Good morning, everyone, and warm welcome to Elekta's Capital Markets Day 2023. My name is Cecilia Ketels, and I will guide you through today's event here in our Crawley office. I also want to say warm welcome to Elekta's President and CEO, Gustaf Salford.
Thank you. Thank you, Cecilia. It's absolutely amazing to be here in our cornerstone office in the U.K., England, and to have a Capital Markets Day with all of you again. I also would like to welcome you online to participate in this event, and I'm really looking forward for the next couple of hours.
We have an exciting agenda. Who are the speakers, and can you tell me what are the topics?
I think we have a really, really interesting agenda, as you can see here in the background, and it is really focused on our strategy, ACCESS 2025, and we'll go through the different pillars. I also have a team, my management team, coming presenting to all of you, the different areas. We also have a very, very special guest, and that's Dr. Alison Tree, that will talk about Elekta Unity and what's happening in MR-guided radiation therapy.
After approximately an hour, there will be a 10 minutes break. For those of you who are online, you have received a telephone number, so if you want to queue up for a question, you can do that throughout the event and then come back and follow the presentation. Gustaf, let's kick this off by having a seat.
Perfect. Thank you.
Gustaf, let's reflect on what happened since the last CMD.
A lot has happened, to start with, we as Elekta, we've been really focusing on delivering on ACCESS 2025, with all its components of accelerating innovation, big focus area, being the customer companion, but also driving these partnerships and forming the partnerships in the cancer care ecosystem, and of course, driving adoption of radiotherapy around the world. There has also been a lot of resilience activities and excellence activities. I also would like to say that all of this is really done with sustainability in mind as well. Sustainability is a big part of our strategy.
Some of the expectations we had two years ago didn't materialize. Can you elaborate on these and the impacts it's had on in Elekta?
Absolutely. When we met, two years ago at the Capital Markets Day 2021, since then, a lot has happened. It was at the height of COVID, we saw the effects. We then saw the supply chain challenges around the world that developed into component shortages, that kind of developed into inflation and all of those drivers as well. Together with the war in Ukraine, all of this has been quite a challenging environment to act in. However, I think we have done a lot through our resilience programs to offset the effects as much as we could, showing growth during that period.
I also look forward to the second half of ACCESS 2025 in the next two years, to take the good momentum we saw in the last two quarters and continue into the next years.
Can you describe what you and your executive team has been driving when it comes to the strategy?
Absolutely. We have been very oriented on kind of delivering on ACCESS 2025. On the slide here, you can see a couple of those areas. It has been a lot to drive product launches from all the innovation investments we have done. We have seen CMM, so Comprehensive Motion Management. We have seen S3 coming out to the market, now treating patients. We've also seen Elekta ONE. That was really the key, key launch we had at ESTRO in a big software suite that we'll talk a lot about during the next couple of hours. We also drove the Unity clinical adoption, getting this fantastic new technology accessible to more patients. We formed and deepened many partnerships, and we see that bearing fruit, and we continued to drive our resilience areas.
A bit more maybe than we planned initially, but that was because of this environment, or the environment around us. Of course, getting to sustainable, targets and validated. That was also a key event for us.
Nice development in challenging time. How do you see the coming two years until 2024, 2025?
I think it's really about taking this momentum that we've seen and then bring that into the next couple of years. It is about driving profitable growth. Really creating shareholder value will be one of my key focus areas, and also the team and the whole company. We will do that through profitable growth, more in expansion, but it's also to continue the product launches, more product launches as we go, quarter-over-quarter, year-over-year, to bring Elekta ONE out there, but also a lot of focus on software that I look forward to launch. Service, a key focus area for Elekta, we are expecting that to grow faster than the install base growth globally.
We'll also continue to drive a partnership expansion, and also get the leverage from Elekta ONE on our full suite of products.
Understand. How would you describe the Elekta model? What will be the success for Elekta, the driving us?
I think that's a great question, and a question I get a lot. For Elekta, what has always made us successful and been the core of what we do, is this big focus on radiotherapy. That is our core. That is what we do here in Crawley as well, one of the first places in the world to produce linear accelerators, actually. It's also, throughout the years and the decades, that versatile solutions. We are not really telling the customers what solutions they should have. We're open in architecture, both from the device side, but also on the software side. We have a culture of innovation. Elekta's had many of the firsts in this industry. If it's IGRT, image-guided radiotherapy, if it's MR-guided radiotherapy, that is part of our DNA.
I think going forward, it is this commitment to partnerships, because we cannot do it all, and we are very proud of our open model, and that is also about partnering with other players in the cancer care ecosystem.
If we now turn to the market development, I think it's gonna be more convenient for you if you stand in front of the screen and present that. Please, Gustaf.
Thank you. Thank you so much.
Please, it's yours.
Excellent. I'm just planning to take you through a couple of slides and pictures on the market update for us as a company in the radiotherapy market. We need to start, as always, on kind of the problem we are trying to solve, or being part of the solution for, and it's of course, cancer. Cancer is expected to be one of the, or the biggest cause of death in the next decades. We're moving from one pandemic, the COVID pandemic, into a cancer pandemic in all regions and countries around the world. Every year, 10 million people die of cancer, and 20 million gets their cancer diagnosis, and I think this trend will just accelerate in the coming years, resulting in 13 million deaths in 2030.
What we are part of is to drive the life expectancy up. In this slide you will see that cancer survivals ship or life expectancy has gone from 50% to 70% over the last decades. That's an amazing development. Every year we see this improving. This is for the U.S., this data, so it's not the same around the globe. We need to bring these new technologies, if it's radiotherapy or cancer care as a team sport, under other therapies, to continue to improve the survival of cancer patients. We need to think about it in two different ways. It's both about improving the clinical outcome for the very difficult cancers to treat, as you see here. That's not enough. We also need to improve the operational efficiency.
These two areas, you will see, is the guiding stars, you can say, of how we think about innovation and development of our solutions and services going forward. Radiotherapy should benefit 50% of cancer patients around the world. That's not the case today. It's part of 40% of the curative treatments. If we look a bit on the trends, as I and we as a company see them, we have the oncology trends of health systems that needs to keep demonstrating value of cares. What they need is really intelligent workflows, and very important, personalization to improve outcomes. What we are doing as Elekta is bringing, I mean, the best technology throughout our different devices, but also with Elekta ONE as a key component to glue it all together.
There's also this constant evolution of new oncology treatments and technologies. We need to be part of that as well. We need to focus on interoperability of technologies and disciplines across the cancer care ecosystem, and that's really what we are doing with our partners, to work on interoperability together with imaging companies, software companies, and other device manufacturers to make that happen for our customers and for their patients. The third key trend is really about the shortage of skilled professionals in all countries, I would say. We need to take a bigger role also in services and upskilling of professionals. We need to build this into our products as well, and solutions, but we also need to work a lot with education and training of radiation oncologists, medical physicists, RTTs, in order to have to close this gap.
That will be key for the next years and decades. For our product portfolio, we have a market-leading position, number one or number two in all our segments. For Linacs, on the Gamma Knife side, we have around 5,300 external beam devices in the installed base. We have launched the Elekta Esprit that we're very proud of. Of course, brachytherapy, close to 2,000 brachytherapy afterloaders and devices. Also, we have on quality informatics on Elekta ONE, that is being taking this full portfolio together and doing more with less, and personalize the different treatments. As I said, this is the biggest asset Elekta has, our installed base, and we work with it to increase the service components, but also the software components on this.
If I turn a bit to the service part, a very important part of Elekta's portfolio. It is 40%, roughly, of our revenue and increasing, you've seen over the years. I often focus on bringing service revenue to grow faster than installed base growth, and that's what I expect to continue in the next years, because then I know that we bring value to the installed base. From the regional dimension, you can see that Elekta is quite well diversified in our three main regions. We have around 120 markets, we sell to 40 offices around the world. You can see it's very well distributed. In Americas, U.S. is, of course, a key market for us. It's about 75% of our revenue.
Elekta's strategy in the U.S. is more about gaining share, because it's quite a mature market, and the right product launches and also partnerships. Europe, it's about 80% in EMEA, and MEA is 20. Here, it's driving growth a lot in emerging markets, but also parts of Europe has a big gap in radiotherapy. For APAC, area that I believe will be one of our key growth areas going forward, China is 50%, and we expect the other market, the Southeast Asia, to continue to drive a lot of growth for Elekta. Just to conclude a bit on the market, we've seen Elekta coming from a situation where we grew close to 10% pre-COVID, going through a couple of challenging years, but now we have seen coming back to this 4% over the period and better in the last quarters.
Looking forward into the next two years, we expect a more than 7% growth on revenue. For the market, we expect 6%-8% globally, you can see 8%-10% in emerging markets, 7%-8% for software, that's a key growth driver in our portfolio. Mature, 2%-4%, and solutions, 5%-6%. With that, I would like to conclude and hand it over to Tobias. Thank you.
Well, thank you, Gustaf. Please have a seat. Yes, now we're gonna talk to our CFO, Tobias Hägglöv. We're gonna reflect upon what the financials impact have on our the business. Here we have Tobias Hägglöv on stage. Before you take that forward-looking statement, looking what to expect for the coming two year, can you please give us, remind us where we stand today?
Yes, I can. Good morning, everyone. Really nice to be here. Looking where we are, this is where we are. We will continue the momentum we're in. If I look back here, over the past year that just passed, we were able to turn a soft performance in the first half to a strong second. We have been able to ramp up sales growth. We have addressed cost. We have seen that the FX rates have turned to be a bit more than accretive. The results you see here, a substantial improved operating margin in the fourth quarter of 2022, 2023. This, we aim to continue. Today, I will talk about our outlook, and I will talk about how we will achieve it.
As you know, as we presented here during the Q4 earnings release, we will grow more than 7% per year. The outlook also contains an EBIT margin expansion over the period, and also to distribute at least 50% of our net income to our shareholders in the form of dividends. This will be done with a constant focus on driving shareholder value. Gustaf, he was into it and looking at our revenue and the revenue development. Clearly, the case has been that, following the pandemic, the market has been hampered by the customer readiness amongst our customers. What we see now is an expectations of an increased growth rate in the market. Looking ahead in our outlook, we have a revenue growth of more than 7% per year.
It will be driven by an accelerated backlog conversion, backed up by the market recovery, as I just mentioned. We look into a continued solid to strong growth of our service sales. Also what we see is that prices are coming up on our order intake. In the PNL, we expect by the end of this year, and more so in next year, also a gradual price increase. We have a strong backlog. We have more than 40 billion SEK in our backlog. This is a backbone for growth. As you see here, over the past three years, we have been running with an average book-to-bill ratio of about 1.2, and in this fiscal year, we expect 35% of this backlog to be generated in revenues. That was the top line. Now, moving here, down further into the PNL.
