Q4 results call. My name is Richard Davies, I'm CEO of BONESUPPORT, I'm joined today by our CFO, Björn Westberg. This morning, we'll take around 25 minutes with our presentation, which is available on our website, before concluding with a Q&A session. I'll talk through our commercial and clinical progress we've made during the quarter, then Björn will cover the financials in more detail.
Moving to slide three on the presentation, I'd like to draw your attention to the disclaimer covering the forward-looking statements we will make today. On slide four, I'd like to start by providing a quick recap on BONESUPPORT, our products, and the markets we are targeting. We're a commercial-stage orthobiologics company with three products on the market today. Our three marketed products are based on our unique CERAMENT platform.
They're all used for the management of bone voids. Bone voids can be caused by trauma, revision arthroplasty, and/or bone tumors. If not managed properly, bone voids can lead to further fractures and can become infected, which leads to a condition called chronic osteomyelitis, which is very difficult and very expensive to treat.
The key benefit of all of our products is that they're clinically proven to remodel to host bone in a six to 12 month time frame. In the case of CERAMENT G or CERAMENT V, CERAMENT G and V, the exciting development is that therapeutics are eluted into the void. This ensures the bone healing process is protected by the antibiotic that is introduced into the void. Our products target a significant addressable market of 650,000 procedures a year.
This number is based only on U.S. and EU5 alone and includes the major orthopedic indications, such as simple and complex trauma, as well as revision arthroplasty. A large addressable market for us penetration. We are developing a pipeline of product candidates based on CERAMENT's drug-eluting properties, which are also targeted to not only to enhance bone growth.
Finally, we are well-funded to execute our strategy through the end of 2020. Moving to slide five. Our highlights for the fourth quarter. In Europe, we delivered our best quarterly sales performance ever, with a growth of 39% due to the continued growth in sales of our drug-eluting products, which also helped to boost our BVF sales. This is a strong indicator of the surgeon preference for our drug-eluting portfolio, which is very exciting for us.
Unfortunately, we continued to witness a continued slowdown in North American bone void filler sales, which impacted the overall performance for the quarter. As you recall, we only have our non-antibiotic-eluting product, CERAMENT BVF, available in the U.S. Our performance continues to be impacted by our distributor, Zimmer Biomet's hardware supply issues, as well as some destocking by them. We continue to engage with Zimmer Biomet on these issues and would expect sales of BVF to return to growth as their product supply situation improves and their sales force focus returns.
A new Zimmer Biomet CEO came on board late Q4, we've already seen an improved focus and motivation of the company's U.S. sales team. Encouragingly, we've seen some end-user sales of CERAMENT BVF picking up in very early 2018.
In terms of clinical development, we're extremely pleased to have completed recruitment for our CERTiFy study, having enrolled 136 patients. This is a key study, as it is the first study to compare CERAMENT BVF with autograft, which is the current gold standard of care in many markets in the world. We're expected to report data from this study in the second half of this year. We recruited our first patient into a revision arthroplasty study in Italy.
This study is a cohort study which compares the use of CERAMENT G or V to prevent or reduce the level of bone infection versus current practice when primary joints are being replaced. This is an important study as there is no current standard of care to prevent periprosthetic joint infection in patients undergoing revision arthroplasty procedures.
Success in the study would provide additional data, which would help open up a significant opportunity for G or V. A patient enrollment in this study is going well, and we continue to expand our network of distributors via new partnerships. We signed an agreement with a trauma implant manufacturer, CITIEFFE, in Italy in November in Q4, and we've witnessed our first sales in France, one of the largest markets in Europe, through our new partnership with Novomedics, which we signed in September.
We now also have a confirmed pathway for reimbursement for CERAMENT G in France, which we'll discuss in a bit more detail shortly. In November, a high-profile publication reported that CERAMENT G prevented specific bacterial strains from forming biofilms on hardware, resulting in difficult-to-treat implant-related bone infections, which provides further evidence of the important properties of our drug-eluting products.
Finally, we're very pleased to have strengthened our executive management team with the recruitment of Helena Brandt as Head of Human Resources. Helena has experience from several major multinationals that help us and support our growth ambitions. Moving to slide six, there's some post-period events I'd like to draw your attention to.
A publication by the Journal of Controlled Release in January showed that the new CERAMENT-based carrier successfully delivered bone active agents, specifically BMP-2 and zoledronic acid, to increase bone formation in a preclinical animal model. As we noted, we recently acquired the IP to this novel product. February, we announced the repayment of the remaining debt under our loan facility with Kreos Capital. We paid the outstanding amount of EUR 9.5 million, as well as an early termination fee of EUR 0.7 million.
