My name is Klaus Sindahl, and I'm heading up the Investor Relations at Embla Medical since two years ago. For those of you who are not familiar with Embla Medical, then I can give you a bit of background. We are a global leader within innovative mobility solutions. We develop prosthetic devices for amputees. More recently, we have also moved into so-called neuroprosthetics, addressing people or patients with neurological disorders such as stroke, cerebral palsy, multiple sclerosis, Parkinson's, et cetera, where people can regain their mobility. We are an Icelandic company. We were founded more than 50 years ago by Össur Kristinsson and thereby also the former name Össur.
We have, throughout these 50 years, developed the company into what it is today, which is a global leader in mobility solutions. We actually started out as a small clinic with focus on a silicone liner, which you put on the stump for your prosthetic device, and this is the invention from Össur Kristinsson. Today we are not only a developer, we also manufacture, and we commercialize these innovative mobility solutions. Over the last 10 years, we have also done vertical integration, meaning that we have acquired close to 200 clinics in 12 markets, including Sweden and rest of Scandinavia. We have direct sales in 40 markets and distribution in roughly 70 markets beyond that, and we employ around 4,500 people globally.
Innovation is a major theme for us. Our growth is based on these innovative solutions and together with another leading company in this area, Ottobock, we sit on 2/3 of the market for innovative mobility solutions. We invest roughly $45 million-$50 million every single year, which makes up like 5% of sales. If you adjust for the clinic business and the bracing and support, which we're also doing, it's closer to 10%. We operate in a very attractive and sticky niche industry supported by some long-term sustainable growth trends. These trends are, as I have depicted on this slide, it's we're moving towards a more aging and more active patient population. Even though you get older, you still want access to good mobility solutions.
Also, we see a clear trend for improved treatments, evidenced with innovation, the more transformative innovation from bionics. For those who are not familiar with bionics, these are the dynamic digital solutions which are based on AI, sensors, algorithms, et cetera, which basically mean that you regain your mobility as an amputee. You can all of a sudden you can walk, you can run, you can hike, you can swim, and you can bike, et cetera. Climb we also seen. This is very, very transformative for this patient group, and we see these solutions getting more and more advanced every single year. We also see a clear trend towards better access to healthcare.
Of course, it's been the more active patient populations which have been driving this because this is where you can justify it from a health economic point of view. More recently, we have also seen that even less mobile patients, more senior patients now also get access to the most advanced solutions, which is a great things. We also see empowered patients. Patients today want to have a say in what type of solutions they can get. They want to impact that decision making, which is also an important trend. Not at least, these solutions need to be cost effective, meaning that they need to be justified from a health economic point of view.
We have proven that over many, many years now that even the most sophisticated bionic devices leads to less falls, less accidents, less hospitalizations, and improved quality of life for these patients. This is an important factor for the healthcare systems to buy in on these concepts. Digitalization is also a big theme in our sector. AI is going to help our clinics to digest the data to ensure a better fit for our patients. Today, clinics are still fairly manual. I don't know if you have ever been to an orthopedic clinic, but they have like a workshop in the back and clinics basically look the same like they did like 30, 40 years ago. This sector is undergoing a huge transformation these years where it's becoming a lot more digital.
You also see 3D printing of the sockets for these type of patients. If we should take a look at the business as such, our legacy business, as I mentioned before, is our prosthetic business, which constitutes to roughly half of our sales today. It encompass a variety of solutions all the way from simple mechanical solutions with some functionality over to more advanced sophisticated bionics, which I mentioned before will read your mobility behavior and help you regain your mobility. There's a huge price differential between the less and the most advanced devices. We're talking about a factor of 10x. Despite that, as I mentioned before, it's still viable for the health systems to buy into these concepts.
Neuro-orthotics, a new area we acquired our way into two years ago with the acquisition of Fior & Gentz. I'll get back to that. We have some interesting video sequences we can show. We have bracing and support. A lot of you would probably be familiar with these braces for acute use if you have been skiing, or you need braces for arthritis or post surgery, you need stability. These are for more acute use, so typically solutions you would use for a few months, and then you basically throw it away. I mentioned before, we have vertically integrated into the clinic space as well. Today, 90% of our sales is based in the more mature markets, typically Western mature markets.
If you look at the patient population, on the amputee side, 80% of all amputee comes from emerging markets. Due to the lack of access to products, reimbursement, good health insurance, and also a clinical infrastructure, these markets have to not advanced to the extent we have hoped. This is something we are working on now on developing, and we have different models to address that. I'm going to show a small video sequence just to illustrate how far we have come with the bionics and how these devices can help patients regain their mobility. There's no sound. Yeah.
