Welcome everyone to this fireside chat for Getinge. I'm Aisyah Noor, Head of European MedTech Research at Morgan Stanley. It's my pleasure to host Getinge CEO, Mattias Perjos, today. Before we start, I'm obligated to inform you to check for research disclosures at morganstanley.com/researchdisclosures. With any questions, please check with your MS sales rep. With that, welcome, Mattias. It's great to have you here again in New York. Shall we start off with a big picture question? You've been running Getinge for almost a decade now. If you compare the company today with when you took over, what has changed most fundamentally about the business? What are you most satisfied with, and what still needs attention?
Well, thanks for having me, firstly. Very nice to be here. That's a broad question to kick things off, and it's always great to reflect, I think, on the last nine years, 10 years that I've been with the company. It's a world of difference, I have to say today compared to 2017 when I joined. I think that's in a number of dimensions, I would say. I think one is, of course, the quality aspect of the business. Even if we're still in a consent decree, it's a much different situation today compared to 2017. We have a compliant quality management system in place since several years now. We've uplifted most of the products that were part of the consent decree as well. We have two key 510(k)s to get approved, but the rest of the range is in a fully compliant state.
We've also made a lot of progress when it comes to our compliance, so that's another positive. We've been able to maintain growth, I think is really a key highlight. I think the one thing that surprised me already when I joined, and continues to surprise me, is the loyalty that our customers show us. It's really tangible that we've been around for 120 years. We have great support from our customers every day. So that's supported growth, and it's also good to see that operationally, I think we're a very different company also. We have a different structure in the business and also a different approach to continuous improvement, for example, which you can, I think, most clearly see for example, in the underlying margin improvement of the business. Quite a big difference compared to a decade ago.
I think maybe the last thing I'd highlight, which is the glue that gels everything together, is in terms of culture in the company. We have a much more long-term culture in our company. We have people who understand what good looks like, how to work with continuous improvements and of course, also serve our customers better.
Perfect. If we move on to the current market outlook, starting with U.S. hospital CapEx. On the second quarter call, you acknowledged concerns around U.S. hospital CapEx, but you had mentioned that Getinge had seen no real demand impact because many of your acute care therapies are essential to everyday patient treatment. Has anything changed in these customer conversations, and how would you characterize U.S. hospital willingness to commit to capital equipment today?
Yeah. No, we continue to be encouraged by the plans that we discuss with our customers, and they really show also long-term perspective and willingness to invest, I think especially in the OR and the productivity of the OR, the outcomes for patients. So surprisingly robust and a good dialogue with all our customers.
Okay. Moving on to the European outlook. So EMEA has actually been Getinge's strongest geography recently, and your second quarter sales for EMEA were up 9% organically, and very strong in ACT. How sustainable is the European hospital investment environment from here, and do you see any divergence between Northern Europe, Southern Europe, Germany healthcare reform, et cetera?
Yeah, I think like you said, we've had good momentum in EMEA for quite a while, and that is encouraging, and I do think that it's sustainable, maybe not at those levels that we had in Q2, but I think in line with our growth ambitions for the year. The picture tends to vary quite a bit within Europe. I think Germany, for example, has been a really strong point for us, and there are pockets of weakness elsewhere. But I think overall the picture is that we feel good and solid momentum. We feel in a very good competitive position in Europe as well.
Okay. If I look at the European tender dynamics for ACT, the order intake in EMEA was up 16% in the second quarter, and you called out ventilator demand in Poland and Italy. To what extent does this represent underlying strength versus a handful of large tenders that you think are just part of the seasonality?
I think we're having both. I think we both have a robust underlying business. Then on top of that, you have these kind of single significant tenders every now and then, and we do have that from time to time in our business. Maybe less so in acute care therapies than in surgical workflows and life science, but it's not an uncommon pattern, I would say.
Mm-hmm. Okay. Moving on to China, which was one of the weaker geographies in the second quarter, which you said expected to remain challenging for the foreseeable future, especially in surgical workflows. Is that challenge primarily macro-driven, procurement-driven, and/or are you seeing more competition?
Well, I'd say all of the above, I think is what contributes to the challenging position and situation in China. I think we've been reasonably happy that we've been able to at least grow the business a little bit the last couple of years. That's not something you can take for granted in MedTech these days. I think that the macro situation has been challenging for a number of years. And I think that will remain a challenge for the foreseeable future as well. The competitive position is definitely also changing. We've seen this for almost a decade in China also, and learned to live with it, and this is something that continues to evolve every day. Then on the purchasing side, I think we've not been in part of any VBP initiative in China, so that's been a plus for us.