The decision to repay this loan made sense, given the interest rate we're having to pay on this debt, and it's important to point out that we still have funding through 2020 post the repayment. Finally, as of March 1st , Emil Billbäck will take up the role of BONESUPPORT CEO. Given the progress that the company has made in the past two years under my leadership, now is the right time for me to hand over the reins as we move to the next level of growth. Emil and I have a robust handover plan in place, and I will continue to support him and the management team post the March the first timeframe.
I would like to thank all my colleagues for their contributions to our recent achievements, and I'm confident with the continued success of the company going forward, as it generates value through execution of its strategy and expansion of its share in the growing global market for bone void management. Coming back to the results and moving to slide seven, you see the market opportunity laid out in more detail.
As you can see, there are about, for the U.S. and EU5, where we conducted this analysis, there are about 650,000 procedures per year where CERAMENT products could be used. We know that the total market is growing about 5% per annum, and it's currently valued worldwide between $2.7 billion and $3.4 billion.
The market is split between bone-derived bone grafts, such as autograft, allograft, and demineralized bone matrix, and the synthetic bone grafts, such as our CERAMENT products. Based on the growing body of data we're generating, highlighting the clinical and economic benefits that our products deliver, I'm confident that in line with our strategy, we'll continue to gain market share from other synthetic bone grafts, as well as further penetration into the bone grafting segment.
Moving now to slide eight, our strategy for growth is laid out and comprises of four main elements. First is to drive rapid sales growth of our existing products in existing markets. We drive sales by generating clinical data, which increases surgeon comfort that our products remodel host bone in six to 12 months, and that for the antibiotic-releasing products, presence of the antibiotic in the bone void protects that healing process.
To achieve this, we conduct a range of clinical trials, such as CERTiFy for CERAMENT BVF. We're also supporting clinical studies with CERAMENT G, assessing its utility for major indications such as complex trauma and revision arthroplasty. We're also generating compelling health economic data to improve market access for our products and to underline their attractiveness to payers.
In parallel with our data generation, we are increasing our marketing and promotional spend, as well as our sales footprint in both the U.S. and in Europe. The second key element of our strategy is to expand the use of CERAMENT G into the U.S. We aim to achieve this via a PMA submission, which is supported by our FORTIFY study. This study is designed to generate the clinical need data that we will need to target a PMA filing for CERAMENT G in the U.S. in 2020.
CERAMENT G has been a key factor in our recent strong sales in Europe. We believe that access to the world's largest orthopedic market would represent a major commercial opportunity, given the clear benefits it provides, which are fully aligned with the growing focus on value in this market. The third element of our strategy is to progress our pipeline.
We believe that the eluting characteristics of CERAMENT provide an ideal platform for a range of therapeutics known to enhance bone growth. We're making good progress with our preclinical activities, which are designed to allow us to decide which would be the first project taken to clinical development. We believe there is significant commercial opportunity for the products that will enhance bone growth.
The fourth and most recent element of our strategy is to review how to expand our product offering in the short and the mid term by some small bolt-on products. As I said, we're very optimistic about the potential of our pipeline. However, it will take some time to bring those first products to market. As a result, we are reviewing opportunities to strengthen our product offering in the short and medium term.
This initiative is being led by Dr. Jerry Chang, our new Executive Vice President, who's evaluating a number of opportunities. Moving to slide nine, I'd like to provide you with some background on our commercial activities in Europe and the U.S. Slide 10. In Europe, our commercial team consists of 20 reps, sales representatives and leadership.
This team is focused on driving sales in the five markets where we sell directly and in supporting specialty distributors who provide access to eigh additional countries. As mentioned previously, we signed a new distributorship for Italy in November and a distributor in France that will give us access to the French markets, which started in September as well. We also added two new reps in Germany and one in Switzerland in 2017.
In Q4, we continued to focus our sales efforts on selling CERAMENT gentamicin or vancomycin to top trauma centers. These centers are important as most of the patients that we are targeting with our CERAMENT products are managed in those FMF. As a part of our marketing efforts, we sponsor meetings which are attended by top orthopedic surgeons, and in Q4, we sponsored a very successful Black Forest Conference on bone infection.
We're also the primary sponsor of the Association of Diabetic Foot Surgeons meeting in Venice in November. Feedback on CERAMENT G for these surgeons continues to be very positive. We continue to develop our health economic models in Europe and have made significant progress with our marketing, market access activities.
