Welcome to Getinge Capital Markets Day 2021. Today, we will boil down the most interesting and exciting things to happen in the coming years. My name is Lars Mattsson, and I'm Head of Investor Relations.
Today, you will meet Mattias Perjos, our CEO, and Lars Sandström, our CFO, who you know very well by now. You will also meet Carsten Blecker, heading Global Sales, Jens Viebke, heading Acute Care Therapies, Stéphane Le Roy, heading Surgical Workflows, and Harald Castler , heading Life Science Business Area.
You will also meet our team supporting the organization with our ambitious sustainability agenda. Lena Hagman on quality, Anna Romberg on ethics and compliance, and Magnus Lundbäck, Head of Sustainability overall. There are some practicalities for today.
We will have a Q&A session by the end of this Capital Markets Day, and you will find the dial-in numbers down below on the screen when we come closer to the Q&A session. There is also an information package, an information slide deck available on our webpage under the report reporting and presentation section on the IR web. Now, let the fun begin. Of course, we kick this off with listening to Mattias Perjos, our CEO. Welcome, Mattias.
Thank you very much, Lars, and thanks everyone who have decided to join us today. We're excited to host this Capital Markets Day. It's been three years since the last time, and a lot of things have happened, of course, in the world around us, in our industry, and not the least, here at Getinge.
I will be mostly forward looking and talk about the future today, but I would like to start with a brief recap of the main developments since 2018. We have achieved more than 4% organic growth since 2018, and we have also closed the gap in terms of EBITDA performance with our benchmark peers. In addition to this, and even more importantly in my opinion, we have improved customer satisfaction.
We have improved employee engagement. We've launched new offerings into higher growth areas. We have finished the remediation that we committed to do under the consent decree with the FDA. We've also launched the most ambitious sustainability agenda in our industry. A lot of great developments that really serves as a good platform for the next phase of our journey. Let's move on and talk about the future then. We have today announced updated financial targets.
We will grow with 4% to 6% organically in the coming years through 2025. We will improve our earnings per share with more than 10% per year in the same time period, and we're also keeping our dividend policy intact. Do I really feel comfortable then raising the bar like this?
My answer is absolutely yes. There are so many good things going on in our company and in our industry that makes me comfortable saying this. We will use most of the capital markets days to focus on some of these things and initiatives. I would like to highlight two things, though, two strong fundamentals that we have in place as a result of the good work done in the last few years.
The first one is customer satisfaction. If we go back to 2018, we had a Net Promoter Score of 27 at the time, which was already really good because our competitors were at 0 in 2018. When we concluded the last survey now in October 2021, we were at 39 Net Promoter Score.
A really good improvement and good evidence that we are on the right track here with our customers. The other key indicator that I would highlight is employee engagement. Here we had a much more difficult starting point back in 2017.
We were below relevant peers and certainly below our own ambition levels. We put a lot of effort into this in the last few years, and we are now at a level which is above benchmark peers and above the target that we set back in 2018 as well. Combining that with the good momentum that we have in our company right now makes me really confident about our ability to achieve our goals in the coming years. What about the external world then?
No one can swim against the tide for any longer period of time. What do the macro trends look like and how are we set up? Are we aligned with these trends? Also here, I would say that we are more aligned than ever with the main trends. If you look at things like cardiac disease, it's still the number one killer in the world. It kills over 18 million people every year.
We have hospital-acquired infections, and we have the general challenge of raising productivity in the healthcare system. All three areas, we are in a unique position to really add value to our customers and make a difference in healthcare. We also have some other specific trends. If you look at the shift in drug manufacturing processes, for example.
This is an area that Harald Kastler will talk more about in his session in Life Science. We have digital as an overarching theme, both in terms of supporting and improving our own productivity, but also in what we can do for our customers, in the value that we provide to them in everything from remote monitoring to decision support and so on.
We're really well aligned with a lot of our trends, and I think one piece of evidence of this is that if we look at our portfolio, the proportion of sales today, it has gravitated towards higher growing areas with higher margins, as well.
We enter this next phase of development at Getinge as a stronger company than ever, both in terms of market positions, customer satisfaction, employee engagement, and the overall momentum that we have in our business, and of course, also in terms of financial strength.
If we now look at the strategy to capture these opportunities and really capitalize on the trends and the good momentum here, I would like to take you through this. The easiest way to talk about this is in the form of our six strategic focus areas. Here we have quality and sustainability as the number one priority.
When it comes to quality now that we've been able to finalize the remediation, we can be much more proactive in the way we work with quality, become more of a learning organization and much more patient and customer-centric as well. Sustainability is a key theme with a lot of energy around, a lot of interest from customers as well.
This is becoming more and more an integral part of our business model, and we're weaving this into the value that we provide to customers as well. 'Cause even if our own CO2 neutrality target has received the most attention externally, it is really the impact that we can make for customers that is important.
I'm talking about things like reduced water consumption, energy consumption of chemicals, for example, and also allowing customers to treat more patients without using more resources. These are really great examples of the impact that we can have.
When it comes to capturing growth, we really have a well-working recipe already, so we will continue, for example, our therapy expansion rollout, which has had good results in the last few years. We will continue to work with our service program. Even though we've made great progress in the last few years, we have really only scratched the surface here, and there's much more work to be done in this regard.
There's a theme as well in terms of growth when it comes to our own business models, using the right channels and so on, that we are continuing to upgrade and work with, and then back to the whole also productivity challenge for our customers, which Carsten will talk more about in his sessions. I also wanna highlight that we are not done when it comes to productivity, even if it has generated some tremendous results the last few years.
I wanna remind everybody that when it comes to, for example, our footprint rationalization, this has been an investment so far. It's really from now and in the years to come that we will see the benefits from this, and we will share some examples later on as well.
My favorite initiative when it comes to productivity is probably quality value engineering, something that Stefan will talk about in his session. This is really the gift that keeps giving. Every time we address a portion of our portfolio, we are able to bring down the unit cost with over 10%. We are able to make it a better product for the customers and a simpler part of the product range for us to work with as well.
Really good examples here. We're also working a lot with modularization and platforming across our different portfolios, and you will see some powerful examples of this as well later on here in the session. Still plenty of things to do when it comes to productivity also.
I've said in other contexts that one lasting effect of the pandemic is that our brand awareness has been significantly raised, and this is a momentum that we will continue to use, so you will see a lot more from Getinge when it comes to continuing to raise brand awareness. This is especially important in our industry being a trust business, in reality.
When it comes to our offerings, a lot of focus going in there to make sure that we have long-term competitiveness, as well. Digital is a key theme across our different business areas. Here, we can provide additional value to customers in terms of remote monitoring, decision support, and even better clinical outcomes of many of the therapies that we deliver.
There's also a number of interesting technology areas that we will continue to invest in, here as well. If you then look at the last area, here, it's more of an enabler actually for everything else that we wanna do. We've had a good journey when it comes to engagement so far, and we will continue the successful rollout of competence development programs, leadership development, talent management, and so on.
Also the implementation of our Smart Workplaces concept that is in full swing right now. Here, the overall aim is to achieve better productivity for Getinge, more engagement among our people as well, and also make a positive impact on our sustainability ambitions in the coming year.
When you look at everything that we have on our plate and all the opportunities ahead, it's really now that the fun begins in this now more forward-leaning phase of the development of Getinge. One important principle that we will bring with us from the last few years into the future is the way we allocate capital.
We decided back in 2018 to be a lot more deliberate about how we allocate capital towards higher growth and higher margin categories. You can really see this portfolio rotation from 2018 to 2021, and this is a momentum that we will continue to build on in the coming years as well.
This is really an integral part of our strategy. If I summarize the capital markets day in 1 minute. We've had a tremendous journey since 2018. We've outgrown our addressable markets. We have closed the EBITDA performance gap with our peers. We have made great progress on customer satisfaction and on employee engagement.
We have macro trends that work in our favor as well. We have a sound and proven strategy that now moves to a much more forward-leaning phase. We have new financial targets of 4%-6% organic sales growth per year. We have an earnings per share target of more than 10% growth on average during the time period as well.
A logical consequence of this EPS target is that we will also need to not only achieve the growth target, but also move our business to a level over 21% in terms of EBITDA performance. In addition to these organic targets, we of course have M&A as an opportunity as well. Our journey so far has been very much focused on our own organic developments, operational improvements, and so on, but we are in a very active phase when it comes to mergers and acquisitions opportunities right now.
We know the areas that we are looking for. We're looking for example, disposables in the cardiopulmonary and critical care. We are looking for consumables to the Surgical Workflows portfolio. Generally expanded U.S. presence for Surgical Workflows.
We are looking at interesting niche players to support our biopharma customers, and there's a general digital theme when it comes to to M&A priorities as well. We are in better operational shape and have also the financial capacity to act on these opportunities. With that summary, I suggest that we move on to the more detailed sessions of our Capital Markets Day, and I really prefer to start with customers.
Thank you, Mattias. Exciting journey ahead of us, for sure. Now let's move over to Carsten Blecker, who is heading the global sales organization. Carsten, Mattias presented a financial target for us to grow 4%-6% organically net sales the coming years. What's your take on that?
Lars, good to see you as well. I feel very positive and confident about the guidance which Mattias has provided. Over the last three years, our performance has been sustainable and improving progressively. There are several drivers which will continue helping us fuel above market growth, such as a strong position in high growth and high margin segments, such as ECMO therapy and sterile transfer.
A go-to-market model, which is well adapted to changing market dynamics with continuous fine-tuning adjustments. Ongoing pricing and service excellence. Last but not least, increasing focus on online connectivity and a transformational business model.
If we zoom out a little bit, look at this SEK 200 million market that we are active upon, what are the key drivers for growth?
The key drivers which one can observe in healthcare are an aging population which drives constant trends for increased costs and the need to mitigate the latter while also facing increasing healthcare personnel shortage. Our offering at Getinge matches extremely well demands and trends and needs as we focus on solutions that provide clinical and operational efficiency, both from a product performance and process redesign support perspective.
Furthermore, our new branding campaigns are not only product related, but also address well the emotional feelings and concerns of patients and staff, such as increased backlog and waiting lists of elective surgeries caused by COVID and in general.
What does this mean for market conditions?
The market is moving towards a higher level of GPO concentration and more ambulatory care activity in order to provide better healthcare at the right cost. For that reason, we are adapting our go-to-market model constantly and in a smooth way, avoiding large restructuring efforts. For example, in the United States, we have been strengthening our corporate account approach, and we are setting up distinct inside sales and ambulatory surgical center sales channels.
Any promising results so far?