I think if you take a step back, what you will see from Getinge's perspective is that we will have gone from having 12%, 13%, 14% growth in China down to around zero. Then hopefully now, when things seem to be bottoming out, grow in line with the market, which is more like in the 5% range.
Okay, perfect. That is interesting that you mentioned that you are not exposed to VBP. What areas are you then exposed to in China for your business, and why do you think the government has not yet scrutinized this element, this segment of the market?
I cannot speculate in the latter part of the question here. We just continue to monitor the situation, but I do not have any insights to share there. I think the areas that have been most impacted for us has been partly the macro dynamics, like we touched on. You also have the "Made in China," Make Local, the local content part of this. That has probably been the biggest headwind for us, especially when it comes to certain workflows. Even though we have a really great factory in Suzhou, where it is performing tremendously well for us, it is still a challenge to be competitive in some of the categories, especially in surgical workflows.
Okay. Then moving on to the life science market, which, per the second quarter results, was quite conflicting. You had very strong order intake, 21%, 41% growth in Americas, better bioprocessing, strong Sterile Transfer, but then washer-disinfector was weak because pharma customers are delaying capital decisions. What is your outlook there? Is the life science market now recovering, or are you still expecting a kind of start-stop dynamic here?
Yeah, I don't think it's really a start-stop dynamic. We still have the decision anxiety for some of the bigger investments, but we're starting to see some decisions being made and starting to be implemented. That's like a small positive, but I don't view it as a start and stop, really. If you look at the other parts of our business, like in Sterile Transfer, which is more directly linked to production output in pharma, that's been going well for several quarters now. That seems to be fully in the clear. On the bioprocessing side, we're starting to see an uptick as well, U.S.-driven, and we remain optimistic about that continuing, but it's not going to be at lightning speed.
Okay. You've said that many pharma companies have announced major expansion plans without yet translating those announcements into equipment orders, and Getinge's Washer-Disinfector tender win rate has remained stable. What's stopping those projects from converting today, and what do you think needs to happen for this pharma CapEx cycle to really inflect?
I think they need clarity on what will apply in terms of tariffs, for example, and the overall geopolitical landscape. That seems to be the main hurdle for putting the foot down and saying, "This is what we're going to go with." In terms of impact on our business, you have both of that. Of course, there's no business if they haven't made the decision where to invest. Also when they've made the decision, depending on the scope that we have, it can be a time lag or delay before we see the orders in our books.
Okay. All right. You've specifically identified or announced U.S. pharma manufacturing investments as an opportunity through 2028. Where does Getinge sit in the investment cycle for these projects, and how long is that lag that you mentioned typically between a pharma company announcing a new manufacturing facility and then Getinge seeing an order?
It's hard to give an average, but if you look at the larger capital equipment for us, like the sterilizers or you mentioned the GMP Washer-Disinfector as well, those projects are often 12 months, 18 months cycles, then we become included. The bigger the projects, we tend to be included earlier in the decision phase of customers, but the delivery times are quite long, and these are complex projects with very often a lot of changes during the course of the implementation as well.
Okay. Moving on to acute care therapies. This business moved from a 4% organic sales decline in the first quarter to 6% growth in the second quarter. Beyond easier ventilation comparisons, what changed between the first and the second quarter, and what's the best indicator of the ACT underlying growth rate today?
Yeah, I think some of the things that we've been optimistic about pointing out is, of course, the Cardiohelp II launch, where we've gone from a limited market release to now a full launch. That's something that we believe is positive, especially now for the second half of this year. Then like you said, we've had the ventilator comps clouding the picture a little bit. We have still some starts and stops when it comes to part of our portfolio. We've talked about the Hemopro 3 launch, for example, in the past, and so on and so forth. But I think the key thing with ACT is to look through these fluctuations that are triggered either by the ventilator dynamics or start and stops in previous comp periods. The underlying demand here is driven by procedure volumes primarily, which I think seems to be fairly robust and stable.
We can also see that customers are prioritizing, even in times when CapEx is constrained, we tend to be in categories that are prioritized by customers. So I'm very confident about the underlying demand situation for ACT, even if there's some quarterly lumpiness here and there.
Mm-hmm. Okay. You mentioned the Cardiohelp II, so that asset received its CE mark in Q1. Then you have resolved the limited market release or you are now in full launch, and you are expecting the new generation to carry a better gross margin than the predecessor. Beyond replacing the existing Cardiohelp units, what can Cardiohelp II do to expand your install base or increase the consumables pull-through?