Our application for a CHOP code has been accepted in Switzerland, and this is the first step that will help us gain a separate reimbursement code for CERAMENT G in that market. We have also agreed a study design with the French authorities for CERAMENT G in chronic osteomyelitis patients. Positive data from which would allow us to list on the high-tech reimbursement list in France. Positive data from the study would also boost sales in other geographies, and that study is planned to start later this year.
Our rapid growth, especially for the drug-eluting portfolio, shows our ability to successfully impact both surgeon and payer choice. Q4 was very successful and a most significant quarter in Europe to date. Moving to slide 11. In the U.S., we have our own commercial organization of 14 people. It comprises the leadership team, regional managers, and product technical specialists, as well as marketing personnel.
Their role is to support the sales of CERAMENT BVF via the Zimmer Biomet distribution network, who distribute BVF for us in the U.S. In Q4, U.S. sales were negatively impacted by Zimmer Biomet's hardware issues, which impacted the sales of BVF, it's because it's usually used in conjunction with Zimmer Biomet's hardware. Results were also impacted by some destocking by Zimmer Biomet.
In Q4, we made changes to our sales management organization with the creation of two new positions, one for east and west of the U.S. The purpose of the change is to increase regional focus on CERAMENT and sales follow-through with the Zimmer Biomet distribution network. We recently recruited a new U.S.-based clinical program manager, who will be responsible for working with KOLs to generate more U.S. clinical data, highlighting the benefits that BVF delivers, particularly its ability to remodel the host bone.
These data will be important in supporting the mid-term sales growth of BVF. Slide 12. I'd now like to turn our attention to our clinical activities. On slide 13, you'll see that we're conducting clinical studies to achieve two different goals.
In Europe, we conduct a number of studies to generate data which, if part is positive, should expand the adoption of our products in existing and new clinical settings. This is either by comparing them with current standard of care, such as our CERTiFy study, or by providing important clinical data about their use in a specific indication, such as the current Italian revision arthroplasty study.
Our first patients have been recruited in our diabetic foot study for CERAMENT G in Italy. We're also conducting our FORTIFY study, which is designed to provide the clinical data we will need for our targeted PMA submission for CERAMENT to the FDA in 2020. Turning to slide 14, the CERTiFy study. Recruitment for that study is now complete, with the data expected in the second half of this year.
As a reminder, this study compares the use of CERAMENT BVF versus autograft, which is a current standard of care for the treatment of tibial plateau fractures. Positive data from randomized studies like CERTiFy would open up a significant opportunity for CERAMENT BVF, allowing us to expand the market for bioceramic bone graft substitutes.
These data will also be a significant step in supporting our reimbursement activities in Germany and further afield. The Italian revision arthroplasty study is evaluating CERAMENT G or V in patients undergoing hip and knee arthroplasty revisions. Professor Carlo Luca Romanò is the study's principal investigator. He has previously conducted a positive revision arthroplasty pilot study with CERAMENT G and is therefore keen to assess CERAMENT G or V in a larger patient population. This study is aiming to recruit 135 patients at six clinical centers in Italy.
The study is looking to demonstrate improved clinical outcomes and a lower infection rate in the CERAMENT G or V group when compared to retrospective control from the same clinical centers. A successful outcome, meaning a reduction in the rate of bone infections during a one-year follow-up, would be important, as at present, there is no standard of care to reduce bone infections in patients undergoing revision arthroplasty procedures.
As previously noted, this recruitment into this study is going well. On slide 15, we have set out the planned timeline for completion of our targeted timeline for completion of the FORTIFY study. The study is now initiated at all 30 sites. Recruitment is progressing as targeted and in line with our timeline for submission to the FDA in 2020.
We have recently had a protocol amendment approved by the FDA, which will allow patients with smaller fractures to be included in the study. Based on patient screening for the study, we would expect this change to have a positive impact on our recruitment. The key primary endpoint is a reminder of the trial of bone union and the absence of infection at the fracture site.
Moving to slide 16, you'll see the importance of this, because there are currently no comparable products to prevent bone infections during trauma procedures. This is recognized as a big problem by KOLs in the sector, due to the enormous impact infections have, both on the well-being of the patient and on the economics of the hospital, due to the patient's readmission.
This paves the way for CERAMENT G to become an extremely important product commercially in the large U.S. market, where there is an ever-increasing focus on the economic benefits that new medtech products can deliver. At this point, I would like to hand you over to Björn, who will provide you with a review of our Q4 and full year 2017 financials.
