Thank you. Thank you very much, and good morning and to everyone, and welcome to this strategy update, where we will elaborate on our new strategy to become a pure-play orthobiologics company. It will be myself, and us, who will be presenting today, and as normal, we have the normal disclaimer. At the end, there will be an opportunity to ask questions. But just to start off, to make sure that everyone has understood what we communicated last night, we have a strategic strategy now to become a pure-play orthobiologics company as of January 2024. That means that the company will have a sole focus on the U.S. markets, which is the biggest market in the world, with high volume and high pricing.
What we have seen with OssDsign Catalyst is a real differentiation and a very strong market acceptance, which is witnessed by the exceptional growth we've shown to date. Of course, with the announcement we made last Monday, with the new interbody clearance, it puts OssDsign Catalyst in a very exceptional class of synthetic bone graft. We see this strategic shift as very accretive to generating higher shareholder value in the future, and we will elaborate that in this call. As part of this, we've also updated our strategy, called now Thrive 26, and updated financial targets, and here we will also come back to that.
What we also communicated is that our legacy cranial platform will be exited in a responsible manner by the end of this year, and the ongoing efforts to sell a total or partial of the assets will continue. But before we get to that, I want to talk what actually brought us to this situation, where we feel so much that the orthobiologics business is the way forward. If we just take a step back, as you know, we are applying our orthobiologics product, OssDsign Catalyst, in spine surgery. Most of spine surgeries is driven by spinal degeneration. So essentially, over time, it degenerates, and it will cause spinal instability, of which some will need to have what's called a fusion rate, sorry, a fusion surgery. In that surgery, you will need metal scaffolding.
You typically use screws and rods or spinal cages, and in every single surgery, some kind of bone graft will be used, basically because you want the metalware to become an integral part of the body, and you need bone formation to make that happen. Today, one in five patients do not achieve a good outcome, so there is a very clear clinical need for a better solution. As we've also talked about multiple times, we went to market almost a couple of years ago now, based on our preclinical data. That preclinical data is the best one we've ever seen on a synthetic bone graft, essentially, showing performance on par with the best drug on the market, called BMP-2, from Medtronic.
When you compare that to what we call the latest, other latest generation synthetic bone graft that were also tested in this model, it is outperforming a ratio of 2-4. What you also see on the right side is a little bit more detail from that preclinical study. The dark gray is the autograft that is the de facto the FDA's gold standard, and the light gray is the predicate device product from Medtronic called MASTERGRAFT, which was used in that study. As you can see, OssDsign Catalyst shows a very strong performance both against autograft and also against the predicate device.
For what we are also seeing, in particular, what we are hearing from customers, is that we have exceptional handling qualities, which basically provide surgeons with not only an efficiency intraoperatively, but more importantly, a high level of confidence when they're mixing, molding, and placing the bone graft. You have to imagine, many of you probably haven't touched it yet, but it's a, it's a little bit like clay, and it has to be mixed with the patient's own bone or, liquid or blood or anything of that nature. What can easily happen, and what is the case for a number of products out there, is that they irrigate, so they dissolve.
For a surgeon, when he or she is placing the bone graft in the surgical site, they need to feel 100% sure that all the bone graft stays exactly where they want bone to grow and certainly not start to dissolve and grow bone in places where you don't need it. This is very clinically hard to prove, and many companies will say that they have it. This is a very, very unique thing that we are seeing and hearing on the product. I want to spend some more time on the very, very significant FDA announcement that we made last Monday. We have deliberately not talked very much, if not at all, actually, about the possibility of getting this clearance for competitive reasons.
So let me start a little bit, explaining what you see here on the image on the left. This is a very typical 1-level procedure, where you're using 4 pedicle screws and 2 rods to stabilize the spine. What you also use in the vast majority of spine procedures is what's called a spinal cage, essentially to make sure that you stabilize the entire spine. For a long time, and this is still what most surgeons will do in virtually all procedures, is that they will put as much bone graft into the cage and in front, and on the back of the cage to make sure that you get a very solid bone ingrowth, and therefore you get a very solid fusion and stabilization of the spine. They have done that for many, many years.
But until last year, everything had been done off-label. And there's a number of data that indicate that the bone graft that is being used in what's called the interbody space, which is around the cage that you see here in the red circle, actually represents up to 50% of all bone graft that has been used. Last year, the FDA gave the first clearance to one of the largest spine companies, who essentially came in with clinical data on 75 patients. And they also gave it to a second one that did the same thing a little bit later, and now OssDsign. So at this point in time, there's only three companies in the entire U.S. bone graft market that has what's called an interbody clearance.
So an on-label claim to be used in the cage or in the interbody space, as you see here. Now, this is very unique, but it's also very unique for a number of other reasons. Both other companies that got this clearance did it not only on clinical data, but they actually went in with their spinal cage data, and the bone graft results were secondary in that submission. We achieved this clearance solely on the preclinical data and the intrinsic safety and efficacy data that we demonstrated on the bone graft alone. So that was the very first clearance on the bone graft alone. What's also interesting is that the other two clearances that exist right now in the market are both much older technologies. So OssDsign is the only of what's called the latest generation synthetic.
You know, we've talked about it before. We're actually a fourth generation out there, but we are the first latest generation synthetic to have an interbody clearance, meaning that we will be on-label for all major spine procedures. A third first is actually, as you know, and as we've said before, we typically compete more with the orthobiologics-only companies in the U.S., because for the bigger spine companies, orthobiologics just does not have the same level of importance. So we find ourselves typically competing with the pure-play orthobiologics companies. And in that group, we are right now the only one to have an interbody clearance. So having an on-label claim for all major spine procedures.
