Ladies and gentlemen, welcome to the BONESUPPORT Quarter for 2018 report. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present CEO, Emil Billbäck, and CFO, Håkan Johansson. Please begin your meeting.
Thank you, operator. Welcome, everyone, to BONESUPPORT's Quarter for 2018 result call. I'm Emil Billbäck, the CEO of BONESUPPORT, and sitting next to me today is Håkan Johansson, our CFO, who joined BONESUPPORT in mid-November of 2018. This morning, we will take around 15 minutes to run through the presentation of quarter four results before finishing with a Q&A session. Next slide, please. Before starting the presentation, we'd like to draw your attention to the disclaimers covering the forward-looking statements that we will make today. Next slide, please. I would like to begin this presentation by quickly recapping on the transformational changes that took place in 2018 to drive an accelerated market penetration for CERAMENT.
We established a new foundation, a new vision, and a roadmap for the company by developing a clear strategy that clarifies the priorities and the journey ahead. We made the important decision to change our distribution setup in the U.S. with the objective of reaching a much greater opportunity, and also replacing a partner with quite some internal challenges and internal focus with a highly motivated and hungry set of distributors. These distributors address the entire market potential for CERAMENT. On the strength of industry-leading clinical evidence and strong customer conversion, we brought a proposal to the board to close to double the European sales force under 2018. At the Capital Markets Day in September, I showed that there are selected areas and metropolitan regions in Europe where we have good penetration, but also other areas where we have great untapped potential.
We have established a strong innovation pipeline, which will allow us to launch a steady stream of new products over the next several years. Finally, we've staffed our management team with very capable individuals. We have now a strong leadership team in place to execute on our strategy. I feel that over the last couple of quarters, we have undertaken several important strategic initiatives, which have greatly improved our ability to accelerate market penetration of our products, both in the U.S. and in the EU. With this short introduction, I would like to talk about the quarter four numbers briefly and our strategic progress also more in detail. Next slide, please. Returning to the quarter four results, the most notable event in the quarter was, of course, the release of the top-line data from the CERTiFy study, showing that CERAMENT BVF is as good as autograft.
An autograft, of course, is the procedure when bone is transplanted from the patient's own hip when proper bone healing does not occur by itself. October 23rd was the starting date for our new distribution network in the U.S. We have been in intense preparation for this since we terminated the contract with Zimmer Biomet in May 2018. Overall, quarter four sales was at SEK 23 million. This is a decline of 15% versus previous year for the quarter, the key reason for this is, of course, the limited sales that we had in the U.S. while building up and ramping up the new distribution structure. In the segment, Europe and rest of the world, sales increased continuously to be very strong, with 31% reaching SEK 19 million.
The strong growth is driven by broader and more frequent use of CERAMENT, mainly among existing customer base and also the success of our antibiotic-eluting product, which grew by 45% in the quarter. In quarter four, we announced that we have hired Annelie Aava Vikner as new Executive Vice President of marketing and communication. She's a very seasoned executive with several years of experience in senior management positions, most recently from Medtronic, she will start with BONESUPPORT on March 1st. Next slide, please. I would now like to provide you with more details on our quarterly sales development. This slide shows sales in the last 12 months, with the dark blue part of the bar representing Europe and rest of the world, and the light blue part of the bar is displaying sales in the U.S.
We can see the effect on sales development when Zimmer Biomet started to have internal challenges and could not keep up with the market demand for CERAMENT. We also see the effect of Zimmer Biomet canceling their orders after BONESUPPORT terminated the agreement in May of last year. We will continuously update this slide and share with you. We have marked the sales that we have in the U.S. under the new distribution in a contrast color, and you can see it on the slide as the purple or lila part of the bar. The chart also confirms the steady growth that we experience in Europe and rest of the world. We finished the year with a strong beat rate.
If we compare only quarter-by-quarter, quarter three of last year grew with 29%, and quarter four grew with 31%. As you know, the growth in the first six months was 14%. This shows a strong beat rate, and it gives us also a good indication on the momentum that we have going into 2019. Next slide, please. In Europe and rest of the world, we saw the improved sales growth momentum from quarter three continuing into quarter four, with a growth of 31% versus the previous year. The quarter four sales increase in Europe alone was 27%, and as I mentioned, the antibiotic-eluting product grew with 45%. We believe this is a strong testifying to the strong customer acceptance of these products and the large unmet need.