I will now double-click on this and look into the drivers, and how we as a company will focus on drive shareholder value, both over this period, but also beyond that. When we look at the gross margin, it's no doubt, I mean, you have seen here over the last years that our gross margin has been under pressure. Inflationary pressure is still ongoing, and we also see that, just our growth profile or growing areas such as the solutions and such as the emerging markets, which are relatively lower gross margin, also, hamper, the gross margin as such. However, we are not standing still. We will drive, and we will improve, our gross margin. The volume contribution that I just mentioned will contribute with scale into our fixed cost in the COGS.
The price increases gradually towards the end of this year and into next year will also contribute. You saw that we very successfully were taking out cost here last year. Within our COGS, this will now be followed by taking out product cost with COGS reduction initiatives. We also see some favorable trends that supply chain are easing and logistics costs have come down. All in all, we're targeting a gross margin improvement with the majority in next fiscal year. Looking at SG&A, clearly here, we see the salary inflation around us, and that is ongoing. What we will do here is to continue the very nice, positive momentum we're in, driving the productivity, of actually ensuring a faster sales growth than the cost growth here by driving productivity within SG&A.
In this, we will also do selective investments, mainly within customer-relating activities and revenue-generating activities in order to remain competitive. When we look at our R&D, this is clearly something which is vital when you look at Elekta's long-term competitiveness, profitability, margin expansion. I'm very proud to work with the team here. You will later on listen in to Maurits and Nish, et cetera, and the work that is ongoing. You have seen over the last years, just here, we have launched the Elekta Espere, Comprehensive Motion Management, and also the Elekta ONE. These innovations are vital, not just to our customers, but also from a financial perspective in the long-term view of driving shareholder value.
When we look over this period, we do expect, as you see here, that the gross R&D as a percent of sales are coming down, that the net R&D is moving upwards, following higher amortization levels. The consequences you see on this slide is that the gap between the gross and the net R&D is narrowing. Looking to a slide that I think we have received some questions over the last quarters about. This is actually then a summary, illustrative scenario for our operating margin and how you can think upon it. Yes, we will drive margin expansion. Yes, we will drive shareholder value. This will be a combination of sales and cost activities. Volume contribution, giving scale, as I just mentioned, price mix to be positive, offset the ongoing inflation with COGS reduction initiatives, continue our efforts on SG&A.
Following the higher amortization, net R&D will lower the operating margin, while actually FX here, given the current FX levels, will be a positive item here when you compare the years.
Thank you, Tobias, for giving these financial implications on the PNL. What about cash flow and the capital allocation?
Yes, thank you, Cecilia. Of course, when you run and drive, shareholder value is not just about the P&L, it's also about the cash flow and the balance sheet productivity. You saw that we ended last fiscal year very strongly here in Q4. We were able to substantially reduce working capital, and we were able to deliver a record-strong cash flow for Elekta. This work and this emphasis will continue in order to drive shareholder value. Where will the cash go? Yes, in our plan, it includes a continued dividend to our shareholders. It also includes to continue to expand our portfolio and offering, and it will also include the great journey we're on to expand our geographical footprint and grow there.
Do you have any closing remarks?
Yes. These are my closing remarks. Product launches to accelerate order growth. We have talked about the market recovery and acceleration of the backlog conversion to drive revenue growth. We will drive margin expansion here by revenue growth, price increases, cost productivity. We will continue our focus on cash conversion and working capital. Our capital allocation is planned to include dividends and also continued investments, both in our portfolio and geographical expansion.
Thank you, Tobias.
Thank you.
Thank you. We have heard Tobias talking about that we will continue to invest selectively in innovation. Let us now hear Maurits Wolleswinkel, who is responsible for our R&D. Welcome on the scene, Maurits.
Thank you so much, Cecilia.
You were presenting the R&D strategy at our latest CMD as well. Can you please start by updating us, what have we updated in our product portfolio since then?
Absolutely, Cecilia. Good morning, everyone. I can say that a very delighted and proud person is standing in front of you, because if I look two years back, across the Elekta portfolio, we have introduced new capabilities and new breakthrough innovations to the market. Starting with Comprehensive Motion Management, and it's truly comprehensive. Secondly, a brand-new Gamma Knife, the Esprit. We brought imaging into the brachytherapy room with Elekta Studio, more recently, at ESTRO, we introduced Elekta ONE, and I would say one of the largest product introductions we did in software for Elekta. Let's start with Elekta ONE. What is Elekta ONE? First of all, it's a unified software environment, and it really builds on the backbone of MOSAIQ.
MOSAIQ is still there, but what we actually do on top of MOSAIQ, we are building brand-new applications in 4 areas: workflow management, treatment applications, real-world outcomes, and in the future, also a new integrated console environment. Important to mention in this respect, and that's my 2nd point, this is an evolving ecosystem. Why is that relevant? Because our customers will not lose any functionality along the way. The 3rd point I would like to highlight here as well is that Elekta, in their software effort, continue to remain committed to open interoperability. How does Elekta ONE fit into the innovation agenda? We actually shared 2 years ago, and maybe you remember and recall this overview. I'd like to actually highlight the objectives, the aims we set out for ourselves in the three areas we highlighted.
The first one is what we said: for every treatment, we actually want to make it a personalized treatment. The second thing we said is that with the data, we want to radically reduce and elevate productivity by as much as 50%, and we think that's a very realistic goal. Thirdly, we want to work towards integrated decision support into every treatment. These are the goals. If I take these three goals, I can summarize them into bringing more personalized treatment to the patients in the clinics with less effort. A way to bring that to life is actually to take a look at a radiation therapy course of treatment. In today's conventional IGRT treatments, we have a quite intense phase of treatment planning, then we have delivery of multiple fractions with review moments in between.
That can be 25, 30 fractions, taking as much as eight weeks of treatment. With higher personalization and better imaging, we actually can make every treatment session a treatment in itself. With more personalization, we can also deliver more dose per treatment session. The result is what we call hypofractionation, and in combination with adaptation, we can really shorten the treatment course, but also do it with less effort. Better for the patient and also better for the clinic. If you have even superior imaging at the point of treatment, and also have imaging while you're treating and delivering the beam, you can even further push the boundary.
That's what we do with MR-guided, what I would say, ultra-hypofractionated treatment, bring it back to even as small as 1 week in just two fractions, and more about it in a later session. Let's zoom in a little bit on the three focus areas I mentioned earlier. Unity clearly is our flagship product when we talk about personalization. Comprehensive Motion Management is doing well. We start to treat the first patients, and we plan to roll out this solution this fall to all our customers as well. The point I want to make is that Elekta is extremely well-positioned in bringing this personalization to the clinic. Across our portfolio, whether it's MR-Linac, brachy, neural, but also enabled by our software, we are bringing personalization to the clinic, and we're uniquely positioned in that respect.
You also see here an adaptive CT-Linac. Let's take a closer look at our plan of how we bring adaptive treatments to the CT-Linac space as well. Important to mention there as well, that we see adaptive treatments as a workflow. A number of capabilities we need to bring to the clinic, inside the treatment room, but also outside the treatment room. We're not anticipating to introduce a complete new system, but bring these capabilities in steps to the customers. We will not only bring them to the customers as new product, but more importantly, also as upgrades. That means that our customers can not only buy the new products, but also basically bring the upgrades to their existing products as well. It's a very important strategy in how we bring adaptive to our CT-Linacs. The second point is about productivity.
With Elekta ONE, we are introducing three brand-new products built from the ground up. Smart View, bringing mobility to our customers. The second one is Smart Flow, that is also new. It's called protocolized-based workflow that really brings next level of automation, but also very important, brings this connectivity to third-party, vendor-agnostic applications as well. The third one is auto-planning. Auto-planning, that's really a breakthrough as well. Treatment planning that can take as long as one and a half hours, we bring back to just one and a half million minutes. We are extremely confident that our aim to reduce the efforts by 50% while delivering more personalization, is very feasible. The third element about integrated informatics: what are we doing there?
We're actually bringing our data analytics and outcome portfolio together in such a way that we connect the underlying data, so that the sum of the solutions is bigger than the individual bases. Integrated informatics is very much also about data and AI. That brings me to the next topic. AI is a big topic. A lot is happening in that space as well. I just want to highlight three initiatives we take that's a little bit more forward-looking. The first one is that we see already in the marketplace, quite some auto-contouring solutions. They typically contour the critical structures. What we are focusing on is the more difficult problem, is to look at actually the target, the tumor. The second example is around bringing real-time motion management tracking to the CT-Linac portfolio as well.
The third element, and the third example I want to mention as well, that's actually coming out of one of our investments I introduced two years ago, is one of the tough problems, is what we call 40-beam CT. That takes really minutes of calculation times. Now, with applying generative AI, we can do it in just a few seconds. A lot of exciting stuff. That brings me to my final concluding slide. I'm extremely proud, as said, and pleased with all the innovations we bring to our customers, but also actually what it will do for the business of Elekta. With Elekta ONE, we generate new upselling capabilities. We will accelerate our transition to SaaS, and with our delivery solutions approach, we will shorten the time to value, but also bring more high-margin upgrades to the market as well.
More personalization with less effort is not only bringing value to our customers, but also to Elekta. Thank you.
Thank you very much, Maurits. Please have a seat. Let us continue with Elekta ONE. Look here for some more information.
We heard previously Gustaf Salford emphasizing sustainability as being part of all business aspects of Elekta. We would like to share with you some more insights on our sustainability agenda. The most suitable person to do that is our Head of Sustainability, Hilma Nordquist. Please, welcome on the stage. Hilma, we would like to know what Elekta is driving when it comes to sustainability, especially when it comes to our product offering.
Excellent. Thank you, Cecilia. I'm excited to be here. It's a great honor to be presenting the sustainability agenda to you. Before moving into how we're dealing with combining innovation and sustainability, I wanted to just walk you through some high-level activities that we're driving across ESG. In the environmental space, we're working with measuring and reducing our emissions according to the Paris Agreement, and we recently had our targets validated by the Science Based Targets initiative that Gustaf mentioned earlier on.
We also, in our social area, we're of course, driving access to healthcare through our core business, but we're also working with protecting and supporting people across our value chain, from the workers in our supply chain, working with our own workforce, caring for them, and also, of course, making sure that our patients that are treated by our machines are done so in a safe way. In the governance area, we're working with making sure that we run an ethical business in everything we do. We have recently issued a sustainability or signed a sustainability revolving credit facility at EUR 250 million, which was a follow-up on the sustainability-linked bond that was issued 2 years back.
I will be focusing mostly on environmental topics in my presentation today, and how we are working with our environmental agenda to make sure that we can grow our business in a sustainable way over the longer term. What you see on the screen now is a visualization of Elekta's value chain emissions. We have a majority of our emissions in the use phase of our products. This is primarily driven by the power consumption of our products, SF6 gas use when running the products, and packaging and end-of-life treatment of our materials. You also see that we have a significant part of our emissions in the supply chain, the materials that we source, as well as logistics that we're running. Only a smaller part of the Elekta value chain emission come from our own operation.
