want to wait for the next generations, then some ones that want to stay in reusable land. That's why the penetration is what it is today.
The most important thing is that from a commercial point of view, we have secured 55 accounts, and 13 of them are within the top 100 hospital, which basically means that some have said yes, some have said no. In terms of the current status of our commercialization, we continue to commercializing the product. It's just that we are upgrading it much faster because of the size of the opportunity that we see in front of us. What we didn't want is actually find ourselves October the 1st with a competitor bringing a new generation of products. We're sitting on more advanced technology and not having brought them into the market in time to make sure that we continue to be the best choice for any ERCP center wanting to do single use. That's basically it.
The last question in terms of the update, maybe let me just refer to the guidance, because when you look at our performance, we have a very strong performance. Most people who have expected for us to raise our guidance. The reason why we haven't done is for two things. One is we have a very healthy guidance out there. Although we are comfortable in terms of our performance, we see a lot of volatility. We see volatility in terms of our core business, and we see volatility in terms of the speed of the vaccine rollout. Of course, as we are more comfortable in terms of seeing how the market comes back, then of course, we will make a decision regarding our guidance. At this point, we are comfortable where we are.
Okay, maybe just a last question just on the bronchoscopy area. You're launching the aScope 5 here in relative near term, and as you also said in your prepared remarks that you were going to launch into the broncho suite. I think that's well known. Now also with all the competitors also moving into the ICU operating room. Should we see the aScope 5 as a premium product going into the broncho suite, or are you considering this to be just a next generation where you can enter the broncho suite but will also take over from aScope 4, actually being launched in, you can say all two, three settings?
Sure. Yeah, a couple of things. One is most of the key competitors are actually not coming into the ICU, they are coming into the broncho suite. The launch of Boston for the EXALT B and the launch of Olympus, I believe they are targeted for the broncho suite. The broncho suite single-use market doesn't exist today. Actually what we are going to have is three companies that together are going to create a single-use broncho suite market, and all that is going to be incremental for us. Our aScope 5 was designed specifically for the broncho suite. Now, there will be hospitals and surgeons in the ICU that would like to upgrade to the aScope 5, and we expect to see that as well, and that will be an additional benefit. The primary purpose of the aScope 5 is to create this new single-use broncho suite market.
Okay. Do you see this as a premium price product or in line with the aScope 4?
We haven't talked about pricing yet. If we go back to our pricing strategy, our pricing strategy is always to be at parity versus the reusable endoscopy cost in any procedure that we complete. If you look at that, you can actually guess what pricing we're going to have.
Okay, great. Thank you very much.
Thank you. Thank you, Thomas.
Our next question comes from the line of Benjamin Silverstone from ABG. Please go ahead. Your line is now open.
Thank you. Hi, Juan and Michael. I hope you are both well.
Thank you, Benjamin.
Thank you. My question is in regards to the mid-term market opportunities. We know that with COVID-19, there has been a push for regulatory recommendation towards eliminating cross-contamination and also highlighting the benefits of single-use endoscopes. I think that the general perception is that COVID has accelerated the potential single-use market. However, I note that in your presentation, you see an expected single-use market opportunity in 2025 of around $2.5 billion . Looking back to your Q1 in 2019, 2020, the quarter prior to COVID, you stated that you saw a similar market potential, but in 2024. I was therefore wondering what the underlying reason for this, I would say implied 0% market growth from 2024 to 2025 could cause.
No, I think it's mainly driven by the fact that we don't want to confuse the audience because we have Let's say our fiscal year goes across two years. You should assume that is 2024, is less 2025 for Ambu, when we talk about $2.5 billion. That has not changed. Listen, in terms of the market, of course, we are creating the market. We entered into segments where the market doesn't exist. In some cases, we are going to do with competitors, and that will make things easier. In some cases, we are doing it alone. There will always be uncertainty in terms of how the development of all these launches is going to go through.
The critical thing is that based on our experience today, based on what we know in terms of our technology, and based on the innovation, we believe that that market is going to be created. The second thing is that we believe that as long as we bring our innovation, as long as we continue to upgrade rapidly into the next generations, we should be able to ensure that the market is created and that Ambu is successful on that. There is going to be, I would say, a lot of volatility quarter-over-quarter and year-over-year until the market is created.
Thanks, Juan. Just to clarify, to make sure I understood correctly. The presentation from Q1 last year where it says market in 2024 plus $2.5 billion versus the presentation today, which is market expected in 2025 around $2.5 billion, are roughly the same estimates. They are based on the same estimates.
Yes, it's the same estimate, and you can assume it's because our fiscal year is 2025 now.
