Welcome to BONESUPPORT Year-End Report 2023 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound five on their telephone keypad. Now, I will hand the conference over to CEO Emil Billbäck and CFO Håkan Johansson. Please go ahead.
Yeah. So good morning, everyone, and, thank you, operator. Welcome to the BONESUPPORT Quarter Four, 2023 Results Call. My name is Emil Billbäck, and sitting next to me is Håkan Johansson, our CFO. We're broadcasting from the U.S. West Coast, where we are participating in the largest American Orthopedic Congress. So we will use the next 25 minutes to guide you through the presentation of the fourth quarter results. So then we will open up the line for questions and answers. So we go to the next slide. Before we will start this presentation, we would like to draw your attention to any disclaimers covering forward-looking statements that we might do today. So let's go to slide three, and get started. So I would like to begin this presentation with some condensed highlights from the report that we released an hour ago.
So overall, quarter four sales were SEK 173 million, which corresponds to a reported growth of 67% year-over-year. In constant exchange rate, the growth rate was 60%. The operating results before incentive provisions was SEK 11 million, which is a profit improvement versus the same period last year of SEK 21 million. Reported EBIT was SEK -8 million, negatively influenced by a few distinct topics, which will be covered in the finance section. The main highlight of the period was, of course, the ongoing launch of CERAMENT G in the U.S., but I wanted to draw your attention to the following topic. In the quarter, we received MDR certification for CERAMENT V and CERAMENT BVF, bringing us to full MDR certification for all our products and our quality management system.
We submitted the market authorization request for a label extension with CERAMENT G in the U.S. for the indication open fracture trauma. At our Capital Markets Day in November, we announced our ambition to enter the spinal fusion segment with CERAMENT. Lastly, CERAMENT G was granted an uncapped outpatient reimbursement through CMS Transitional Pass-Through Payment program, the TPT. I will cover these topics more in detail during the presentation, but let's first look at the sales development, and let's go to slide four of our deck. This is one of our standard charts for the quarterly report and investor presentations, and obviously, one of our favorite charts. It shows the last 12 months sales in Swedish currency every quarter since quarter four, 2016, split by region and product category. The sales numbers are really taking off.
If you look at what looked as a big disruption to top line in 2018, following the change in U.S. commercial structure and strategy, it now rather looks like a small dent on a successful journey. The strong acceleration in both geographic segments over the last 24 months becomes very visible in this slide. In the U.S., the performance has been boosted, of course, by the continued launch of CERAMENT G. In Europe, we see an improved market dynamics and strong capturing of market shares by CERAMENT from more traditional treatment methods. In total, the antibiotic eluting CERAMENT globally is grown with 220% versus quarter four, 2022, and 25% sequentially over quarter three, 2023. Let's go a bit into the details, and we will start with North America.
So sales was, as you have seen, 132 million SEK in the quarter, which corresponds to a reported growth of 79% year-over-year. At constant exchange rates, growth would have been 70%. The U.S. pandemic surgical backlog has been quite decisively addressed during 2023 by the healthcare systems through stretched hours in the operating theater and increased recruitment by the hospital. This has created favorable market dynamics during 2023 for hip and knee surgeries, but also for corrective post-trauma surgeries and for foot and ankle surgeries. The Swedish krona experienced exceptional volatility in the quarter, impacting both reported sales and expenses. Large impact was seen on the recalculation of operating assets and operating liabilities, and Håkan will cover this later in detail. Sales are taking off well in the U.S., with the largest driver being CERAMENT G in the U.S.
Sales reached SEK 76 million in the quarter, which is up SEK 13 million, or 21% sequentially. We have now several surgeons that have used the product and developed experience, and also collect the data in a structured way. These surgeons are forming our growing base of ambassadors, and we're facilitating peer-to-peer group discussions within the hospital and at hospitals in the region. We see good continuous progress with hospital systems, adding approvals at the same pace as in previous quarters. We saw one of the strongest quarters when it comes to onboarding of new surgeons, surgery centers, and orthopedic departments. This is driven by the hospital system approvals that were accomplished in quarter two and quarter three.