That's that's referring to our facilities, the car fleet that we're running, and the power that we procure to run our operations. That's quite common for companies only to have a small proportion of your emissions in Scope 1 and Scope 2. As you can see, we have the majority of our emissions in Scope 3, and we're working on our methodology to constantly become better at measuring this in different ways. With this understanding of our emissions, we can also then work in a coherent way with reducing emissions across our value chain. We have, during the last year, designed and set targets for ourselves in order to be able to do so. We've set four science-based targets. We've recently had them validated as well, which is a big step forward for us.
I'll walk you through the targets one by one. Looking first at our own operations, this is then Scope 1 and 2. We're working with reducing those emissions in absolute terms by almost a half in the next 10 years. This is about us transitioning our car fleet to a greener one. We're also going to transition our power consumption in our own operations to renewable electricity. We have another target for our supply chain. This is about motivating and engaging with our suppliers to enable them to set their own targets for working with their environment work. This is a way for us to really scale up climate action in our supply chain.
This is a common way for companies to address supply chain emissions, we have started with this work and engaged suppliers, and we're being tracked in all of this. We will be reporting on the progress for the first time in the next annual report, coming out in a few weeks' time. So far, we're seeing good progress on the numbers here. Moving to the last target, we have set an Elekta-specific target for our emissions, which is about us wanting to reduce emissions from our products per treatment course that we deliver, because we see a need to increase number of treatments that we deliver over time, and we want to make sure that we deliver cancer in an environmentally sustainable way as we grow our business.
This is where it gets more exciting, when I will be moving into the innovation part of my section. I suggest, Maurits, why don't you join me and we can deep dive a little bit more into this target market? Excellent. Maurits, we've been talking about this target during the design phase of it, and we acknowledge that we want to be able to make sure that we can continue to treat more people in an environmentally sustainable way in the longer term. We are tracking now emissions from how we're using our products, and then tracking that per treatment course that we manage to deliver globally. This is very exciting. It's an Elekta-specific target that we have designed for ourselves. I wanted to...
I mean, I mentioned before that Scope 3 emissions from Elekta products are primarily driven by the power consumption, running our machines. I was thinking maybe you can elaborate a little bit on how we are innovating to reduce those emissions.
Yeah. Happy to. I think it's well known that Linacs are, I would say, energy hungry.
Yeah.
This has been an attention point for quite some years, actually, already at Elekta. Maybe good thing to mention here, first of all, is that today, the Elekta Linacs are up to 40% less in energy consumption compared to competitive systems. That is really competitive.
advantage for Elekta. We see more and more customers asking for that. I think that's an important point to make here as well. We're doing pretty good. But that's during the delivery of the beam when the patient is treated. The next thing we're now doing is all the time around it, call it the standby mode, the idle mode, but also during QA. We're now really zooming in how we can reduce the energy consumption in the non-treating time. A lot of attention, yeah.
Brilliant. I also heard you speak about hypofractionation in your previous presentation here. It's one of the ways for us to drive number of treatments that we can deliver. Perhaps you can elaborate on that.
Yeah, yeah. The statement I make about more personalization with less effort actually very nicely dovetails with the sustainability goals we have set for ourselves as well. If we provide more dose per fraction and we can limit the number of fractions, that means also being able to treat more patients on a single Linac. It makes radiation therapy more accessible, but also less visits of the patient to the clinic as well. One of the studies actually showed is the highest CO2 emission is actually caused by the number of visits that the patients need to do traveling from them home to the clinic. A lot of exciting things there as well.
Excellent. Yes. I mean, if you can travel less to the hospital, that's a big deal for the patient
Yeah
and for the environment.
Yeah.
It's good. Excellent. It's clear that when we're working towards this target, innovation will be critical, both for driving down our, what we call the numerator and the denominator, and driving up the denominator here. Thanks for sharing your views here.
Thank you.
It sounds really exciting. Sounds really exciting to shape the future innovation with the same or better performance and less emissions. That will conclude the first strategic pillar. Thank you, Hilma and Maurits. Maurits, can you please come up and join us? Because together, with some of your colleagues, we want to move into the second strategic pillar, which is that is driving a partner integration across the cancer care ecosystem. With me here, I have Habib Nehme, our Chief Commercial Officer. I have Carlos Castilleja, our Head of Americas. Elekta has, as the largest standalone radiotherapy company, chosen to collaborate with strong partners in bringing together the expertise in cancer care continuing.
You were recently appointed Chief Commercial Officer, but already in your previous role, you were highly involved in the partnership. Habib, if you can please start telling me what are the advantages with the model that Elekta has chosen?
Yeah. Thank you, Cecilia. It's a great opportunity as well for Elekta and the industry. The core advantage of the partnership is that we're bringing to our customers, comprehensive solutions, going from diagnostic, planning, treatment, and this is worldwide, not only focused on our region. Second one is improving the customer experience, because we are allowing them to have multiple technical choices, going as well from diagnostic workflow, and that will tailor the solutions to their patient they are treating and giving care for. Another key advantage is to keep Elekta with the open design, open flexibility, like Gustaf talk about the open architecture, right? Not forcing the customers to go to a rigid and a forced architecture and closed one.
The other main advantage, and my colleagues would agree with me, is that giving to our sales force opportunity to partner with the other companies to elevate the discussions and the value proposition to the C-suites of the main private oncology companies and IDNs worldwide. Us, as an independent RT company, making us focusing on our core business, which is the precision radiation medicine with more competitiveness.
From a commercial point of view, what have we achieved with our partners so far?
I mean, the last 18 months have been very active, where with the partners, we have mapped the organization, the processes in place, the steering committees, and we sign globally, the regional agreements, and we started working on opportunities, filling the funnels. We have managed as well to put in place the value propositions, going from diagnostic, as we said, to treatment. And we streamline the channels, and we know where to go, how to go, and start winning. We start winning in mature market, in as well in emerging markets. This is great opportunities for us, because we know that 7%-8% of the opportunities are bundled with imaging.
We are working in a competitive way, therefore, and still 90%, around 90% are independent RT, I would say, solutions.
Some countries with example of the
We have Romania, we have India, we have Tanzania, we have. You see, it's like a mature market and emerging markets.
Yeah.
I mean, very promising, I would say, partnership.
Thank you. Carlos.
Yes.
You are head of Americas, and therefore, covering the largest radiotherapy market in the world, the U.S. market. What opportunities do you see with this partnership, in the U.S.?
I think we first have to recognize a few things, right? One is that we have the complete radiotherapy portfolio on the market, but yet patients can't be treated on our solutions unless they get diagnosed, which takes testing and imaging, and so forth. At the same time, we need to also recognize that large IDNs, integrated delivery systems and large cancer networks, manage majority of the cancer centers in the U.S. The partnerships, a partnership with like-minded imaging partners allows us to unlock the full patient journey, as Habib was talking about, right? From the diagnostics to survivorship activity, as well as the opportunity to hone in on the executive level that where the decisions are being made.
Yeah. If we look at the R&D part of it, and that's your area, Maurits, we are talking and working on increasing the interoperability between our open system and those of our large partners. Can you describe what improving interoperability means in this context?
Yeah. Happy to. First of all, let's define what interoperability means, and it means exchange of data and information. You do that for two reasons, that you don't need to redo certain efforts. Typing again, diagnosis, for example, into a different system, so you want to limit that for efficiency reason, but you also want to increase it for quality reasons, so that in all these handovers, you don't make mistakes. These are the two reasons why interoperability is important. We distinguish two types of interoperability with our partners, interoperability across the cancer care continuum. How do we link diagnosis, if you see in the picture here, with treatment as well? Also within treatment, we have partners, simulators, pieces of software, where we also have interoperability with.
What we are trying to do is to further strengthen and deepen that interoperability. Since Elekta essentially is taking ownership over the end-to-end RT treatment journey, we sort of own the rich data and context that we can share with our interoperability partners to increase the interoperability, to make more efficient but also safer. It's a very important topic.
Previously, you were presenting the R&D strategy. What role has and will partnership have in that R&D strategy?
Partnerships is very important as well, and they are sometimes also related to interoperability, of course. There's more than that. We see a lot of innovation in radiation oncology. Elekta, I see Elekta as the integrator in the radiation oncology department and beyond. That's our role, as being the integrator. As an integrator, we need to do two things right: that the totality works together in a good way, and the second thing what we need to do right is that we always are ahead of the curve, so we have the latest innovations. We continuously are thinking about what do we want to do in-house ourselves and where do we need to partner, because we don't need to do everything ourselves, as long as we continue to be the oncology integrator. That's the approach.
Got it. The final question to you, Habib. On the commercial side, what can we expect for the future there when it comes to partnership?
Yeah. I mean, let's summarize it. We'll continue, as Elekta, to reach out to the install base of our partners. We see that more than 50% worldwide. We continue together to offer standardized services and solutions to work on common training programs, educational programs for our customers. Maybe co-marketing and co-distribution as well. Common financial solutions together. Together we'll be strong.
If I summarize this, Elekta's multiple partnership is a strength to the business, and there is exciting things to come going forward. Now we will take a break, and when we come back, we will dive deeper into the expanding world of treatments of MR-Linacs.
Cancer is a rising issue in Africa, and cervical cancer is one of the leading causes of cancer deaths among women in the region. Every two minutes in the world, a woman dies from cervical cancer, so the idea of eliminating cervical cancer is early detection, early screening, and early treatment. Rwanda has been a front runner in addressing cervical cancer. Today, over 90% of young girls are vaccinated on HPV, but there are still 1.5 million women who need to be screened. Cancer is a disease that is scary. People know that, "If I have a cancer, I'm going to die." People prefer to do not even know if they have a cancer.
To change those perceptions, Elekta Foundation partnered with the Rwandan government and local NGOs to pilot a project in the Gicumbi district, where there's not been any screening before.
Didn't know the signs and symptoms of cervical cancer. From the trainings of Elekta Foundation's support I have attended, I started to work with cancer detection.
We did some community mobilization, where we could target women who are in the market or even in other community forums. The community health workers, with the tools that were pre-tested and produced, they were really able to communicate 'cause they were trained how to conduct an IPC session.
We're very privileged to have Elekta Foundation as part of our partners. If you look at the work that we've done in Gicumbi, it's quite tremendous because we managed to screen around, 20,000 women in less than four months. From screening 20,000 women, we detected many women who have developed precancerous lesions. We provided treatment right away. 528 women were treated with pre-cancer lesions.
If I knew that we have screening in Rwanda, we do everything, I would have done it earlier before, they wouldn't detect that my cancer is in the earlier stages.
Through screening, we also detected 19 cancer women. They are now receiving treatment. The work done in Gicumbi shows that early interventions will save lives. Saving mothers means saving children. Our work is touching lives, and we can do more with your support. Let's join hands to eliminate cervical cancer and do our utmost to close the gap on access to high-quality cancer care for everybody.
Where you are born and where you live should not determine how long you will live.
Welcome back. Our next strategic pillar is driving adoption. That is done differently depending on the market. Immature market is very much about increasing efficiency, but also about better outcome. We have asked Dr. John Christodouleas to give the latest news from the MR-Linac scene. John is sharing his time between being an oncologist in Philadelphia and working for Elekta as the Head of Medical Affairs. Please, John, I know you have some fresh news for us.