Thank you so much.
In October and finish in September.
Yep.
Yeah.
Thank you.
Thank you, Benjamin.
Our next question comes from the line of Niels Leth from Carnegie. Please go ahead. Your line is now open.
Hey, good morning. On the duodenoscope, as far as I understand your answer right before to Thomas, the 550 patient trials has effectively been halted. Why would you not begin all over when you have the 1.5 version ready? Mixing the first pool results with hopefully better results would kind of mix up the results in the trial. Also, have you received confirmation from the eight centers in the trial that they will stay in the trial when the 1.5 version is ready? Thank you.
Yeah. I would say that's a bit of a technical question. The two things that are important for you guys to know are the following. Number one, we are going to present the clinical data with our aScope Duo 1.5, and we will do that for our Q1 results, and we will do that at DDW. The second thing is that basically, the relationship that we have in terms of the clinical trials and so forth will be the ones conducting it. Now, whether we stop or do it and how do we do it and so forth, that's really not material. You can count on the things I just said.
Okay. The 550-patient trial will contain results from both the 1.0 version and the 1.5 version?
Yeah. Basically, that's why it's a bit more technical. Maybe you and I can talk separately-
Okay.
In our analyst meeting, but it really doesn't matter, basically.
Just finally, it seems like you're delaying the launch of your colonoscope by one year. Is that solely related to the delay of the duodenoscope, or is it a delay related to the colonoscope itself?
Yeah. I think I have mentioned before that when we introduce our aScope Duo, we are 70% in terms of the development of gastro and colon, because a lot of the technology is leveraged in terms of the gastro and colon. This is actually not related with the development of colon. It's just related with our desire to integrate aScope Duo 1 .5 technology into our launch. It's not really a one-year delay. It's just that we don't give quarterly targets because it's a competitive environment. Again, what you can assume is that we are going to enter into colonoscopy in that year.
Okay. Thank you.
Thank you, Niels.
Our next question comes from the line of Yiwei Zhou from SEB. Please go ahead. Your line is now open.
Hi. Thank you for taking my question. A couple questions. I'll limit it to two at the moment. Firstly, you said in the report you had a meaningful revenue from the duodenoscope in Q2. How should we understand the meaningful revenue here? Maybe comment a little bit on its contribution to the 17% organic growth. Secondly, you said 55 accounts order your product already. Is it fair to assume those orders have not converted to sales yet? Certainly still on the duodenoscope. Would you please elaborate a bit on what are the main sort of feedback you have heard from the physicians on the aScope Duodeno version 1, and where do you see the need for further improvements with the new version? Is it fair to understand that there will be a redesigning of certain components with the version 1.5?
Sure. Thank you. Let me take the last two, and then maybe Michael can comment in terms of the materiality of duo and the contribution to the growth in Q2. First of all, when you say 50 accounts order, basically means that we have sold to 50 accounts, and 13 of them are within the top 100 hospitals. I would say that level of traction is a good traction, taking into account how complex is ERCP, and this is very important. I believe a competitor talk about the adoption expectations in terms of duodenoscopy, saying that it's going to be gradual year-over-year. We see it in a similar way, basically. The procedures last longer, they are more complicated. There is more patient risk during the procedure. Surgeons want to be very confident before they adopt new technology.
That's different to what we see in ENT and cysto. You cannot launch in December and then in May report that 50% of the upgrades are already in market and that you are going to have a generation 1.5 by September if you actually have to completely redesign the product. That is basically telling you that the upgrades we are doing are minor, but the core of the performance of the product is good, and we are just basically refining it to make sure that we get to the performance that we want to get. In terms of the materiality, Michael?
Yeah. No, thank you for that question also. I think the reason why we chose to put language like we did was to follow up on the comments that we shared with you at our Q1, where we said that we had started to invoice on the duodenoscope. What we're saying now is that we have continued, and the size of the revenue that we have invoiced is meaningful relative to the growth that we are reporting. I think that's the closest I can get. I think it's fair for you to get the information that we're actually reporting a meaningful revenue that is having impact on the growth that we are reporting.
Okay. Thank you. Can I just follow up on the duodenoscope? Could you be a little bit more specific on the new version? Image quality or maneuverability? Is the elevator system a guide ? Where do you see the need here for a further improvement?
Yeah, again, we are in a competitive environment, so it's not good for me to go into details regarding our next generation. As I mentioned before, typically in single-use endoscopy, you are looking at three things. You are looking at image re solution, you are looking at maneuverability, and you are looking at functionality. We are basically strengthening all three of them. Again, it really reflects two things. Our rapid R&D engine. It is very difficult for a company to iterate at this level of speed while advancing other 20 launches to bring to market. The second thing is the fact that within duodenoscopy, at any point of time, we are committed to make sure that we have our most advanced technology with the most attractive economic offering.