It is a great new evolution of the Cardiohelp platform. So we have better sensor technologies. It is a lighter product as well. Just to remind everybody, there is a lot of transport applications with helicopters and ambulance and so on. The other thing that I think generally will drive demand in ECMO is also new application areas like CPR, for example, is something that we have seen for some time now coming and that we are optimistic about going forward. So that will definitely be a demand driver in this.
Okay. With respect to the U.S. sales of Cardiohelp and HLS, that still remains restricted to existing customers or customers without a viable alternative. You have guided to a 510(k) submission for the complete ECMO system in the second half of 2026. Are you still on track for that second half submission? What milestones do you still need to see before the FDA review begins?
Yes. I think the short answer, we are still on track for the submission second half of this year. I think the ongoing dialogue with FDA has been very constructive as well. So we look forward to finalizing the last pieces of work for a complete submission. We will come back and update the capital markets when that has been done.
Okay. Then for CardioSave, the CE mark was reinstated under conditions. Shipments have now restarted. In the second quarter, you said you remain supply constrained for this product. How quickly is the manufacturing capacity improving, and when can the CardioSave supply in Europe normalize?
I cannot give a forecast for when we are completely out of supply constraints. But we have been plagued by both labor shortages but also component shortages for this business. We have had to take out a lot of products for testing for quite some time as well. So we are gradually moving ourselves out of this situation. It is improving on a weekly basis, but I cannot give you a forecast for when we are completely unrestricted here.
Okay. All right. If we move on to the cardiac assist. Teleflex, one of your competitors, has agreed to sell its acute care business, including the IABP portfolio, to Intersurgical as part of their portfolio transformation. Does that change in ownership create an opportunity for Getinge to strengthen the position as CardioSave returns? Or could a more focused owner ultimately become a stronger competitor in your view?
Yeah, I have no idea. It is too early to say. We will have to just monitor the situation here. I am hoping that it creates a better situation, but too early to say.
Okay. All right. With respect to ventilators, that business benefited substantially in 2025 from a competitor exit. Then Q1 and part of Q2 2026 comparisons are now a little bit difficult. You have now said in Q3 and Q4, the comps are cleaner, the market stabilized. So what is a reasonable normalized growth rate for your ventilator franchise from here?
I would think this will return to the low to mid-single-digit growth territory. That is the most realistic outlook, I think. It is nice to see things kind of stabilizing both, I mean, COVID, post-COVID, but also these competitive dynamics settling a little here. So that is the best guidance. It is a business also that continues to evolve from rather capital-heavy to more software to more high-value disposables and so on. So it is a good trend from that perspective, I would say.
Okay. Now moving on to Paragonix. This business has performed quite well for you. The last disclosure we have from you on this business is well over $100 million, and you have since called out it is tracking above expectations after the acquisition. How is Paragonix performing in 2026 so far? How big is this business now, and has anything surprised you about the execution or share gains of this business?
No, we continue to be happy with the acquisition. The integration has gone well. It performs in line with our expectations. Key thing for us, key focus has been now on the OUS launch, so Europe, where we have had really good momentum, and we are continuing to invest in that. We have all the regulatory approvals. It is more about investment in resources and infrastructure to support the growth of this business in Europe. Then, of course, we are also starting to invest in the next generation of products. Those were the two main reasons we acquired the company, and the strategic rationale remains intact.
Mm-hmm. The competitor of Paragonix, TransMedics, generated close to $ 200 million revenue in second quarter, up 21%. Against a competitor growing at that pace, how should we judge whether Paragonix is gaining or losing share within the organ preservation?
Yeah, I realize that's hard from the outside given that it's integrated in acute care therapies now, and we've created transplant care as an individual product area under the ACT umbrella. I think one should keep in mind, though, that our business in transplant is very much focused on the device and the service related to this. We don't have the full service model with aircraft and all that part like TransMedics, so it becomes difficult to compare, I think.
Mm-hmm. Okay. Again, on this topic. TransMedics says their technology has helped to drive U.S. liver, heart, and lung transplant volumes higher, and they're targeting 10,000 U.S. transplants by 2028, 20,000 by 2030. How do you size the addressable opportunity for organ preservation? Is the bigger opportunity share shift from ice boxes or growth in the number of total organs transplanted? Just help us kind of size that market opportunity for you.
I think we've also passed the 10,000 transplant mark. So we're involved in a lot of transplants, but with a much smaller scope than, for example, TransMedics. So that's important to keep in mind when you compare also. And I think there's clearly a need when it comes to patient needs here. There is a challenge with the donor supply, donor availability. I think that the whole industry needs to address. So that's really a key thing. And then I think, of course, as we implement new technology as well, that will also help growth of the business. So it's not easy to give a single answer on what's the key factor. There's a number of factors in play.