Lars, we start to see good traction, but I predict that this is only the tip of the iceberg and that our mentioned go-to-market fine-tunings will deliver incremental impact throughout the coming years.
Carsten, almost everyone talk about digitalization in healthcare. How can we provide added value to customers here?
Lars, this indeed is a very important focus area, and Getinge will provide value through our Getinge Online service offering. It provides cost efficiencies and improved uptime, which is very beneficial to our customers and also allows us to move away from classical transactional service contracts to a risk-sharing model.
Another example would be the online monitoring of the anesthesia gas consumption across different surgeries and the possibility for clinicians to fine-tune their protocols for the benefit of patients, economics, and sustainability considerations.
What role does COVID play here? How have we changed interaction with customers due to COVID?
First of all, I would like to highlight that I'm extremely proud about the commitment of our sales, service, and installation staff, which has been serving our customers throughout the pandemic without any interruption and always keeping the needs of patients in mind. While we promote virtual interactions for environmental and other evident reasons, we will remain extremely flexible and consider that customer is king, and as such, we will operate as per customer preferences.
Let me give you some examples of where we see face-to-face meetings adding value. These would be, first of all, service visits which cannot be done remote. Secondly, hands-on product demonstrations. Or thirdly, as a third example, on-site inspections to well-define the scope and manage turnkey projects.
On the other side, I also would like to share with you typical examples where meetings can take place in a virtual setting, such as, in the first place, internal or customer trainings or visits to our new virtual experience center. In the second place, certain parts of factory acceptance tests by Life Science customers. Thirdly, for example, discussions between Getinge experts and key opinion leaders.
Sounds great, Carsten. How much of the cost that you have saved now during the COVID will come back? Around half?
Lars, in general terms, yes, I would agree this is a good assumption.
Are there any specific aspects that you want to highlight from a commercial strategy perspective?
Sure. I would like to highlight three areas which have worked especially well. First, pricing, service, and working capital excellence. Secondly, patient-centric product allocations when facing product supply shortages, thanks to our global sales operating model, which has been especially important during this pandemic.
Third and lastly, adapting and anchoring a new way of working, which had started prior to the pandemic and has been catalyzed and well implemented during the pandemic with positive impact on the environment, work-life balance, and financial KPIs.
Are there any huge opportunities out there that we haven't talked about, Carsten?
First of all, the areas which I mentioned before, of course, represent ongoing opportunities and upsides. I also would like to highlight two areas, as per your question, where we are less advanced, being the opportunity to further develop and successfully market our online connectivity value propositions. Secondly, the opportunity to insist on pursuing a true breakthrough with our Surgical Workflows business in the United States.
Regarding Surgical Workflows, we have made numerous people changes while also working on aspects like improved service offering, where we saw great results, launching inside sales support, appointing distinct ambulatory surgical center sales leadership, or improved project management. Consistent focus and progress in these areas will be needed while we continue to look out also for inorganic opportunities in the field of Surgical Workflows related in particular to North America.
Regarding digitization and online connectivity, we need to leverage the latter to provide a unique service experience. Our digital health solution team is restlessly working on an attractive, scalable digital offering which serves well different customer interests and needs.
What about the customer satisfaction at this moment?
We recently did a new customer survey in the same markets as last time and could observe that the percentage of consulted customers who would advocate to others to work with Getinge moved from a relatively high 27% in 2018 to a much higher 39% in 2021. You need to remember that 0.0% would be MedTech average. The good thing here is that we still have a huge amount of untapped potential and that we have clear actions in place to further improve customer satisfaction.
Could you please give me three concrete reasons why we reach these levels and what this actually could mean for the future, the coming years?
Our customer satisfaction survey entails many aspects, but we specifically have scored very highly on the following three areas. First of all, related to sales staff, our customers consider that we have come a long way in being able to provide total solutions and consider total cost of ownership, while also ranking very highly their appreciation for us assuring timely deliveries.
In the second place, related to service staff, our customers have expressed that they appreciate high expertise of our service technicians and us assuring minimum downtime. Thirdly, related to product offering, our customers have ranked very highly our reliability and clinical performance.
Sounds like we have something really good going on here. Carsten, we have 25,000 customers out there, and we do a lot of good things for them. If we zoom in on the top 100 hospitals around the world, what is our standing?
Yes. We have a relatively sophisticated market intelligence tool which allows us to track our position among the top 100 ranked hospitals globally. We currently hold a very good position among 17% of these top 100 accounts, which of course also implies that we have the opportunity to further increase our position significantly among the remaining 83%, and this is our daily focus.
It sounds like we have a good potential for further growth. Carsten, could you please summarize everything for us here?
Lars, thank you for the final opportunity. There are three areas which I would like to highlight, which I believe are critical for our future success. First of all, doing even better on what we are doing well, such as excellence in pricing and service, while continuously ensuring customer satisfaction, which will allow us to continue gaining market share as we have been experiencing across most product segments.
In the second place, strong focus on connectivity and associated incremental and differential value propositions. Lastly, continue adapting our go-to-market model to market needs, ensuring both a customer-centric and cost-efficient approach.
Thanks a lot, Carsten. See you later at the Q&A session.
Thank you, Lars. See you all later.
As you know, sustainability is key for us, and the responsibility lies within the business areas and the sales organization. We also have supporting functions, and we are going to meet the three people responsible for these support functions here and now. We actually, we're listening to discussion they had a couple of days ago. It's Anna Romberg, heading ethics and compliance, Lena Hagman, heading quality, and Magnus Lundbäck, responsible for sustainability overall. Please go ahead.
Thank you, Lars. Now we are gonna talk about sustainability and what that really means for us. With me here today, I have my two esteemed colleagues, Magnus and Lena, and my name is Anna, and I am super excited about this discussion. I wanted to open up a little bit what sustainability means for us. It is not one part of our strategy, it is really the foundation of our strategy.
We want to be a long-term sustainable company, being it in the eyes of our investors, owners, employees, the environment, the society, our customers. We really want to have a stakeholder perspective on what we do. To make sure this is as concrete as possible, we have divided our sustainability work into four pillars. It is very simple. It is first and foremost about who.
It's about the employees, having engaged employees that have a passion for what we do. It is about what our products, making sure they have the highest quality, and we have patient safety at the core of when we make our products. It is about where the societies where we operate, the environment.
Then it is about how we do things to make sure we do business in an ethical way and really act as responsible leaders in everyday activities. So this is what it is for us in a nutshell. To open up, Magnus, I have a question for you to start with that's really relating to a very ambitious target that we set for ourselves a year ago-
Mm-hmm
... relating to environmental sustainability. Could you open up a little bit more what we have committed to?
Yeah. We committed to become CO₂ neutral by 2025, which is, to my knowledge, we are having the most ambitious target in our industry, at least. You might find another company here and there that have such ambitious targets, but, you know, it's a bold statement we have done. It's a statement. It's not something that we just put in a piece of paper.
It's like we want to show our customers, our stakeholders, and then our employees that we mean we are serious when it comes to environment and our environmental impact on the environment. If you are a customer to Getinge, you should always know that we are developing our product using eco-design principles, which is where everything starts.
Then when they are manufactured, they are manufacturing with using renewable energy sources, and they are shipped to the customer in the best possible way available in the marketplace. We still don't have electrical trucks, but when electrical trucks will be available, we will sign up for them and make sure that we transport our products using them.
That's the main thing on the sustainability journey. But it's also like you all know what gets measured get done. It's not that we just took a decision to become CO2 neutral one day to another. One year before we took the decision, we set up a structure. We made sure that we can actually measuring the data that we have, so we can see our progress towards the target.
One year before we put that structure in place, and then we make sure that we are working towards the target, and we can take the necessary decision to reach this target.
What has been the most challenging thing then in relation to this target?
I think it's when you work with people and when you put up, you know, ambitious targets, it's always, you know, can we do it? Since we set the target, it has been a lot of discussion, is this possible? Is this doable? We have really proven for ourselves that it is.
You know, we will reach this target. We will work hard. Sure, it's a lot of hard work that comes before here, but we will reach it. We are all convinced that we will do it. That would be what I would say was the kind of the hardest, you know, the biggest challenge when you put up an ambitious target like that. I think we have seen it, all of us here.
Yeah. Sort of the mindset thing to really believe in what we are doing and.
Exactly. Believe in it and buying into it and actually doing it.
Yeah. What's then like a success, something that you are particularly proud of?
There are many things that I'm proud of, or we can be proud of in our company. I think one thing that sticks out obviously is the employees and the passion they have around this, the activities they do, the initiatives they are taking. Because becoming a CO2 neutral company is not something you can decide from the top. That will never work.
We need to get the employees in this together with us and really the people that do the daily work, that they instead of taking the plane to somewhere, they take the train, if that's possible. They think twice before they go on internal business trip, for example.
In the small things, you know, turn off the light and leave the office in the evening and not using more energy that you actually use. It's the small things as well as the big things.
It's all about the people, right? Making sure everybody buys into it, so to say.
Yeah. I believe so. You can't do anything like this if you don't have the people on board.
Yeah. Yeah. I guess another area, Lena, where people really is critical is when it comes to quality. Now we talk a lot about like a quality mindset of really ensuring we have, you know, quality at the heart of everything that we do. It's truly been a quite long journey for us, and I think we should be humble and honest that we have had a lot to do within this area. Could you open up a little bit sort of why quality is so important for us and, you know, what we have achieved so far?
I think to be in this industry where the quality compliance is one, the baseline to be in the industry is super important, of course. Just to take us back a little bit where we are coming from is that you know that we were entering the Consent Decree with FDA back in 2015. We were then setting up remediation plans for how we should actually go back and redo the work. Because when you are on remediation, it means that you have failed to do something and you need to redo it. As you may also know, the remediation is in two phases.
The first phase is when you do the remediation, you upgrade your quality system, make sure that all your processes and procedures are up to date to the regulation and the standards, and you make sure people are following the system. From that moment of time, you are in compliance. The second phase of the remediation is when you need to go through the product documentation.
There you need to look into the documentation to see that you have identified all the product risks, and you have mitigated them. You have evidence that you have done all the testing and verification and validation that is needed in order to support that your product is safe to sell. The first phase we completed already back in 2018. The second phase, we actually completed the Q3 this year.
It has been a tremendous long journey, but it was a very happy moment at the time when we were finalizing our remediation work. Now we're entering the next phase of our quality journey, where we're looking more from a more proactive way of working, where we are putting the quality mindset, building the quality culture. There is where we're building in quality into sustainability and the sustainability framework.
Because sustainability is absolutely for me, is that we have a long holistic and long-term thinking in what we do. That's of course also applicable for quality. The three main areas in the sustainability framework is clear roles and responsibilities and processes. It's also continuous improvements because that's the baseline that will build the foundation to be sustainable. Of course, that is built on our company values.