That's the basis that we have to be able to compete in the market, and we want to have all of that, in the case of duodenoscopy, before the reimbursement is expanded, because we consider that's going to be an important event to drive adoption.
Okay. Thank you. I'll jump back to the queue.
Our next question comes from the line of David Adlington from JPMorgan. Please go ahead. Your line is now open.
Yeah. Morning, guys. Hope you're well. Just maybe first, actually, maybe on the legacy business start, because there's not a lot of focus there. As electives come back, do you expect to see some benefit from pent-up demand for procedures? I'm just wondering if you had any ideas in terms of what the inventory levels are like in the channel, and therefore could we see any restocking? Just on the bronchoscope, obviously Olympus launching a suite of products into the space. Just wondered if you had any thoughts around pricing there, and whether you had anything on how they're pricing relative to your offering. Thanks.
Yeah. Thank you, David. In terms of electives coming back, I think like most hospital MedTech companies, we believe there is a pent-up demand, and we believe there will be a benefit from that pent-up demand. Maybe what is different from Ambu to other companies is that we don't have a calendar year. Our year finishes in September. We believe that the benefit of the pent-up demand for Ambu this year is going to be minimal. Of course, it depends on the COVID vaccine rollout, and there are different developments right now, and that's basically kind of a source of uncertainty for Ambu. We believe there is pent-up demand. Outside of the United Kingdom, we don't believe there is stock out there, and therefore we should see a benefit from it.
In terms of Olympus and PENTAX, let me first of all say that for the creation of a single-use endoscopy market, having the largest reusable players, having their commercial infrastructure talk about the benefits of single-use endoscopy and the occasions where they think single-use can play a role, is very positive. That is really going to help us to create the segments where they are going to introduce products at a faster rate than what it would have been if they were to be on the other side, trying to stop the creation of a single-use market. In terms of pricing, we do not have visibility in terms of their pricing. Of course, we have a significant volume advantage against any of those players in single-use. We have probably seven times more volume this year than the next competitor.
Because of the modularity, we have a cost structure that allow us to price competitively in pretty much every segment where we want to participate. Again, our pricing is not really relative to competitors, so even if they have higher pricing, we will still pricing based on how much it costs a hospital to use reusable endoscopy to be able to facilitate the migration to single-use. That's how we are thinking in terms of pricing.
Perfect. Maybe just to follow up, your price per scope came down this quarter. Is that just a reflection of the mix, or is there some pricing pressure out there?
Hey, David, this is Michael. Yes, it is entirely a reflection of the mix. There's nothing that you should really pick up there. It is the bronchoscopes versus the other scopes.
Got it. Thank you.
Our next question comes from the line of Annette Lykke from Handelsbanken. Please go ahead. Your line is now open.
Thank you so much. Most of them have been addressed, but I'd like to go back to the duodenoscope and Thomas' question, Benjamin's as well. Could you share some more color on where you would see the benefits, and can you confirm that where you saw the focus area was resolution, functionality, and then did you say viability, or what did you say there, Juan? That would be very nice to hear a little bit more about that. Also, we can see on clinicaltrials.gov that only five out of eight sites are recruiting. Do you expect those to recruit soon, those lacking three? Finally, a question on the scope sales. If we stick to your mid-guidance of 1.35 million scopes for the full year, would that imply that we should see H2 sales on par with H1?
Can you, Michael, say a little bit about this, why we should expect not to see any growth sequentially between H1 and H2? Thank you so much.
Thank you, Annette. Let me start talking about the improvements and then the clinical, and then Michael can comment on the guidance and expectation for the second half. What I said was maneuverability, so the ability for the scope to navigate inside the body.
Yeah.
We actually believe that is a core strength of our product. We have learned from the launch, and most importantly, we have seen that we have technology available that we could bring forward faster to further strengthen the performance of the product. I cannot comment on that, but you can imagine that basically means improving the image resolution, improving the functionality, and improving the ability to navigate inside the body. We are doing that ahead of October the 1st , because we want to make sure that when healthcare system says, "Well, now we have an even bigger economic incentive to move to single use," that the value proposition of Ambu is as attractive and competitive as it can be. In terms of the clinicals, we started with two, and then in the months we expanded to five.
We are basically going to restart with our aScope Duo 1.5. We want the clinical data to reflect the performance of the product that we will be commercializing. We will continue to expand the number of sites. I think it's likely that by the time we finish, we'll probably be beyond the eight centers. In terms of the mid-guidance, Michael?