Thank you, Cecilia. It's my pleasure to give you a very brief update on our clinical development activities. As likely many of you know, the MR-Linac Consortium is a collaboration between clinicians on the front lines of care and Elekta and Philips, with the purpose of defining best practices and evaluating best practices for MR-guided radiation therapy. As you may have seen from our social media activity last week, we had our annual meeting last week in Amsterdam, and I think it's fair to say that this was our most successful event ever. It was our largest meeting. We had over 600 physicians, physicists, radiographers, RTTs participating both online and in person. We had over 300 individuals join us in person for this event. It was a truly global event. We had 65 different cancer centers from 26 different countries represented at this conference.
While we had an extra special focus this year on education and training, we still had top-notch research with over 100 scientific abstracts on both technical topics as well as clinical topics. Just to give you a little sense of the kinds of presentations we had at this consortium meeting last week, I want to describe three presentations, three abstracts that actually won awards: the best clinical abstract, the best technical abstract, as well as the Young Investigator Award. The first abstract was by Dr. Jeremy De Leon, here on the left side of our screen. Dr. De Leon is from St Vincent's Hospital in Sydney, Australia, and he described their experience with sim-less prostate SBRT.
Just to describe what that means, as you may know, in the conventional workflow in radiotherapy, usually when an oncologist decides to treat a patient, the very next step is to bring the patient back for an imaging session. That's the simulation scan. You're simulating the treatment. Sometimes we call that the mapping session, right? Once we get those images, we import them into the software, and we can take a week or two to plan the radiotherapy, and then we have to bring the patient back for that treatment. What Dr. De Leon and colleagues realized was that with Unity, you're updating the plan to reflect the day's anatomy every time you see them. That simulation plan that you create in the beginning in the traditional workflow is really just a rough draft.
What they also realized was that all these patients that they're seeing in prostate cancer already have imaging, right? They're getting imaging as part of their diagnosis, and that they can use that imaging to create a rough draft plan and so spare that patient that extra visit, so they can go straight to the machine. That really helps the clinicians with throughput at the clinic level and really minimize the visit burden and travel burden of the patient. You can imagine in regions of the world where distance to the cancer center is a major obstacle of care, this could be a very big deal. The second and third abstracts here are about utilizing the Elekta Unity in novel ways to identify parts of the tumor that may or may not be more or less radiosensitive.
In the second abstract, the middle gentleman is Michael Dubec from The Christie in Manchester, England. He presented a project on using a novel imaging technique to identify the level of oxygen in different parts of the tumor. Because we know that oxygen level within the tumor is a surrogate for how sensitive or insensitive it is to radiation. If you can see parts of the tumor that may or may not have enough oxygen, those parts might benefit from additional radiation therapy, from additional dose. In that 3rd abstract from Sunnybrook Hospital, was looking at a novel way of using Elekta Unity to look at the white matter of the brain. They were looking at the white matter tracts to see how they were disrupted as potentially a surrogate for whether a tumor is infiltrating in that area or not, okay?
That if there is infiltration or regression of infiltration, that might tell you how the disease is responding. The reason why I really wanted to tell you about these abstracts is because all these ideas, sim-less, prostate SBRT, oxygen, you know, oxygen enhanced imaging, tractography, these ideas were innovations that we, as the vendor, did not anticipate. This is the future of radiotherapy being defined by the clinics in real time and at a pace that I think we've never seen before in radiotherapy. You know, I like to say that Elekta Unity is an information-generating machine, and if you give really smart and hardworking clinicians lots of valuable information, they're going to innovate. Speaking of really smart and really hardworking, it's my pleasure to introduce our guest speaker today, Dr. Alison Tree.
Tree is a clinical oncologist at The Royal Marsden NHS Foundation Trust in London. She's also an honorary faculty of The Institute of Cancer Research, London, where she has led some of the most impactful clinical research in prostate radiotherapy in the last 10 years. Dr. Tree?
Thank you very much. Good morning, everyone. It's a delight to be with you, and my job really is to share some of the enthusiasm and excitement there is amongst the clinical community about the Elekta Unity. There we go. Radiation has been on a massive journey over the last few decades. Starting here with the first ever modern radiotherapy treatment. Ever since then, we've been innovating and changing the way we deliver radiation to improve outcomes for the men, women, and children that we treat. Initially, we guided our radiation with pure X-ray beams, which was very crude, but did a reasonable job. We innovated and included CT scans to improve the quality of the radiotherapy. We then developed intensity modulated radiotherapy, which helps to spare the healthy tissue around the prostate and reduce side effects.
We developed stereotactic body radiotherapy or SBRT, which helps to give high doses to really difficult to control tumors. Of course, the pinnacle of all this innovation is the Elekta Unity, which we're now excited to be testing out and learning new things from. In prostate cancer, which is what I spend most of my life treating, we've been on a journey over the last couple of decades. It's a fairly short innovation window, really. When I started training, we would treat prostate cancer every day, Monday to Friday, over six and a half weeks, and that did a reasonably good job. It might control about 60% of prostate cancer five years later. We found out that if we lengthened the treatment, we made it over seven and a half weeks, we could cure more men.
Obviously, they had to come for longer, but it improved cure rates, which is good. We then innovated, and this next tranche of trials combined two things: both shortening the radiotherapy course, which makes the treatment better for the man. He can get his treatment over and done with and get back to normal life and work sooner. Alongside that, we also innovated our technology. We incorporated IMRT, we incorporated some early forms of image guidance, and this further improved the cure rate, so we went up above 90% cancer control in prostate cancer for the first time. Over the last decade, we've been shortening the treatment even more, so we want to go down to just five treatments in prostate cancer, and we've been testing that in the PACE trials.
That's we don't yet have the five-year cancer control outcomes, but we anticipate that they will be at least as good as the 90% we've seen before. Concurrent with this story, we've also been dropping side effects. Initially, we might experience about a third of men might experience some moderate or severe bowel side effects from their radiotherapy with these early trials. Just by improving the technology and using the same dose, we could drop that by more than half using IMRT and image guidance. In the PACE trial, where we further innovate the technology, we can drop that down to below 5% of men experiencing what we call bowel bother. Better technology cures more patients with less side effects, and that's a key theme for us moving forward.
John's already alluded to the excitement we have at the moment about making our pathway more efficient. At the moment, when I tell a man he has prostate cancer, he needs radiotherapy, he then waits several weeks to actually start that treatment. Can you imagine how stressful that is, knowing that you have cancer and your treatment hasn't yet started? We want to try and shorten this pathway to improve outcome for patients and also to reduce anxiety. That's why we think this simulation-free pathway is a realistic proposition within the next few years. We've got some work to do to make that applicable to all patients, but with the Elekta Unity, that actually becomes a vision that we can see.
If you don't have a Unity, obviously most radiotherapy around the world still delivered on a non-Unity machine, we know that the images we have are pretty poor. I've put on the screen here two images from a CT scan or from one of our normal linear accelerators, and you can see they're blurry. This is actually a picture of the prostate, but you might not be able to see that because it's not very clear at all, and yet this is how we guide our radiotherapy day by day at the moment. You might just be able to see here a little white dot. Can you see that? That's a little piece of gold that we've implanted into the prostate to make up for our poor imaging.
This brings me on to the one of the first of four key advantages that we see to the Elekta Unity. To put these little bits of gold into the prostate, we need to put that probe into the back passage of the patient and pass those three needles forward into the prostate. This is okay, but it's not a very nice procedure. Men want to avoid it if they can, and with the Elekta Unity, we don't need it, and that's a key advantage. Many men come to me asking to have the Unity specifically to avoid this procedure. The second key advantage to the Unity is that we can see what we're doing much more clearly than ever before.
On the left-hand side is the image, is a CT scan image, so in the middle is the prostate, at the back is the rectum, and both sides, you've got the hip bones coming in. You can see that the prostate is not very clearly seen, so if your, the precision of your treatment relies on my ability to see the edge of the prostate, that's not going to be the most precise treatment. In contrast, on the image on the right, it's the same orientation, so the hips either side, prostate in the middle. You can see very clearly the edge of the prostate, so very quickly you can see that the imaging improves the precision of our treatment. The third key advantage to the Unity in this setting is that we can monitor while we treat.
On our normal machines, you might take an image, you'd set the patient up to the right position, and then you turn your imaging off because we can't deliver the radiation at the same time as taking the image. At the very moment you need the most precision, you turn off your imaging, which doesn't make any sense at all. With the Elekta Unity, we can get high-quality cine MRI images while we deliver the beam. I know at the very moment I need to deliver the dose, we can be seeing what we're doing, and if there is any movement, we can stop the beam and carry on when it's safe to do so. The fourth key advantage to the Unity is to change the dose whenever we need to.
This, to me, is the most exciting part of this machine. What we normally do, is create a plan for each patient, so it's one personalized plan per patient, but within that patient, from day to day, their anatomy will be shifting. In this image, this is a CT scan. I've labeled where the prostate is, and behind we have the rectum or back passage. From that image, in advance of the treatment, we create a perfect radiotherapy dose distribution for that anatomy, which is great. If nothing ever moved inside us, that would be okay.
Sadly, we know sometimes the men turn up for their first treatment, I think you can probably all see that the prostate here has been squashed forward, the rectum, the back passage is very extended, we have two options: We can either deliver what we know to be an inferior radiotherapy dose, which could increase side effects, or we have to send the patient away without treatment that day. We've what we've seen from using the Unity over the last five years is we have some patients, like this is one of my patients, where their bowel is totally different every day. It's in a different position. We know one radiotherapy plan would do a really poor job for this man, decrease his chance of cure, and increase his chance of side effects.
Our data would indicate that the Unity can increase the dose to the tumor by up to 10%, and that I would expect to improve cure by a similar amount. The other thing that we've learned, as Dr. Christodouleas was just alluding to, is we've seen things we didn't understand before. This machine has enabled us to learn more faster about what we do. This is one of my patients. I've drawn around the prostate there. This is a side view of the prostate. The prostate's in red, and the bladder with the bright urine, you can see above it. He had five treatments in the Elekta Unity, and by the final treatment, I think you can get an impression just from that image that the prostate's swollen, right?
We never knew this happened before until we could image every day with MRI. In fact, if you look at a population of patients we've treated, the prostate swells by up to 21%. That's a massive increase in volume, and that threatens our chance of curing the patient because if I take the prostate radiotherapy plan from the first day and apply it to the last day, I'm missing half of the prostate. The other thing that's the Unity allows us to do is to conceive fundamental changes, paradigm shifts to the way we deliver radiotherapy. What we normally do is, we've explained, we draw around the target, the prostate in this case, which I've drawn around in blue, and then we put up what we call a margin around it. This is a safety margin because we know things can change.