Now, being a breakthrough device and a disruptive standard, a disruptive product to standard of care, a surgeon will not be allowed to use and apply CERAMENT G until they and the operating staff have been properly trained. A large share of the sales people's focus in the U.S. is now to ensure that these new customers get properly onboarded, trained in application technique, and instructed on billing procedures. In December, we submitted the label extension request to FDA, for the CERAMENT G in prophylactic use. The data for the submission is compiled out of existing, published, peer-reviewed clinical studies, and these show strong results with CERAMENT G at index surgeries of open fracture trauma cases. A 400-patient, demographically matched cohort control group have been used. The infection incidence for the control group was reported to be a mean 14.5%.
In comparison, in clinical publications for CERAMENT G, used at open fracture trauma, infection rates have been reported to be between 1% and 3.7%. During quarter four in 2023, CMS approved CERAMENT G for outpatient reimbursement through CMS Transitional Pass-Through Payment, with its own reimbursement code. This payment is intended to reimburse hospital outpatient departments and ambulatory surgical centers for the incremental device cost that they otherwise might have of CERAMENT G. The purpose of this reimbursement program is to promote new technology and provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The TPT is uncapped and valid for three years. So I think the TPT could be said to really be a strong testament and recognition of the strong differentiation, health economic benefits, and improved patient outcome shown in multiple clinical studies for CERAMENT G.
I'd like to draw your attention that since 2016, there are only 23 medical devices that have ever received the uncapped TPT reimbursement. So that's on the U.S. Let's also go a bit more in detail on Europe on next slide. So for the quarter, we saw sales of 41 million SEK, corresponding to a reported growth of 38% year-over-year and 32% at constant exchange rates. Europe has been delayed in the ability to address the large surgical backlog due to shortage of staff and structural disruptions. Towards the latter half of 2023, we saw improved market dynamics from increased surgical capacity and also a stronger focus on the healthcare systems to address the pandemic-induced backlog. Reliable market data in this area is not readily available, but several sources imply market growth rates of around 6%.
Now, within this strong dynamic, CERAMENT is capturing significant market shares, mainly on autograft and traditional bone cement, which is obvious by our growth rate. While we got a bit disrupted by the pandemic in setting up our hybrid structure in Spain and Italy, we are now seeing these under-penetrated markets take off nicely, with strong growth rates above 70% in the quarter. With a Medical Device Regulation certification for CERAMENT BVF and CERAMENT V, we have now full MDR CE certification for our entire portfolio and our quality management system. This is a strong achievement as the transition from the EU Medical Device Directive, the former regulatory landscape, to the EU MDR, which is the new landscape, poses a challenge to the companies within the medtech industry, with significantly higher demands for clinical evidence.
Data from mid-2023 indicates that less than 30% of submitted MDR applications have so far reached certification, and that there is still a large number of devices for which the MDR application have not even been submitted. Thus, I'm very pleased that the solid documentation, the growing pool of clinical evidence, and the skilled organization at BONESUPPORT has brought us to the other side of this process. The level of marketing, and market and marketing activities is very high. We participated in several of the regional and national orthopedic conventions in order to meet surgeons that still have not yet heard about CERAMENT.
At the two largest meetings that both took place during quarter four, the European Bone and Joint Infection Society and the German Orthopedic Trauma Meeting, the DKOU, we held satellite symposia, and these symposia were facilitated by faculties consisting of distinguished European orthopedic surgeons, with a program featuring a blend of clinical evidence presentations, patient cases, and panel discussions. In total, over 250 orthopedic surgeons attended our symposia, generating many new potential users. So that is a short wrap-up of the business in the region, and we'll now hand over to Håkan for more of a deep dive into the figures. Håkan, over to you.