We're seeing the first results of our increased focus on trauma, as well as good growth within our core indication of osteomyelitis. We believe that we can grow even stronger in Europe, and during second half of 2018, we recruited 11 of the 13 sales representatives that we announced that we would hire to cover metropolitan areas and regions across Europe, where our CERAMENT product generated limited to no sales. A key focus for this sales force expansion has been Germany. The direct markets, meaning the markets where we have our own sales force, grew significantly faster than the markets that are serviced by distributors. In the quarter, we recruited a very skilled and experienced sales executive in Denmark, and we have decided to service this market on a direct basis. This puts us in closer and direct interactions with the Danish customers. Next slide, please.
We're pleased to report that already on October 23rd, which was the starting date for our distribution setup, we took the first order from a hospital that was going to have a procedure done with CERAMENT. Pleasingly, all the systems worked. Sales in the quarter was more or less in line with our expectations. 2019 has gotten off to a very good start. At the end of the year, we had 38 distributors, which together deploy more than 500 sales reps. At the end of quarter three and during quarter four, we have invested significant efforts in getting the distributor reps trained on CERAMENT BVF. We have also shared with them how we would like CERAMENT to be positioned with its benefits against current treatment options for different indications.
The physical training has been focused on how to instruct orthopedic surgeons on how to use the product, as well as on the extensive clinical evidence that is available for CERAMENT. The physical training has been followed up with a series of online modules as well as exams to validate that the knowledge has translated well. Our own commercial team in the U.S. is working on marketing and promotion tool, as well as market access, to secure that CERAMENT gets listed in all the right hospitals. This team has successfully secured our first big wins with HCA Healthcare and Spartan Medical. The HCA Healthcare's contract gave us access to more than 1,800 care sites, where CERAMENT, when it was managed under Zimmer Biomet, only had limited access. Next slide, please.
One of the absolute highlights in quarter four was the release of the top-line results from the CERTiFy study. The study ran from 2013 and had the last patient included at the end of 2017, with a final follow-up in mid-2018. The results have been much awaited, as the medical caretakers have long sought for a suitable alternative to autograft. CERTiFy is the first-ever randomized level one clinical trial comparing a synthetic bone graft substitute with autograft in tibial plateau fracture patients. Autograft is widely seen as the golden standard of care for this indication, particularly in the major European markets. In an autograft procedure, bone is taken usually from the patient's pelvic bone to fill the bone void.
Now, this requires an additional surgical procedures. Earlier research has shown that up to 39% of the patients experience long-lasting pain from the harvest site. The results from the study shows that CERAMENT BVF is as good as autograft. This enables us to start a transformation on the standard of care and for BONESUPPORT to actively target around 160,000 procedures that are done each year in the top European five countries with autograft. With that brief update, I will now hand over to Håkan, who will cover the financial overview.
Thank you, Emil. Next slide, please. Please go to slide number 10. The net sales drop of 50% in the quarter should be valued in the perspective of the transition to a new distribution structure in the U.S., with sales start on October 23rd. The Europe and rest of world segment reports continued strong growth and increased 31% compared with the corresponding period last year. Net sales for the full year amounted to SEK 96.6 million, compared to SEK 129 million last year, a decrease of 25%. The segment, Europe and rest of world, increased with 22%, and net sales in the segment North America decreased with 56%.
The return of U.S. sales, as you can see somehow in, in previous presenting graphs, makes Q3 2018, a clear turning point in the execution of BONESUPPORT's commercial strategy, with sales and marketing investments in both the U.S. and in European direct markets. Next slide, please. BONESUPPORT has built up a new distribution structure, which is active since October 2018. This new distribution structure enables a better geographical reach to the target group for CERAMENT BVF. At the end of the year, BONESUPPORT had its own commercial organization in the U.S.A., with 21 employees and 38 contracted distributors, with a total of more than 500 sales reps. The low sales for the period should be viewed against the ongoing development phase, with training for distributors, sales reps, and conversion of customer contracts.