Thank you, Richard. Continue to page slide 18. Sales in the quarter decreased by 9% overall, impacted by the declines in North America, as mentioned earlier. In contrast, Europe and the rest of the world delivered its strongest quarter ever, with sales increasing by 39% versus Q4 last year. I will provide more information on these developments in the following segment slides.
Slide 19, North America. Sales decreased by 35% in the quarter, impacted by the internal product supply issues Zimmer Biomet is facing, combined with some Zimmer Biomet restocking as well. We are in constructive dialogue with Zimmer Biomet to find measures to improve the situation, and they are confident that they will be able to improve their supply situation quarter by quarter through the course of 2018.
Sales in 2017 full year increased by 13%, which is good considering the impact of the supply issues Zimmer Biomet is facing. We expect the rate of sales growth of CERAMENT BVF in the U.S. to improve as Zimmer Biomet resolves its supply side challenges. The contribution for the fourth quarter, which includes direct costs, decreased because of the lower sales.
Slide 20, Europe and rest of the world. Sales increased by 39% in the quarter, driven by increased acceptance and usage among our targeted surgeons. CERAMENT BVF recovered from the weakness seen in Q3, with Q4 sales increasing by 46% in Q4. Full year 2017 sales increased by 42%, which is good. We are targeting a faster rate of growth as we generate further supportive clinical data and continue to invest in our sales and marketing activities.
Slide 21, operating result development. Overall, there was a decrease of SEK 5 million in the operating result in the fourth quarter versus last year, mainly driven by lower sales and lower gross margin. Sales and marketing expenses in Q4 increased as we invested in the sales force and in our marketing activities. We have good interest in our seminars from leading orthopedic surgeons, all of which have generated very positive feedback.
R&D expenses increased by SEK 4 million in the quarter, mainly driven by the FORTIFY study, where patient recruitment is on track. Administration expenses are much lower as the cost for the employee stock options stock options were reduced. As mentioned before, the cost for the current employee share option programs will come down a lot in 2018, as much of the vesting has been done in 2016 and 2017. Slide 22, KPIs.
The key three things on this slide are: Q4 sales decreased in the U.S., but this was partly offset by the best quarter ever in Europe and rest of the world. Secondly, a low gross margin in Q4, but a very good margin as achieved for the full year. Thirdly, strong cash situation and operating cash flow for the year was a good outcome, given the value of the investments we are making in our commercial and R&D activities. Overall, we're in a strong financial position and on track in executing our growth plan. At this point, I'd like to hand over back to Richard.
Thank you, Björn. Moving to slide 24, I'd really like to conclude the presentation by saying that with CERAMENT G and CERAMENT BVF, we have two products which we believe have unrivaled clinical and economic benefits, and we're confident that they will gain significant share in the bone graft market. A key focus of the company remains generating further clinical and health economic data to enhance the competitive positioning of all of our products, which drives sales growth.
With a CERTiFy readout later this year, FORTIFY is progressing as targeted and ahead of our submission for CERAMENT G in the U.S. with the FDA. We are also confident that our pipeline of CERAMENT product candidates designed to enhance bone growth will generate significant value.
Finally, we've made a lot of progress over the last two years, and I have the utmost confidence in our strategy. The experienced management team believe that they are equipped with significant funding to generate significant value for shareholders. I'd finally like to take this opportunity to thank everyone and to wish Emil, my successor, all the best for the future. Operator, we'd now like to open the call for the Q&A session.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad now. Our first question comes from the line of Franc Gregori from Trinity Delta. Please go ahead. Your line is now open.
Thank you. Good morning, Richard. Good morning, Björn. A very positive presentation. You've achieved a lot, and I feel rather mean saying this, but can I just ask more about what's happening in the U.S.? three questions, really. Do you still have faith in Zimmer Biomet longer term? Second one is, how quickly do you think it will be before you two recover sales, and will you recover them to the level you are and where you hoped to be? Well, let's take those two, and then we'll take it further.
Okay. Well, thank you, Frank, and good morning. Yeah, I mean, the first question is interesting, when it, you know, it's faith in our distributors, Zimmer Biomet. I mean, I think from all of the meetings and dialogue we have with them, there is a strong desire from their side, you know, to of CERAMENT BVF for us. I think the, you know, they're definitely willing partners and good partners. I think the real challenge comes down to, you know, how fast can they really fix their internal supply side issues? Just as a recap for the, for the audience on the phone, you know, this comes to the actual point of sale.
