Hello and welcome to today's webcast presentation, where we have Integrum presenting the Q3 report for 2023. With us presenting, we have Rickard Brånemark, Jörgen Svanström, and Jeffrey Zanni presenting. If you have any questions, please feel free to use the form that is located to the right, and we'll take that up during the Q&A after the presentation. With that said, guys, please go ahead with your presentation.
Thank you, Ludwig. So, this is Rickard Brånemark. I am the founder and CEO.
Good morning, good afternoon. My name is Jeff Zanni, U.S. President of Integrum.
Hi guys, I'm Jörgen Svanström, the CFO of the company.
Okay, so let's, let's start with our Q3 report presentation. Jörgen, can you give me the next slide, please? So first we're gonna do a quick recap of the company. We're gonna dig into some details in the U.S. market, and then we go to the figures at the end. So just to reiterate that, not only is amputation sometimes the only possibility to save a patient's life, but that's also creating a lot of challenges for that individual to restore mobility, mental health, and quality of life. And that's the space where we think we have the best solution in the world. And there is a very substantial total addressable market. If we look into U.S. and some of the key markets in Europe, the total addressable market is about $8 billion. Next slide. So why do we do this?
Well, the standard prosthesis that has been in clinical use for many, many years. It's called a socket prosthesis, which is a sort of the best there have been. But it's not really a good solution. And it leads to a lot of mobility problems and a reduced ability to work. The shaping, the sliding, the rubbing of the socket towards the skin is causing recurrent infections and hard-to-heal wounds. And it's also so that volume fluctuation of the stump, which is very frequent, requires socket adjustments, and then from time to time you're not able to use your prosthesis at all. Next slide, please. So we have been clinically in this space now since 1990, and we are truly transforming the lives of people with mobility challenges with our OPRA Implant System. So, we have a lot of clinical experience all over the world. Next slide, please.
The OPRA Implant System is the first bone-anchored implant solution for amputees ever created. It's based on the core technology called osseointegration. That was discovered by my father already in the early sixties and been used for dental implants since 1965. We really stand on a very safe technological platform. Next slide, please. We have now treated more than 700 patients globally. We have an efficient and standardized treatment. It is surgical two-step insertion. It's regulatory approved in the key markets. We also have developed an external safety device like a ski binding that is decreasing the risk for fractures that might otherwise occur with a rigid connection to the skeleton. We have over the years also implemented improvements. Maybe the most important is the BioHelix surface that is a macro, micro, and nano structured surface that is increasing the success rate.
That was introduced in the orthopedic arena around 2014. Next slide, please. So the clinical success rate you see here is without the BioHelix surface. But we have been able to show 92% success rate in a prospective study following patients for up to five years. We see not only in this study, but also in many other studies that we increase the mechanical function. We create something called osseoperception. It is that you can really feel with your artificial prosthesis. You can feel if you step on grass or if you step on stone. We see that the patients are more active and that can be measured by step counts per day. We also see by using patient-reported outcome measures that we increase mental wellness and quality of life. Next slide, please.
So we have focused a lot on maybe the most demanding application, which is the above-knee amputation. We have CE Mark and we also have a full pre-market approval in the U.S. since December 2020. We have publicly announced that we now go for the upper arm in the U.S., but we have CE Mark not only for the upper arm, but also for thumb and digits in Europe under MDR that we briefly mentioned. Next slide, please. On top of this, we have for more than 10 years now continued to develop the world's first mind-controlled prosthetic device, and we are the true leader globally in this field. Next slide, please. So what we use is that we have our implant system and we use that as a bidirectional communication portal.
So that means that we can talk to the brain through a peripheral neuromuscular integration, which is muscles and nerves in the amputated extremity. And by adding a control system based on artificial intelligence, we can have the prosthesis perform very, very precise movements. And in addition to this, it's not just the efferent control, we can actually add artificial tactile sensory feedback that will create an additional layer of functionality for the prosthesis and also create for the brain a feeling that is much closer to having your arm or leg back than without sensory feedback. Next slide, please.
Since we are a leader in this field, we have had opportunity to start collaboration with, for instance, Chalmers in the beginning, but now at the latest years also we have an extensive collaboration with the MIT and we recently got, together with Shirley Ryan AbilityLab in Chicago, a massive grant from NIH, National Institutes of Health, of $8.7 million to further evaluate the e-OPRA system in different clinical settings, paving the way for a future regulatory approval. Next slide, please. So we're not only in the U.S., and if you see in the report we are now starting our expansion in the rest of the world. We have been in the rest of the world for long, but we have focused on the U.S. market has been our priority. And Jeff will talk more on how he is now expanding the growth in the U.S.