There have been no sales to Zimmer Biomet reported during the period. The negative contribution, as you can see in the table above, was mainly due to the significantly lower sales, combined with increased costs for strengthening the organization in connection with the new distribution structure. Next slide, please. For Europe and rest of world, net sales for the segment increased by 31%, compared with the fourth quarter of 2017, and amounted to SEK 18.9 million, compared with SEK 14.5 million. The increase in Europe was 27%, and sales from the five European countries with direct sales accounted for 84% of the segment's sales, driven by increased use of CERAMENT G and CERAMENT V, our antibiotic-eluting products, which together increased by 45% in the quarter.
Net sales for the full year increased by 22% compared to 2017, and amounted to SEK 62.5 million, compared with SEK 51.2 million in 2017. The increase in Europe was 27%, with a growth of antibiotic-eluting products of 33%. The contribution dropped to SEK -9.7 million, compared to SEK 7.6 million last year. The negative trend is mainly due to implemented investments in the sales organization, which are burdened in the short term despite positive sales development. Next slide, please. Growth in the fourth quarter of antibiotic-eluting products, together with a gradual return of U.S. sales, gave a favorable product and market mix in the period, which you can see on the gross margin above on the table.
Q3, after the correction of error communicated previously this year, with no U.S. sales, represents a less favorable period in terms of the market mix. Cost control measures are implemented with a plan to ensure focus and allocation move to commercial acceleration, more details around that will follow on the next slide. BONESUPPORT remains funded to realize our commercial strategy and to reach profitability and positive cash flow. Next slide, please. Total expenses in the last quarter is up with SEK 10 million compared with the same period last year. Selling expenses and commercial investments are up with SEK 17 million. This clearly shows where we have the focus and where we have the investments made. Administrative expenses are low in the latest quarter.
That's mainly due to lower cost for stock option programs in the fourth quarter, 2018, but also due to general cost savings, such as lower spend on consultants. Volatility in previous quarters mainly relates to stock option programs and non-reoccurring costs relating to settlements with previous senior managements. With that, I ask you to turn to slide 15, and I'll hand back to Emil. Thank you.
Thank you, Håkan. I will go to the next slide. I hope that you agree with me that the BONESUPPORT has an exciting journey ahead of us, and also a very exciting year ahead of us. 2018 was very much a transition year, where we made several strategic decisions to enable a stronger and accelerated market penetration. The changes implemented in 2018 have, above all, been done to drive commercial discipline and commercial decisiveness. We have now a commercial platform in the U.S. that is able to pursue the full potential of CERAMENT. In Europe, we are confident that our expanded sales organization can continue to grow the sales of our antibiotic-eluting product by a combination of better geographic reach and increased penetration of important indications markets, such as trauma.
With the arrival of the CERTiFy data showing that CERAMENT is as good as autograft, we believe that we have the key to transform the treatment standard for the 160,000 procedures per year in Europe, where autograft is used. Our expanded European sales team will play a key role on this mission. CERAMENT's work mechanism, remodeling to host bone, the antibiotic-eluting properties, and the clinical benefits are all well documented with more than 130 peer-reviewed publication. In the first half of 2019, we will supplement the documentation of clinical benefits with data showing the health economic benefits. Traditionally, treating bone infections has required multiple procedures and hospital visits. We have previously shown in a British study made on 100 patients, that with CERAMENT G, a chronic bone infection was eradicated on 96% of the patients with a single-stage treatment.
During 2019, we will show what benefits like these can bring in terms of reduced cost for the healthcare system. I believe that we are very well positioned to have a strong 2019, and beyond that, we have high confidence in our corporate target of an annual growth of 40%. As Håkan mentioned, we are well-funded to reach profitability, and I'm confident that we can deliver significant shareholder value on the journey ahead. Next slide, please. This only shows you the calendar of value-generating milestones, many of which I have mentioned in this presentation. You can see when you have news to look out for BONESUPPORT. With that, we conclude our presentation and would like to open the call for questions.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Again, if you wish to ask a question, please press zero one on your telephone keypad now. Your first question is from Kristofer Liljeberg . Your line is now open. Please go ahead.
Yeah. Hi, good morning. Two topics I would like to discuss, first U.S. and then Europe. When it comes to Europe first, could you describe a little bit the importance of having the GPO contracts and what the possibility is to approach customers before you have signed that? In the case of previously with Zimmer, they have access to more or less all hospitals that they have as customers with your product. Also when it comes to the U.S., if you could comment if you believe Zimmer still have some inventories that could continue to hurt sales.