You can see from these videos, it's quite transformative for patients, how these bionic devices can help patients regain their mobility. This is something which is growing a lot. It's growing very fast. If we do a drill down to the prosthetics, you can see that we are growing around 10% on average in a market which is also structurally growing around 6%-8%. We can only do that because of these innovative models, these innovative solutions entering the market every single year.
We see a clear trend towards functional trade-up, meaning that every time a patient visits a clinic, they will always see some kind of upgrade to their solutions to the benefit for both the patient but also for the system. Fitting rates are still fairly low. I mean, on average, it's only one out of three of new amputees who get fitted with a prosthetic device. In a market like Sweden or Germany or Denmark, it's somewhat higher. It's closer to 60%. It still tells a story that it's too few who actually are getting offered a good solution if you are an amputee. I also need to mention that it's a very sticky business.
I mean, you have these relationships with the users for lifelong, meaning that we have recurring sales. Typically, you will get your prosthetic device replaced like every third year. You are very, you familiarize yourself with the clinics, with the brand, et cetera, the technology. You have a strong relation with the CPO, this also means that the business have some resilience into the future. If we look at what are the causes for amputations, vascular diseases is the main cause. 2/3 of all amputees come from vascular diseases, not at least diabetes. Actually, our targeted audience is for especially the bionics, is primarily trauma related.
It's cancer, it's congenital diseases, as well as now also war is a big factor for people to get amputated. Nevertheless, this is still a huge opportunity for us to address. I have to also mention that vascular diseases, often patients are very far, very progressed in their disease, which means that they often are laying in bed. They're bound to their home, so they don't get out that much. Then they are usually not prioritized for the most advanced bionics. Yeah. Now we talked about bionics, and this is also a maturation story, right? The technology has been in the field for some years now, over the last 10, 15 years. It's now, it's starting to pick up.
It's doing that because of innovation, as we have talked about, but also functional trade-up as well as this regional coverage expansion. Up until recently, it was only the most active patients who got prioritized for bionics. Now, with the data, with the trials supporting the use in less mobile patients, we see a significant opportunity with the coverage expansion. We are quite well-positioned with this given that we have a portfolio of solutions not only for the most active, but also for the less active users, which will help drive growth many years ahead. Also because we believe that bionics will eventually become a new standard of care.
I now wanted to shift gears to neuro-orthotics, which is a new area, which I started out presenting. These are braces. These are shells, as you can see to the right-hand side, addressing patients suffering from stroke or cerebral palsy or multiple sclerosis, where you also take advantage of the technology from the bionics. You see here on the knee and on the ankle that we have fitted this patient with bionics. It's a patient who otherwise would be very reliant on a wheelchair or a walker, and maybe I can best illustrate that in this video. Here we have a patient suffering from multiple sclerosis. I think we can all recognize a patient like this in the street. Very, very difficult mobility solution.
When you fit her with these neuro-orthotics, it's a completely different world, right? I mean, these intelligent devices, they read her mobility behavior, and this is the first time she's trying it out. It does an immense difference for patient suffering from paralysis in whatever condition they have. This is a very interesting market. It's still somewhat immature, as I mentioned. I mean, we're probably one or two decades behind prosthetics in terms of awareness, in terms of reimbursement, but we're getting there now. It fits very nicely into our portfolio of existing mobility solutions like the prosthetics, because these patients suffering from neurological disorders, they are basically treated at the same clinics as the prosthetic patients, in these O&P clinics.
You have the CPOs who can cover that span of patient treatments. Similar to prosthetics, it's also a very sticky business, we see recurring sales to the tune of 70%-80%. This is a very attractive, untapped market, where we have sort of gotten the proof of concept in Germany where it all started, where you see the most penetration today. Now we have expanded to multiple new markets. Over the last 12-18 months, we have expanded into U.K., France, Switzerland, the Nordics, Benelux, Australia, and more recently, also the U.S.
Believe it or not, I mean, many places, the standard of care have been these kind of braces, like you saw in Forrest Gump 25 years ago, where the metal pieces basically fell apart. That's been the standard of care in the U.S. until 10 years ago. With these intelligent braces, we believe that there's a large untapped market we can penetrate. It's also a market which represents potential 5x or 10x compared to the prosthetic market, also because we can cover a wide span of indications, including the ones I'm mentioning here, with the stroke, MS, et cetera.