Next slide, please.
Thank you, Rickard. Yeah, I will provide a brief overview of our Q3 performance for the U.S. market. Next slide, please, Jörgen. We're pleased with our performance for Q3, and we're going to continue to fine-tune our ecosystem approach. These five bullet points are really kind of most important tasks for our acceleration model as we head towards into the fourth quarter of the year. Continue to drive resources into our OPRA centers, continue to secure an indirect representation of our portfolio. Make sure that we're continuing certification, training not only surgeons and staff, but also field-based virtual training to continue to create more awareness of our technology. Obviously, grow the patient pipeline through referrals and expand our ambassador team for patient-to-patient information. And then lastly, make sure that we're supporting expansion of our team and really driving a controlled growth model from both resources as well as marketing.
Next slide. This is our ecosystem approach. What this has enabled us to do is deploy our resources in very targeted markets to get the best return. This ecosystem model continues to be fine-tuned, however, is working well. We're also identifying distribution channels in these markets to top grade in certain areas and expand reach of patient production. Then lastly is we're also creating programs directly to the hospitals that allow us to engage patients for a referral system directly into the ecosystem. Next slide. The ecosystem model, this is something I showed in the past. The intent of the ecosystem model is to deploy resources to capture patients and drive those patients to the surgeon customer in the middle. Essentially harmonizing everyone around the nucleus to facilitate patient production and patient journey.
It's essentially capturing the patient from the start and leading all the way to the rehabilitation and post-operative OPRA implant. Next slide. If we do a quick overview of the patient journey, it's broken into four stages. One is capturing and qualifying the patient. There are some provocative marketing exercises that we're now deployed, essentially asking patients, Am I a candidate for OPRA? And second, something that we launched at a recent trade show is if you have a question on osseointegration, ask us, we invented it. It's then preparing the patient and driving those patients to the ecosystem of their choice. Which creates a long-lasting referral network to that ecosystem. The patient then goes through surgery. And then lastly, through rehabilitation. The great thing about rehabilitation, the connection to post-operative rehabilitation is that we have a lifetime connection to the patient through our Axor device. Next slide.
So we have some short-term and immediate growth drivers as well as some long-term. If we look at the short-term, continue to grow our facilities, making sure that we're engaging patient production in each ecosystem. Also make sure that, as number two, we're focused on our strategic partnerships for patient production through prosthetist centers, hospitals, outreach events, support organizations. We're also offering multiple channels of product on the post-operative side. So there's channels to capture our Axor device. And the last from a short-term driver is really, again, to pay to identify the patients and drive them to those ecosystems. And expand within key markets where we identify higher yield patients. The last number four is to expand our direct-to-consumer capture initiatives. And this is again supporting patients with engagement in our devices and products and pushing them to the ecosystems of their choice.
We're also doing an awareness program outside of just resources deployed into the ecosystem. And we're engaged in social media campaigns as well as podcasts and other things that are driving amputee support through different online measures. Next slide. There's not too many companies that can use the word inventor, and we certainly can. As you can see on the left, there was a podcast that just happened a few weeks ago with Dr. Brånemark. And Cosi, which essentially had a nice patient population and told the story of who we are. We're now driving our stories not only through multiple trainings virtually and in person, but we're making sure that our story is reproducible and being told throughout our entire distribution channel the same way. And this was a great event to highlight some of the activities that we're doing.
To increase not only awareness to our company, but also increase patients' awareness as to are they a candidate for OPRA Implant System. I'll turn it over to Jörgen.
Thanks, Jeff. Yeah. So let's talk about the numbers for Q3. Yeah, the one obvious highlight is, of course, that we've increased our net sales for the quarter to SEK 30.1 million. From SEK 18.7 million last year, same quarter. Which gave us a 61.2% growth year-on-year. And also, it's quite pleasing to see that this also means SEK 300,000 in operational profit. In terms of market, I think it's also worth mentioning that we opened up a new center of excellence in Kyiv during the quarter. Looking more closely at the numbers, as I said, net sales are SEK 30.1 million, leading to 61.2% growth. I think also worth mentioning is that if we look at direct material cost and commission, our gross margin is 83%, which is consistent with the year and we're maintaining sort of the same level that we've had.