To become a learning organization where we learn from history and the mistakes we do, and also learn from each other. Because I think that's the key for success to be sustainable moving forward. As you know, we have also tried to be a little bit proactive during this journey when we are finalizing the remediation.
We have set a quality system that is global, in order to make sure that we, as soon as the coming new regulation as the European MDR, we just update it, we make sure all the sites will be in compliance, not only the Consent Decree sites, all the sites within Getinge at the same time. That has been also a very good milestone during this journey. We have done.
We have also moved to less Notified Bodies in order to facilitate our implementation on the European MDR, because that's a huge effort required in the industry to move into the new regulation to do the CE mark for the European market. We have also tried to make some efficiencies in the way we are doing.
We have implemented an automated complaint system. In the past, the service technician had to have nine different systems to enter complaints, now it's only one, in order to get it faster and listen to the customer in a much better way. We have already entered the second phase of this project, where we try to make it more automated, and also to simplify to make it more efficient as we go.
That's the next phase of what we would like to enter now in Getinge when it comes to quality.
That's exciting. I'm looking forward to that phase. You talk about the quality mindset and quality culture, and how would you describe that looks like? You know, if I go out to a factory and meet my colleagues there, how, you know, how does quality culture or mindset look like there?
I think everyone needs to take the ownership for quality, what they are doing in the daily work, like you do, like I do, everyone needs to do that. Quality is built in in all the processes we are doing. Quality is divided in two parts, as you know.
Compliance is one, but then it's product quality that is more connected with the safety of the devices or the products and services we are selling. It's the ownership of each individual in what they are doing, following the different processes we have, but also to raise the voice or the hand to say, "I can see that here we have a risk.
This is not looking good." Dare to stop and do, because that's the way we learn, and we can be proactive and avoid that we actually have issues in the field in the future. It's ownership for each individual, and that's what we have been talking for some years now in our Getinge strategy, that quality should be an integrated part in what we do every day, everyone at work.
Magnus, as we hear from Lena, it's all about the people, our colleagues, the employees. You know, this last year, two years, has really been quite extraordinary, and we have had extraordinary achievements from the people of Getinge. Could you talk a little bit about the employee perspective?
The year has, to say the least, been a very challenging year for all of us, I think. We have all lost a close one, and have had relatives and friends being seriously sick. To be a company that actually can be a part of the solution of the problem has been, of course, something that I think every single employee in Getinge has appreciated very much.
We could actually see the passion our employees have in the company during the pandemic. One example is that the sick leave rate was actually lower in the middle of the pandemic than it was before the pandemic in some of the production sites we have. We had service technician renting motor homes to be able to go to customers and serve them, and that's passion.
You can't explain that in any other way. That's passion. I think what that had learned us as executive in this company that is the power and the passion our employees have for the company and our products and really what they do for society. When it comes to learnings and leadership, we have all been experience a quite unique situation.
Suddenly, just over a couple of weeks' time, we had the whole employee was working from home except for the production employees then. Of course, that puts new demands on you as leader. We need to learn new ways of doing things. We put together a series of seminars together with Harvard Business School, where we discussed topics like how do you create psychological safety? How do you speak up?
How do you motivate? How do you engage people in settings where they can't meet, having a coffee, having a lunch, you know, they're sitting in front of a screen. We worked a lot with that. We learned a lot of that and from that, and we will also take a lot of these learnings going forward as a company, as an organization.
The other part is how we did things that we also realized quite early that we can do things much more efficient and effective by doing it slightly different than we did before. It actually works as good or better many times to do things remotely. We can reach more customers, we can have better dialogue with people internationally.
We have learned a lot on the way we do things as well, and this was all the learnings have been packaged into a concept which we call Smart Workplaces. This concept is more about how we work, how we integrate with each other, how we, when we pick up the phone, when we actually do a business trip, when we need to do that, when we need to meet colleagues physically, because we need to do that as well.
Especially we need to meet the customers, of course. But some of the trips that we did perhaps before the pandemic, we have realized we don't need to do them, not in the same extent at least as we did before. This whole concept is also created and rolled out as we speak in the organization now.
It's really fascinating to see the journey that we're on. Also for me, it's important, you know, working with legal and compliance to make sure that we have a culture where we want to do the right thing instead of being afraid of doing the wrong thing.
You know, it's sort of a mindset shift. What is the driver? Are we afraid of breaking the law, or do we want to do what is right? To create that kind of positive drive around how we think about our decisions, the consequences from our decisions, and how we run our operations basically. Yeah, it's a, you know, cross-functional effort.
Thank you, Lena. Thank you, Magnus. Thank you, Anna. Over to you, Lars.
Now it's time to move over to our three business areas to take a look under the hood. We start off with Jens Viebke in Acute Care Therapies. Good to have you, Jens. You have a target of 4%-6% organic growth from 2022-2025. Can you please explain how you will achieve this in your three segments, the ICU setting, the cardiovascular surgery setting, and the vascular intervention setting?
Sure, Lars. For the ICU segment, I think ever since the Capital Markets Day in 2018 and even before them, we've been advancing a number of very important product development projects through our development pipeline. Until 2025, we will have launched quite a number of new hardware products. This is across our extracorporeal life support, ICU ventilation, and hemodynamic monitoring. All of these devices really have one common denominator.
They will really bring significant improvements when it comes to key parameters such as patient outcomes and hospital efficiency. They will also lower the Getinge and production costs compared to sort of the current devices. The first launches in this suite are already announced. We have the Rotaflow II ECLS device.
We have the Servo C ICU ventilator, and we have the NICCI non-invasive hemodynamic monitoring device. I'm very happy to say that we are quite encouraged by the earlier customer feedback that we get on these devices. When you're talking about growth in this segment, Lars, I think that you cannot not mention the ECLS disposable products.
As you know, until recently, we've been quite capacity constrained, which has led to an order backlog. We have invested a lot in our manufacturing capacity, and the constraints are now removed. That will, of course, be a significant contributor moving forward. We really expect this to be one of the strongest growing revenue and profit generators in all of Getinge for the coming years.
For the cardiac surgery segment, the growth really comes from a mix of different things. First, we have new products such as the recently launched heart lung machine, HL 40. But we're also working on a new endoscopic vessel harvesting device that we are planning to release during this period. Second, we will continue to expand our geographical reach in both EVH, anesthesia, and vascular grafts.
Also in this segment, we have very recently implemented a strong capacity expansion in our factory in La Ciotat in France. This is really to satisfy the strong ramping need that we see for vascular grafts from customers in Asia. Then third, we have our cardiovascular interventions customer segment. Here we expect to receive our pre-market approval for our covered stents, and we're also forging a couple of very interesting strategic partnerships.
In addition, of course, we have intra-aortic counterpulsation, where we're launching a new type of balloon catheter, and this is very much satisfying a strong and unmet customer need, for patients that are waiting for either VAD implants or heart transplantation.
Then towards the end of the period, we're planning to launch both new hardware, but also new disposal products in the IABP segment, which we believe will have strong impact both on revenue and profitability. Some of these products, on the disposable side will really have the potential to stretch into the PVAD segment, which would be usable on a significant share of our extensive installed base for balloon pumps.
Wait a little bit. I mean, please tell me a little bit more about that because that's really interesting.
I'm really sorry, Lars. This could be some truly revolutionary stuff, and we really need to keep this to ourselves for now, all of the details around this.
Basically you're talking about utilizing the huge installed base we have in intra-aortic balloon pumps, or?
No, that is correct, Lars, and that's really the strategy when it comes to stretching into that PVAD segment.
Okay.
To utilize that installed base.
Okay.
It's gonna make us very strong.
Great. Really encouraging. If we take a look at the ICU setting, we have performed tremendously well during these last couple of years, but what's the view on the coming years?
Well, when we talk about the ICU, it's very important to remember that, of course, COVID-19 was a big game changer, but there are also a number of underlying trends or challenges, if you will, that existed before COVID-19. I think that the pressure in this segment was really building for decades.
This is really due to the sheer technical complexity of a state-of-the-art ICU today and also the info overload that this produces that really requires highly skilled healthcare professionals to take both accurate and timely treatment decisions. As we all know, COVID-19 really stressed this whole system way beyond its limits. It didn't only highlight the urgent scarcity of trained HCPs. But it also really highlighted the need for new medical device innovation.
We also have an advantage here because quite a lot of clinicians and service technicians from Getinge was really on the front line, helping hospital staff to treat the critically ill COVID-19 patients. I think we learned a lot of valuable lessons here, and these lessons are now going into our product development. It's important to say also that long before COVID, we were very much focused on developing technology, which is designed to really provide support in clinical decision-making.
Examples of that would be our automatic lung recruitment tool and also our GUIDE platform. We also early understood the importance of connectivity and interoperability of medical devices. We have invested a lot in building these types of solutions. Examples of that are our Quiet ICU and Getinge Online.
When you talk about our Quiet ICU concept, it really demonstrates a very important principle. Both I and I think everyone in Getinge is convinced that this would be very important. That principle is open communication standards. Not to create sort of suboptimal lock-ins for clinical users. Our strategy here is to absolutely not try to dominate or control the Internet of Medical Things.
Instead, our strategy is to become the most attractive ecosystem partner in the ICU and in the OR. Moving forward, we will be investing even more in this area. There's just so much to be done. We need really a robust infrastructure, an IT infrastructure. We need to ensure that cybersecurity and patient data privacy is in place.
Remote capabilities and then sort of AI-based decision support tools that really help clinicians to save patients' lives. We intend to do this with a mix of internal developments, acquisitions, but also with partnerships with some leading medical research institutions.
Extracorporeal life support products, ICU ventilators, advanced ICU ventilators, that is. These are two product categories that received quite a boost throughout the pandemic on sales. What's your take on or your expectations going forward?
Well, Lars, if we start with ECLS, this really accelerated in the pandemic and there were a lot of learnings made among our customers for how to apply this therapy more successfully. I think we did a lot of learnings as well, being part of this. Similarly to the overall ICU situation, there were already before COVID a number of underlying trends. In COVID-19, the main application for our ECLS products was really to treat ARDS or acute respiratory distress syndrome.
Beyond this indication, we see a number of new indications now developing rapidly. One example is ECPR, which is a combination of ECMO and cardiopulmonary resuscitation. Another example is cardiogenic shock caused by AMI, acute myocardial infarction. Here you really need to treat this successfully.