Unfortunately, within that safety margin, there are some healthy tissues that aren't cancerous, that don't really need to have radiotherapy. In this case, it's the bowel or rectum. At the moment, on our normal machines, we need this margin because the prostate can swell, the prostate can move. The patient can wiggle on the bed, and the cancer can change. We have no way around this. Now, for the first time, we're starting to envision a world where we don't need that margin. We can spare all of that healthy tissue around the cancer and reduce the side effects. Where does the Unity enable us to go in prostate cancer? You can tell from the construction of my slide, I think we're on a journey. We've dropped down from 8 weeks to 4 weeks to 5 days.
The question is: How low can we go and still cure prostate cancer? The Unity allows us the ability to create these beautiful dose distributions on the day's anatomy, which gives us the confidence to test really ambitious strategies moving forward. One of those is the HERMES trial, which we're running at The Royal Marsden. In fact, we've nearly completed the recruitment. It's been a really popular trial. In this trial, half of the patients get five treatments on Unity, and half get two treatments on the Unity. This is the first time in the world we've ever done two treatments with MR-guided adaptive radiotherapy. Since we started this trial, two other trials that are essentially the same have opened globally. I think that indicates how much excitement there is about this strategy going forward.
If you only get two chances to get it right, which machine do you want your treatment on? I think the problem with the other machines, the non-Unity machines, is we rely on CT, which as you, I've just shown you, is suboptimal. You need to put gold seeds in for that added security. You need bigger margins, and you've got no way account of accounting for this prostate swelling, which remains an issue for many of our patients. I've talked all about prostate cancer, but I just wanted to mention that this is not just about prostate cancer. This machine perhaps has even more to gain in other tumor types. On these images, this loop I'm showing you is a patient on the left whose cancer is growing outside of the red area.
That's the high dose radiation area we've designed before treatment, and you can see the white area growing outside. His cancer is spreading outside of the area we are radiating, and because we can't adapt that on our normal machines, that man would be at higher risk of the cancer returning. Actually, this patient was treated on a Unity in Canada, and so they did adapt. They saw this tumor change and changed the radiotherapy field accordingly. On the right is a different patient whose cancer is shrinking, so you can see the white area shrinking within the red line, and that's good. That means the cancer is responding. What it does as it shrinks is it brings normal brain into the high dose radiation area and means that you're at risk of causing side effects from the treatment.
Finally, this machine opens us up to new possibilities, biological targeting. We traditionally treat the whole prostate to the same dose because that's all we could do before, but now I can see the actual tumor both on the left, so you've got I don't know if you can see that, but there's a prostate in the middle, and there's a darker area over to the left of the screen, and that's mirrored on the right-hand side. This is a diffusion-weighted imaging, so biologically telling us what's going on within the prostate. Now that we can see this, we can imagine new ways of treating prostate cancer, where we put more dose where the tumor is and less dose in the rest of the prostate, where there's no or minimal cancer.
That's what we're testing in the current suite of trials called DESTINATION, where we'll change from our traditional model on the left, where we give the whole prostate a red hot dose, and move to the approach on the right, where we're giving a really hot dose to the tumor and dropping the dose to the rest of the normal-looking prostate to spare those normal tissues. This is the, I think, the future of radiotherapy, certainly in the prostate and applicable to all different tumor types as well. If you were to imagine the perfect system for curing cancer with radiotherapy, you'd want to start the radiotherapy immediately with no waiting. We're working on that with our sim-free planning ideas. You want to see the cancer clearly during and before treatment. We can already do that on the Unity.
You'd want to change the radiotherapy plan as often as the internal anatomy moves. We can do that now with adaptive radiotherapy and more innovations to come. We want to do all of this in as few treatments as possible. Everyone wants to get their cancer treated, cured and get back to normal life. Finally, we want to do all of this with no side effects at all. We're getting better. We're not at zero yet, but we're going to get there. Thanks very much for listening.
Thank you. Thank you, Dr. Tree.
Sure.
we'll take just a few minutes while we still have you here, to ask you your thoughts about Comprehensive Motion Management.
Yeah.
Obviously, we were at the MR-Linac Consortium meeting last week. There was a lot of buzz generated. What are your initial impressions based on what you've heard? Just to acknowledge, we know that you haven't had that upgrade yet.
Yeah.
at The Marsden.
No, it's coming very soon, I hear.
Yes.
Yeah, there's a massive amount of excitement within the community about the CMM strategy. We can now start to imagine these kind of ambitious visions for other tumor types and not just prostate and pelvic tumor types, but liver tumors, upper abdominal tumors, pancreatic cancers, where historically we've not done the best job. I think the ability to track and gate is really key. That's important for those. Also in prostate cancer, what we see, it's not so much movement with respiration, obviously, down in the pelvis, but we can see the prostate drift sometimes as we're treating, and that's quite difficult to handle. What this new strategy will enable us to do is to just tweak the plan as we go.
If the prostate's sort of sinking as the man relaxes on the bed, we can just make slight adjustments while we treat. I think that's gonna be critical for prostate.
Right, critical to do that quickly.
Absolutely, yeah.
that the treatment times don't expand.
Yeah.
Exactly.
Absolutely.
Great. gating and true tracking obviously are sort of the headline innovations within this latest innovation.
Yeah.
There are, there's a whole set of, innovations that are coming out with this release. Are there other bits that intrigue you based on what you heard?
Absolutely. I think one of the key things that I've shown you is, but it's the imaging is critical, right? That's why this machine is so different to everything else, because of the MRI. There are shades of MRI. We want to keep innovating with the MRI protocols, and we've worked with Elekta and several of the MR-Linac Consortium sites to make sure that the images that come out of the Unity are perfect for each different tumor type. They might need to be slightly different to visualize different structures or different cancers, and also to bring out that biological targeting that we want to do. Some of that's coming out in this new release.
Yeah. Of course, we're very grateful to you and everyone within the MR-Linac Consortium for working so closely together with us to help make sure that we have the most appropriate imaging sequences available to you.
Great.
Great. Okay.
Great.
I think that's it. Thank you very much.
Thank you so much, John and Dr. Tree for sharing your views and the latest news with us. We're gonna continue with drive adoption, and we talked about mature market very much. If we go to emerging market, focus is more on increasing the install base and what Elekta has been doing here. Our Chief Commercial Officer will walk us through. Please, Habib, welcome back on stage.
Thank you. Hello, everyone. Very pleased to be here with you today. Just remember, in June 2021, Elekta talked about the strategy in the emerging markets, and we talked about 5 main pillars or approaches. Here we're going to tell you and discuss that Elekta walked the talks. The first one, which was improving the coverage and going local and having a local presence. We see since that time, we gave access to more than 200 million people on the planet, access to radiotherapy by installing more than 500 Linac, including China, in the emerging markets. More than this, we went direct in 5 major countries with a mid-size, I would say, population. We went direct in Egypt, we went direct in Thailand, we went direct in Indonesia, in Philippines, in Romania.
We went direct as well in the neuro business in Turkey. This is giving access and being locally present for more than half a billion of the population worldwide. Second one, with the technology come the human capital, and it's very important, radiotherapy is how we can educate and train the human capital in these markets and sustain it to sustain the solution. Since that time, we trained and educated more than 31,000. We provided more than 31,000 trainings and webinars, either physically or virtually. Third pillar of this strategy is partnering with the ministries of health, because they are key in order to drive the adoptions in the countries.
We see Elekta since that time, who are the major partner, in the Ministry of Health in South Africa, in Egypt, in Morocco, even in India, with the aims, where we have the major, I would say, part of developing radiotherapy, in India. The first one is accelerating the transfer of technology, the transfer of know-how of radiotherapy from mature market to emerging market. We partnered with many groups, operators, either in France, in Europe, to operate and transfer the knowledge, make the planning in Africa, in Rwanda, in Senegal, in Togo, or from India to the emerging market in Kenya, or as well from Singapore, Malaysia, to India. We have a successful partnership with these investors in these countries.
The fifth one is developing the right product for site ability, service ability, for comprehensive application, for this market. We have a lot of examples with the Harmony, with the brachytherapy. They are adapted to the needs and the mix of cancer in these countries. Is this a short-term strategy for the ACCESS 2025? Even we are halfway, and we are well entrenched in order to deliver on the ACCESS 2025, we see this is as well, a long-term and sustainable strategy, because in these emerging markets, with high demographics come high incidence of cancer. This is done or designed and implemented to last and to be successful. What it is for Elekta balance sheet, for Elekta revenue and profit?
If we combine the pillars of strategy that we're talking about, for example, partnering with the Ministry of Health or strengthening our partnership, this is accelerating, our socket, in the green fields in this emerging market. We see that 60% of the revenue in these emerging market coming from this solution. However, there is a double benefit as well. As we go, direct with a local presence, we are building more on services on the existing install base. We're bringing more service offering on the existing install base. With the greenfield new installed base as well, we are offering, from day one, comprehensive services packages, and more, we are offering Software as a Service.
There is a double benefit, double effect, because there is a top line increase, but as well, this acceleration, accretive margin increase, with the services constituting 40% of the revenue. We are having double benefit on the top line, acceleration, and on the bottom line with the margin. Thank you.
Thank you, Habib. Before we leave, this, strategic pillar and move to the last one, we have one important market that over the years has increased the installed base, but there is much more to come. I'm talking about China. Look at this.
Hello, good morning. I'm Gong Anming, head of Elekta China. Today, I'm very happy to share some up-to-date reflections regarding China's RT market. First, as the China's RT market benefits from a series of policy tailwinds, we have seen strong market growth, and I expect to maintain this strong growth moving forward. As a part of the 14th Five-Year Plan, China's government is implement national and regional healthcare reforms, with the goal of expanding high-quality medical care at provincial and county levels. Consequently, we have been involved in a significant number of unique public tenders over the past 6 months, and achieved double-digit growth last year. Elekta has been and continues to be the market leaders for RT in China. Our solutions exist in the all leading healthcare institutions, differentiating to ourselves as a primary market provider.
As a market leader, with over 11 players in China RT market, we have still achieved more than 45% of the Linac market share in 14 national medical centers. Even during the pandemic, we completed the installations of Elekta Unity in top 3 RT centers and top 3 general hospitals in China mainland. All 3 national neurosurgical centers have chose Elekta neuro solutions. Not only that, local team has also made a breakthrough to bring Elekta's neuro solutions to top conventional RT centers, helping us expand our neuro business operation. We achieved 100% share of ranking in top 10 general hospitals and cancer centers, as well as being leading localized OS solution as always. Localization plays the vital role to business growth in China. I'd like to share you our localization initiatives and the fruitful results.
Since the last CMD, we have further strengthened our positions by localize our entire Linac, TDS, and MOSAIQ product portfolio in anticipation of changes to policy. Considering the shortage of qualified RT professionals is one of the most important bottlenecks in China's RT market, we have continued to invest in training and education of healthcare professionals, further supporting the growth of qualified RT professionals as the market grows. Even during the past three years, we have delivered trainings to more than 30,000 healthcare professionals by utilizing online or hybrid approaches. We will continue to educate oncologists, physicists, technicians on our best-in-class products, and also to improve system quality for operating service, driving quality assurance with our customers through increased attach rate by new offerings. Particularly in March, we announced a joint venture with Sinopharm to further improve access and the quality of care as the market grows.