I wanted to end my presentation also just talking briefly about emerging markets, because this is, as I initially talked about, this represent a huge opportunity because it's here where we have 80% of new amputee volume. Due to various reasons, lack of co-coverage, insurance, access to products, as well as a well-established infrastructure, we have not seen the breakthrough in these markets. There are pockets such as China, Brazil, Southern Africa, et cetera, where we are seeing the potential through private pay. We need these markets to mature a bit more. There is a lot of untapped market potential to pursue.
A market, of course, it's on a very tragic background is, of course, a place like Ukraine, where you have seen 50,000-100,000 young amputees due to the war, right? These are typically young men, aged 25-35 years, so they are in the productive age. They would be reliant on prosthetic devices for 50 years or so, right? This is very devastating to see. We are one of the companies who can help address this. We have already started through donations, through collaborations, and help from NGOs. More recently, we have established our first clinic in Kyiv. Of course, it's very difficult to establish a footprint in a market where there is an ongoing war.
We are very focused on helping the Ukrainians to the extent we can. I think that will be my end note, so we can open up the floor for questions.
Thank you very much, Klaus. We can sit here if you want to.
Okay.
om man har några frågor till Klaus Sindahl får man räcka upp handen, så kommer tror jag Mats Ekberg med en mick. Tar jag upp det. Thank you for a very interesting presentation. Embla is, I mean, you have growth targets, based on organic growth. Are you focusing entirely on organic growth, or are acquisitions also something that is of interest for Embla?
It's a very relevant and current question you pick up on here because we have over a long period of time, I mean, since we got listed first time in Iceland in 1999, we have grown the company around 70% CAGR.
Okay
Which is of course very high. This is through a healthy combination of organic growth and then acquisitions. Acquisition is a big part of our DNA.
Okay.
This is how we have developed the company over the years.
What kind of companies do you acquire, so to say? Is it technology or geography, or could you evaluate a little bit?
Yeah. We have basically three buckets, when we talk about M&A. I mentioned during my presentation, we have acquired around 200 clinics.
Mm-hmm
In the course of 10 years. Beyond that, products and technology, Fior & Gentz the neuro-orthotics.
Mm-hmm
Is an evidence to what we have done on that side. We're also looking for opportunities which can generate market access, where you see mature markets with good reimbursement systems, where we are not present today. That's sort of the three themes we are looking at when we are doing M&A.
Yeah. You have a forecast for this year when it comes to organic growth. How much is driven by volume growth, and how much is driven by raising of prices and so on? Could you elaborate a little bit?
Yeah. It's a very interesting question because-
Mm-hmm
The overall volume of new amputees is not growing a lot. I mean, you're talking about 1%, 2% globally. Of course, there are particular situations like Ukraine, right, where it's, I mean, a steep increase in patient volume. Overall, you see patient volume on the amputee side only be about 1% or 2%. The rest of the growth comes from, yeah, price-
Yeah
But also this functional trade-up. I mentioned during my presentation that every time, a user get into the clinic, they would typically, experience some kind of an upgrade, to more advanced, prosthetic solutions. This is driving, excuse me, this is driving, a lot of our growth, with this functional trade-up that you see patients being qualified to more sophisticated advanced, devices.
Okay. it gets more and more sophisticated by the.
Yeah
Time. Okay.
It's like having the latest iPhone.
Yeah. Okay. What about competition? You didn't go into that into details. What kind of competition do you have, what kind of players are active in this area?
Yeah. There are two dominant players in this field. There is, of course, Embla Medical, and then there is another company which got listed here in Germany in the fall, Ottobock.
Oh.
It was actually the largest IPO, the last two years in Germany. These two companies combined sit on 2/3 of the market, right, where we hold roughly 25% of the market. You have like a tail of smaller players, having around 3%-5% market share.
Okay. Thank you. We have one question from the audience.
Hello. What's the average price for a prosthesis for a leg or a arm?
Yeah, it depends. I mean, if you talk about a full bionic leg with both an ankle solution and a bionic knee solution, you're talking about a retail price around $30,000, so SEK 300,000. This is something you need to continuously maintain, service, replace every three years.
You take the service also?
Yeah. We have the clinics also, so we would also help service maintain these prosthetic devices.
Yeah. Thank you.
One question regarding profitability. I mean, you're a profitable company, but you still don't give any dividends, I think, to the shareholders. Is it because you want to make acquisitions and invest in the business? Could you elaborate a little bit?
Yeah. Yeah. It's true that we have policy to return capital to shareholder through share buyback.
Yeah.