You really need like a combination of ECLS and intra-aortic counterpulsation therapies. Also over time, we've seen an increasing number of hospitals that add ECMO capability to their portfolio. We see sort of new training programs popping up, and we also see a strongly increasing activity in academic conferences on this particular topic.
As I did mention earlier, we have made some significant investments in this area. Actually, since we met at Capital Markets Day in 2018, we have tripled our capacity for HLS sets, which is our most important ECLS disposable. We've also doubled the capacity for ECLS hardware manufacturing.
Impressive.
As I said, Rotaflow II was recently launched, and we're also planning to add some significant innovation to a future version of our flagship ECLS product, the Cardiohelp. We're also actively searching for different types of tuck-in acquisitions to sort of complement our portfolio in a good way. If we talk about ICU ventilation, I think I mentioned a lot of the things already, things like innovation to help clinicians treat patients better and more efficiently.
Beyond that, it's really about capitalizing on our installed base. COVID-19 really boosted our installed base. We now have more than 100,000 ventilators that are operational in the field. We've always had like a large potential for after-market sales on our installed base of ventilators, but it's been quite far from fully utilized historically.
Mainly due to, I would say, the hardware selling cycle. It's really both on our sales force side, where our sales force for ventilators is mainly focused on selling hardware, but also on the customer side where, because they do a big sort of acquisition of ventilators, and then there is not much budget left to buy other things.
I think that the big game changer here and what has really changed in the last few years is really connectivity, 'cause this will really make it easier to capture more after-market revenue. If you think about what connectivity really means, apart from increased computing power over several different platforms, it also means remote downloads of software. It means potential for e-commerce of the sticky kind.
It also means streams of both machine data and clinical data. We will be changing our customer offering more and more. Some examples of that is, for example, proactive service notifications that will have a huge impact on device uptime, but also on service efficiency.
You have treatment protocol adherence, that's very important both for a patient outcome, but also for lowering treatment costs. You have immediate ordering of things, like disposables and spare parts or clinical software options or even training when you need it the most. Of course, you have the whole piece around advanced clinical decision support.
This sounds both encouraging and inspirational, so, really interesting, basically. If we switch gear a little bit and look at the cardiac and vascular systems, you expect quite a significant hike in both sales and margins in the coming years. Could you please tell us a little bit more about that?
Well, if we start off with cardiac systems, I think I've already mentioned some things like the new products for EVH and IABP. I think that and then also, of course, the geographical expansion that will drive growth. When it comes to the projected margin accretion, this is really about diligent work with production costs for both current and future products.
Also not to forget our footprint reduction project in New Jersey. Of course it helps that our remediation projects against the sort of warning letters are largely completed, which also contributes. On the site consolidation project in New Jersey, this has really been a true success. We've gone from three sites into one, and we have also clearly beaten our financial outcome expectations on that one.
Of course, aiming to lower production costs significantly. We already do that in all product development projects, but it's not always so easy to achieve in products that are already out on the market. We have one great example of this, and that is the move of the Acurate production line to Getinge's factory in Suzhou, China, from New Jersey.
This is something that has lowered production costs with close to 40%. If we continue with the vascular systems, as I already mentioned, the PMA is of course very important. Also the capacity increase in La Ciotat will drive growth. Then we also actually have a new superior stent technology under development that we also believe will drive growth in this period.
On the margin side for vascular systems, apart from sort of the increased overhead absorption that comes into play with increased revenue growth, here we also expect lower remediation costs since we are more or less done with our remediation projects.
One thing that has been important for vascular systems is that as we are preparing for EU MDR, we work very diligently with portfolio pruning, sort of weeding out some of the less important and less profitable products. I think this will also, particularly in the case of vascular systems, help to improve margins.
Jens, here are the targets, the financial targets for you for the coming years. What are your take on that?
Well, one sort of summarizing things, I would really, what I would say is that we're just so well-positioned in the many highly attractive life-saving product segments, and we're working very hard on new product developments that will hit the market quite soon. So this will really sort of reinforce and or even improve those market positions, which I think is gonna be very important.
We also believe that digital will play a crucial role in many of our market segments. We're paying special attention to innovation and investments in this area. As you know, we have also been super busy since the last Capital Markets Day with improving our productivity. What is really interesting in our organization is that it's almost like we've adopted a completely new way of thinking.
Today, it's like in everything we do, productivity thinking is involved. It is really a true cultural change in both Acute Care Therapies, but I also think in the rest of Getinge. I think that both from the growth and from the margin perspective, I think this bodes really well for our future development.
Sounds great, Jens. A big thank you, and see you later in the Q&A session. Now, let's move over to Surgical Workflows and Stéphane Le Roy. Hi, Stéphane. Good to have you. Back at the Capital Markets Day in 2018, you laid out this great plan to get growth going and improve margins. Then came COVID-19, throwing a spanner into things. Could you please elaborate a little bit on what happened?
Sure, Lars. Good to see you as well. You know, of course, we had built those plans before COVID, and like anyone else, we were hit by the storm, and of course, we had to adapt. In a way, I would say that the fundamentals of the plans have not really changed.
One could even say that it was a bit of a catalyst for some of the changes that we wanted to do, because when, of course, your revenue drop and you have less products coming out of your factories, it makes some of the changes even more urgent.
That's what I really like about the financials that we published a couple of weeks ago, is that even though we're running about 15% below pre-pandemic levels, we have already improved the profitability by about three percentage points, which I think illustrates the efforts that we've made on productivity improvement. It's also a hint of the potential of that business unit when somehow the revenue trajectories goes back on track, you know?
Sounds great, Stéphane. On that note, order growth seems quite strong at the moment. Isn't that right?
Yeah, absolutely. We had two good quarters of double-digit orders growth versus prior year, but I also wanna say that, of course, 2020 was a low base, and it's not only higher than last year. I wanna say that the order book right now, as it was at the end of September, is actually higher than it was in 2019. We are really seeing a recovery.
What's important that our viewers realize is, of course, there is a bit of a catch-up effect in a way that, you know, hospitals had been postponing investments. They were pushing a bit the life cycle of their equipment, but you can only do that for a while, right? I think now there is a demand coming back a bit because of this catch-up effect, but it's not only that.
I'm really convinced that in these businesses, there are a couple of drivers of growth enablers that will continue to support the business going forward.
What are these drivers, these trends?
Yes. You know, we have basically two areas where we do business in Surgical Workflows. This is the operating rooms, and this is the sterile reprocessing department or the SPD. In the OR, I would say that this is actually in a way, the heart of the hospital. It's very core for the hospitals, both from an operational perspective, medical, reputational, and financial perspective.
We're seeing big changes in the OR. We are seeing more and more minimally invasive procedures, more imaging during the procedure with hybrid ORs. We're seeing a continued shift towards ambulatory care and of course, more and more demand for digital integration of the different parts. All of this is creating a need for hospitals to constantly adapt and modernize their infrastructure to be able to propose to their patients the best standard of care.
That's supporting the operating room's activity in a way.
Do we have a good enough offering here?
No, I think we do, absolutely. We're well positioned, and I will come back to that in a minute when I talk more about the offering specifically, but. I would say that in the infection control side of the business, we also have strong changes that are pushing this hospital infrastructure as well.
You know, there is a continued fight against hospital-acquired infections, and there are more and more regulatory or efficiency gains possible for hospitals, and they need to modernize their sterile reprocessing units. They need to have more automation of the workflow to make the work conditions of their employees better. So we're really seeing here as well, some tailwinds in the infection control business.
What's your ambition, given this context?
Yeah. Overall, we see this business as large, growing, mid-single digits% as a market. Our ambition is to grow with the market by also, you know, improving the profit. We are well positioned to do that in a way. We have strong offerings. We have truly global market reach and good customer relations, so I believe that we have a good position to reach this ambition.
Could you please be a little bit more specific on how to succeed with this?
You know, Lars, it's a good point. You know, our growth ambition is really based on two components. The first one is, yes, I'm convinced that we can grow what I call our legacy businesses, which is somehow capital equipment and services towards, you know, operating rooms and sterile supply. I'm convinced that there is more that can be done here.
Definitely, we also need to transform the gravity of the portfolio. That's why beyond this legacy growth, we are really actively trying to have a shift of our revenue structure towards new segments that are stronger opportunities for us, and they're also good from a financial perspective, like infection control, consumables or digital healthcare sales in a way.
I take your word on that there is still opportunities in the legacy part of our business, like through differentiation. That is right, isn't it? Like with the Maquet Volista that we recently launched.
I think that's exactly one example of what I believe that there is still, you know, quite a lot of opportunities in the traditional, you know, capital equipment businesses. The only way to differentiate ourselves in these segments are by innovation and by stronger sales execution.
I think, you know, for innovation, what I really like is that, you know, even though we have kept a strong, you know, grip on our expenses in the last years, we really have protected our innovation engine in a way. The example you give is a good illustration of that. This is a new feature for our surgical lights that is, you know, enabling surgeons to keep the surgical light on when they are performing fluorescence-guided imaging.
I think it's a good example of how innovation, customer centricity can help us somehow protect that competitive moat that we have on some of the equipment businesses.
Let's shift from legacy business to the value segment. What's your take on that?
Yeah, we talked of course about this last time at the last capital day, and I think we're executing well on that plan. It's another area where we can differentiate ourselves. We are very mindful not to be trapped in this, you know, premium technology segment offering. We know that even more so after COVID, our customers are looking for, you know, affordable solutions.
They don't always want the best of the best. They want sometimes simple solutions, and I think we're doing good here. We recently launched the Lyra, the new table or the new Solsus sterilizer. Both have been designed and are assembled in China, and they really found their space in the market. You know, they are growing. What I really like about it is they are not really cannibalizing or offering in the premium segment.
It's actually quite the opposite. They are somehow protecting our portfolio differentiation, and I think that's why we have in the pipeline another couple of these product introductions in the value segment, and they are a good enabler for growth.
Stéphane, you have singled out infection control consumables as one area where you see great potential going forward. Could you please tell us about that?
Yeah. Really the thing is, we believe that we can take a bigger share of this market, you know, thanks to our install base, our good relations with our customers. I think it would allow us to have a more comprehensive offering to our customers.
Also from a pure financial perspective, we think that this is an attractive segment to be in, but our margins are also, you know, more recurring by nature. I think we can do a lot here. This is not a new thing for Getinge, infection control, you know, consumables. We already have a business of about SEK 600 million of revenue here, but I really wanna increase the focus on that and maybe be a little bit more disciplined in our ambition to gain more space in this market.
We're doing that both internally, you know, organically, working on improving the portfolio, working on building out some sales channels in some countries, but we're also doing that inorganically, Lars, and I'm sure you saw that we acquired two companies in the last month.