The joint venture will deepen our market access by expanding our service and the sales coverage, as well as enabling us to more solutions of capital financing. In addition to our leading informatics solutions offering, we have a tradition of using the best software partners to always cater to local needs and then provide the optimal solutions for our customers. Our customer will continue to benefit from the best combination of Elekta solutions and third-party applications going forward. We have a promising product pipeline with high interest for pro- Harmony growth in China market. It is expected to drive order conversion ramp up from COVID already. We also expect to see continued health development from local competitors within China.
I'm confident that our strength of localize our product portfolio, supporting China RT market, and the continued partnership with Chinese ecosystem players as present today, will ensure that we will maintain our growth trajectory. Thanks for your time. See you later.
That was our Head of China, Anming Gong. Now the last strategic pillar of today is being the lifetime companion, and that's very much about working with our customers and raising the already high service quality, and raising customer satisfaction even further. Anish Patankar, you're welcome on the scene. You are our Head of Software. Can you please elaborate on what we have done in this area lately?
Absolutely. I'm gonna talk a little bit about software as a service, and as it relates to Elekta ONE. You know, coming from the Silicon Valley, these are exciting times for software in the healthcare space. How has Elekta or any other medical device company sold software traditionally? Customer buys a license for the software. Elekta will go and deploy the software on a server on the customer premises. Customer will then use the software, and then at a certain point in time, you know, the license for the software is renewed, the whole cycle repeats itself. A couple of years ago, to be a really a modern software company, Elekta changed that model. We started offering our informatics software as a service, meaning the software is hosted in the cloud, and the customer pays a subscription fee for the software every year.
I'm happy to state that since we took that first software order as SaaS for our informatics solution, last year, 15% of all of our informatics software orders were for SaaS. Building on this initial success, we plan to offer Elekta ONE primarily as software as a service. What are the benefits for our customers with this SaaS commercial model? As we showed you, the product strategy for Elekta ONE, there's an underlying Elekta platform that goes with every product for Elekta ONE. What this means is that Elekta can offer different software packages to our customers, and customers can choose the right level of functionality that works for their workflow. Secondly, if customers want to have all the solutions from Elekta as part of Elekta ONE, fantastic.
If they have 1 or 2 applications from other vendors, we are committed to making sure that the Elekta ONE applications seamlessly interoperate with those applications as well. Our commitment to the open ecosystem of software continues. Most importantly for our customers, with the streamlined workflow in Elekta ONE, with Smart View, Smart Flow, auto-planning, our aim is to reduce the cost of every treatment in radiotherapy by 50%. That's a big ambition we are moving towards. What does this mean commercially for our customers? Every software package will have clear pricing based on patient volumes. There will be a single service agreement. Customers do not have to plan in advance if they need so many X number of licenses for physicians, Y number of licenses for dosimetry, and so on. We have unlimited licenses.
They can choose to scale up and down based on how they're evolving the needs of the clinic. If they're expanding, if they're getting acquired, it's seamlessly taken care of. The other thing is upgrades. They are baked into the subscription itself. There's no upgrade fees that the customers have to pay later on. It's all taken care of as part of the subscription. Most importantly, for the CIOs and the IT people at the hospital, they don't have the burden of procuring hardware, upgrading the operating systems, making sure the latest security patches are installed. Elekta takes care of all of that in the background, allowing the IT people, the CIOs, to focus on serving their stakeholders, the clinicians, and patients. What does all of this focus on SaaS mean for Elekta in terms of efficiencies and cost, right?
Most importantly, SaaS packages allows us to deliver a lot more value and a lot more product at the customer site. This allows us to capture, on average, 80% more revenue per SaaS customer compared to the traditional licensed customer, and that's big. Secondly, SaaS allows Elekta and the customer to be true lifetime companions. We have had 0 attrition to date for any customer adopting SaaS from Elekta. On the efficiency side, since we have the Elekta ONE platform, customers can seamlessly go from 1 software package to a higher level, higher functionality package. It's easy for us to add more solutions on top of the platform. It's a simple amendment to the SaaS contract they already have. The service contract continues to cover everything that they have, and a single invoice continues to go to the customer.
Very seamless operating model, allowing them to choose the right functionality level based on where they are in their clinical needs. The other thing, of course, is for us to have the conversation with the customer about moving to SaaS, every touch point we have with the customer, be it a contract renewal, be it a conversation about adding more products from Elekta ONE, or be it just a curiosity about the cloud. Every such touch point for the customer is an event for us to have that conversation, that SaaS, is that gonna work for them or not? On the cost side, we are partnered with Microsoft's Microsoft Azure to deliver the SaaS solution to our customers. With that, we instantly get a global footprint, delivering the solution worldwide.
We get best-in-class product and cybersecurity from Microsoft, and allows us to focus on building the applications of Elekta ONE, improving oncology care, rather than investing in building the infrastructure for providing the cloud. Having control of this infrastructure, having full insight into the customer environment, we can proactively and rapidly respond to any configuration needs for the customer, any support needs for the customer, really boosting customer satisfaction, and at the same time, keeping the cost of service for Elekta incredibly low. Really, really interesting development for SaaS, for us and for our customers. The excitement for this SaaS model in our customers is truly global, both in mature markets and in our growth markets. Here's a great testimonial from HealthCare Global Enterprises in Elekta, a huge hospital chain, 24 locations across the length and breadth of the country.
2 70-plus oncologists working there, treating 200,000 patients every year. If you look at the quote from Dr. Shantanu, they have really implemented our informatics solutions comprehensively, medical oncology and radiation oncology, as software as a service. They have standardized their workflow, achieved great levels of streamlined workflows, allowing them to focus on what matters most, treating patients effectively. This excitement is translating not only to growth markets, but also to mature markets. Please don't take my word, see it for yourself in a video from our mature market customers.
We do take care of a lot of patients. If we're looking at an annual basis, we have about 10,000 new patients per year at all of our sites combined.
Adopting the SaaS commercial model with cloud really made operational sense to 5D Clinics as an organization. Some of the other benefits are the simplicity of having a single invoice for the service, which reduces the paperwork and time for our accounts team.
Here at OCSRI, there are several reasons that we decided to go forward with the digital platform and the SaaS model. Those include security, redundancy, and accessibility. Several of the products within the SaaS model really allow us to find more information than we used to be able to find. Another thing that was really great when we implemented the SaaS model and the cloud model, in particular, is that it really was less expensive for us than replacing servers per our organization's timeline.
We make use of MOSAIQ SmartClinic to manage the movement of patients through our clinic. Having created treatment bookings, treatment planning, and treatment smart board workflows, being able to access MOSAIQ SmartClinic from the phone app has also been well received by staff.
There are many features in Elekta software and hardware that are helpful. Me, as an administrator, the analytics piece is very important to me. It really gives me a good picture of what's going on in all the different areas of this department, and all of those are so important in knowing, you know, how to look forward and how to budget and how to plan for the future.
One of the main attractions of a managed solution was that the hardware and software was managed by a team of experts. Making use of this service meant that we, as an organization, did not have to expand our IT infrastructure or employ any other full-time equivalent staff, to ensure the software is performing as expected. We found at 5D Clinics, the overall uptime and in general, the performance, has really, yeah, met our expectations as an organization.
Here at OCSRI, the trajectory has really changed as we've worked with Elekta, and it's all because of the partnership that we have with Elekta and working together and being a team.
Thank you, Anish, for explaining the SaaS model and Elekta ONE for us. In October 2022, we increased our value-added service as we launched Elekta Care 360. This was to support and identify need at our customer. Let us now hear what Fox Chase Cancer Center says about this solution. Please.
Commissioning a new machine, it can be very time consuming, so whatever we can do to reduce that time is, as an administrator, is what's important to me. When you have a machine that's out of commission and you can't do patients, you're affecting the patient's care, and you're also affecting your revenue.
I know I'm helping patients. Whenever I see the patient ring the bells when they finish the treatment, and I'm just happy for them that they came to the right place, using the right machine, using the best treatment plan from us, and to receive their treatment.
As an administrator, you know, there are 100 irons in the fire, so having this organized system at Elekta Care 360 really helped. I had timelines, I had meeting minutes, I had everything to refer to. I had a great expectation of what was gonna happen and when it was gonna happen. There were no questions. It helped me keep the patients flowing accurately, so I knew when our timeline was. It helped keep staff scheduled appropriately.
I had commissioned, like, 10 plus machines here at the Fox Chase, and without the commissioning team, then physicists will need to figure out by yourself, by reading the manuals or asking your friends, those kind of thing. For our physics resident, can ask any questions at any time, and he will answer us. I personally love it because our resident needs some firsthand information from the vendor, too. There are a lot of new features for physicists to pick up. Definitely make my whole commissioning process easier and more correct.
The timeline was seven days for commissioning. That was amazing to us. We didn't believe it for the first one, and then when it happened, we said, "Okay, now we can solidly predict that the second one's gonna be seven days." With the Elekta Enhance go live, we were able to recoup on our investment within a week of having our patients start. It's definitely a collaboration of what we need and what they offer, and it's just been fantastic.
We are happy that Elekta provide this service for us, and then we are happily treated with our Elekta machines. Very, very happy experience.
Fox Chase is an American company, and we rolled out the Elekta Care 360 first in the U.S. Let us hear some more about the U.S. market, and I welcome back Carlos Castilleja, the Head of Americas.
Thank you, Cecilia, for having me.
We just heard Christine and Tree talking about the productivity gains from Elekta Care 360. I would assume that productivity is something that several customers are wanting, and especially in the U.S. market. What is your view on that?
Yeah, I would obviously say that productivity is top of mind for the majority of the cancer centers right now. I mean, if you, in fact, look at 50% of the health systems are reporting some kind of financial challenges, as well as we know that staffing is up by at least 5x. These challenges are creating the need for U.S. cancer centers to really look at opportunities around operational efficiency. Our solution set, with, you know, you're talking Elekta Care 360, the SaaS solutions, and even Elekta ONE, as you heard a little about today, offer these activities.
Do you have some customer examples?
Yeah, we do, actually. What we heard recently just with Fox Chase and Christine, right? With the Elekta 360 and commissioning services, saving them weeks on end on commissioning time, so they can be up and treating patients faster. I could mention the centers like Moffitt Cancer Center, Cooper, MD Anderson, also taking advantage and looking for pursuit of operational efficiencies using MOSAIQ and the SaaS model as well. I would use some of these as some of the examples, but there's many more.
sure. What other market dynamics do you face in the U.S. market?
Market dynamics in the U.S., I would first want to start by recognizing that therapeutic therapies have decreased mortalities by around 3%, this is absolutely great for those dealing with cancer. However, there's still a strong demand and adoption for advanced therapies. With the challenges that we just talked about with productivity, I would also say that U.S. customers are really looking for differentiated advanced therapies, that's where our portfolio is really today, Cecilia, setting the market a competitive market edge with our advanced therapies and portfolio of suite of portfolios.
I'm sure you have some examples here as well.
