All right, welcome back, everyone, for the next presentation. My name is Sten Gustafsson, I work as a healthcare analyst at ABG. And I'm happy to present the next speaker, Jesper Söderqvist, CEO of Boule Diagnostics. So we'll start with a presentation, and then we'll round off with a few questions afterwards. So please go ahead, Jesper.
Thank you very much, and very nice to be here again. I was here a year ago, and you could really say that's happened a lot in the world around us, but also at Boule. So I'll try to, you know, reflect a bit on that during this presentation. But I will start with a kind of general overview of Boule. So we are a global niche player, providing solutions for decentralized hematology, i.e., that blood diagnostics. We're a quality supplier, both to the human and the veterinary market, where we provide instruments and consumables, but we also have a business where we provide white label consumables to other suppliers.
What makes us unique, I think, is, and attractive, is our business model, where we place instruments that use consumables for the lifetime of the instruments, which creates a robust recurring revenue. And if you combine that with our OEM consumables, we have a large portion of recurring revenue. So we have a number of things to expand our business currently. One thing that's new since last year is that we have launched a new veterinary product, which we launched in the end of the second quarter and started shipping in the third quarter. In 2022, we started a partnership with Fuji, where they are selling our solutions in the veterinary market in Europe. Earlier this year, that was expanded to cover eight countries in Europe, and we continue to work and build relationship with Fuji.
So that's very encouraging. Our, you know, OEM consumable business continued to develop very well, and, you know, we've seen growth this year. We have taken a step to establish local production in India, and I'll come back and describe a little bit about the rationale for that. As we have talked about, that we are, you know, with our current portfolio, we are expanding in Middle East and Africa. Most importantly, I'll talk about that in the end, is our develop into modernizing our product portfolio, where we are, you know, building new technology, and we will plan to release and launch a new five-part instruments at the end of next year. If you look at the market that we play in, so decentralized hematology.
If you take the global hematology market, covering also the central laboratories, it has a market value around SEK 85 billion. About 10% of that is instruments used in smaller clinics, physician office labs, a vårdcentral in Swedish, that use benchtop analyzers. So that, you know, the result can be given at the time of the visit of the patient. One way to divide this market is to look at what type of measurements are done on these instruments, and that refer to three-part and five-part, and that's basically how well you can measure the white cell population. There's no market data, how much of those instruments are sold in the decentralized segment.
But if you look at overall market, about 20% are three-part instruments, which is the core of our business today, and about 75% is, you know, five-part instruments. What we are doing right now in our, you know, strategic investments, is to provide a strong offer in the five-part segment. So you can see that that should, will fuel the growth once we get this instrument out to the market, so we expect to see, you know, significant growth in 2025. A smaller part of our business is also in the veterinary segment. It has a market value of around SEK 2.5 billion-SEK 3 billion. And that's a market that has been growing. It was a very high growth during the pandemic, but it continues to grow, you know, faster.
We really see that now when we come out with some expanded offering, that we can really boost our growth in that segment. So let's look at the Boule's product portfolio. Boule is one of few providers that, you know, do cover both the instrument and all the consumables, doing development, production, sales. Our instruments is, you know, we have three-part instruments, which is our flagship models, where we have some unique features to aspirate blood. One thing is the micropipette adapter, so you, from a single drop of blood, can draw, you know, blood and do a complete blood count. We also have this walk-away solution, which is very compact, which is very much appreciated in the smaller laboratories, that provide, you know, a solution for kind of high volume testing.
We also have an entry-level five-part instrument, so it's, you know, we are playing there, but we, we don't really get access to the, you know, the full market as we will when, once we have our new modern portfolio. And then we also have our veterinary solutions, where we also have a clinical chemistry instrument that is, you know, combined with, with our hematology instruments. We place those instruments with the customers, and then they buy consumables. And the consumables is tied to our instruments, with an RFID security. In that way, we can secure the quality of the testing, but also very important for us, of course, is that, you know, we tie and protect our recurring revenue from consumables to the installed base.
Thanks to our, you know, capabilities, both in, you know, development and production, we have also attracted a number of other suppliers where we provide white label sales, our OEM business. So if you look at our business model, you know, we are a product company, and most of our sales is done through distributors. So we use distributors globally that, you know, market, sell, install, and service the installed base. In order to be close to the market and really work with the distributors, we have, you know, regional sales offices that really understand the market dynamics, business culture, reimbursement systems, and they work very closely with our distributors when it comes to larger tenders. In that way, we can be present in 100 countries, and, you know, we have about 200 distributors.