The first one, Quadralene, based in the UK, is now a center of excellence for chemistry and disinfection globally, and it has really helped us gain a lot of know-how in the field of chemistry and disinfection, and we are already seeing the effects of that. The most recent one, we acquired biological indicator technology from a company in the U.S. called Verrix, and we are very positive about that.
You know, this will allow our center of excellence in Denver to really become a full solution provider in the field of sterility assurance from chemical indicator to biological indicators. I would say, you know, both internally and externally inorganically, we're building on the plan to be a more consumable-centric company.
Sounds great. What about the low temp sterilization offering in all of this?
I think it plays a big role in that, to be honest, because it's, you know, it's important that our viewers realize that low temperature sterilization is not like a just a new capital equipment. Low temperature sterilization, even much more so than steam sterilization, has a very high attachment rate of consumables. You have sterilant and indicators.
I think this is going to be a true game changer in the gravitation of our portfolio actually, when we go to market with that. I'm very pleased with the progress that we are doing here from a R&D perspective. We have promising results on our prototypes. I hope we go to market latest in 2023 with that.
You know, when we do that, I'm convinced that it will be a true game changer in our portfolio structure.
Looking forward to that, Stéphane. You acquired two companies basically in the last 12 months, Quadralene and Verrix. Are you going to make a step change here now with M&A?
Always hungry. We screen a lot of companies every year, a lot of incoming opportunities. There has been a lot of activity, even during COVID, even more so during COVID, I would say. You know, we're reacting to incoming opportunities, but there are a couple of areas where we are proactively building the funnel of opportunities, and these are, for instance, consumables, I just talked about it.
Digital healthcare is one of the areas, you know, digital solutions in our core hospital departments like the OR and the CSSD reprocessing department. I would say maybe, Lars, any opportunity that has a strong footprint in the U.S. market, we are actively looking at.
I would like to stay a little bit with the digital healthcare offering. Could you please elaborate on that?
Digital is key for us. Of course, it's a key element of our growth and productivity journey. There is one thing I would like to say first is that for us, digital is not only a promise or a vision, it's already a reality today, you know. What is different for hospitals is that, you know, sometimes you have a good local solution, but it's very difficult to globalize it because the healthcare systems are so different and the way of working.
There is one good example of where we were successful with that is actually T-DOC, our, I think, industry-leading CSSD supply management software. It is used today by more than 800 hospitals around the world to manage their production, and I think it's a great success.
From a financial perspective as well, you need to know that about SEK 500 million of revenue comes from digital today. It's growing double-digit year-on-year. Actually already about a third of our financials today or a third of our revenue are already recurring by nature from service level agreements or software as a service. Definitely a reality as well as a promise.
The order book is growing quite nice there, isn't it?
Yes, we have right now all the orders in the book for a bit more than 40% above pre-pandemic level. Definitely we can see good momentum, and we are quite optimistic about the future as well. There are new solutions coming in. We're also growing our sales channels.
Definitely the ball is rolling. Let me give you a couple of examples on that. The first one I can name is Torin, where we try to do a little bit similar to what we did with T-DOC. Torin is our OR scheduling solution. It's already a quite successful software in the German-speaking countries, and we are now starting to internationalize this solution.
We sold the first sites, one in France, one in Japan, so we see the progress of that, and we are very hopeful that it will, again, increase opportunities for us in the digital space because OR management is a key topic of the moment, of course, you can imagine, post-pandemic. Another good example of that is what we call connected equipment.
You might know, Lars, that we already have 4,500 machines connected every day to our Getinge Online portal. The key thing in the next years will be to increase the value of the data coming from our equipment, both for us, like, you know, service management, information on the usage, but also for our customers, utilization, productivity and clinical information.
Getinge Online is definitely an area where we want to grow, not only to offer solutions, but also to monetize this data and make a profitable revenue stream out of that as well.
Great. Let's shift to productivity. This is an area where you have been performing really well, right?
Yes. I mean, it has been at least a great focus, I have to say. You know when we were together at the last Capital Day, you know, I was pretty clear that a lot of the transformation journey from Surgical Workflows would have to come from disciplined action on our cost base, which, to be honest, had been drifting for a while and had become a little bit inadapted to our revenue and to our market conditions in a way.
So we really started in 2019 to do pretty standard cost out right sizing activities in the sales and service side of the business, in the industrial and in the support functions. We can really see the effect of that already.
If you look at the year-to-date financials, you can see that we are operating more than SEK 400 million SG&A below the 2019 level. I think that's a good sign of this achievement. Of course, it will pick up a little bit when we go to a more post-pandemic world, hopefully. I can tell you that the vast majority of these savings are actually structural and are not coming back.
What did we do more than these structural changes and improvements?
After this somehow, cost out activities, we really entered the more difficult work, which is continuous productivity improvement. We did a lot on service. You know, service is a people and process business, so you have to work on improving the training of your engineers, you have to work on improving the processes in how you dispatch them with more tools to do service remotely, in how you manage your spare parts, and we have made good progress here. We also worked quite a lot on the product cost, to improve the material cost and the assembly efficiency of our products. Actually, a lot of it started with the portfolio work.
Because if you have a bit of a messy portfolio with which is sometimes the case when you're built over time by acquisitions, you have redundancy in your range, then there is only so much you can achieve in terms of productivity gain.
A lot of what we did was to take the portfolio, rationalize the offering, and just to give you an example, on sterilizers, we'll move over a couple of years from 18 models to 6 models and only two manufacturing sites. I think it's very promising. Also long-term enablers that we have done to really simplify our different platforms in all the offerings.
This is really impressive, I must say. Where will this take us from a financial perspective then?
Yeah. If I wanna summarize the financial trajectory, I would say mid-single digit organic growth, you know, with all the things that we described before. Discipline, continuous profitability improvements year-on-year, and that will take us to double-digit EBITDA performance. That's where we think this business can go. On top of that, focused, disciplined M&A strategy targeting our strategic priorities.
Beautiful. Any final words?
Yes, Lars. Maybe I'd like to take the time to recognize the teams a bit for what they did. You know, I'm very impressed by the drive and the resilience of our teams. You know, we were hit by a pandemic. We were managing, you know, operational firefighting. Even while doing that, they were delivering on a quite ambitious transformational agenda. I can say that I'm very impressed and very proud of them. I would like to maybe say those words about them, you know.
Important, for sure. Big thank you, Stéphane. Now let's move over to our Life Science business area and Harald Castler. Hi, Harald. Good to have you. These last couple of years have been quite something, haven't they?
Yes, Lars. We have had a really good growth ever since establishing the business area. We've been working with aligning sales and supply chain processes. We have put a very clear growth strategy in place, and that has been to focus on recurring revenues. Within recurring revenues, we have seen, for instance, our single-use DPTE-Beta Bag has had a net sales growth in the last three years of 40% year-over-year.
Some margin improvement on top of that, right?
Back in 2018, we were at an EBITDA of 13%. Now we can see in the last 12 months we are up to 19%. This is, of course, a combination of several things. The good growth, the volume increase has of course helped, better factory utilization. The fact that we are moving more into single-use products has had a good effect on our product mix. We have seen a better OPEX utilization efficiency.
If we look at the product mix side of things, you have quite a strong growth in the biopharma product segment. Why is that?
Yeah. We are focusing on two parts. One is the research of new drugs and the other one is, of course, production of these drugs. Our offering covers bioreactor systems, cleaning and sterilization, and then we have what we call the Sterile Transfer, where you find the Beta Bags.
The areas that has been growing the fastest in the last years, that is, in Sterile Transfer and but also now in recent years, bioreactor. It is, of course, an effect from the pandemic. We can see that there is an increase in both interest and of course need for vaccines, but also for other drugs. The interesting thing here in the vaccine production is that new technologies has been used and that fits perfectly into our offer.
This has made our sales in the last years actually to go off the chart. We don't expect that to continue in the same way. From now and in the next coming years, 2025, we will move more into normal growth rates. Nevertheless, single use will continue to be very important in our offer. By 2025, we believe that single use will represent 50% of our net sales.
Harald, how much of our sales comes from vaccine-related business and demand?
If we say directly vaccine production, we estimate that 10, maybe 12% of net sales this year is directly related to the COVID vaccine. Main part of that is, of course, Beta Bags. Our estimate is that we will see a good growth in demand. We believe that next year, actually, the production of vaccine in the world will continue to grow a little bit.
Then in 2023, it will be more a plateau and from there, maybe declining a bit. There is also an underlying demand from other types of biopharma drugs. This area has historically been growing for about 20% a year. The interest hasn't gone down, rather the opposite.
We see, for instance, new development and breakthroughs using the mRNA technology that looks very promising in, for instance, cancer treatment.
What's your expectations on growth for Beta Bags and Sterile Transfer for 2022?
We believe that Beta Bags will grow roughly 30%. An important task is, of course, to secure that we have capacity to deliver on these demands. I'm happy to say that we are just at the finish line in setting up our next production line in New Hampshire in the U.S. We are planning to ship the first products by end of the year. With that, basically, we're gonna double our capacity. Obviously, it will be a ramp-up during the first half year next year, but we will basically double our capacity of DPTE Beta Bags.
Harald, back in at the Capital Markets Day in 2008 and 2018, you mentioned that BetaBag was your golden nuggets. What about the Alpha Port? Why is that so important?
Yes, it's a quite simple answer. To use a Beta Bag, first you need to have an Alpha Port, because these two products are sort of docking to each other. Once we have an Alpha Port installed in an isolator, it's basically only our Beta Bags that can then fit to it.
There is a strong correlation between Beta Bag sales and Alpha Ports. We believe that in average, an Alpha Port that is installed in a filling line application consumes about 3,000 Beta Bags per year. We have also seen when we go back and look at those numbers that it's actually growing also from there. There is a very strong correlation. It's like a razor blade business model.
Given what you just said, what does the Alpha Port sales look like at the moment?
Yeah. First and foremost, we have a large installed base of Alpha Ports. We are the industry standard when it comes to this technology, and we have a strong market-leading position. Then we can see that we have on average over the last years been at a 25% CAGR on Alpha Ports. In particular, we can see now in the last years that sales to China is increasing a lot. We are so far selling very little of beta bags, so this is very promising.
For sure. It seems like everyone wants to go with the Sterile Transfer solution that we have at the moment. Why is that?
Yes. If you look back, I would say 10-20 years, the traditional way of putting a filling line, that would be in a clean room. A clean room requires people and is quite expensive to run. There's also risk for contamination. What has happened in the last 10 years is that filling lines are moving into isolators. You have a sterile barrier that you need to put things in and out.