Of course I do, absolutely. You can talk about Cleveland Clinic is a longtime Gamma Knife user, and most recently, and even this week, I believe, they're going live or starting the installation, at least, with the newest Esprit. They were looking to take some competitive edge. As well as you can look at Robert Wood Johnson up in the northeast corridor of the U.S., where they fully adopted the adaptive story with buying 3 Unities within that health center. Lastly, there's Atrium Health, which is a key strategic competitive account. Again, a competitive account, but yet, they've decided to move forward with Elekta BrachyStudio.
Great. What do you say are the critical factors for success in the U.S. going forward?
critical success factors for the U.S. going forward? Interesting question. Ultimately, there's three things I see that are really key for us moving forward and really putting a strong trajectory in our growth. First of all, I've talked about two of them, right? First is the productivity. We need to continue to solve our challenges for our customers, and that's with our solutions that we mentioned earlier, Elekta Care 360, SaaS, and Elekta ONE, as an example. At the same time, we need to drive adoption in those differentiated advanced therapies. That's where, again, we have the competitive edge. You talk about MR-Linac adoption, you talk about CT Adaptive Linac, create new opportunities for Gamma Knife, create new opportunities for Brachy.
Lastly, I would say that we need to accelerate our market approach, and one of those ways of approaching is gonna be with partnering with and leveraging our partnerships with, like, the imaging partners and looking at those opportunities and looking where we can take advantage. Also I'd say that, Cecilia, we are going to grow new competitive sites as well as, or I should say, we're gonna grow new sites as well as competitive flips. We'll do that by strategically selling and as well as having sales hunters actively going after competitive sites and national accounts. With those three areas, I believe that we'll continue to have a strong trajectory over the years, and we'll also be able to become a stronger partner with our companions in delivering best cancer care.
Well, thank you so much, Carlos, for your view on the U.S. market. Well, now we have gone through all four strategic pillars, and we made room for your questions, and we will take questions, from our audience here in Crawley, as well as from those of you watching us online. For those online, please use the telephone number that you have received, to sign up for questions, and we will be right back. We have several listeners, queuing up for questions, and I'm just gonna ask you to ask only two questions. Please, the first question, then let us, answer that before you do, the second question. Let's, start on the floor here. David, we can take your question, please.
Hi. Thanks, everybody. David Adlington, JP Morgan. Just a question on the R&D spend. Obviously, that's been quite volatile in terms of what has been recognized on the P&L. It was 10% historically, 8% last year. I think peak was 12%. I know it's gonna be going up from here. Maybe just give us some help in terms of how much it could go up. Could we go back up to that 12% level, possibly even higher?
This will be a question for our CFO, Tobias.
Yes. Hello, David. Thanks for the question. I think what we've shown here today actually was that we expect the gross R&D to decline and continue to do so over this period, while actually you will see the net R&D to increase following the amortization, and you will see that gap to narrow. That is actually what you will see here over this timeframe. Sorry?
Any help in terms of when and when, where that might peak in terms of % of sales?
In terms of net or gross R&D?
Where the net R&D, in terms of % cuts to sales, comes out on the P&L.
I think in terms of the gross R&D, we have already peaked in terms of the as a % of sales. You will see in absolute terms that it's fairly stable, maybe a slight uptick now, given the salary inflation that we're on. In terms of the net R&D, that will go up and narrow it, and you will see that closing up during this time period.
Okay. The second question, just in terms of the cost per treatment, looking at that down by 50%, just wondered what the key source of that cost savings was gonna be. Is it in the planning side, somewhere else? How do you translate that into additional revenues or value for Elekta?
Maybe Maurits?
I'm happy to take that question. I think there are a few factors there. First of all, it's driven by automation. Auto-planning is one of that. Protocolization also drives automation. Yes, essentially, we will be able to treat more patients on a single Linac. The opportunity for Elekta is to sell these new capabilities that enable that automation into the install base and our customers. Yes, we will lower the cost for clinicians and for our customers, but we will do that through upselling the capabilities that are required to do that.
Is that a recurring revenue stream, or is that a stream that you recognize upfront?
Depends on what we bring to the market. As Anish pointed out, our intention with Elekta ONE is to lead with subscription. We will see a number of elements being brought to market through subscription. We still have, of course, hardware to sell as well that typically will not be sold that way.
All right. Thank you.
Thank you. The next caller will be from a listener. Please, Kristofer Liljeberg, Carnegie, the line is yours.
Thank you. Hope you could hear me. Sorry I'm not there. My first question is, if you could update me on your development work on the new Linac platform. The reason I'm asking is that you said here during the presentation that you're not planning to come out with a completely new product for CT adaptive, treatment.
Yes.
Okay, Maurits.
Yeah, I'm more happy to take that one. A year ago, I think it was the capital markets there at ASTRO, we indicated that we would bring a CT-Linac solution within the next three years, but we didn't say how we are going to do it. Today we explained how we bring that to the market. As I indicated, we see adaptive as a capability and not as a system. The different capabilities, the online adaptation, the integrated workflow, the better image quality, see them as building blocks that we bring to the markets in the form of new capabilities or new systems as well, but also as upgrades. Don't expect a new adaptive Linac. We will basically bring adaptive treatments and capabilities as new systems, but also as upgrades to our install base.
That's our approach.
Does this mean that you're not planning to launch a new platform? Because I thought it was also a cost reduction initiative involved in that.
When it concerns adaptive, this is the approach. There are more things we do when it concerns cost reduction, integration of elements. We also look at gantry structures, how we can simplify that. Some of them will be introduced through upgradeable functionality. Some of them will also be under the hood, so the customer will not see it, but it's a cost reduction for Elekta.
Yeah, I can.
Okay
... add into that, Kristofer, that the cost reduction that you will see here, that is not dependent on a new platform. We do it with the current product offering that we have.
From a marketing and pricing point of view, you don't think it's important to have a completely new platform, new brand name, et cetera, for a new Linac?
I mean, we modeled that as well, and we believe the combination of bringing new capabilities to the market, and of course, we will put a nice package around that, with the upgrade packages, actually, will optimize the value we bring to the market, but also to our customers. We believe it's actually a very attractive approach. Instead of selling one new Linac with these unique capabilities, we basically say, "We can elevate your whole clinic to the latest level with new Linacs, but also by upgrading your existing." It's very appealing, because they really want to elevate the standard of treatment and not be dependent on a single Linac, but be able to do these new treatments on all the Linacs.
It resonates very well with our customers.
Okay, thank you. One more question, and that's: you have, of course, this large backlog you could sell from, both probably this year and next year, but could you also comment on the new order demand?
Gustaf, please.
Yes, I can start. Hi, hi, Kristofer. We see, I mean, as I mentioned a bit in the beginning, that the demand for radiotherapy is there, because during COVID, it was not maybe the area that many healthcare systems focused on. It was other areas. The cancer care backlog has been being built up now during the last couple of years. We foresee good demand, across the geographies, into next year. I think we had some very big orders, of course, in last year, in Europe particularly. I don't think they will come back in the same way as we saw there. Still, in other parts of Europe, Middle East, Africa, China, of course, ASEAN countries, we see good demand.
As well in the U.S., it's more of a market share gain market for Elekta. With what Carlos talked about, it is really about, you know, breaking into new accounts and grow with the larger systems in the U.S. We foresee a good and healthy demand into next year. Then, of course, it's about bringing the backlog to the customers and install new machines to drive the revenue growth going forward.
Thank you, Kristofer. Then we take a question from the audience here. Please, Lisa Clive from Bernstein.
Hi, thank you very much. Question about reimbursement for Elekta Unity. Around the launch, there was a lot of talk about differentiated reimbursement, and also a need to change the coding towards a sort of by cancer type way of reimbursing. Does Elekta Unity need separate reimbursement in order to reach its full potential? My understanding is the units that you've placed have been mainly in academic centers. They can use their research budgets to justify the much higher purchase price. I guess I'll ask this question in two parts: Can you just discuss it in context of the relatively new, bundled reimbursement system in the U.S., and then very broad brush, second part, how it fits in with reimbursement outside the U.S.?
Let's start with our CEO, and then maybe John also can add on that.
I'll just start. Of course, reimbursement is extremely important around the world for what we do. It's also important to say, for radiotherapy, we have good reimbursement levels in many markets. For Elekta Unity, you can use those codes already now and have a very profitable system in most markets. Of course, we see this benefit that Dr. Alison Tree talked about, the value, the improved outcomes that will come to also to cater for higher reimbursement levels. We're working on that, an iterative process, and we're focusing a lot on the U.S., of course, because it's the biggest healthcare market in the world. I think, John, you can talk a bit more about, I mean, what we're doing.
Yeah.
So on.
Yeah, we're working very closely with the professional society in North America, ASTRO, which you may be familiar with, to make sure that we ensure that our users, the clinicians, have fair and adequate and also stable reimbursement. What I would say, in our largest market, in the United States, we do have adaptive planning codes or replanning codes. But what we don't have is MR-specific codes yet. Of course, it just came out, and this is a very lengthy process. We want to make sure that the reimbursement that is currently enjoyed by our clinicians is stable over the long term, which is why we're working with the professional societies to do that. Then on the second part, if I just might add, you talked about the bundled payment schemes that are coming out.
In my view, the Unity is sort of the perfect system, right? If you're trying to lower cost, the first thing that you'd want to do is really drive hypofractionation and automation, right? That tool has been designed for both of those things, 'cause all the imaging enables automation, 'cause that's the information you use to drive automation, and of course, the increased precision enables hypofractionation. Right now, I think we are positioned to, you know, flourish in the current market, and should bundled payments arise in the US market, well, we're very well positioned as well.
I think it's interesting to hear the different time aspect from the capital market and in the radiotherapy just came out from 2018, and maybe the capital market has another just came out aspects on the timing.
Did you have another question?
Just outside the U.S., you obviously deal with a whole host of reimbursement systems.
Yeah.
Just commentary on that would be helpful.
Yeah, I mean, I think, our strategy there, of course, we want 212 countries to have fair and adequate and stable reimbursement for MR-guided therapy. We focus on the largest markets, China, France, Germany, the UK. Every one of those is its own problem and challenge, right? We again, just those three pillars. We want fair and adequate reimbursement and stable reimbursement. We have a team, both at the corporate level, but also in the local environments, working with the professional societies to move and the agencies, the appropriate agencies, to move that ball forward.
Thank you. We have another question on the floor, please.
All right. Thank you for taking my question. Rickard Anderkrans, Handelsbanken. First one, I believe at the last Indy, you mentioned that around 50% of new orders came from emerging markets. How has that developed, and should we interpret it that roughly 50% of the current order backlog comes from emerging markets, or could you add some flavor to that? Thank you.
I think that's a question for maybe Habib.
Yes, I mean, we're growing in the emerging markets, and we are accelerating as well, the backlog transfer. I think during COVID, there have been kind of some disruptions in the supply chain globally, but actually, we have a strong backlog, which is transferring, and as well, we are gaining shares in many markets there.
Thank you, Rikke. Did you have another question?