Programs, because we are a very acquisitive company, right?
Yeah.
Because these opportunities, they occur every now and then, we have a more flexible approach, through share buyback programs rather than having a dividend policy.
Yeah. Yeah, sure. When it comes to emerging markets, you almost ended your presentation on that. How is the development for you guys? Obviously, it's a huge market, right? Is the reimbursement important part of a market maturing, or what should we expect?
Yeah. It's absolutely critical to see good reimbursement for markets to mature a bit.
Yeah.
I mean, you have huge markets like India, China, Brazil, South Africa, et cetera. I mean, a market like China is entirely a private pay market.
Mm.
Talks about that reimbursement, there will be some kind of insurance being implemented in a market like India, right?
Mm.
I mean, that's the diabetes capital of the world. It's a huge market. We have, like, also strategy to enter India with a more laser-focused strategy.
Mm
On specific patients.
Okay.
Yeah, because the, this health economic adjustments or assessments need to justify, you know, the price and the reimbursement at the end of the day.
Yeah, of course. How do you actually grow into new markets? Is it through your own sales or with partners, or how do you sort of?
We-
Put down your flag in new markets?
We will typically enter a market through a distributor, initially, and then, as the demand grows, we would probably also, integrate with our own clinical footprint, thereby also ensure that more of our solutions would be sold to the relevant patients.
Yeah. When it comes to your portfolio of your technology, is it something you lack in that portfolio, so to say, services that is of demand for this patient group, or?
Yeah. We touched a bit upon that, the insurance is now starting to validate the bionics for less mobile patients, so the more senior. We have seen that this coverage expansion will help us grow. When you talk about a less mobile patient population, I mean, it's quite fragmented. I mean, there will be.
Yeah
Some who are more active in that patient group, which we can absolutely fit, then there will also be some patients who are less active in the less mobile category, if it makes sense. We are developing a more dedicated K2 solution to solve that because with our current portfolio, we can address some of them, but we cannot address all of them.
Yeah. How much do you invest in R&D in your company if you put it in relation to sales and so on?
R&D is a very important component for our growth. Last year we invested just shy of $50 million.
Okay.
This will lead to a number of new innovations being launched to the market every single year. We in general see a more focused and a higher demand for the most advanced, stuff because this is what people-
Mm
Are looking for and, what is in demand and, where we also see very solid health economics.
Yeah, of course. What kind of threats do you see going forward for your company? Is it increased competition or the macro environment?
I mean, I think we can all realize that, or acknowledge that we are living in a very uncertain geopolitical environment right now.
Mm-hmm. Yeah.
Where, I mean, even, good healthcare insurance is at stake. I mean, you saw recently in the U.S. where Medicaid, I mean.
Yeah
Is removed from 10, 20 million people.
Mm. Yeah.
Most of our patients are on the U.S. Medicare, right? But you never know.
No.
There's also a lot of talks about U.S. supply security. There's tariffs, et cetera. There's a number of factors in play, right, where you need to invest more in the U.S. and that's also something we can address if needed.
Okay. How is tariffs actually now when you mention it? How does that affect your business? Do you have local production or?
Yeah. Actually, most of our production is out of Iceland.
Okay.
We also have manufacturing in Mexico-
Mm
A little in the U.S. We have in Germany and also some sourcing from China. When it comes to the core prosthetic devices, the core solutions, our legacy business, then we are currently exempt, due to the Nairobi Protocol. No one knew-
Oh, okay.
About that.
No, no.
Until a few years ago. We're exempt on those kind of solutions.
Right
When it comes to the more, bracing support, the more acute solutions we also offer, then they are actually subject for tariffs. We pay to the tune of $2 million per quarter in tariffs.
Yeah. Okay. Thank you very much, Klaus. Time flies. Oh, we have another question.
Oh.
Sorry.
Yeah.
A little bit on the question of R&D in general. For the MS patient group and for those type of prosthetics, do you also have partnerships in place for pain or other sort of measurements that could, y eah, is that in your strategy pipeline? If so, how?
You mean partnerships to reach?
Yeah
Users?
For instance, we had today some companies that are looking into pain modulation.
Yeah. now, we have, as I mentioned also initially, we are fully integrated throughout the value chain. Of course, I mean, 90% of our sales is not going through, our own clinics. We're also looking for distributors, partnerships, collaborators to get our solutions out there. I don't know if that answered your question?
Thank you.
Yeah.
Okay. As I said, time flies. Thank you very much, Klaus.
Thank you so much.
You can come. Thank you.