There are two ways of doing that. One is using reusable stainless steel equipment, and the other one is using stainless steel plastic bags or could also be plastic containers. This has proven to be a lot more efficient.
Time to market, you don't need to do validation, these kind of things, so it really is boosting your productivity. Now especially during the vaccine development that was done in an incredibly fast time, the only way to go was to use single-use solutions.
Is there any way for us to expand the market, expand the usage?
Yeah. All types of in and out transfer of an isolator require some kind of sterile transfer technology. The biggest application is moving stoppers and caps for the ampules. You also have the liquid, for instance, and there we see a fast-growing area. We are working very close to partners like Merck Millipore, Meissner, and Pall.
We see really good growth and opportunities in liquid transfer. There is also other transfer applications further up in the manufacturing line, up in the downstream area. Where also sterile transfer is key and having control of sterility and particles is vital.
What about the R&D pipeline? Do you have anything interesting going on there?
In the next years, we will be launching some very exciting DPTE products. We have now what will come next year is a completely new port and bag solution, allowing customers to dispatch components into the filling line isolator without using those gloves that you normally see in an isolator.
Because typically you don't want to sort of interfere into the isolator and disturbing laminar flows and things like that. We are also looking at new solutions for really high capacity filling. We have also new products that are sort of dedicated for this type of high-speed filling that is typically the case in vaccine.
Sounds great, Harald. Really looking forward to it. Basically, it sounds like your biggest problem is to decide on when to go ahead with the next production line and where to build it.
Yeah, I would say that we need to take a decision in the next 12 months where we're gonna put the next extension of capacity. It could either be, which is maybe a natural choice, to put it in France or in the U.S., where we already have today manufacturing of DPTE-BetaBags. Another alternative is to put it in China because we have seen the big growth now of DPTE Alpha Port, so the volumes will come, getting a HASS in Suzhou, a clean room facility that can easily be rearranged for pharmaceutical applications, and would be an alternative for next line.
Let's shift gear for a while and look at the other part of your biopharma business offering, bioreactors. What has happened there lately?
Yeah. In bioreactors in the last 12 months has been really something. We have had a 30% growth in the last 12 months, and this is due to the increasing focus on pharmaceutical drugs. In bioreactors, what makes us unique is that we have a very user-friendly software making it easy for scaling up or actually also scaling down from pilot scale up to production scale. And also making the yield higher and those things are what counts in the end of the day.
30%, that's quite something. Is that doable over time?
No, 30% is unrealistic. We believe that the market growth for bioreactors will come down to, let's say, the low tens. We also see a good opportunity, actually, to capture some market shares, and given our strong offering that we have today, but also quite an interesting R&D pipeline.
Let's stay with that pipeline for a while. Do you have something on single-use bioreactors in that, in there?
We do. We are going to launch six new single-use bioreactors in the next years to come.
Will there be different sizes, capturing both the laboratories and the production?
Yeah, in 2022, we will complete our offering of single-use lab scale reactors, and that will also include a GMP version for small scale pharmaceutical production. In 2023 and 2024, we will also launch our mid and large scale production reactors.
What you clearly are saying is that we intend to grow in single-use items. How does that fit with the environmental agenda that we have?
It's very easy to believe that single use is not environmental. If you look at the energy consumption in running a manufacturing plant with stainless steel solutions, you can actually see that single use is considerably reducing the CO2 footprint. The reason is that you get of course a higher productivity, so a higher throughput, but also that you can skip large energy-consuming sterilization and cleaning procedure. I would say that the single use is actually reducing the footprint, the CO2 footprint.
That's good to hear. We have been talking a lot about organic growth here, but of course, there is this path of M&A acquired growth as well. Do you scout actively at the moment and, yeah, what's going on, basically?
Yeah. You could say that when we acquired the bioreactor company, Applikon, two years ago, we have been quite busy in the integration work, but that is now to the end. In the last half year, we have sort of ramped up our activity in scouting for new opportunities. Where we are really looking is in single use applications, of course, that's something we want to grow.
We are looking in the areas around the bioreactor to strengthen that offer, and of course, in the fill and finish in the last step. There is also an area between the upstream, the bioreactor phase and the fill and finish, and that is what we call downstream. That is filtration, analytics, and these kind of things.
There we are also looking for opportunities to see if we can find sort of niche players that fits into to our portfolio.
So-
Niche is the play, the keyword, when it comes to bolt-ons.
Sounds great. Have you zoomed in on anything on the radar? I need to ask.
We have a lot on the radar, Lars, but, I can't really talk about that here.
Oh, no worries. What about the price levels? I mean, is that a problem?
Yeah. Price levels are, as you probably have noticed, quite elevated in the last couple of years. That is a problem, of course. If we find targets that has good potential and really fits into our strategy, even if the multiples are high, for sure, we can sit down and discuss about the deal.
Harald Kastler, lastly, we need to talk about the financial targets presented here today. Organic growth, the EBITDA margin improvement that is quite significant. What's your take on this?
Yes, Lars. I'm quite confident that we will succeed with this. We can see how the pandemic has actually been like a catalyst for intensifying development of biopharmaceutical drugs, and that is fueling the growth even further. We also see strong market trends in single use. Now we have secured capacity to capitalize on that growth, both in bioreactors and in beta bags.
We also have a strong R&D pipeline that will drive our market shares. In addition to this, we are, as we talked about, actively scouting for attractive bolt-ons to strengthen our position in the biopharmaceutical segment even further. Then on top of that, of course, we will work with productivity improvements throughout our supply chain.
Thanks a lot, Harald. Really encouraging to hear your thoughts on this, and thank you again. Now let's move over to financials and our CFO, Lars Sandström. Good to see you, Lars.
Thank you.
Could you please summarize what has happened within financials for Getinge since 2018?
Yes. If you look at the period here, we're talking about four years. When we came into 2018 and the Capital Markets Day, we had a period where we could see a slow improvement when it comes to order intake. This was the result of a dedicated, focused work on getting top line in order first to reinvigorate growth.
Really looking through the different product categories, the different geographies we are active in, and really ensure where are we strong, where are we weak, and dedicate activities and resources to really get this back on track, so to say. The next step, which was really important, was on the productivity side, to get our gross profit margin moving in the right direction as well.
This also, here, a lot of work on the full supply chain to get better results through the group. Also what we have seen here during the last years, a very dedicated work when it comes to service and getting the service profitability in place, which is also a good contributor to gross profit. Not only gross profit, but also when it comes to our operating expenses.
Also here, productivity has been a very important area of focus during this period. We can see the results coming through. We have had dedicated investments in operating expenses, like quality system, compliance area, et cetera, to get that foundation in place, but that has not hindered us to have a very strict cost control as well.
Is that actually enabling growth and better operations?
I think so. I think it's a risk thing, especially to give the organization the foundation to do and conduct better business. And that is, so to say, enabling growth for the future, absolutely. All in all, this has then delivered a solid EBITDA margin improvement during this time.
What about capital effectiveness or efficiency then?
As well, quite important. Coming into 2018 and during this period, we have had quite a focused work on working capital. You have seen that. We are reporting on that every quarter. You have seen all working capital days improving from mid-2018 up until today, from some 138 days down to well below 100 at the moment.
That has, of course, contributed significantly to freeing up cash from the balance sheet. Some SEK 2 billion here in the last two years has come through the cash flow. Of course, investments as well. Having quite a focused, dedicated mindset when it comes to what are we investing in, having clear business cases in place before we make decisions, and really put the money where we see the best growth.
Still being somewhat below the depreciation rate, which has also improved the efficiency of the capital, resulting then in improved return on capital employed through the period here.
That's really good to hear. If we look at the left part here, the improved profitability aspect, we clearly have closed the gap towards peers on the margin side. How much of that is coming from the COVID effect, the so-called COVID effect?
No, but of course, we have had a positive impact during 2020, and also this year, 2021 from the pandemic. We should remember we also had quite a negative impact in other areas that has impacted us as well. So all in all, yes, there is some net positive impact here. Looking through the period, we have had an EBITDA margin improvement of 1-2 percentage points per year. That is where we are, so to have been organically during this period. Even if I look through, so to say, the pandemic impact.
One negative from the pandemic is the freights, the prices going up, delays, and so on.
Yes.
What do you see when it comes to these things?
I think the pandemic started, and then we have a geo-economic recovery now happening all over the world and impacting all industries, including us then. That is then seen now in the supply chain disturbances, increased raw material, lack of components, et cetera, et cetera. We are not immune. We have done a very good job in handling it, I think.
We are having a good focus and good track on it. We measure and follow the material cost through all our sites to ensure that we can track and trace which suppliers do we see cost increases, which materials, and then take action to act upon it, both towards the supply chain together with our suppliers, but also then when it comes to pricing to offset part of this impact.
Clearly a good development on profitability and assets. What's the next step?
Oh, that is what is coming now up until 2025. I think one answer is that we're gonna actually continue on the profitability route, ensure that we capture growth opportunities and drive productivity measures through the whole company. Of course, then it comes to profitable investment side here. We have through the good years here now and the increased stability when it comes to profitability and financial position, we can now step up a bit on the investment side.
We are now talking about R&D, organic growth, and M&A.
Yes.
What's your take on R&D?
If we start with innovation, R&D, innovation is more than only M&A, but it's of course also the whole solution, selling, et cetera, where we are. Yes, I think we will invest more. That will happen through utilizing. Actually, we have spent a lot of resources into remediation during last years.
Yeah.
Now we can dedicate more and more of this resource to be fully focused on innovation.
Yeah. One should expect some 5% to 6% of net sales to be spent.
That is what we say, around 6%, I would say, going forward.
Yeah. If we look at the, so to say, the M&A part of this, how much dry powder do we have?
Yes. A question we very often get, of course. When I look at the balance sheet, the simple answer is to take one number. I don't think it gives the perfect picture, but just to give you an answer, I would say we have some room or to invest SEK 15 billion as it is today in M&A activities.
I rather look into how to do this and what it actually means, and just take one step back. Getinge is the combination of some 70 acquisitions up until 2015. Up until 2017, 2018, 2019, there was nothing. Now the last 2 years here, we have done investments of around SEK 1 billion or half a billion SEK a year, the last 2 years.
That pace, I think it's time now to step up to some SEK 5 billion a year. I think that is what we see and would like to go forward with.
That's quite a step change. I mean.
Yes, from the historical levels, the last years here, of course. But I think we are ready now. We have three solid business areas in place with solid management teams who are able to find good opportunities, but also to bring them in and integrate them into their organizations. Of course, the financial, the profitability and the financial stability to do it.
This is where we will allocate capital, basically, because other types of investments, we are on a good level, aren't we?