Here in the fourth quarter, of course, it's still very early days, but could you describe a little bit if the sales you had came from a few of the distributors or if it was more broad-based? The second topic of Europe, if you could maybe describe how soon you think the new sales reps you have hired now in the last two quarters will start contributing to sales. Also, of course, important to CERTiFy study, whether this is something you think benefits sales already and how you could use that before the publication, and maybe if you could share when you expect to publish in a scientific journal. Thank you.
All right. Thank you very much, Kristofer. We will, we'll do our best to. There were quite a few baked in here. I hope we took notes, otherwise, you just have to remind us and we'll come back. There are several physicians that more or less demand to get access to this product. If you do not have GPO contracts, you would basically eventually be shut out from about 50% of the market. You need to get on the GPO contract. What I can tell by what has happened so far from us starting to sell in October 23rd, is, our progress on the GPO contract and the progress on the, veteran and, sorry, Veterans Affairs contract has been a bit better than I expected.
Our market access has worked slightly better than I anticipated. That is a very positive note, and that gives us also strong optimism for 2019.
Sorry, did you mean that you were able to sign those contracts earlier, or that the uptake in sales after having signed them were better than you expected?
The sales comes only two, three months after you have signed the contract, so we haven't seen any sales as a result of the contracts we have signed. We have disclosed two of the signings in this report, Spartan Medical and HCA. What has impressed me is that the product, because it was considered that CERAMENT is such a novel technology, so it has been supplemented to an existing contract, and that has been more positive than we expected.
On this topic, just to make sure we get it right, is it fair then to assume that, you know, having GPO contracts is not or you will it won't stop you to approach those customers, it won't stop to deliver on your sales forecast now in the next few quarters, but over time, you of course, need them, because otherwise you won't be able to eventually sell to those customers. Is that the way to see?
You have understood it perfectly correct, yes.
Okay, great.
There was a question on Zimmer access, which I'm not sure I fully understood. Zimmer might have been, let's say, on a broad basis with most of the GPO contracts, but with different parts of their portfolios, and they had many different sales forces. While they had a good representation, our estimate was that of our relevant target group, Zimmer Biomet only had access to and promoted the product to about 1/3 of the U.S. market. The third question was regarding inventory. Do we expect that Zimmer have inventory still of CERAMENT? Closely impossible to give a verdict on, as we don't have that insight. We have seen with during quarter four, quite a few customers that have had plenty of products on their shelves.
I'll be very surprised if this situation can continue because we haven't delivered any product to CERAMENT after June time frame. Eventually, there will be a end of Zimmer Biomet's inventory, and of course, that's why we also feel positive that having seen some early success in the U.S., where there is still inventory out, we believe that when that inventory is depleted, we will have a strong uptake in sales. Your final question on the U.S. was regarding the distributors. If the sales we saw was with a handful of distributor or broad across the base. The work that was done in quarter four was to train and educate all the sales representatives of the distributor.
The customers that place orders are very loyal, long-term customers of CERAMENT that were very pleased to buy the product from us and take part of the service that we contributed. We should not make too many conclusions of the sales we have seen in quarter four. I'd prefer to come back in later reports exactly how the distribution concentration will look like. When it comes to Europe, good question regarding the sales representative. When can we expect to see results from them? We have hired 11 out of the 13. They have undergone rigorous training at the head office as well as out in the field. They have started to meet customers. The impact on sales in quarter four was negligible.
We should start to see some first impact on sales in quarter one, and I was asked at a preview conference call how much impact an orthopedic salesperson have, and I shared that in the first 12 months, the impact lies somewhere between EUR 70,000 and EUR 120,000. That's, you know, we have a great technology. We expect to be somewhere in the middle of that range. The final question was on CERTiFy, and indeed, Kristofer, the salespeople are already out with the top-line results because once we release this, it's quite a breakthrough result that has been accomplished. Many of the 20 trauma centers that were part of the study are very well reputed in Germany.
Of course, this is sending waves across the market that finally there is an alternative to the autograft that has proven equivalent in efficacy. We are basically done with the manuscript. We have chosen, based on the very strong results, to submit this to a highly ranked medical journal, and unfortunately, it's in their hands. We hope that the publication will not take too long, but we cannot predict exactly what date it will come.
Great. Thank you.