Typically, if you take trauma, for example, you know, the surgeon is, has a trauma case, and the Zimmer Biomet rep would be going in with a kit of parts that the surgeon needs for that particular procedure, and on that tray would be placed CERAMENT.
If there is a missing components within the Zimmer Biomet hardware kit, the Zimmer Biomet rep will then sort of pull out of that procedure, and so it usually goes to one of our competitors, in which case then not only was CERAMENT, you know, BVF not be on the tray, but, you know, we're actually sort of selling uphill against the other reps. That's the sort of the fundamental issue that's at play here. It does come down to, you know, Zimmer Biomet fixing its trauma, hardware supply challenges, and how fast they can do it.
I think the positive news for us is that Zimmer Biomet has been investing in its foot and ankle hardware kits, which don't have such significant supply side challenges. We're certainly seeing enthusiasm and revenue growth in that particular segment. That's the kind of first positive. The second positive, as I mentioned, you know, the new CEO's come in late in Q4.
He made the point of mentioning CERAMENT in the Zimmer Biomet U.S. sales force kickoff meeting in 2018. We're starting to see some early indications in end user sales of this renewed focus from the sales force. You know, as we say in Britain, you know, one swallow doesn't make a you know, one bird doesn't make a summer. I think the indications initially are good.
You know, let's be very well aware that they also have some significant supply side challenges yet to overcome, which will affect us. When I look at the year, you know, I'm optimistic on the year in terms of our plan, but, you know, we still may face some headwinds in Q1. I'm not sure yet. We need to see how it goes. You know, I think the foot and ankle side is positive for us. Of course, you know, as we look longer term, we need to assess, you know, how are we gonna bring, at some point, CERAMENT G to market.
That leads on to what I was about to ask. This shortfall in the financial contribution from the U.S., does it affect your plans? You've got ambitious plans for more clinical data, for product acquisitions, et cetera. Does this affect that, or do you have enough financial resources to still achieve all your plans?
Björn, I'll turn this to you.
Yeah, we have the funds available to execute the strategy, so we're confident in that.
Thank you.
Thank you. Our next question comes from the line of Kristofer Liljeberg from Carnegie. Please go ahead. Your line is now open.
Thank you. Can you hear me?
Yeah, we can, Kristofer. Good morning.
Thanks. Yeah. My question about U.S. were answered already, but two other questions. One for Björn about the cost that continues to increase much lower than expected. Is this the type of pace in cost expansion you foresee now in 2018 or 2019, or are there reasons to believe it will be more significant pickup? That's one question. The second one is about the adjusted study design for FORTIFY. If you could maybe explain a little bit more why you're doing this and whether it was triggered by slow recruitment in the more severe patients. Thank you.
Okay. Thank you, Kristofer. I'll start with the cost side and then Richard Davies will take the FORTIFY question. I mean, the cost very much vary depending on the activities we have, of course, and the major components there are the big studies, and the major one now is the FORTIFY study. We are increasing also, of course, sales and marketing activities, but not a very high pace, I would say. That is also balanced by the quite stable cost administrations. Of course, we have an increase in cost probably this year as we are executing more and more into FORTIFY study.
No, I think it is development this year is +17% is quite similar to as coming forward as well, although we have some increases related to the public costs.
Would it make sense for it to be, you know, more aggressive on hiring sales reps to drive growth even more in Europe?
We are increasing sales reps. We're receiving benefits of doing that. As Richard mentioned, we are increasing, for instance, one person in Switzerland, but also we have a couple more persons in the U.K. as well. We're also expanding, I think Richard mentioned this as well. We have clinical liaisons who's of course supporting of the operations there as well.
We are increasing, but at the same time, this industry doesn't require a large number of sales reps. I think we have a good number, but it increases some. Of course, it also come when we see there are opportunities to expand in other direct markets, and now we are present in that sense in five markets in Europe. As Richard mentioned, we are progressing in France.
We have a setup now for instance, when we are in these big countries, we have distributed channel now or agent channel, when we have them coming on the reimbursement list, then is the question for us, of course, to expand into direct sales organization as well there.
Yeah, I think, Kristofer, just to sort of build on what Björn said, you know, one of the models that we're seeing as successful is now, you know, to have trauma specialty reps that can support our existing sales force, we certainly, you know, plan to place those in Germany, which is one of our bigger markets, as well as the U.K. So that's typical of the type of investment that you'll see over the coming months. If I take your FORTIFY question. Yeah, I mean, as we've run the study this year, we've seen that we have a, you know, relatively significant number of patient exclusions based on the size of the bone gap, okay?