Yes. Thank you for the question, Annette. I know exactly what you mean. There is definitely, when you model it out and we end in the middle of the guidance, there are scenarios for revenue being the way they are. I think as Jose was also saying, the signal we would really like to send here is that despite the performance that we have for the quarter and for the half year, we are in a very volatile environment. We are seeing signs that we are moving out of the pandemic, but we're also seeing signs that Europe is not yet fully out. On the top of that, we still have launches that will have a good impact or that are planned to have good impact for the second half of our year.
I think all those elements taken into consideration is the reason why we have said we'd like to reiterate the guidance for this quarter here, and we will then take it as we move forward. To your point on whether the scenario for where we're being in the mid and revenue will be flat, I understand what you mean.
Okay. Thank you.
Thank you, Annette.
Our next question comes from the line of Niels Leth of Carnegie. Please go ahead. Your line is now open.
Thank you very much. If you're going to make material changes to your duodenoscope, for example, the elevator system, which some doctors have requested, would that require a new FDA approval? Thank you.
Yes. Niels, thank you for your question. As I mentioned before, you cannot do rapid upgrades if those require material changes. Basically, we have a good working product that we could strengthen, and that's what we are doing, and the nature of the changes does not require a new FDA approval.
What you're saying is that the changes you're making are immaterial changes?
What I'm saying is that the changes I'm making does not require a new FDA submission.
Okay. Then just a second question, perhaps more relevant for Michael. If we look across your three reporting segments, and if we apply an EBIT margin of, say, 10%, 12% to your legacy businesses, the anesthesia and PMD divisions, which used to be the case before the visualization business became so big, it would imply that your endoscope business is loss-making if you adjust for R&D capitalization. Obviously, you're investing quite heavily into the GI business. If I'm correct, you must have invested more than DKK 2.5 billion into the GI space by now. How far are you willing to take your investments in the GI space, given the effect it has on your P&L? Thank you.
Thank you for that question, Niels. I think just to get one thing right, I think when you are referring to that very big amount, you, of course, including the Invendo acquisition, which I think is a separate thing. I would say overall, our innovation costs, considering our modular approach, when you look at it across the pipeline that we will be launching, are very reasonable. That being said, when you're trying to do the profitability per segment, which I cannot really comment on, there's just one thing I would love to say is that, you know that within visualization, we have two or [three] different sales forces, and those products related to the sales forces are on very different lives on their life cycle curve. It's very natural that you have some of those products that are generating better profitability than others.
Could you just update us on the effect of R&D capitalization for the full year?
That's not really an information that we are sharing, but when you are building an R&D organization, it is something that is moving very slow. The impact that you're going to see in the second half are not going to differ that significantly from what you have been seeing in the first half. It's going to be higher, maybe 10%, 15% or something like that, but it's going to be in the fourth quarter. You're right, and as we also disclosed in the presentation, we continue to build our innovation organization. We are expanding in our site in Germany. In order to continue to have an increasing launch plan in front of us, it is requiring that we commit to those investments.
That also means that your free cash flow for the full year will be negative?
I'm not saying that. In fact, we are not guiding on that. What I think that the takeaway is that the overall investments into our innovation is very much in accordance with the plans that we have been having.
Okay.
Yeah.
Thank you, Niels.
Thank you.
As you can imagine, our assessment regarding the potential of Ambu in GI is such that we are building a new single-use endoscopy plant in Mexico, an R&D GI center. We are right now in the midst of building our business in duo, and in a few months, we're entering into gastro. This is actually not a long-term bet. This is a bet we are doing now, and we expect to see the benefits as we have seen the benefits in any of the other launches.
Thank you. Great. Thank you.
Thank you, Niels.
Our next question comes from the line of Michael Healy from Berenberg. Please go ahead. Your line is now open.
Thanks very much for taking my questions. Hi, Juan Jose, and hi, Michael.
Hi.
Not to labor on the duodenoscope too much, just in terms of your strategy for regulatory approval outside of the U.S., can you just share with us your thoughts on European and maybe Japanese approval and which versions we should expect for those approvals? Secondly, I don't know if you can help here, just in terms of the revenues you're generating from the aView 2 Advance. If you could just share a little bit of a thought around that. Are you selling many screens, or are they still heavily discounted? Perhaps what the margin profile is there. Final question, just on semiconductors and maybe rising plastic costs, are you experiencing any impacts on your business? Thank you.