Thank you, Kristofer.
Thank you. Your next question comes from Hank Gregory. Your line is now open. Please go ahead.
Thank you. Good morning, gentlemen. Obviously, the U.S. is an important question. What I would like to ask is: how is the messaging going there? You've got an additional two months of this year going through the messaging, in particular, amongst your target surgeon groups, and what do you expect to come from that? I also have another question. It's to do with the CERTiFy study. To us, obviously, it's clear, excellent news, but I notice that in the text, on five separate occasions, you use the word adequate alternative. Is this your Swedish conservatism or something being lost in translation, or is it really only just adequate? Should it surely be equivalent or similar to?
Thank you for the question. The messaging, if we look at the U.S. market, is, of course, here's a synthetic bone graft substitute that is the best documented product in the market, with industry-leading evidence regarding the benefits. That is the positioning that Zimmer Biomet had with the product, and that's the same messages that we are now continuing. The only difference is that we are closer to the market, and we are in direct contact with the customers. When it comes to CERTiFy, we will have to do a correction there. It's, as you say, a probably poor Swedish translation. The CERAMENT BVF has proven to be as good as autograft. It's a strong alternative to autograft.
We have looked at the efficacy parameter and shown that CERAMENT is indeed making the healing as good as using your own bone tissue, but you can avoid to have the second procedure done, which it means that when you have to harvest bone from the patient's own hip. We know that this is taking more surgery time. We know that this also, every procedure will increase the risk of infections. So I would like hereby to officially, correct that and say, it's a strong alternative.
Excellent. I'm relieved to hear that. Thank you very much, Emil.
Thank you.
Thank you. Your next question comes from Alice Nettleton. Your line is now open. Please go ahead.
Yeah, it's great that you're starting to sell in the U.S. with your own distribution network, so good. I was just picking up on Kristofer's question about whether you could split the U.S. sales a bit more. I was just wondering if only previous customers have bought so far, or if you have had some additional new customers that weren't from the Zimmer relationship.
Yeah, thank you for that question. A good question, and that is also something that I have been almost in daily contact with our U.S. team to find out, and I'm pleased to report that we have indeed, orders from customers that are well-established and have used CERAMENT in the past, but we have also, a good book of new customers that have not used CERAMENT before. This is especially pleasing because one of the reasons to build up our new distribution network was to reach the entire market, where Zimmer Biomet only promoted CERAMENT to one-third of the market. We will see in later quarterly reports if we will also share more details on the customer base, I can confirm that we see orders both from new customers and from legacy customers.
Okay, you won't provide further detail on any patterns you might be seeing in terms of...
It would be I can say so much that very pleasing to see that we're picking up orders in states where before we had very little penetration and in several metropolitan areas, but it would be too early also to make, you know, big conclusions on just a few weeks of sales. We started October 23rd, then there was Christmas, there's Thanksgiving, there's holidays. I think we'll come back to that in later quarters.
Okay, thank you. I have another question about CERAMENT V and G in Europe. Obviously, this is quite an important, an important growth that you're seeing, and I was wondering whether you could provide any further details on what you think is driving that growth in Europe?
Absolutely. In Europe, we see very strong traction and momentum now of the antibiotic-eluting products. They represent a truly unique benefit for the orthopedic surgeon and the patient. What I think we're starting to see now is all the clinical evidence highlighting the benefits of these products are now starting to have impact. Since mid-year last year, we have firmed up our commercial discipline, and we have also increased our presence at medical conferences. We start to see that the customers that have tried the CERAMENT products with antibiotics, they are using it now more broadly at more indications and in more procedures. The sales growth we see is mainly with existing customers that are using it even more frequently.
That gives me also good optimism for 2019, when the new sales reps will start to generate new customers to come on top of that.
Okay. Are you doing well in trauma?
We started trauma as a major initiative last year, I would say we're doing really good inroads. What is encouraging is that the CERTiFy study is specifically made on trauma patients, this, of course, helps us to enter this segment.
Okay. Thank you very much, Emil.
Thank you. Your next question comes from Niklas Elmhammer . Your line is now open. Please go ahead.