It's called an RABG, radiographically assessed bone gap, and it's a complex measurement of the piece of missing bone, if you like, that's held together by the IM nail. You know, as of the end of the year, we're recruiting well, and on our target. We also sort of, you know, we're very aware that we're kind of losing a significant number of patients, you know, because the RABG was quite large, so quite a big gap. We applied to the FDA for a change in the gap size. That gap now is a smaller one, which should allow more patients and to accelerate our recruitment, which I think is a good thing overall for the study.
As I said, you know, as of the end of the year, we are kind of on our target for the 2020 submission.
Okay, these changes, how do you see that affecting the chances of the success in the trial?
Yeah, I mean, that's a tough one to sort of comment on. It for sure will accelerate our recruitment. You know, we've got a year's worth of data now, so we can see from our exclusion logs, who's been excluded. It shouldn't affect efficacy either way. It's still a relatively major gap that in the bone. This amendment was really to, you know, boost enrollment rather than anything else.
It's not so that those recruited patients have less bone infections than the larger gaps?
No, the bone infection is consistent across all gaps, frankly.
Okay.
Yeah.
Okay.
Yeah.
Thank you.
Thanks.
Thank you. Our next question comes from the line of Sten Gustafsson from ABG. Please go ahead. Your line is now open.
Good morning, this is Sten from ABG. A few questions. First of all, if you could help me understand the how we should model the R&D expenses for 2018. I'm not sure I fully understood the answer earlier there. Will the Q4 spending level be significantly higher on a quarterly basis or just gradually higher? That's my first question. The second one is, if you could give us some sort of update on trading in Q1 and if you have any view on sales growth for 2018, that would be my first few questions. Thanks.
Thanks, Sten. I mean, I'll actually going to hand these to Björn.
Hello, thank you for the questions. Start with R&D expenses. We have a level now of the R&D organization, which is very to execute the strategy. We did increase somewhat last year, and we will increase somewhat as well going forward. It's very much depending on the products we are executing. Of course, FORTIFY study will have an impact this year as well, and probably a larger impact than last year.
Okay, thanks. I had assumed a, a quite large increase, actually, over 100%, so maybe that's too much then.
Yeah, well, maybe it's too much.
Yeah. All right.
The second-
Thank you.
Attracting and as mentioned in one of the slides, we presented that Zimmer Biomet are confident that they'll be able to improve the supply situation quarter by quarter in the course of 2018. As we have the, let me say, for some time now, Q4 in the U.S. With that, as a background, I think it's fair to assume that this will have an impact moving forward as well, quarter- by- quarter.
Okay.
As a positive impact, quarter by quarter.
Just a follow-up on the U.S. there. The sales you generate now, is that primarily from old surgeons? I mean, surgeons you have already done business with, that sort of repeat sales or is it new surgeons coming on board as well, or do you have any insights to that?
Yeah, I can give you some qualitative, Sten. We don't have kind of a surgeon by surgeon end user data, okay? That's Zimmer Biomet, it's not ours.
Sure.
Qualitatively, yeah, I mean, we have a It's a pretty good mixture, right, of existing surgeons who use the product and like the product, as well as new surgeons that we're able to bring on. We're seeing, you know, some interesting developments, you know, both in foot and ankle. As well as in the oncology setting, where, you know, as you, as a surgeon, an oncology surgeon removes the cyst in a bone, typically in teenagers, they need to, you know, they need to fill the void left over.
Because of some unique characteristics of CERAMENT BVF, the oncology surgeons really like the product. It has to do, you know, under fluoroscope, they can see where they put the CERAMENT BVF, and they can see if there's any sort of tumor left.
They can't see that with other products. We do have a significant advantage in that particular setting, and it's somewhere, you know, we're focused on in 2018.
All right. Thank you. That's all from me for now. Thank you.
Thanks, Sten.
Thank you. Our next question comes from Jonas Peciulis from Edison. Please go ahead. Your line is now open.
Hi, good morning. Thank you for taking my questions. I would like just to clarify on the new distributor agreement in France that you announced in September. You announced actually first sales, so that probably was a BVF, if I'm correct. The other question would be, what's the timelines and the process in terms of, you know, gaining regular approval for, you know, GNV products?
Yeah, sure. Good morning, Jonas. Yeah, you're right. We signed an agreement with Novomedics in September. The first sales that you're seeing, or we're seeing right now are non-reimbursed sales. This is where hospitals are buying the product at sort of full list price. It's been not only BVF sales, but G particularly, as well as key surgeons start to gain experience in using the product. To get onto the high tech list, we need to provide sort of level 1 compelling clinical evidence. We've agreed on a chronic osteomyelitis study that we're in the process of establishing and setting up now. It's fully funded within the cash that we have on hand.