Okay. Just last one on Paragonix for the innovation piece. Paragonix has expanded from SherpaPak into multiple organ-specific preservation platforms. You have KidneyVault, and you've also talked about expanding outside of the U.S. What are the most important product launches or indication expansions that investors should watch out for the next years?
Yeah, I think for now, the current year and the coming year, I'd say it's mostly about expanding with the portfolio that we have. We have the regulatory approvals we need. The next generation with integrated perfusion technology will be more important, and that's something to keep an eye out for. But we haven't given a timeline for when we'll start bringing this to the market.
Okay. All right. Moving on to life science then. Your life science business in scale is about 1/3 of the ACT business, so close to SEK 5 billion, yet it contains one of Getinge's fastest-growing and highest-margin franchises. The Sterile Transfer. Does that business, life science altogether, have sufficient scale today? And how large does this business need to become to reach its full strategic and margin potential?
Yeah, I don't think it's that much of a scale question. Actually, like you pointed out, if you look at Sterile Transfer, it's a significant portion of our life science business. That's certainly at scale. If you look at the big sterilizers, for example, we're a leading player, so that's certainly at scale as well. We're smaller when it comes to bioreactors, as an example, and some of the single-use supply. But I don't feel that scale is the bigger issue. I think it's been more vulnerable to the type of sub-segment that we're exposed to in bioreactors, for example, and some individual customer dependencies here. So maybe that you can solve via scale, but it's not my top three concern when it comes to obstacles to growth of this business.
Mm-hmm. Okay. Sterile Transfer has moved from destocking concerns in 2024 to now double-digit order growth. Second-quarter recurring life science revenue was up 23%. You've talked about GLP-1 manufacturing growth and this EU GMP Annex 1 as the demand drivers for BetaBag. Can you separate for us how much of the current growth is these different drivers and how much is underlying share gain in your view?
No, short answer is no, I cannot. That's not something we disclose externally. I think we have a good understanding of our customers and what the products and the solutions are used for, but it's not something we communicate externally.
Okay. On the BetaBag durability, you've talked before about how the AlphaPort hardware creates this future stream of captive BetaBag consumable sales, which is an attractive business model for Getinge. Once the AlphaPort is installed, how sticky is that customer? What does the lifetime consumable opportunity look like relative to the initial sale? How long does that sale sustain before the customer needs a second installation?
Yeah, it's rather sticky, I have to say. I can give you a percentage number, but it's very, very rare that a customer tries an alternative BetaBag with our AlphaPort. We've had some single instances in the past, but the customers tend to come back to us for a quality reason, and they really don't want to take any risk with contamination and revalidating their production lines. I think it's a very high level of stickiness. How often it's replaced depends quite a lot on the customers. I couldn't give you an average on that.
Okay.
It is a business that also is supported by the regulatory trends, both, I think, by FDA guidance here in the U.S., but also Annex 1 in Europe. I think there's a lot of good supporting factor, driving factors for this business.
Mm-hmm. Okay. For bioprocessing, that business has finally shown some signs of improvement after some time of downturn. The second quarter order intake was also contributing to the life science order growth. What are you seeing in the customer utilization and the funding environment that makes this a real recovery than just another restocking cycle in your view?
Yeah. I don't think stocking is an issue here at all. It's more about we're seeing the investment decisions starting to be made again after a difficult time. You had some destocking dynamics post-COVID, but I think the bigger hit was partly we have very big China exposure, so from a macro perspective, it was a difficult situation there. Competitive environment has become more intense as well, and that's something we'll have to live with. But it does seem to be coming back and showing a little bit more underlying strength now compared to a year ago.
Okay. If we now move on to surgical workflows. This business generated an 8.7% EBITA margin in the second quarter, a little bit higher year-over-year. The last 12-month margin has now hit double digits at 10%. Is that profitability now sustainable, and what do you think is the longer-term margin potential of this business?
Yeah, we've always said that it should be a double-digit margin business given the portfolio we currently have, given that we have invested in the next generation of operating tables, for example. We've added Healthmark and Quadralene. We've done some organic investments and developments when it comes to infection prevention consumables. I think the composition of the business now really makes it possible to be at a 10%+ business.
We've said that we'd like to be comfortably above that threshold before we put out a new target.
Mm-hmm. Okay. Within surgical workflows, the infection control business has been one of the strongest parts of this business. You saw the second-quarter growth in both the service and consumables, and strong North American order intake. What is driving that strength, and can infection control become a larger recurring revenue franchise for Getinge?