Yes. Hello. Good morning. Thank you for taking my questions. I was wondering regarding the U.S. commercial organization, I think you mentioned that 300 sales reps have been trained, but you now have 500 contacted thus, when do you expect all 500 to complete training? I was wondering about gross margins in North America. I recognize it's a short period with low sales level, but I was wondering if the margin of some 88%, is that something that we should expect going forward? Regarding OpEx, you mentioned that you have a program to strengthen co-cost control. If you could elaborate a little bit on that, please.
Thank you, Niklas. Good questions. We have in a short period of time, trained 300 sales representatives in the U.S. We have a training manager, a very skilled person that we have recruited during last year, who will continue the training efforts all year. So this is a continuous effort. She will be constantly out visiting the distributor sales reps as well as customers, and I expect that coming mid-2019, we will have trained all the 500 sales reps, but not only one time, probably multiple times. We meet them at congresses, and we have also constant communication over email, where we collect questions from them when they encounter from discussions with physicians that we then redistribute. We constantly also send out new data, new clinical studies when they arrive.
It's an ongoing process in making sure we have the most skilled sales representatives in the U.S. The gross margin in quarter four was 88%. It's not fully representative of what we expect going forward, but is very much colored by initial orders and getting on certain contracts. What I have mentioned in previous calls is what we reiterate, that the gross margin is estimated to be above 90% in the U.S. Your final question was on cost control. Yeah, this is prudent, I think. I think every organization should have a certain section of cost control. For us, it's more to make sure that the investments we do really pay tribute and is in line with our executing our strategy.
I have mentioned many times that I believe we can be more forceful and more decisive on the commercial side. We're making sure that we're spending less on consultants and that we're spending more on bringing our product in front of surgeons. I find it to be a very sound decision.
Would you expect certain items to be sort of administrative costs to come down or what sort of line, what items will be affected with it?
I think the way to look at this, Niklas, is looking at our total cost base. Going forward, we will continue to invest in the commercial side, but we will not have the kind of cost increases that we have seen in the past years. There will be a gradual shift, of course, and yes, a part of that will come from administration. Also within the line sales and marketing, we are realigning where we're putting the investment to make sure we have people in front of customers to present the product.
In total, Niklas, if you look at the total cost base, we are making sure that it doesn't have as steep increase as in previous year, while yet allowing us to invest in clinical studies, product development, and a decisive commercial organization.
Okay, great. Thank you. Follow-up on, if I may. I missed sort of the timeline milestones at the end of the presentation. Regarding FORTIFY, do you expect to complete enrollment this year still?
Yes. What we have communicated at the onset of FORTIFY is that recruitment will be completed in 2019. Nothing has changed in that aspect.
Okay, I'll certainly end that. Thank you.
Thank you, Niklas.
Thank you. Your next question comes from Lalla Gregory. Your line is now open. Please go ahead.
Good morning, gentlemen. Obviously, CERTiFy the full data is a big thing for this year. You've also had a couple of presentations in major journals, a couple of publications. You mentioned the health economics data. I'm presuming that's from the Nuffield study. Would you be able to give a timeline when that might be revealed? Also, if there's anything else major that we can expect in terms of publications this year? That's my first question. My second question, I noticed in the conversations about Europe and Q&A and also in your presentation, that Germany will be quite a big point of focus. There have been hires there, also the comments that you put in place about certifying the German trauma centers.
I was interested in how you might see that particular market expanding and what sort of contribution you're expecting from there in the context of your European growth. Finally, more generally about Europe, we're coming up to a year before the European Medical Devices Directive becomes implemented. I think it's May next year. Would you be able to comment on how you might see any changes to the competitive landscape and how you're positioned with respect to that?
Thank you, Lalla. As always, very good questions. Thank you. I have to admit that previously, I've probably been a bit too optimistic when it comes to when journals will publish our results. We have been good at writing up the manuscript, but there's a lot of papers fighting for attention with the big magazines, so I cannot give a time. I would refrain from giving a time because last time I did that, I had to change it, actually. What I can say is that with both CERTiFy and the health economic data, which we also believe we will publish, we are targeting based on the merit of these researches, we are targeting the top magazines in the industry.
That makes a lot of sense.
We have very, very good results to present, and I will do my best to negotiate with these magazines to get a timely publication. Germany is the biggest market for bone graft substitute. Potential in Europe. In Germany, I would say that about 35% of the procedures are still using autograft. It's a very data-driven market. It's a very conservative market from aspect of therapy tradition, and a very strict market in requiring evidence to make a change. This was in the consideration for doing the CERTiFy study, to be able to start converting the German market. The German market is our top priority in Europe. I cannot give you numbers because we don't release numbers specifically for countries.