It will be the first-ever level 1 chronic osteomyelitis study ever conducted, which I think will be extremely positive for other markets as well. We look to initiate the first patient into that study by the end of this year. So we're probably a couple of years away from being able to make a full, a full application to the high tech product listing, because we need the study to conclude. I think we're making, yeah, the early steps look extremely positive for us, and obviously we need to see what the outcome of the study is.
Okay, that's fair play, actually. Thank you. Second question on this rather significant growth in Europe. I was thinking about the, you know, how sustainable is it going forward? In your, you know, from your insights, what could be the main drivers this behind such growth? I mean, it's, is it like surgeons are switching their products and that, you know, not, you know, going back or, you know, or maybe you can see clear correlation between investing in marketing and promotion and this pickup in growth. Any of your insights would be helpful. Thank you.
Sure. Björn, do you want to start and I'll fill in?
Yeah. As mentioned, the full year sales increased by 42%, which is good, but we're targeting a faster rate going forward as we generate the support clinical data and also continue to invest in sales and marketing activities. Also, we are taking a bigger sort of share voice and also activities in trauma. That's one of the key drivers for going forward, that we are able to take care of more market share in trauma as well. That's very much the focus, as Rick mentioned as well, that we have trauma specialists, like in Germany and England going forward as well, for instance.
Yeah, I think Björn's spot on. If you go back to slide seven, you'll see that where we talk about the 650,000 procedures per annum in U.S. and EU5, and you'll see on that slide, the significant chunk of that is simple and complex trauma. This in January, we kicked off a sort of fairly significant trauma segmentation with our sales force. We plan to have a trauma specialist in the U.K. and in Germany added to our team. I think this focus, you know, sorry, let me step back one. You know, there's an old saying that if you want to catch a big fish in a big pond.
You know, moving from sort of a chronic osteomyelitis view, where we're data rich and experience rich, and now starting to penetrate the trauma market, is going to be very positive for us and will open up new avenues of growth. For example, in the U.K., we focus on those 20 level 1 trauma centers. We focus on those 20 centers in establishing the use of CERAMENT G or V with the key surgeon, the lead surgeon, and then sort of driving that usage down through the individual accounts. Of course, this is supported by the data we're generating in our, some of our phase IV studies.
Also we have, I would say, a stronger focus now on key accounts overall in direct markets, and that will very much be a driver for the sales increase going forward. That will also, well, when we have increased usage among big hospitals, then the small hospitals will also sort of look at that, and they will use the products even if you don't really make so many visits to the small hospitals. That's also a positive benefit of this focus as well.
Okay. Okay. Yeah. Thank you. Thank you for that. Thank you.
Our next question comes from Lala Gregorek from Trinity Delta. Please go ahead. Your line is now open.
Good morning, gentlemen. I had a couple of questions just following on from what you were just talking about now with respect to Europe. Are you able to provide a little bit more information about what the share of the drug-eluting products is versus BVF? Which indications in which countries are you seeing particular strength, and also on top of that, how it sort of interconnects with the data that is coming out, either in case studies or the full data that comes out from the trials that you've been running?
Thank you. Thanks, Lala. I mean, share in this setting is very difficult for us. There's no such thing really as IMS data as you typically would see on the drug side. We are commissioning a piece of work, which is a follow on from our market sizing, to try to establish this year, you know, share and share change as we go forward. That's something that, you know, I think you can expect to see as we go forward. The strengths are typically in trauma, the surgeon, so the average he uses the 10 mL version. Yeah, whereas in the oncology setting, it's typically 30 mL to 40 mL, in foot and ankle, it's typically 5 mL. That's kind of a way to think about this, okay.
The, you know, we continue to generate data. I think a key publication that we're expecting, yeah, first half of this year is our sheep animal model that we showed investors during the management roadshow, pre-IPO, whereby we're, I think, the only company that's able to demonstrate how our product fully, yeah, right through the whole void, fully remodels to host bone. I think that'll be a key publication for trauma surgeons as we go forward. Once that's published, you know, we'll educate our sales force on how to talk about that with key surgeons. As Björn mentioned earlier on, we're also invested in market medical liaison specialists who have a higher degree of freedom to talk to healthcare professionals on clinical data that's being generated.