Thank you, Emil. So net sales improved from SEK 103.2 million to SEK 172.7 million, equaling a growth of 67% or 60% in constant exchange rate. Emil has already spoken about the strong performance in the two segments and the major drivers behind the sales acceleration. Let me comment on the currency. Changes in currencies measured in year-to-date averages into 2023 versus 2022, had a positive impact of, in total, SEK 7.7 million, of which SEK 6 million relates to the stronger U.S. dollar. Currency movements and conversion to Swedish SEK impact expenses, as you will see in later slides, but also through realized impact from in- and outgoing payments and from conversion of assets and liabilities in foreign currencies, to say. Let's move to the next slide.
The contribution from the segment North America improved with SEK 34.7 million and was reported to a regional contribution of SEK 52 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 73.2 million, compared with SEK 52.1 million previous year, of which sales commissions to distributors and fees amounted to SEK 4 million, compared with SEK 24.3 million the same period last year. The increase of SEK 1.4 million, excluding the sales commissions and fees, was driven by currency effects of SEK 1.3 million. The contribution was also charged by R&D costs related to clinical studies of SEK 0.5 million in the quarter, compared to SEK 1.7 million previous year, where previous years included SEK 1.3 million related to ongoing projects.
From the lower graph, showing net sales as bars and gross margin as the orange marker, it can be noted that the gross margin is remaining strong and reported to 95%. In Europe and rest of the world, a contribution of SEK 5.7 million was reported, to be compared with SEK 3 million previous year. The improved contribution relates to the increased sales after effect from increased costs. Sales and marketing expenses increased with SEK 6.5 million and was driven by field vacancies, increase in sales representatives, and high level of market activities to capture the momentum we now see in Europe, but also by currency effects of SEK 1.4 million. From the lower graph and the orange marker, you can see the gross margin remaining stable compared with the previous quarter this year, with a minor impact from product and market mix. Next slide, please.
Selling expenses increased with SEK 12.8 million versus last year, of which SEK 2.7 million relates to currency effects. In Europe, we have filled vacancies and increased our total European commercial organization to 31 people. The cost increase in the quarter relates to a ramp up in activity level at congresses, medical education, and of course, the continued launch program for CERAMENT G in the US. As presented at our Capital Markets Day in November last year, R&D initiatives are now accelerating due to the execution of strategic initiatives, such as future expansion into spinal fusion and a plan for marketing authorization submission for CERAMENT V in the US.
In the quarter, we had the FDA submission fee for the CERAMENT G trauma label extension and the cost for MDR CE certification for CERAMENT BVF and CERAMENT V, totaling a bit more than SEK 2.5 million. Underlying administration expense, excluding the effects from the long-term incentive programs, remaining on a stable level. The quarter included temporary impact in consultancy spend and provisions for short-term incentives, the latter following the strong business performance during the year. Next slide. The adjusted operating profit was reported to SEK 10.9 million, compared with a loss of SEK 10.1 million for the same period previous year. The SEK 21 million improvement following a strong sales performance and despite substantial negative impact from currencies with a net negative impact of SEK 11 million.
The difference between adjusted EBIT and reported EBIT operating loss are expense provisions regarding long-term incentive programs, amounting to an expense of SEK 18.9 million this year, compared with SEK 9.2 million previous year, as you could see on the previous slide. The reason behind this is the high this high expense is the acceleration in share price development during the period and how this affects the value on the long-term incentive programs. Of the total cost of SEK 18.9 million in the period, only SEK 1 million is cash flow impacting in the future. For the second consecutive quarter, a positive cash flow from operations was reported, despite the period involving a high build up in both semi-finished and finished products, ensuring full flexibility, the flexibility of products to future market needs. And with this, I hand back to Emil.