Mm-hmm.
We'll see if we will might reconsider that later during the year, but at this point, we will only provide numbers on a European basis. The final question was on the Medical Device Regulation, which is replacing the Medical Device Directive. What do I think will happen? The Medical Device Regulation, above all, is forcing all producers of medical devices to make sure that there are clinical evidence to support the claims of the product. I welcome this. I believe this is needed to make sure that surgeons, patients, healthcare providers, and government can really trust in the product they are using and that the product is doing what it's intended to do. How will this influence the market? I think you can be sure that BONESUPPORT has one of the best-...
documented products, this will not be any issue for us, but for some of our potential competitors, small scale, that haven't done the same kind of homework, I think it will be a little bit tougher.
Thank you very much. That's really, really informative, and wishing you all the best for a good Q1.
Thank you, Lalla.
Thank you. Next up, we have a follow-up question from Kristofer Liljeberg. Your line is now open. Please go ahead.
Yes, thank you. Going back to the previous question on U.S. sales. Of course, there's a lot of previous users of CERAMENT in the U.S. that hasn't bought from you in the quarter. In your view, have they changed to something else from Zimmer, for example, that they are very loyal to them? Could it also be so that they have, or that they are sitting at some inventory that they are currently using?
Yeah.
If you have a view on that, would be helpful.
Yeah. That's a very good question, and I will definitely have a view on that because that's something that I've asked myself, and I've asked the team. We have no indication that the physicians that have used CERAMENT have switched to something else. The reason that not more customer have placed order is because they have already had service from the previous distributor named Zimmer Biomet.
Do you have a view how much inventory they could still have?
I can just say that we still in 2019, we're off to a very good start, sales-wise, in the U.S., but we still find pockets of inventory, and I can only speculate when that will be completely emptied, but that will definitely happen.
Okay. Is it possible to characterize how much of the previous U.S. sales were coming from those type of loyal customers? Because if that's a clear majority, I guess as soon as they have used the inventory, they will get back to you, and you will see a pretty dramatic pick up, given that you now also recognize a higher share of sales as revenue.
Yeah. I think this is a $1 million question or probably a $1 billion question. I have done similar moves in my past history, both on the European continent and in the U.S. When you leave a distributor, a big orthopedic company like Zimmer Biomet, of course, you lose a few customers. You should take my comment as the key users that we have all these years had a very close relationship with, they stay very loyal to Cerament. Zimmer Biomet have a product which in certain aspect, could compete for some indications, and I would be positive that they would try to promote that product for those specific individuals and cases.
How much business we will lose and how much business we will gain from new territories and new states where Zimmer Biomet didn't promote us, I cannot give any numbers. You're absolutely right on the dynamics, but I cannot give any verdict on it, unfortunately.
I understand that. That's very helpful. Then my last question, of course, you have to handle the balance sheet, the fact that you are loss-making. When it comes to hiring new sales reps, moving into more countries, if you have had, you know, an even stronger balance sheet, would the organization have been able to handle a more aggressive rollout of more sales reps, or are you doing what the organization can handle now? I'm not thinking financially, but with the resources you have on the management side.
Yeah. Good question. The limitations is not the balance sheet. The limitation is, we're a small organization. We want to find the right individuals, we want to give them the right training, education, the right start. We need to onboard them to get into their territory. We work very closely with them for the first 6-8 months to make sure that they can represent BONESUPPORT and CERAMENT the way we want to, the way that makes us special. The limiting factor is how many talented people we can find in the market that meet our requirements, how much we can manage to integrate at a given time.
The prolongation of your question is, once we have hired these people and start to see the results and they're up and running, could there be more hires? Yes, it could be. I think we want to evaluate and see how well is this effort paying off. Of course, it's a big burden for the organization to increase with so many individuals, but those options are always at the table.
That's very clear. That's all from me. Thank you very much.
Thank you, Kristofer.
Thank you. There are no further questions at this time. Please go ahead, speakers.
Well, I would like to thank everyone for taking the time this beautiful spring morning, and wish you all a good day, and look forward to stay in touch with you. Thank you. Bye-bye.