I think you should note that if we look at the operating costs for this year, they are SEK 23.2 million in comparison to last year where we had SEK 22.3 million. And this is a SEK 0.9 million increase corresponding to about 4%. And yeah, we've been talking about cost control for quite a while and I think that I mean this shows our operational leverage. In comparison with the growth of revenue, 4% is considerably less, of course. Looking at the operational profit, as I said, it was SEK 0.3 million. Of course, that was heavily affected by currency effects from our AR. And the currency effects were negative SEK 5.7 million. So discounting these currency effects, we actually have an operating profit of SEK 6.1 million.
The EBIT margin without the currency effect is 1.1%, whereas without the currency effect, we have a 20.2% EBIT margin. Leading to a net income of SEK 0.8 million for the quarter. And I'd say that looking at the year to date, I think the figures are sort of the same story. We have a 40% growth almost for the year in terms of revenue. We have a consistent contribution margin of 83%. The operational cost is increasing, but only slightly, showing our operational leverage. And we are making a profit both on the operational profit level and the net income. Worth mentioning is that looking at year to date, we have a positive currency effect of 1.4%. So discounting that positive currency effect, we still have about SEK 2.5 million in operating profit.
Moving on to focus on the U.S. for the quarter, the U.S. showed revenue of 20.3%, which corresponds to a 43% year-on-year growth. I think it's worth noting that the 20.3% for the U.S. this quarter is above what we have as a total revenue for the whole group in the corresponding quarter last year. As Rickard mentioned, we are planning to submit the PMA application for transhumeral amputations. Also mentioning the ecosystem that Jeffrey mentioned before, I think it shows that this approach has really driven sales for this quarter. So we think that this is the way to go forward. Looking at the rest of the world, we have SEK 9.9 million in revenue for the quarter.
This corresponds to more than a doubling of our revenue in comparison to the same quarter last year. Obviously, the new center in Kyiv has contributed to that figure. And I mean, we can only say that they are really dedicated down there in Kyiv and doing a lot of good work. And not the least from a humanitarian point of view, this is really, really comforting to hear as well. Also, as Rickard mentioned, we now have full certification for our products that we intend to sell in the EU under the MDR regulations. So this is really good news. Okay, Rickard, I think it's time for a summary then.
Yeah, I just need to put on my microphone then it's easier. So yes, go back one slide. So you see there's a lot of interested people around me. And this is not from Kyiv. This is from Lviv. This is from a hospital called Unbroken that is sort of fairly famous. That's one of the leading hospital systems in Lviv, or I would say actually in Ukraine, to take care of wounded warriors. It's a big effort by the government and they're building a lot of things. And we haven't really started to explore other potentials in Ukraine that we might have over time. We just been focusing on Kyiv. So it's, I would say, a most likely an untapped big potential that we can still utilize. So next slide, please.
Yeah, of course it's nice to summarize because I think we're really starting to deliver now. We have record revenue again. We had that last quarter. We have it again. We're above SEK 30 million in the quarter. We have a record revenue for year to date. That is also, you know, more than we had last year for the full four quarters. And we're growing substantially with 60% and 40% roughly year-over-year. And we're running excluding currency effects with a substantial, you know, profitability. Last quarter it was well above 20% and now it's still over 20% even if it's just that. And year to date we're now moving the company from not being profitable to be a profitable company. So I think we feel that we're in a very, very strong position now for continuing our growth and expand.
But also to continue to be the leader in advanced amputee care. And there are also other markets where we have big, big problems with amputations. Where there is war, we have another conflict there in Israel and Palestine. And where there might be, you know, earthquakes like Turkey and we talked about that previously. And we haven't really started our work there yet. So more to come. Stay tuned. I thank you very much for listening, and now we're more than happy to answer any questions you might have.
Thank you very much. Like you said, now we'll jump into the Q&A section here. We'll start with the first question. Could you please give us an update on the strategic review?
Yeah, that would be a very quick answer. So that's still in progress and we don't have any more public information to share. Sorry.
We'll take the next question here. Is it possible to elaborate on how many operations that has been performed last quarter in Ukraine and in Turkey versus the rest of Europe and the rest of the world excluding the U.S.?
Well, I guess that's on me too. Sorry we don't disclose those figures.
When do you expect to reach neutral or positive cash flow? Do we need any capital injections in your view?