Yes. When it comes to normal investments that you would say, going into fixed assets, machinery, equipment, IT systems, et cetera, I think we are in a solid place there. Of course, there can be investments if there are specific needs for capacity increases like we are doing now in the U.S. when it comes to the BetaBag, for example. Normal capacity increases, we should be able to handle by driving the productivity rather than more big investments.
Sounds great. This takes us to the financial targets. What's your take on the targets?
Well, the targets, as you know, we have communicated now today, top line, 4% to 6% organically, adjusted EPS increase 10% per year, and then a dividend of 30% to 50% of net income. To reach this, we need, of course, the growth. I think we are well in line with the market growth here.
When we look at the different product segments, how we are gravitating into good product segments and geographies where we have a good position with good underlying growth, the 4% to 6% seems very reasonable to me. Then the 10% EPS, that will require that we move towards an EBITDA margin when we come out of the period here of above 21%.
I see that also fully feasible with the growth, together with the continuous productivity measures we do, that is, fully possible.
This will take us to a return on invested operational capital above 20%.
Yes. That is what I see. We have had a bit of a boost now during the pandemic, but looking at underlying and the profitability improvement we have, and then in capital efficiency, we continue to drive, that will be about 20% is what we are seeing.
All of this is also organic, right?
Yes, exactly.
M&A will come on top of this.
M&A is on top.
Yeah.
That is, as I mentioned, investment of around SEK 5 billion a year during this time period we are talking about today, that would add 1% to 2% points on top line. That is what I can see.
That sounds great, Lars. Great. Thank you a lot, and thank you for taking the time. Now we have Mattias coming in soon, wrapping things up before we go into the Q&A. Mattias, it's time for a wrap-up before we go into Q&A, isn't it?
Absolutely, Lars. Thank you very much. I would just like to conclude with saying that we're entering into this next phase of continued growth and productivity, Getinge with better momentum than ever before. We have updated our financial targets, so organic growth of 4% to 6% per year on average through 2025.
We have an earnings per share target improvement of more than 10% per year throughout the time period on average. A logical consequence of this is that we will not only need to reach our growth target, but also deliver an EBITDA performance of above 21% for the end of the period. Our momentum when it comes to portfolio gravitation will of course support in this.
We have, as you've seen from a strategic perspective, many good initiatives in place to really support this development. We have macro trends working in our favor as well, and I really appreciate you taking the time to listen to this. Let's move to the Q&A. Please start dialing in right now, and we will see you in a couple of minutes.
Thank you, Mattias. With me, I have Mattias and Lars, but also Magnus, Anna, Lena, Stéphane, Jens, Harald, and Carsten, of course. We are ready for your questions. By the way, team, thanks for a great performance today with the presentations. Please dial in. You see the number below. While doing so, I see that there are some incoming calls here. Operator, you can put them through, please. Hello.
Just bear with us one moment. And if you do wish to ask a question, please press zero-one on your telephone keypad now.
Well, while waiting for the questions to come in, I would like to ask you, Mattias, when you look at the targets that we have presented, is this something that you're really confident on?
Yes, it is absolutely. I think, we've looked at the end market growth in the coming years. We've tried to see through all these moving parts that COVID has thrown up, and we're quite confident now that even if we're not really at the end of the pandemic in any way, we do have enough visibility to look at the end market growth and also make an assumption about our own specific categories and how these will evolve. We're really comfortable that this is a good level to put the bar.
Sounds encouraging. Operator, do we have any calls incoming?
Yes. The first question comes from the line of Victor Forssell from Nordea. Please go ahead.
Yes, thank you very much. I hope you can hear me well, and thanks for the Capital Markets Day so far. I'll just start with a question on Acute Care Therapies, please. That is when we look upon your sort of conceptual graphs here in terms of the gross margin improvements. So, you know, the question is really tied to the 26% or more than 26% that you aim for in this period of time. Does that really imply that your OpEx has to grow at a very, I mean, fast pace? Is that how we should look upon it?
All right. Thank you. Thanks, Victor. Thanks for the questions. I will hand that over to Jens Viebke since it was a specific acute care therapy question.
Thank you, Victor. I mean, of course, OPEX will need to grow somewhat, but not at the same pace as revenues, of course, in this case. We will, of course, make different investments in terms of OPEX for sure.
Just looking at sort of the COVID tailwinds that you've had on margins here in the last couple of years. I know that you aim to grow fast in the ECMO business line and cardiac and vascular systems should improve their sales, at least from depressed levels in the next year and so forth, and perhaps a decline in ventilators. Overall, is there any reason that the gross margins should be declining short-term here and in the coming years?
Should probably not comment too much on the details, but I think you can see in the graph that overall, moving forward, they are sort of growing from this level where we are sort of today.
Okay. I'll limit myself to one more here. Now that you have this large potential of upgrading your installed base of ventilators in terms of software, et cetera, could you comment a bit around how much of a software and service is attached to your current sort of incremental ventilator sales? If that has, you know, the 30% historically, what type of number is that on new sales today?
I mean, that's I think 30%, 20% to 30% is probably sort of a good estimate of what it has been historically. I think what is really the key here moving forward is going to be our digitalization and sort of the connectivity and the type of opportunities that that will give us.
That will really make it possible to sort of add on more things both because of our sort of the inherent data streams that we can get from that installed base but also for different types of sticky disposable, et cetera, and how we can sort of attach that to the ventilation installed base.
I think it's also important to remember that to be able to connect ventilators, we also need to see a turnover of ventilators moving forward. That will, of course, take a little bit of time since the average life length of a ventilator today is 10-15 years. It sort of takes a while to replace older machines that cannot really be connected. Yes, there will certainly be an upside, but it will take a bit of time until it sort of comes.
All right. Thank you so much.
The next question comes from the line of Scott Bardo from Berenberg. Please go ahead.
Yeah, thanks very much for taking my questions, and thanks for the new targets communicated today. The first question, please. Obviously, you know, you've been performing pretty strongly on the profitability side for the last few years. Obviously, we don't know how you close this year, but in keeping with your progressive margin expectations by 2025, can you share some
Thoughts about next year. Would you expect aggression next year or could margins dip actually? Maybe some sense of the phasing of this ambition would be helpful, please. The second question, really to a couple of the divisional heads. I think you've talked about moving into single-use bioproduction for higher volumes.
I think in Surgical Workflows talked about low temperature sterilization as a future growth area. These are both markets that have been served by strong incumbents for a very long time. I wonder if you could help us understand, you know, what is it really that you have that is differentiated that can capture in these already solidly developed markets? Thanks.
Great. Thank you, Scott. I'll take the first question then while Stéphane and Harald prepares mentally for the second one. When it comes to the guidance for next year, we will wait until we've closed out 2021 and see where we end up both in terms of revenue and in profitability. We will come back on the outlook for 2022. It's a little bit too early today to go into that. I guess we can move to the second question, and I'll hand that over to Stéphane to begin with.
Thank you, Mattias. On the low temperature sterilization, Scott, I think you're right, there are incumbent players, but we think there is room for more players, actually. We're confident that our product can really be very competitive in that market. I think we have both the role to play from a product perspective, but also we have one of our core strength is that we're a full provider of the SPD today.
We have the ability to provide full CSSD solutions, including steam sterilization, and now we'll have as well low temperature sterilization. I think that project and commercial reach that we have is a key differentiator for us when we enter the market.
Thanks, Stéphane. Over to you, Harald. Similar question. You're muted, Harald.
Sorry for that.
Once again.
No bioreactors, of course, as you are saying, are served by some strong competitors. I would say that the vessel itself, the bag, is becoming a bit of a commodity, me-too product. Where we try to differentiate ourselves with our offer is more into the software.
We talk very often about this with scaling up and down between lab and production scale, and in software, user friendliness and being able to compute all data in order to optimize processes. That's where we believe we have an advantage.
Thank you, Harald. We can take the next question.
The next question comes from the line of Peter Östling from Pareto Securities. Please go ahead.
Yes, thank you. Two quick ones. On one of the pages, you showed where your strengths were regarding different hospitals. Is it possible to, I think it's on slide 28, Getinge is present at top 100 hospitals globally, 70% very high, 24% high. Is it possible to elaborate a little bit and talk how this very high, high and the potential, strictly geographically, how that looks?
Yeah, absolutely. I think the first thing to remember as well, when I add on to the information, is that we do sell into all the top 10 hospitals in every market. Then, of course, there's a bit more to say about the graph that we showed there. I'll hand it over to Carsten to explain a little bit more about the potential that we see based on this.
Okay. Yeah, my pleasure. So first of all, we have a pretty sophisticated market share tool that is, generally speaking, focusing on the product segments. We have, of course, also consolidated that for the top 100 ranked hospitals. Here we separate between are we strongly positioned with our range of Surgical Workflows, or are we strongly positioned with our range of Acute Care Therapies offerings?
When you see on that page that we are saying that 17% we are extremely well and strong positions, it means that we are positioned very well for both Acute Care Therapies and Surgical Workflows. Then you will see that I think it is another 24% where we are only strongly positioned.
That means that we are either on one or the other ones feeling that we have a dominant position. Not sure if that answers your question.
Yeah, it was more on the geographical side of those 17%. Is that more tilted toward Europe or?
It is really across the board. If you're going into this ranking is by Newsweek, you will see very quickly. I don't know by heart how many of the top 100 ranked hospitals are located in the United States, but there is of course a wide range and number of hospitals among the top 100 that are U.S.-based, as well.
It's really like, across the board.
Okay, great. Thanks. Now my second question. The 8% point improvement in EBITDA margin since 2018, can you say anything and divide it into cost efficiency, productivity and top line volume growth? How do you see that split from 2021 to 2025?
Yeah. Thanks for the question. I think the short answer is probably no, that we're not disclosing that. It is, we have a good understanding of this ourselves, but it's not something that we disclose in detail externally here, so.
Okay. Not for the future either?
We can contemplate it now that you ask, but we hadn't it in our plans. Yes, of course.
Okay. Fair enough. Thank you.
Thank you.
Very good Capital Markets Day. Hats off to you, Lars.
Thank you, Peter.
Thank you so much, Peter. Appreciate it.
The next question comes from the line of Kristofer Liljeberg from DNB Carnegie. Please go ahead.
Yeah. Thank you. First I wonder, given that you sound pretty optimistic about the group potential in all three business areas. Could you maybe explain a little bit about the lower end of the sales growth range? How are you thinking about that?
Then I wonder about the margin target for ACT, about 26%, considering that you're already at 28%, and you're talking about continued improvements. Is that COVID effect that we have to take into the calculation? My final question relates to what you say about the integration manufacturing sites and Surgical Workflows. Does this mean that manufacturing will close in India at all? That's all from me. Thank you.