I think it's a number of things that are driving this. One, again, this is also linked to procedure volumes, so that's one important underlying factor. It's also driven by more awareness of infection prevention and how to work proactively with it, so that's another continuing driving factor that is important. We spend quite a lot of time and investment on clinical education and so on, which is important, and also longer term becomes reflected in both order intake and sales.
Mm-hmm. Okay. On digital health, this business or digital health solutions grew the order intake by more than 30% in the first quarter. It talked about OR integration, then it declined again in the second quarter. That is highlighting the lumpiness of the project business. What does the underlying growth rate of digital health look like once you look through the project timing? Can software eventually become a meaningful profit pool?
I think long term it can become a meaningful profit pool. It is still a business that is. There is a lot of gray area in terms of how you define this, therefore it is difficult to say, "Okay, this is the underlying growth." We can clearly see that there is a trend towards digitization among our customers. We can clearly see that, for example, when it comes to our tools, when it comes to operating room planning and capacity utilization, customers can see a measurable benefit when using our tools and hence the willingness to pay for this as well. I think also when it comes to our T-DOC product, which is for sterile goods flow, it is a product that has been around for over 25 years, and we have a clear leading position.
It is one of the few truly global digital applications in our industry as well, which also, again, is driven by the same factors as mentioned when it comes to Healthmark, so procedure volumes, but also the fact that what makes an operating room productive is, one enabler for that is what happens in the sterile supply department, making sure that you get the right tools for the surgery, the right time, properly disinfected and sterilized. That is something that T-DOC does tremendously well.
Mm-hmm. Okay. If we move now to the profitability and the cost outlook. Against a challenging cost inflation environment in the second quarter, you again highlighted successful price adjustments and productivity improvements. Could you remind us where you are seeing the most cost headwinds across labor, components, freight, and which of your productivity or pricing efforts are making the most difference?
Yeah. When it comes to the inflationary pressure, I would say in percentage terms, it is probably on transport and logistics. But in absolute terms, it is definitely labor inflation. That is a much bigger portion of our cost composition in the company, so that is a bigger impact. But like you mentioned, and I keep repeating, I think our team has done a tremendous job when it comes to purchasing negotiations, working with productivity to mitigate some of the headwinds that we have seen from inflation.
Pricing broadly as well, I think the team is doing a good job. We have been around 2% average this year, and I think that is well done in a rather challenging environment.
Mm-hmm. Okay. Could you talk about the gross margin? You achieved 55% adjusted gross margin in the second quarter, up year-over-year, and that did include some tariff refunds. But even excluding that benefit, you had mixed pricing and productivity moving in your favor. As you look beyond the refund and the current tariff volatility, do you still see a scope for gross margin to continue expanding, or will the labor and material inflation piece offset that more in the near term and midterm?
Yeah. It is a bit hard to speculate, I think, in the short term here. But if you look at the long term, and if you extend this to our 2028 targets, part of getting to an EBITDA level of 16%-19% is a gross margin improvement as well, which comes from some of the factors that you mentioned. So pricing, mix, productivity, I think growth itself. We have good operational leverage in our business, so just pure growth also helps.
Mm-hmm. Okay. One comment on quality costs. Those kind of peaked in 2024, then it fell a little bit in 2025, coming down again in 2026. Of that SEK 800 million quality cost in 2024, how much of that ultimately disappears from the P&L? More broadly, when should investors expect the gap between reported and adjusted earnings to come down over time?
Yeah. I think the SEK 800 million that we've talked about that's kind of extraordinary, that peaked in 2024, they reduced a little bit in 2025. They will reduce a little bit in 2026 as well. The bigger steps are in 2027 and 2028. We've said that we'd be disappointed if not half of it was gone, at least by the end of 2028.
Okay.
That's another contributing factor, I think, to the margin expansion.
Okay. One on capital allocation and M&A. Your net leverage was 1.7x in the second quarter, well below your internal 2.5x threshold, and that's despite Paragonix, Pennamed, the dividend. Given the balance sheet capacity, where is the hurdle today in reinvesting organically or doing another acquisition or returning capital to shareholders?
I think the M&A pipeline is quite active. There is a lot of inflow in the M&A funnel, and we continue to analyze several hundred companies every year. I think when it comes to capital deployment, our plan A is always organic investment in market presence, in new products, and so on. Then it is selective M&A of different size. We have done a number of bolt-ons the last few years. We have Paragonix, that is a new adjacency for us, and we are open to larger acquisitions as well if there is a strong strategic fit.
Okay. Fantastic. That takes us to the end of the session. Mattias, thanks so much for the insights today. To the audience, thanks for participating. Thanks, everyone.
Thank you very much.