Yeah, Jörgen, I think maybe you can talk a bit about the cash flow situation and also opportunities that we could explore.
Sure. Yeah, I think I mean, it's quite normal to experience. I think the cash flow, first of all, the cash flow is because we are growing. It's a working capital issue mainly. And that's quite normal when a company is growing as rapidly as we are. And luckily it's the account receivable that is growing rapidly as well. So from that point of view, I think there are I mean, we can talk about, for example, factoring and revolving credit facilities to cover that type of problem and still be able to grow without ending up in a cash flow situation. So we I think we're looking pretty good from that point of view.
Thank you.
Yeah. So yes, sort of emphasize that we consider ourselves to be in a strong position and we don't consider ourselves to be in the position where we need extra cash.
Perfect. Thank you. What specific measures were taken to achieve the significant growth in the American markets and what are the plans to sustain this growth trend?
So there's this ecosystem model we launched not that long ago that's proven to be successful. We are continuing to invest resources not only as a cost-effective model of growth, but also resources deployed to those ecosystems so that we're deploying our resources to capture as much possible opportunity. This is sustainable, and once we fine-tune these ecosystems appropriately, we'll extend those to other ecosystems. But the intent right now is to stay very focused in on the model that we have right now. And then upgrade and top grade certain areas of distribution and continue to clinically educate and train and create more awareness penetration in each of the individual ecosystems.
Yeah, maybe I would like to add there that and we have talked about this previously too since Jeff stepped in. We have moved from what I call more general marketing approach to much more execution in the market. Would say it's activities towards the ecosystem. And that actually means that the way we spend our money is much more efficient in driving revenue, which is shown by the figures and the ecosystem that Jeff is talking about. So very cost-effective and still we're driving growth.
Thank you. Take the next question here. Regardless of the outcome, is there a due date of the strategic review?
No.
Thank you. The next question here. How do you assess the potential market opportunity for Integrum's OPRA implant systems in Ukraine and Turkey? And what strategies do they have to capture market share in these regions?
Okay, yeah, that's a big question. Let's talk about Turkey first. So there we have decided to go with a well-established distributor. And there is also not a war going on, so that means that there are some regulatory requirements that we need to be sorted out. But there is this earthquake that will help to drive the attention towards the OPRA Implant System. If we move to Ukraine, the need is enormous. It's terrible to see all the wounded soldiers and private patients too or civilians, sorry. And as we stated in the report, the Ukraine Minister of Health said that at the end of 2024, there would be more than 100,000 amputees from the war. So it's a really, really big problem for them to address.
It's also so that especially, and this is almost exclusively related to soldiers, we have this tourniquet syndrome, which is, you know, you save your life, you have your body armor, but you lose your wounded limb. And that leads to these short stumps where our technology is really, you know, outcompeting the socket many times over. So that means that there is a fantastic sort of business opportunity, but there is also a very big humanitarian need. And we need to find a way to manage both of them in a good way. And that will over time, I think, require governmental support and not just donations where it's driven right now. And we know that the government is very interested in the technology.
I've talked, for instance, to the head of the Unbroken Hospital about approaching the government in a more formal way to establish not only one center, hopefully several centers in Ukraine to meet the increasing demand of our technology. I hope that was a sufficient answer.
Yes, thank you very much for that answer. We'll take the next question here. How have Integrum's investments in strengthening its organization, both on the regulatory and commercial fronts, contributed to positioning Integrum for future growth and leadership in advanced amputation treatment?
Well, so I can talk about some of the generic, but then maybe Jeff, you can comment also how you build the organization in the U.S. to scale up business. But we have invested in experienced managers. Jörgen, we'll be one of those. We have a very experienced chief operating officer. We have a very experienced head of quality and regulatory affairs, etc. We're, so I think from a competence standpoint, we're very good in a very good sweet spot. And then below these managers, we can come in with, let's say, lower salary people to execute a lot of the work and we can just scale that. We have from a supply chain perspective, we have a scalability at least five times. I think I said publicly five to 10 times from where we are right now.
But when we go above that, we need to expand our supply chain network. Jeff, do you want to say something about the U.S.?
Yeah, sure. First of all, I want to certainly give credit to the U.S. team here to move into the new model, which allows them to stay very focused in on penetrating certain areas. So I reviewed it with the team and said that we're going from more of a shotgun approach to a sniper-like approach. So we deploy these resources. They're very intentional and they're very specific in key markets. Secondly, as we grow in revenue, as Rickard just said, there are certain areas of administrative applications that need to be done. And we have a very controlled growth model that, as we hear the voice of the customer and the needs of the and align it to the needs of the business, we grow according to our revenue growth. So it's a controlled function of the U.S. business.