So that's sort of an example then of how we would try to or how we intend to sort of interweave our data through our segmental push. Obviously, the CERTiFy study is BVF in tibial plateau fractures. Tibial plateau fracture is a trauma indication, a fairly common one. Again, that should work towards both the remodeling of host bone, as well as the economic benefits of a single-stage procedure versus a multi-stage that you would see with our competitors.
Just like that there as well. As we mentioned in the report, the sales in direct markets increased by 42% and accounts for 80% of the sales in Europe and the rest of the world. The drug-eluting products within Europe and rest of the world accounts for 75% of the sales. The drug-eluting product for the full year increased by 51%. That is very much the focus in Europe, that we are really sort of focusing on the sales like in trauma, et cetera, and so on, to increase the segment DBM.
Okay, great. That's really helpful. I have one housekeeping type of question as well. With the U.S. PMA filing, is FORTIFY data basically the last major piece that will define what the timing of filing is?
I'm not sure I fully understand your question, Lala. The PMA submission is the final submission that we would do, and we've targeted that for the 2020 timeframe.
Mm-hmm.
That's what our recruitment curves have built off for FORTIFY study.
Okay, great.
Yeah, the FDA, you know, I think, has to assess the, there's nine months to assess the application, and then label negotiation after that. Fairly typical of the FDA. It's highly procedural. It's a standardized timeline that they tend to want to stick to.
Okay. In, in terms of other things that you'll need to submit, but FORTIFY is basically the major piece of that?
Yeah. I mean, as with any FDA submission, we have to submit not only the FORTIFY study itself, but our full data package.
Mm-hmm.
We would probably aim to submit the French osteomyelitis study as well, because we think it would support our indication discussion. You know, we've always got to remember that whilst within the IDE study, we have a broad label in there.
Mm-hmm
... that's been accepted by the FDA. It's a negotiation that will happen after the sort of the final review is done. The more supporting data we have and the more supporting data we generate in that timeframe, that could be submitted to the FDA, you know, puts us in a stronger position.
Perfect. Thank you very much.
Thank you. As another reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. We have a question from the line of Kristofer Liljeberg from Carnegie. Please go ahead. Your line is now open.
Yeah, thank you. Follow up on Europe. Could you provide some details, how much of European sales really come from the bigger markets, U.K., Germany, and Nordics? Secondly, now with France, for example, a few years away from getting reimbursement, are there other new European markets that you think could be of significant importance in the more nearer term, so to say?
Yeah, I'm going to let Björn take the first one, Kristofer, and then I'll take the second one.
The sales in Europe total was SEK 51.2 million Europe and rest of the world. Then if you look on direct markets, that was SEK 40.1 million, and that is, of course, mainly the big markets there, U.K. and Germany, also Switzerland and Sweden and Denmark. The increase that mentioned 42% for the full year.
You would say, you would say then that U.K. and Germany stand alone is significantly larger than the Nordics, correct?
Yes.
Yeah, yeah. Correct, Kristofer.
Okay, thanks.
Coming on to significant other markets, you know, I think if you look at Southern Europe, Spain and Italy, you know, if you want to go direct in those markets, you always have to run the risk of taking on the accounts receivable issues in those markets. At the current moment, pretty happy with our new distributor in Italy, CTFE, and our current distributor in Spain. I, you know, at this point, I wouldn't, I wouldn't push any harder into those markets. I think we've got the right partners and the right structure. You know, the interesting thing is really, I think, for the in the company, is to look at Asia in particular. There are very big markets in China, Japan, and some other Asian countries.
I think that would be our first. In 2018, we've had a number of approaches from potential partners for China, particularly. I think, you know, elucidating a strategy around how we're going to do that and with whom is, I think, one of our key deliverables for 2018.
Right. When it comes to growth and in Europe, dependent on U.K. and Germany, would you say penetration is still so low that you will should be able to continue to grow by this sort of pace in the foreseeable future before new markets like France is picking up?
Björn here. As mentioned, sales increased by 42%, and that's a good number, but we are targeting a faster rate of growth as we are penetrating, as Richard mentioned, larger segments like trauma, for instance. We anticipate a higher growth than that.
That's even before you get, sales in France going?
Yes.
Okay.
Yeah. I think if we look at our key accounts, Kristofer, you know, there's a long way to go yet, quite frankly.
Great. Thank you.
Thank you. As there appear to be no further questions, I'll return the conference to you speakers.
Well, thank you very much. Obviously, some robust discussions. You know, just like to thank everyone for their input, and I'm looking forward to the continued success of the company going forward. Thank you very much.