Thank you, Håkan. Let me then start with a short recap of the key messages from our Capital Markets Day in November, and also announce a change in timing for one of the communicated milestones. One of the key messages from the Capital Markets Day was the ambition to enter the spinal fusion segment with CERAMENT. We will be entering this segment in the future with a strong value proposition, matching an existing market need. One out of five spinal procedures actually fail to fuse due to insufficient bone remodeling, and in about 40% of the procedures, off-label antibiotics are used, yet in 2%-6% of the procedures an infection develops post-surgery. There's plenty of solid data confirming the strong bone remodeling capabilities of CERAMENT.
Most of it is in extremities, but there are also compelling evidence supporting these capabilities in spinal fusion. In autumn last year, a preclinical spinal fusion study was presented showing positive results for CERAMENT BVF. We have decided that there are sufficient strong data points for us to submit the application for the interbody fusion indication, while we continue to generate more data related to certain application techniques. Now, just as a reminder, the regulatory clearance in the U.S. for spinal posterior lateral fusion, called PLF, for our CERAMENT BVF, is already in place. The application that we are referring to here is the supplementary spinal interbody fusion procedure. The application is already completed, and the submission will take place during Q1 2024. This will, however, not change our timing for potential market entry, which is slotted at the earliest for the end of 2025.
As a second step, our ambition is to introduce antibiotic-eluting CERAMENT to the spinal fusion indication, but we will return on the future timing for this. Another highlight of our Capital Markets Day is that we will be submitting a marketing authorization for CERAMENT V in the U.S., and that will take place in the first quarter of 2025. We also gave a guidance where we emphasized that sales growth in 2024 will be above 40% in constant currency. So let me with that, go to the last page on this presentation and do a quick wrap up. Now, we are of course, pleased to present such a strong quarterly result that is more than confirming the high and strong traction that we see of CERAMENT in the market, reflecting how surgeons are experiencing improved patient outcome with this therapy.
We have today reported a top-line growth of 67% for quarter four, 2023. We reported on continued success of CERAMENT G in the U.S., regulatory filing for the extended label, and finally, the untapped incremental reimbursement in the ambulatory surgical centers under Medicare. That concludes our presentation, and let me then open up the floor for questions that you might have.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Mattias Wadsten from SEB. Please go ahead.
Hi, Mattias Wadsten from SEB. Thanks for taking my question. The first, I think we'll take them one by one. The first one, the decision to submit the application in Q1 now to FDA for BVF in spinal fusion, previous communication Q4. Could you talk a little bit more about this? And then I think I did hear it correctly, that it doesn't change market entry timing. That confuses me a bit. So yeah, that's the first question.
Thank you, Mattias. Yeah, we will start by that. So we have carefully reviewed the data that we have available on CERAMENT BVF. What we felt we were missing was a small animal study that articulated some of the parameters which we felt was required for such a submission. And during late autumn, the presentation of a rat study with CERAMENT BVF really gave us that additional information that we felt we needed, together with the, of course, extensive data that we already have in terms of bone remodeling.
Now, given that this is a fairly crowded segment, the spinal fusion, our strategy here is that we will submit the extensive data we have and then let the questions from FDA potentially guide us in what we should continue to reply to their questions or if we should generate any additional data. Timing-wise, that will be more or less the same as the original timing. The spinal fusion small animal study that came during autumn shows good results, both in the micro CT and in palpation of the Newton force for the spinal fusion. So we felt that we have a good package, and we would like to submit that to FDA to also initiate the dialogue.
So your question then is, well, if we do that six months earlier than planned, then why aren't we launching potentially earlier? Well, that's also because if, if this submission is accepted and approved and will lead to the interbody fusion, that's all fine. But we also feel that we will not go to market before we have extensive application technique data. So you could almost see it as the studies that have been built into our applications are very much on the mechanism of action and the bone building capabilities on a microbiology perspective. But it doesn't take away the fact that the clinicians deserve also to see how the product is applied in various different shapes and forms before we go to market with it.