Again, the last thing is that we've also streamlined duties and responsibilities. So rather than not having a combined goal and plan, everyone is aligned to a very strategic goal and plan and everyone is achieving everyone's function is there to achieve that plan and goal.
Yeah. I also just to jump in here a little bit, I think there's a lot of things under the hood that's difficult to spot through an interim report like this, I guess. And this is also why I mentioned the operational leverage. But my experience is that as a company, you move through different phases that put different demands on an organization. And like Rickard and Jeffrey has talked about already, I think we have a management now that can enable that operational leverage as well and further it. And I think that's an important feature of this company.
Thank you for that answer. We'll take one final question here. What milestones should investors look out for in the coming quarters?
Yeah, yeah, you know, that we never give any prognosis, but we can speculate and you know, we said that we're going to run this company with growth, profitability, and good cost control. I think we are delivering that and we plan to continue to work like that for sure. We also see that if you look at the figures, the rolling 12 months, I think it was 96. Jörgen? Yeah, so there is a three-digit possibility around the corner. So I'm confident that we're going to crack that. And then I think what we will see is that we have now with Jeff and the U.S. organization, I would say a fairly solid growth in the U.S., our top priority market.
There are some seasonal or even sort of less than seasonal monthly fluctuations in the sales pattern in the U.S. that Jeff has identified and we will continue to work on. But it's also related to, say, for instance, you know, February is that's the shortest month. Now it's the longest February, you know, every fourth years, etc. But if you have, like we had this year, the big meeting, the American Association of Orthopedic Surgeons, and that's almost a full week meeting. If that's happening in February, that means that there are only three weeks really left to run business in February. So those fluctuations will continue to be there. The fluctuations related to individual surgeons that we talked about, I think we mentioned, you know, we had one surgeon moving from Johns Hopkins, etc., where that was causing us some issues.
We see less of that now because now we have more centers up doing surgeries. But that's still too few to really, really balance if we get one of our lead centers to have staff changes for for our champion. But what I see and I think everyone can see if you look at the percentages, what what we see can happen here is that we can have a very interesting growth in the rest of the world. Now it's Ukraine. We have Turkey. We have I talked about Israel, Palestine. And we are also trying to dig deeper into how we're going to run our prime market in in the U.S., sorry, in Europe, which is which is Germany. And we're working very, very thoroughly and we look a lot into what Jeff has been doing in the U.S. and see how we can implement that.
I think we are very optimistic that we can continue to deliver good figures for sure. I cannot see that there is anyone close to outcompeting us at the top of advanced amputation care. Jeff, do you want to talk a bit about the U.S. and what you see coming?
I think that one thing to recognize is, though we're pleased with our Q3 results, we haven't even begun to scratch the surface. It is a giant addressable market here. We are only focused in on above-knee transfemoral amputation. And as we extend our product offering, it'll just increase our utilization even more and expansion even that much faster. The team has done a phenomenal job at adapting to the new ecosystem model. And the results show. I think as we continue to grow and expand, the awareness of patients and our technology is ever present in every conversation.
And now we're also utilizing a program that was created some time ago called the Ambassador Program, where we actually have patients that have our technology and we've engaged them now on platforms that they can talk to other patients that want to know if they're good OPRA Integrum candidates. So again, I think it's an incredible market here in the United States, a huge TAM. And we'll continue to fine-tune the ecosystem model and the go-to-market strategy, the commercial strategy. And it's only going to increase as we expand our reach, drive patients, and as we get closer to launching new technologies in the U.S.
Yeah, thanks, Jeff. Jörgen, do you have anything to add?
No, not for this, I guess. I mean, we are always talking about the $7.8 billion, right? $8 billion. So of course for us, I mean, that is the goal, isn't it?
Yeah, so what I can promise is that next quarter, we will take 1% of the total addressable market. That will be roughly SEK 80 million. That's one. That's a promise. And that's an easy promise to make. Thank you.
Okay, thank you very much, Gentlemen, for presenting today and answering all of our questions. And also thank you to everyone who followed along for this webcast presentation with Integrum. And I hope you have a great rest of the day. And until next time, thank you very much and goodbye.
Thank you, everyone. Thank you.