Yeah. All right. Thank you, Kristofer. I can answer the first one. We do, as you know, have a rather broad portfolio. There are a number of categories with very, very different growth rates. So when you talk about the lower end of this depends obviously a lot on the comeback of elective surgeries, for example.
And there's also some thinking around capital that we just need to be mindful of. But I said initially, we are comfortable about where we've put the bar and where we're certainly leaning more towards the higher part of this span, I would say. Then I'll hand over the Acute Care Therapies question to Jens and the Surgical Workflows one to Stéphane.
Hi, Kristofer. Good question. No, but of course, there is a little bit of trailing effects until Q3 of COVID. I mean, it's just to look around in the world and you see that there are several parts that are sort of affected by COVID still.
If you sort of recall where we were in 18 and 19, we sort of just breached the 20% limit there going from 18 to 19. I mean, COVID has been there, but we've also managed to do a lot of good sort of productivity work during that period. 28% is a lot higher than 26% for sure, but 26% is a lot higher than 21%, where we were in 19.
We are on our way, but it's sort of a continuous improvement journey over that time period.
Okay. Should we interpret this as you think there is a risk that the margin in ACT will go down here coming years when the positive ventilator effect disappear?
I think you should interpret that as that of course there are some tail effects of COVID right now. On the other hand, there is some more to be had, of course, from elective surgeries coming back. Don't forget that some of our elective surgery products, of course, have really nice margins.
Thank you, Jens.
Okay. Thank you.
Move to Stéphane for the other part of the question.
Yes, Kristofer. On the steam sterilization, the illustration of the visual was about steam sterilization, and we have made the modifications that we wanted to make to the footprint already, and they have been made in the last 24 months.
You might recall that we have closed our operations in Ankara in Turkey and that we have transferred all of our healthcare sterilizers assembly from Getinge to Poznań. Somehow the target footprint has been reached here when it comes to steam sterilization. Nothing to expect here in the short future.
Just to clarify that then, we're not closing the Getinge site. That is our Life Science site. We've made room for Life Science in that part of our business.
Okay, I understand. Thank you.
Thank you.
The next question comes from the line of Rickard Anderkrans from Handelsbanken. Please go ahead.
All right. Hi, everyone, and thank you for taking my questions. To accelerate the journey here towards more high growth and high margin areas, should we anticipate Getinge to participate in, you know, divestitures in the other areas that's referenced on slide 16, to sort of slim down the portfolio even more? Or is it something that gets the foot into the door for you guys, so to speak?
Yeah. Thanks for the question. There's no plans right now to do any major divestments here. We're happy with the categories that we are present in, and we expect that to stay this way. This is at least what we've factored in into our planning and the new targets.
All right, great. Thank you. Another one on the Acute Care Therapies, the cardiovascular segment there. A lot of things going on in product launches. That seems to be quite exciting. You mentioned China as a particularly strong region there for vascular grafts. Can you talk a little bit more about that opportunity and why China stood out in the reference there?
Yeah. Happy to do that. Since that's more of a market thing, maybe Carsten, wanna have a stab at answering the market dynamics in China when it comes to vascular?
Yeah. We had some competitor facing certain challenges on the one hand, and we have been taking over that space. At the same time, we had been ramping up very timely our manufacturing capacity. We have been serving customer needs in a segment where we are extremely well-placed, and where we have been growing faster than competition regardless. It's a matter of combining some very good positive drivers, really.
All right. Thank you. Just a final one. Surgical Workflows side, if I didn't misunderstand, there were roughly one-third of recurring nature. What could it be? Can you talk a little bit more about the initiatives? Is it primarily you know internal development there, or will it be more coming in on the recurring side from acquisitions, do you think?
Yeah. Thanks for that. We'll hand that over right to Stéphane. You won't get a number from him, but he can talk about the dynamics of this.
Sure.
Yes. The comment during the presentation of the third was about the digital part. Today our recurring revenue is essentially service agreements, technical service, and digital service agreements, as well as consumables. As I explained, I think there is really an intention to grow the recurring revenue share of our portfolio.
I think the biggest driver here will be the progress that we intend to do in the field of infection control consumables. We don't wanna be in every segment of the market, but we have identified a couple of areas like chemistry, like sterility insurance, indicators that really are, for us, a potential to grow significantly in that space. As you know, of course, these are recurring revenue.
They are used each time you process a load at the SPD. I would say I really, really highlight this one initiative as a key driver to our recurring revenue progression.
All right. Thank you very much. That's all for me. Thanks again.
The next question comes from the line of Karl Lorrain from Danske Bank. Please go ahead.
Yes. Three questions from my side. First, you mentioned the ambition to reduce quality cost by 10% by 2023. I was wondering if it's possible to say what is the current cost for quality within the group as of today.
All right. Thank you, Karl. I'll hand that over to Lena to talk about that.
Thank you for the question. I think when it comes to the quality cost, I will not, of course, share that at this moment of time, because I think it's important to bear in mind that there is not a clear benchmark in the industry today where you're actually setting up what quality cost actually is.
W hat we have tried to use in our internal calculations is that we are using the McKinsey benchmark report from 2017, and that's what we are looking at. What we can see is that we are below benchmark today. There is
Unfortunately, there's not a good way of putting this, but when we look at our data and how we will have all the initiatives and how we will work with efficiencies, we believe that we can reduce this to 10%.
Okay, thank you. Another question for Stéphane, if it's possible to say anything about the net sales within Surgical Workflows. You seem to have a quite strong order momentum with orders above 2019's levels now in Q3. So I was wondering if it's possible or could you elaborate a bit on when do you expect the net sales to be above 2019's levels again?
Yeah. That's really the golden question, because as you can see, the trajectory of Surgical Workflows really depends on our ability to get back on the revenue track that was the pre-pandemic level. It's a bit early to answer specifically that question.
As you know, our revenue conversion cycles are between six to nine months in average. Now we depend on the ability of the customers to receive our goods. We also have some supply chain challenges as well. It's a bit hard to make a prediction on when really we hit the 2019 mark, but hopefully as soon as possible.
Okay, thank you. A last question on M&A. Just how we should read this, Lars mentioned SEK 5 billion. Is that on average what you would expect to invest in M&A during the time period?
Go ahead, Lars.
Yeah. Looking at that, I think, we say here SEK 5 billion a year just to give you a clear indication on that we need to do a step up here to really make an impact here compared to what we have been doing the last years here.
I think what we have doing the last year is really to test, do some really good acquisitions here and really work on getting all the integration through, bringing them into the business area, but also then on the sales side, et cetera, and now see that it works really well and it is time to step up. That's why we indicate now and say SEK 5 billion a year in the coming years. As you know, M&A is
It is a bit opportunistic as well, but what we would like to see is to grow on this pace with successive acquisitions and not maybe one big one because those are more tricky to do, but rather several acquisitions during the time period here, and consecutive over the coming years, actually.
Okay, thank you for a great Capital Markets Day.
Thank you, Carsten.
Thank you, Carsten.
The next question comes from the line of Ed Ridley-Day from Redburn. Please go ahead.
Good afternoon. Thank you. My first question relates to the cardiac assistance business and IABP. You appear to be, first of all, more confident on that business. Can you speak a little bit more color on how you see growth going forward, particularly as it relates to a competitive position with Abiomed?
Also if you could give us any more color at this stage on the innovations you're looking at for the new IABP system, that would be helpful. My second question would be around the guidance. I fully understand that you do not want to speak to group guidance for next year, and certainly thank you for the detailed update today.
In terms of the acute care business and the life science business, there are a lot of moving parts, obviously, next year. I'd just like to confirm on life sciences that you do still see growth in 2022 on 2021. In acute care, given the soft comps this year, could we even be looking at a double-digit growth in acute care next year? Thank you.
Yeah. All right. Thank you. When it comes to the guidance questions for next year, you will have to wait until we've closed out this year. When it comes to the cardiac system question, I'm happy to hand it over to Jens to elaborate a little bit there, but again, without giving guidance for next year.
Right. No, of course. No, but I think when it comes to sort of the innovation now in the pipeline, et cetera, I think you had that. I think I also mentioned that in the interview that there is sort of disposables innovation both in the shorter term and in the longer term.
In the shorter term, it's really about basically products that are supporting current indications in a slightly better way than we do today, which is exciting. On the longer term, we really feel that I mean we have a fantastic installed base, and we want to utilize that for further sort of consumable growth or disposable growth.
That will likely take us into sort of the PVAD space in terms of mechanical circulatory support. On the actual balloon pump itself, we are working on a quite exciting platform that can both sort of serve several different segments in different parts of the world right now.
We have previously had sort of multiple platforms doing that, so that would be a big productivity win. But that platform will also be able to sort of serve some of those disposable innovations that may take us at least towards the PVAD space.
Yeah, thank you. Just some quick follow-up, if I may. Just related to Abiomed and Impella. Clearly, over the last few years, the company's made a lot of noise around its indwelling pumps. It seems to me that obviously there have been some setbacks for them. It seems to me that the competitive environment has slightly shifted back to IABPs more generally. Is that a fair comment, if you could speak to that?
Yeah, I think that's a fair comment without giving too much details on how we see sort of Abiomed.
Fair enough. Thank you.
Thank you, Ed. We have time for two more questions, and then we have been consuming the half-hour Q&A session. Two more questions or two more callers, please, operator.
The next question comes from the line of Scott Bardo from Berenberg. Please go ahead.
Yeah, thanks very much for the follow-up. I'll keep it real quick. Just really a point of clarification from Lars, please. Because as I look to your divisional targets and weight those according to the growth trajectory that you've just given, that implies a group margin at less than 20% by 2025, assuming corporate costs remain similar. I just wondered if you can clarify that. There seems to be a little bit of a disconnect with the divisional targets and the overriding group target.
Yeah. Thank you. No, I think there is not. I think we're happy to share and sit with you and talk a little bit on that maybe more in detail. When we look at the growth and the movement we see in productivity and moving into the more higher growth areas, this is where we end up on this profitability level when it comes to the EBITDA level, where we say that we will come above 21% at the end of the period here. We feel, as I said, and we have said today, we feel pretty confident about that for sure.
Okay. Thanks so much indeed, guys.
Thank you so much, Scott. Actually, that was the last question. I just heard that in my from the control team here. We will have plenty of time, many years, talking about the plans that we have been presenting here today. We are looking forward to that.
A big thank you to Mattias, Lars, and the rest of the team. Brilliant. Most important, of course, you watching this. Thank you for taking the time, and we really look forward to discuss this more in detail going forward. Thank you for today.