Yeah, just a quick follow-up. Can you comment on the share of the group backlog for emerging markets, just to get a sense of?
Gustaf?
I think it's been fairly stable over this couple of years. I mean, we've seen quite a volatile development in some of the emerging markets. I mean, China was down initially of COVID, and then it came back up dramatically, I would say, in December and November timeframe. As a share of total, I think it's fairly flat.
Yes
compared to what we saw two years ago. Going forward, I mean, I expect those, as I mentioned in my section, emerging markets to grow faster. The good thing is that greenfield growth comes also with this service contract that Habib spoke about, previously. What we start to see is that with that scale and that services and software installations, the profitability of emerging markets starts to develop very nicely in that backlog.
All right, thank you. A question on Elekta ONE as well. What share of the customer base do you target will adopt Elekta ONE over time, and how quickly do you think that can be achieved, just to get a sense of the magnitude?
Yeah, I would let Anish to answer that at least first.
Elekta ONE, I mean, we target everybody, right? I mean, there's no reason to say it's only for these customers or another set of customers. The idea is, of course, that existing customers of our systems today, be it the planning system or the informatics systems, they're all targets for Elekta ONE. We made a statement that our current MOSAIQ, the informatics system, continues to be the backbone, so there's no loss of functionality for any of our customers, and we provide all the benefits that we outlined in detail, and we intend to offer it as a service. The target is everybody who has a Linac, who's in radiotherapy, and also outside of radiotherapy. It also has solutions for medical oncology, for patient engagement, and so on. It's really a comprehensive suite of solutions, integrated and offered by Elekta.
All right, you're expecting 100% penetration over time then, or just to get a sense of the ambition.
The ambition, yes, of course, right? The ambition is definitely we take it to everybody. The uptake, of course, will be gradual over time.
Thank you.
Okay, the next question will be from the webcast. Please, Veronika Dubajova from Citi, the line is yours.
Thank you, Cecilia, and thank you for the event today. Hope you hear me okay, and apologies I can't be there in person. Maybe I can just start with thinking about the backlog and sort of single customer and regional risk that you see in there. Gustaf Salford, I don't know if you're able to comment on some of the recent news around GenesisCare, but also just give us some reassurance in terms of when you look at the backlog, at, let's say, the top five customers, what proportion of that do they account for?
let us CEOs answer that.
Yes, let me start. I think lots of questions on GenesisCare at the moment. They're going through a Chapter 11 process in the U.S., and they have two parts of their business, is U.S. and then rest of the world. It's a long-term partner for us, so we try to support them throughout this process they're in right now. We look forward to continue to supply GenesisCare around the world with Linacs and all our product suites going forward. It's a bit early to say exactly what the consequences on backlog and so on will be. If you look at the top five customers, I think GenesisCare is a very big one.
Most of the other customers we have in that top 10 list is significantly smaller, I would say. Overall, on the backlog, we go through it every quarter, development of the customers and so on, and we have a very healthy backlog of this more than SEK 40 billion that we will install and deliver to our customers over the next, yeah, 3 years. On the service side, it's right, 50% of our backlog, and those service contract is also often CPI-adjusted, so we continue to adjust those prices to protect our margins going forward as well. I see limited risk for our order backlog. It is in good shape.
That's very clear. Thank you. Then maybe just to follow up on the bundled payment model in the U.S., and if you're hearing anything new about whether this will be resurrected and what the timeline might look like for implementation?
Yeah, I can I'll take that one. I mean, I think it's a simple answer. Unfortunately, it's still on hold. There's been conversations that are ongoing. There's obviously continued changes throughout the normal CMS process of doing evaluation of the codes, but at this point, it's been, what I would say, indefinitely, kind of, on hold, so unfortunately.
You're not expecting it to kind of come back anytime soon, is that fair?
I mean, it's hard to say. I mean, ultimately, it's a reiterated process that continues through the cycle, and they could add things into each of those cycles. We just don't know. It's... We still continue to work with the, with the agencies and industry leaders, and we continue to go forward, but I couldn't speculate on when and how it would go.
We are prepared.
We are prepared and still quite satisfied with what's out there today.
Understood. Thank you, guys, so much.
Thank you, Veronika. Did we have another question? Yes, here, in the audience.
Thank you so much. Mattias Vadsten from SEB. You talked about it in the presentation, but any further color on the differences today versus in the past in terms of Elekta in the aftermarket context? Do you simply have better capabilities today, and solutions to address the aftermarket, or is there also an internal focus to be more aggressive to capture this potential? Two, if you could provide any assessment in terms of the aftermarket and hardware sales in context to the 7% midterm sales growth target, that would be interesting as well.
Yeah.
Yeah, please.
I will start. Aftermarket is, and has always been important for Elekta, so it is our installed base. I referred it to the biggest asset we have, because we can put new innovation on top of that installed base. That's difficult for other vendors to do if you're a pure-play software company. I think what Maurice presented, how we can bring the installed base to becoming adaptive, is a huge aftermarket opportunity. What Anish talked about with Elekta ONE, bringing that to glue together the whole radiotherapy department, together with the imaging department, also huge aftermarket opportunity. It's also good from a shareholder perspective, because it is driving better margins and recurring business to increase the stability of our revenue streams across the periods. I think all of this is a big part of our focus, and you hear us talking about it.
It's also part of what Habib talked about, going into new markets. We have, you know, physical presence in places like Philippines, Thailand, Indonesia, because that drives service growth, it drives aftermarket opportunity, and also this close customer relationship that you get from the aftermarket. To quantify it is quite difficult. I mean, it should be a growth driver, quite a stable growth driver for Elekta. Big part of what Tobias talked about in our margin expansion over the next 2 years.
Thank you so much. My next one is on price increases. If you could spend some time to talk about what the price environment has been like over the past 5, 10 years prior to the pandemic, and if you could help us in any quantification or discussion around the magnitude of price increases in realized terms, because that's difficult to-
Yeah.
-to assess.
Yeah.
Thank you, Mattias. We take Gustaf again, and then-
Absolutely. I'll just kick off, because I talked to many of you and many online about the price development over the years. Historically, I mean, in med tech, you've seen you launch a product, you got the price increase, and then over time, the cycle, it went down with a couple of percent per year. It was kind of a S curve. Today, in a high inflation environment, it's not the same. I mean, all med tech players have then increased price. Working with that, we have realized around 3%-5% since the inflation started. Our ambition is to drive that through innovation, but also through price increases, because we have the inflation on our material cost.
I think going forward, I think we primarily will increase prices with new innovation, because that is when you bring value to the customer and they accept price increases, so that's still. Over the last one and a half years, we have raised prices to offset inflation, and we've also adjusted our service contracts linked to the indexes we have in them. I think that's a bit of the background. Maybe Habib,
Yes, I mean, our focus on prices didn't start like one year ago with the inflation. It started three, four years ago, where we started building very robust structure of value-based model pricing and all the infrastructure of IT, of the analytics, and as well of having the culture of pricing across the organization. Which allow us to react very quickly to the inflation. We can see that when we took the mix of regions, the mix of products, we have accretion of around 3.9% to 5%, that we start seeing it as a revenue and as a margin on the revenue. Yeah, it's, it allow us to react very quickly to the inflation, and we see it on the results.
Yeah, I can just add on that. Actually what we see on the order intake for like-for-like products is that we're too on this to actually be in erosion, flattish, and now we see that, just what you mentioned here, Habib.
... the positive development for prices, which then later on towards the end of this year and into next, will start to materialize in the P&L in terms of revenue.
Thank you so much.
Thank you, Mattias.
Thank you.
Do we have another question from the audience here? Yes, please.
Thanks. The typical two questions. It's Richard Gordon from Highclere. The first one is just my understanding of the Unity product, that it's much larger than a traditional Linac, so you can't just replace one with the other, and often requires either sort of new build space or incremental space at a hospital. Just wondering, to what extent does that potentially slow down the take-up of Unity because it's just so much larger?
Yeah, John, please.
Yeah. Yeah, I wouldn't say that it's so much larger. It does require a deeper pit than the conventional linear accelerator. You know, I think that that's a challenge that actually we've been getting better at managing. The bigger issue for us, certainly in the beginning, was getting the magnet into the departments. You know, like anything else, with innovations, we've been able to do that better and better and more cheaply. I think, over time, obviously, centers are building new spaces. They're seeing the future with us, so they're building spaces that are more easily accessible and appropriate for multiple MR-Linacs, actually. We are getting better at figuring out how to get those units into place with the least amount of disruption.
Yeah, I'd add to that, a little bit of addition to that is that I think, again, speaking more of the Americas, but, getting in front of that with the strategic planning with these health systems and having these conversations is key, where it's not only us, but obviously our competitors are having conversations and sharing. They're building larger vaults and accommodating for what they may not know exactly they will be delivering. Of course, we want it to be a Unity, and, but, getting in front of it. At the same time, echo the words, it's not necessarily a challenge, it's something that needs to overcome, but it would happen with other products as well.
One thing to add, I mean, Unity, as referred to, is becoming more standard of care, so it's becoming a part of radiotherapy. When our sites plan, think about it, they always have, you know, part of the discussion about the MR-guided radiation therapy, and they think about the vaults. We have had a dramatic learning curve, also down here in Crawley, about how to install faster, bring up the patients' volumes as quickly as possible, workflow, software, to enable that to truly be a clinical and very profitable system for our customers. Bringing down for the patients from weeks and weeks into a one-week treatment is just fantastic. I think that will also be a big part of the growth journey for Unity going forward.
Great. Thank you. The second one, I apologize if I misheard this, I think there was a comment earlier that the Elekta machines were using 40% less energy than competitive products. I just wanted to check if I heard that right, and if that is the case, how is that achieved? 'Cause it sounds like quite a competitive advantage.
Yes, I think this is one of the hidden gems I think we had, and we start to actually communicate more about it. Because it's a bit technical how we get that. It's the whole design of the beam line and how we control that beam line. Yes, our energy consumption is substantially lower. Now energy prices has come down a little bit, but especially at the peak half a year ago when electricity was so expensive, we were talking about, like, SEK tens of thousands a year in savings on an energy bill. That's big, yes.
Well, thank you. It's time to wrap this up. Thank you all for participating here today in Elekta's Capital Markets Day 2023. All the materials, the PowerPoint, and the recording of the webcast will be available on our webcast after this. Gustaf, may I ask you to summarize what we have been discussing here today? What are the key takeaways?
Absolutely. I'm happy to summarize the day. First of all, thank you so much for listening in to our Capital Markets Day. We started about talking about the first two years, the first half time of ACCESS 2025, where Elekta delivered growth under very challenging circumstances. We also talked about fantastic innovations. We talked about the launch of Elekta ONE and what it can do for our customers and their patients. More personalization with less effort. We also had a fantastic speech from Dr. Tree, talking about what MR-guided radiation therapy can do for patients.
I'm really looking forward to the second half of ACCESS 2025, to bring the fantastic momentum and all the investments we have been making over the last 2 years into the second half, and continue to drive value for our customers, their patients, but of course, also our shareholders. Thank you for joining us.