Thank you very much, Michael. An excellent questions. In terms of duodenoscopy, as you can imagine, this is a global launch, and we already submitted for regulatory approval for our aScope Duo in Europe, and that's going to be our aScope Duo 1.5. It's the same case in Australia. We have already submitted. In the case of Japan, we are actually going to enter with our aScope Duo 2.0. It's mainly driven by the fact that Japan just actually started the commercialization of our aScope 4 Broncho, and they are getting approvals of our aScope ENT and cysto. They are actually building the company on those segments, and then they are going to get the aScope Duo 2.0 and gastro, and then they will build the GI business.
In terms of semiconductors, I think everybody reads the disruption and the fact that there are some product shortages. We haven't been impacted by that. We actually prioritize to make sure that we maintain our service levels, and that is a key priority, and the pricing changes we are seeing are, to this point, immaterial for us. Of course, there is volatility in terms of the sensor market. Michael, do you want to comment on the aView 2 Advance?
Thank you for the question, Michael. I think we've been talking about this in the past also, that when we sell monitors, there are a variety of different models. Some monitors are being sold at full price, some are being sold at a rebated price, and in some cases, we are bundling monitors together with a certain volume of scopes. It's clear now that when we are in a phase where we really want to place our monitors in order for customers to take better advantage of the full range of our technology, we have a larger incentive to get the monitor out, and I think our behavior should be seen in that light. But even considering that, we are taking healthy revenue streams from the monitor.
Okay. Thanks very much.
You're welcome.
Our next question comes from the line of Alex Gibson from Morgan Stanley. Please go ahead. The line is now open.
Great. Thanks. Most of them have been answered. I guess just to narrow down on, in the visualization business, you're talking about flat revenues in Q3, and that just goes a bit counterintuitive to the momentum you're seeing, customers you're adding, and the product launches being rolled out. I just wanted to check, what sort of level of growth are you actually seeing in April and May, and is it just based on a conservative assumption, or have you seen a real step down in terms of momentum? Lastly, on the GI launches in the gastroscope, we're getting pretty close to the expected launches. How confident are you of having a product ready in the next four months that can be commercially sold? What are your expectations for volumes relative to maybe prior launches in the first year for the gastroscope? Thanks.
Well, thank you for the question. Let me take the first one. It's a tricky one, because as you know, we have very high comparables, and we also have a very solid Q2 that we are now leaving out of. I think the signal we are just sending is that operating within the guidance that we have given you and considering the comparable from last year and considering a quite healthy Q2 here, we're just cautious that Q3 may be on the same level, which is actually a very solid and good level that we would be satisfied with.
Yeah. Alex, let me talk about gastro, because I would say when I look at the launches in front of us, gastro is going to be a very important one. Unlike ERCP procedures and maybe more similar to cysto and ENT, a gastro procedure is more relatively straightforward. Of course, you're talking about a market which is several times larger than the market that we are operating now. It's actually bigger than all the markets that we are commercializing today. We are basically in line to do our regulatory submission as planned. Of course, we need to wait to see the response from the authorities, and they have their own timeline. We are basically moving along. Now, in terms of the uptake, it always takes time at the beginning when you introduce it.
As I just said, in the case of gastroscope, we are expecting to see a more rapid uptake than what we are seeing in the case of duo. We are confident that when we look at 2024, 2025, gastro is going to be an important part of the market as well.
Okay, great. In terms of latest pricing dynamics for the gastro scope, have you come to any conclusion on where it should come out?
Yeah. We will share our pricing strategy as soon as we launch the product. Again, our pricing is very much grounded on healthcare economics. If you look at how much it costs a hospital to use a reusable scope, if you take into account the cost of the tower, the scope, the repairs, de contamination and so forth, whatever it costs a hospital, a high volume hospital to do a gastroscopy, that will be the pricing for our product.
What is that number then?
We share our pricing only when we introduce our products, Alex. You are a few months early. As soon as we get it.
No worry.
Very soon.
Gotta try. Gotta try.
Thank you. At this stage, we have no further questions. I will hand back to the speakers for any final remarks.
Okay. Thank you. Listen, thank you everyone for your patience with some of our technical issues, and also for your interest in Ambu. Let me just take the opportunity to say one thing. In these calls, we have investors, we have analysts, but we also have hundreds of Ambu employees. This is a tradition that every time there is a quarterly earning, all of them join to listen the results. Everything we have shared, this is your work. All this progress, all these launches, everything that we are doing reflects all your efforts. I know that in the midst of our COVID-19 pandemic, it had not been very easy. You guys are the biggest source of confidence we have in terms of the future outlook of the company. Thank you very much, and everybody enjoy the rest of the day.