So that's why we remain with the original timing, so we have enough time to collect the evidence that signifies when we go to market. We pride ourselves in having strong evidence, looking at the product from all different angles.
Thanks, for that answer. Then, I think, in the previous call, in conjunction with Q3, you highlighted the 82 system approvals, hospital system approvals, that at the time were around about 1,000 hospitals. One out of five bought at least one box of CERAMENT G. And I'm just wondering, what's the case here now in terms of, you know, number of hospitals and, and what share that, that bought at least one box? And then maybe to this question, if you could update, if there is anything new on Vizient and what, what that could, imply. That's the next one.
Yeah. Thank you, Mattias. Yeah, so, in the beginning of the launch of CERAMENT G, we disclosed the number of hospital systems where we had approval, but we felt that also led to quite a lot of conversations on how many hospitals are in the different systems and what is the penetration rate. And eventually, we felt that maybe that's not where we want to drive the absolute focus, but rather show and display what sales we have on CERAMENT G. The pace of getting hospital system approvals in quarter four was the same as in previous quarters. So the delta between quarter two and quarter three, you can apply that on quarter four if you want to. The pace remain unchanged.
The biggest difference rather is that the approvals have gone a bit better and a bit faster than we anticipated. So we have spent a fair bit of quarter four to bring on board those hospitals that have received approvals to work with the product from their central organization. So we have been very active in the market, and in quarter four, we had actually a record high recruitment of new surgeons and new clinics starting to use not only CERAMENT G, but also CERAMENT BVF. So the quarter has been very much focused on training, education, application techniques. You also asked Vizient, what about Vizient? No news on Vizient, ongoing discussions.
But as we have discussed a couple of times, several of the big hospitals under Vizient are very determined to use the most updated and modern therapies, and they will do that regardless of what the somewhat weaker central organization might think about that.
I appreciate that and the good answer. Then, my next one actually relates to EMEA, which looks to accelerate growth in the fourth quarter compared to what we've seen earlier in the year. So the market, I guess, you know, it's improving a bit, but it looks like you get some leverage on the extra sales that you've put out facing customers. So if you could give some flavor here, you know, how we should look at it, because, yeah, it looks strong in EMEA, I must say.
No, I agree, absolutely. It is a very strong result, and it's easy maybe to lose track of percentage point back and forth when the business is growing with almost 40%, but at that growth rate, we're definitely taking strong market shares on more or less all markets. But the dynamics have improved, Mattias. We see that Europe specifically was slow in getting extra staff in and stretching also their surgical theater hours. And I think we should expect that the market dynamics in Europe will continue to be favorable. I mean, there will be quarters up, and there will be quarters down, and we've seen that they're also more prone to disruption when surgeons go on strike. But governments have noticed the large surgical backlog and are putting a higher focus on it.
We are definitely on top of that wave with a positive market dynamic also going into 2024.
Good. I think I will jump back in the queue. Thank you.
Thank you, Mattias.
The next question comes from Erik Cassel, from Danske Bank. Please go ahead.
Hey, good morning, Emil and Håkan, and good afternoon to everyone else. First, I just want to touch upon the profitability issues that the market seems to be seeing. I mean, you touched upon the NRIs several times, but when I sort of try to do the math on that, I get a clean EBIT of nearly SEK 26 million when sort of looking at underlying profitability, adjusting for NRIs, incentive costs, and FX. I mean, is that the sort of ballpark figure correct for where you see underlying earnings as well, or has something more structurally changed?
I'm glad how you phrased the question, Erik, because it also shows that you've been able to capture the... all the disclosures that we have in the report. We're trying to indicate on how, okay, how is the underlying business going, and what is the end impact of those external factors? So I can only say, Erik, that you're in the right ballpark.
Okay, perfect. Then I have a question on the sort of mix of the growth as of now. You've been on market now for quite some time. I mean, is it possible to now give some sort of flavor on how much is coming from more use of, you know, the early adopters using it for more cases versus still, you know, mostly new surgeons trying out the product?