Of course, the 80/20 rules apply, so, you know, you know, the larger portion of the business with this, with a few larger suppliers, distributors. Then, thanks to our business model, where we, you know, have, this razorblade model, we also have, you know, significant part of our revenue are coming from consumable sales, which is recurring revenue. So if you combine our, the consumables for our instruments and for our OEM, we have about 60% recurring revenue. What's also unique with Boule is the, multi-brand strategy we have, that we use, several product brands. So we have, two, brands for the human market, which enable us to have, multiple distribution channels in the same market to better penetrate those markets.
We use Exigo for our veterinary business. The last few years, we have also built up a brand around training, which we call Boule Academy, and that's a way for us to market and really reach out to an audience through webinars, et cetera, and it really helps us keep in contact with the markets. I think the business model is best explained with this graph. Here you can see the blue bars are the number of instruments per quarter, and you can see here that, you know, the instruments placed per quarter varies. The gray bar is the rolling twelve-month revenue from instruments, and the red bar, the red line, is recurring revenue from consumables. You can see up until the pandemic in 2020, we kept a stable growth.
As we installed units, we grow our recurring revenue. Then we had this unfortunate pandemic when the world closed down, and basically, all the decentralized testing stopped during a period, and you can really see that dip in 2022, and then how we have, you know, kind of rebound, regain that test volumes after, you know, starting in 2021 going forward. So, you can see that, you know, we will, you know, continue to build an installed base, but we also see there's, you know, we don't see the same growth of the consumables, and that is because some of the testing that was done on the three-part installed base is shifting towards five-part.
And that's why it's so important for us to modernize our platform to come out with this next generation five-part system, and then we can start to see the growth again. In the meantime, we you know continue to push. You know, we have the best three-part system, no doubt, in the market. And we you know we are selling, we adding distributors in Africa to fuel the growth. But we also seen you know in the last year that we have had you know challenges in some of the markets where we had you know that have payment restrictions and foreign currencies, et cetera. But overall, I mean, the trend is positive. The OEM consumables has really developed very well.
We have doubled that business, more than doubled that during the last two years, and we started in 2021 put specific resources towards that segment. It's very good business because it's a long-term business where we're part of the development of products, and you know, basically, we supply those in suppliers during the lifetime of those products, which is like 10, 15, 20 years, and the supply agreements is typically 10 years long. During the first nine months of this year, we have seen a growth of 12%, and we are growing a you know, a pipeline of potential new OEM customers.
So I thought I will take you to Florida and visit our facility and listen to one of my colleagues, and I know I can try to catch back my voice a little bit. See if this can work.
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So we don't only have great products, we have a great team as well. It's great to see my colleagues there. So, another thing that we have done this year is that we have extended our veterinary offering. We have a four-part system, and we have a chemistry analysis that we bundled. But also in the veterinary market, there is a, you know, market requirement or desire, let's say, to have five-part instruments. So for that reason, we have done a co-development with a partner, and in the end of the second quarter, we launched this new H50V. It's now launched in Europe. We started selling it in the third quarter. We also have some nice orders in Q4. It comes with 13 predefined animal profiles.
We analyze more than 30 parameters, and we can, you know, get the result within a minute. Also we have, you know, that built-in mixer, which means a very simple device, and that's why we have it on, also on our other hematology veterinary products. It's really a bench-saving space for the veterinary lab. So that's very well, you know, well-received. One of our partners that are selling this is Fujifilm, that, you know, have a strategic intent to grow in IVD. So this really has helped us open up, you know, new veterinary markets in Europe.
And we also see that now when we come with this bundle, with both the four-part and the five-part, we actually, we have also started to boost our sales of the four-part. So, yeah, looking good. And that, you know, this was the first time for many years that we launched a product, so I'm very happy about that. I don't know if you heard that, but, I mean, it's more and more we see that many countries, and particularly larger countries in Southeast Asia, is promoting local manufacturing. And that's something that we also listen to, and we also see that we get more and more competition from China and Southeast Asia. So one of the markets where we have, you know, gone ahead and started local manufacturing is India.
India is, you know, it's an interesting market because it's, you know, 18% of the world's population. It's predicted to become the world's third largest economy in 2028. It has a, you know, a very well-educated middle class, you know, high GDP growth. And they also have a healthcare reform where, you know, the Modi want to offer basic healthcare to all the population of India, which means that they really want to build a diagnostic kind of network all over India. And that infrastructure means that they're going to build 100,000 new labs. And they also have a Make in India policy, meaning that if you want to be part of those tenders or win those tenders, you have to have, you know, local production.
However, the prices and the test volumes on these instruments, you know, that will be equipped with these 100,000 labs, is much lower. So in order for us to be competitive and also be able to play there, and it's also part of our strategy, you know, make sure that we keep our premium brand with our new modern product portfolio. So what we have done is that we have licensed our older technology, and they, you know, redesign to get rid of last-time-buy components. We started already last year, actually, by setting up a reagent license manufacturing. They built a complete, you know, factory in Lucknow. It's a really state-of-the-art facility.