Yes, absolutely. And you, I assume you refer them to CERAMENT G in the U.S.
Yes, exactly.
Yes. Yeah, so the dynamic here is quite interesting. What we have referred to in earlier quarterly calls is this go, stop, go. We clearly see that. So we have had a lot of surgeons starting to use the product in quarter three and quarter four. But we also have a few surgeons where the hospital administration has said, "Okay, we need to look further into this product," as it has both a bit of a price difference versus the standard of care, but it is a new technology and they're figuring out how to build it, how to deal with it administratively....
The surgeons that have used the product, and if we trace it back now to quarter one, we can very positively say that they are seeing the results that have been shown in clinical studies, and this is very rewarding. Right now, we are at one of the biggest orthopedic conventions in the world and in the U.S., and we have sessions where surgeons can come forward and present case studies. Those that have done it in a structured way, they see that their patient outcome mirrors what has been done in the big clinical studies. This, of course, leads to an increased use among those surgeons also and more ambassadorship, where they talk to other surgeons that still haven't discovered CERAMENT G.
We should remember that we're still in the very early phase of this launch. So if you look at sales in the quarter, a clear majority of that sales is coming from customers that came on board during the year because they have much bigger volume use. And then there are quite a few also new surgeons, actually a record amount of new surgeons, but they are using it maybe in one week, and then they wait three weeks before they use it the next time. Also, in terms of evaluating with the operating staff, how did it go? Was it a desired results? And did also the patient in the first checkup perform as anticipated.
We must always remember ourselves that introducing these breakthrough devices in orthopedics, unless it's a generic, which is absolutely not, it takes time, and it's a long journey.
All right. Thank you very much, Emil. I think I'll limit myself to just one more. I was just a bit curious on what more can be said about the cannibalization of BVF in the U.S., and sort of how you expect that to trend, because previously, you sort of expected to be as in Europe. I'm just wondering if you see any sort of change to that statement.
No change in statement, really. There will be cannibalization on, on, CERAMENT BVF, and I think, mid, long term, the ratio between CERAMENT G and CERAMENT BVF is gonna be the same as in Europe, but not because CERAMENT BVF will decline, but due to the exceptional growth rate in CERAMENT G. That ratio will eventually be reached also there.
Perfect. Perfect. Thank you very much, guys.
Thank you, Rick.
The next question comes from Sten Gustafsson, from ABG Sundal Collier. Please go ahead.
Thank you. Good morning, good afternoon, everyone. Just to follow up on the previous question regarding FX impact on non-recurring items. In the other operating income and expenses, is it fair to assume that all of that is related to revaluation effects, which are non-cash, or at least a minority?
Yeah. Thank you, Sten. So, on that line, a vast majority, with the exception of a few hundred thousand, everything relates to either realized FX impacts from in and outgoing payments or the conversion of assets and liabilities to Swedish SEK.
All right. Yep, that's good. Thanks for that. When it comes to the overall OpEx spending in 2024, how should we think about R&D costs? I mean, you mentioned there were some fees to FDA and MDR in Q4, but we also perhaps should expect that there will be some additional clinical trials coming, et cetera. So how do you see the R&D line develop throughout the year?
Well, thank you, Sten. And again, I think that the way to think here is that, of course, all the ambitions expressed at the Capital Markets Day in November will also mean an impact in R&D spend going forward. The animal studies that we need to do to support the submissions we have in the plan, et cetera, will mean that the existing run rate will move up during the year. So I think that what we see in the fourth quarter with the step up that we see in the expense level, et cetera, that can be expected also to continue going into 2024.
Thank you very much for that. And regarding the sales commission level, it seems like it's coming down a bit in percentage of sales, at least compared to my estimates, but is the level right now a good proxy for the year, or are there any sort of one-offs in there that we should be mindful about?