I was there in May, and it's quite amazing what they have accomplished until now. We were ready in the beginning of September, and now we've been waiting for the Indian authorities just to give go ahead. Also now in September, we extended that partnership to also include license manufacturing of this kind of simpler, older instrument. And in this way, we will have, you know, a position to participate in the India market. And also what we've done, this is not investments by us, it's a royalty manufacturing, so that we will, you know, gain royalties from both consumables and instruments that our partner produce.
So that's something that, y ou know, we will lose some top line, but we will increase our profitability in terms of prof- of gross margin. And that will, you know, start also kind of towards, you know, late 2024 and 2025, you will start to see the effect of these investments and decisions. Then, of course, you know, our, you know, most important strategic project is the development of this next generation five-part hematology system. You know, we discovered some things we had to, you know, improve during the spring. All those improvements are implemented. We're now preparing for clinical validation. We have, you know, set up the production lines out in Spånga. We're working on the production readiness, and it, I mean, that's. It's really happy to see, you know, kind of all the activity around this.
We're, you know, targeting regulatory submission next summer, and we, you know, starting to launch the product, you know, during 2024, and we should see significant sales in 2025. Actually, last week, we was at a big trade fair in Germany, Medica, and we actually had a small room where we do a sneak peek preview for our distributors, and that, you know, it was very good feedback on having this instrument. So very much look forward to, you know, the next, you know, year and then the year after that. Okay, we also recently published our Q3 report. I think I'll go quite fast through that. But, you know, basically, you know, we saw, you know, growth in OEM consumables. We saw growth in most markets, except Asia.
We saw that, you know, launching new VET product, you know, give results. And also, what was very nice to see that we had a strong operating cash flow of SEK 28 million in the third quarter. And that, you know, thanks that we have, you know, put some, you know, kind of things aside that we had worked on with new regulatory framework and supply chain issues. And we really see that the efficiency savings programs are generating result. So very happy to see sales is stable, gross margin was stable, you know, despite that we had an unfavorable product mix, which really means that our, that our, our efficiency savings and saving programs we have going are continuing. Looking ahead, you know, we're now navigating more and more complex market.
The good thing is that, you know, supply chain and logistics has normalized. We are, you know, navigating an increasingly complex landscape with war sanctions, you know, payment issues, et cetera. But I think, you know, we have learned to live with that now. You know, it's things are happening. So if you look going forward, you know, we expect the OEM business to continue to develop. In Asia, you know, we have a plan, you know, to also be competitive in kind, in the value segment, protecting our premium brand. Eastern Europe, further decline due to the war in Russia. LATAM is a five-part market where we are positioning ourselves to kind of gain growth in once we come out with our new instrument.
Also in Middle East and Africa, we are, you know, now pushing our current product portfolio, and the investments we've done is putting local staff there are starting to pay off. So in summary, you know, we are navigating this complex world. We have an extended veterinary portfolio. New distributors, you know, help us, you know, drive sales and sometimes compensate from these kind of more countries where we have lost a little bit due to the external conditions. We have an efficiency saving programs in place, and I really look forward to launch the next generation five-part hematology system next year. Thank you very much.
Thank you. So we have time for, yeah, I guess, one or two questions. And I wanna go back to the five-part system-
Yeah.
... product. How is that different from what's available today? I mean, where do you see you have an edge over your competitors?
So what... You know, in terms of the kind of parameters we measure, it's similar to others.
Yeah.
But so is our three-part instruments. What we have built our brand on, and it, it's really reliability, robustness, user friendliness, and we know that, you know, our distributors are, and our end customers are willing to pay for that. We have also implemented a number of new technologies. You know, it's a completely new digital technology, so we digitize the signals very well, and we do digital signal processing. That's on the inside, on technology.
Yeah.
But it that will create a lot of possibilities going forward. But it and it we have a you know nice design this autoloader with walk away solutions. We have thus that MPA where we can draw blood in a in a very efficient way. All those are features that you know plays very well with with you know you know what we hear from the market.
Excellent. One final question. You talked about the recently announced Q3 report here, where you returned to growth. We're now sort of halfway into Q4. What do you see out there, and how should we be sort of comfortable that you can continue to grow, or is it too early to say?
Yeah, I don't make any forward-looking statements, but in general, but it's the world around us is quite unstable. Let's put it like that. So I mean, I don't have a crystal ball, exactly, you know, how things will develop, but what I've learned from previous crisis is that things are stabilizing, and I think that's what will happen also in this. So the question is, will we come back to a more normal mode of operation already in 2024, or will it be a little bit later? That you can answer, maybe for me.
I don't know. All right. Excellent. Time is up, so thank you very much, Jesper, for the presentation, and best of luck.