I know, I think that the latest quarter, it's only minor movements in the total percentage. And again, just to remind you, Sten, and everyone else, that the commission and fees is not only the sales commission, it's the sales commission, freight cost, GPO fees and a few other sales-related charges. We believe that it's a good indication of the level we can expect also going forward.
Okay, excellent. My final question relates to the TPT approval you got there. Will this approval have any impact on pricing? How do you see pricing on CERAMENT G in general for 2024?
So the TPT will not have any effect on our pricing. We're not making any changes to the pricing. We believe the value proposition is well balanced and well accepted, so we don't see any need for it. If anything, possibly in the future, there might be price increases. But
Okay
... not as we have in the near term.
Well, that's good to know. Excellent. Thank you very much, and congratulations on another good, strong quarter.
Thank you, sir.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
So back to us here, then. We have two written questions that I would like to address. We have one from Kristofer Liljeberg at Carnegie, where he says, "Can you explain the drivers for the sequentially higher selling expenses in quarter four, and what the number of hospital approvals was in the quarter?" So I already commented on the hospital approval. It is almost a completely straight line in terms of hospital approvals, mirroring what we've seen in quarter two and quarter three. And Håkan, would you like to comment on the sequentially higher selling expenses?
Yes, I can. So again, my first, I think that to keep in mind is that from seasonality point of view, we have Q2 and Q4. That is, all is more active in terms of market activities, congresses, et cetera. So there is a certain sense of that seasonality, which means that Q4 is coming in higher than, in this case, sequentially to Q3. And then in this year, we also have the effects that is impacting and accelerating that pattern even more.
Very good. Then we have one question from Dr. Maximilian Köhn. It says, "First of all, really good top-line performance in the fourth quarter. Can you give us some hints regarding the current momentum into next quarter, and in contrast, your guidance of more than 40% growth? Thank you." So as I mentioned, the momentum in Europe and the market dynamics is very strong. We have seen during 2023 an increased capacity in the U.S. hospital systems, which has led to strong momentum in knee and hip surgeries, and also a bit more in foot and ankle, where we are more represented. It's difficult to say how long the strong momentum in the U.S. will continue.
It started before Europe, and I really couldn't have a good view on it. But in terms of Europe, we do expect that the catch-up of the backlog will continue. Now, all that said, in terms of market dynamics, it seems almost regardless of market dynamic, if we look at the key markets where we are present, we are growing at a factor of significantly higher than what the market is doing. So we are obviously taking market share on every single one of the different markets that we are on, and probably that's where we are focusing. But we can also enjoy, of course, that all those patients that have not had the elective surgery is finally now getting good care. So those were the questions we had.
Thanks, everyone, for calling in this early morning in San Francisco and afternoon.
There is another question on the phone line. One moment.
Great, we have one more question. That's great. We will give room for that.
The next question comes from Mattias Wadsten from SEB. Please go ahead.
Yeah, sorry, maybe one or two more. In terms of the one-off cost, if you could take, you know, the investment to increase manufacturing capacity was mentioned, fees for MDR certification and the FDA filing. So if we could just take those one by one and how much they were in the quarter.
Sure. And again, so, we, as we have presented also in the quarterly report, the actual expenses that relates to MDR and the submission is SEK 1.7 million. Those are... SEK 1.7 million related to the extended submission. SEK 1.3 million relates to MDR certification, and the minor, you could say, investment in increasing production capacity is SEK 1.2 million.
That's clear. Thank you very much.
Yeah. So some of these costs, you know, are mandatory fees when you send in the submission. The production capacity increase is simply because we believe that our sales growth is very strong and will continue very strong. So we're making some modifications to accommodate that. So these are costs that will occur at some quarters, but each of them are carefully measured against preparing us for the future.
Thanks.
Thank you, Mattias. Well, that's all, folks. Now, Håkan and I are off for the first morning coffee, and we wish you all a good time until we speak again. Thank you for taking the time to listen to us, and please keep following our exciting journey. Bye-bye.