So this is, of course, an undisputed recognition of the strength of the preclinical data that we already know resonates strongly with surgeons, but it certainly also sets us apart in the marketplace right now. And of course, we expect that to have an impact on the acceleration coming to hospital approvals, number of users, and the product usage we are seeing, and of course, also an ability to both protect and maybe sometimes even get slightly better pricing as we are approved in hospitals. So a very, very significant clearance that I cannot stress enough how important that is for the company. But as you also know, we have already in the first week after launching the product started investing in clinical.
We acknowledge that of course, to keep the growth trajectory going in the years to come, we also need to complement the preclinical data and the strong handling we're seeing with more clinical data. We started our TOP FUSION study, which is our first in man in Hungary. That enrollment is fully completed, and patients are now coming up to one year, and we expect a publication to come out in the first half of next year. Six months after we launched in the U.S., we also started our prospective multicenter spinal fusion registry called PROPEL. As we have announced, we have now exceeded 200 patients in that registry and also expect to be able to produce clinical papers coming out of that registry as we come into 2024.
So we are looking very much forward to 2024, which will be the year where more clinical data will be coming out on OssDsign Catalyst, clearly supporting the already strong trajectory that we are seeing. And with that, I'll just hand you over to Anders to recap on what we see on the current trading.
Thank you, Morten. So we're still in Q3, so current trading will have to be Q2 numbers, as we've shown previously. I want to highlight this U.S. development, as you see in this chart, which has been quite exponential for a number of quarters now. Of course, it's clearly, as you can also see in the chart, driven by the Orthobiologics section, where total growth in the U.S. is exponential, but it all comes from Orthobiologics, really. It's been a continued increase in hospital approvals and a broadening of the customer base. We've now reached a pretty high number of users in the U.S., and, in the last couple of quarters, we've also seen some major wins in terms of the IDNs, large hospital systems, which really bumps the sales upwards.
And of course, what this does when, when Orthobiologics Franchise drives the U.S. sales in this way, it also means that the U.S. share of total sales increases quite dramatically. So looking at this slide, we see that going from in 2020, a third of the group's sales being the U.S., we're now seeing Q2 more than two-thirds, even 72% of the group's sales being U.S. And, this just continues to grow. And it was also the fifth quarter in a row with more than 100% growth in the U.S. market. And when the U.S. market grows, and when the Orthobiologics with higher margin grows, then also the total margin in the company grows.
So this has led us from 46% in 2020, with more U.S. focus in 2021, and certainly a lot more Orthobiologics after that, all the way up to 77% in Q2. So more than 30% this point's growth in margin is, a pretty pleasing result.
Now, as we also said, after the second quarter, we have been getting a lot of questions about where we see value lie in the company right now, and what we think will drive further value creation for shareholders in the years to come. As we also said last time, we clearly see all of that coming from the orthobiologics business. You know, with a U.S. rolling 12-month momentum, about 3 times a big size of the big part of the business. Now, more than 2,000 patients treated, actually 200 patients in PROPEL and so on. So we clearly see that this is where shareholder value is, and that is also why we are taking this strategic shift to focus 100% on that business.
We also do it because it is really a technology platform. It has multiple application areas that can drive incremental growth and profit in the future. We have line of sight to some clear, I would say, new products that we need to develop to have a competitive portfolio. I think what we announced last Monday with the FDA is a very clear testimony that this product and this technology has potential also for indication expansion. Then we also know in this year, nature, it can deal with high heat treatment and a few other things. That also means actually that you can think of other new revenue streams to use that technology in combination with other products.
That is not a strategic priority here and now, but it is certainly a potential for driving incremental revenue in the years to come. So as a result of that, we have been going through a strategic process to see what or how can we drive, how can we increase shareholder value? And we see the response to that question or the answer to that question as being a fully orthobiologics company. It's a very large market in the U.S. Solid underlying growth. We'll go through all of these in a second. Clearly scalable, high gross profit, lower cost base, less structural cost, improved cash flow, and a much more simplified business, which enables focus to accelerate. But if we start with the first one, we have shown this before.
As you know, world market being about $2.6 billion for spinal bone graft, but of which $1.8 billion is in the U.S. So clearly, a very attractive market, big in size and good pricing. So this is where the company will focus. In addition, we haven't talked so much to these actually, but there are some very interesting dynamics happening on a macro, on a market level, which is really fueling the demand for synthetic bone graft. First and foremost, as I said in the beginning, we treat patients who suffer from spinal degeneration, and that is age-driven, right? That's driven by age. And that means that most of our patients will be in the category of plus 60 years.
And that group, this is world data, but that group is expected to double over the next 30 years. So we will see an increasing need for more and more, procedures also, as we all live longer, these days, and are expected to live even longer in the years to come. The second trend that's happening is really we are seeing a surgeon preference, move towards more synthetic. As you saw from our own preclinical data, autograft is the de facto gold standard as recommended by the FDA. But we are now seeing not just OssDsign Catalyst, but generally the latest, generation synthetic bone graft are, performing on par, sometimes even better than autograft. A surgeon also has the opportunity to use allograft product, which is donor-based products.
And of course, they always come with a fear of disease transmission because you are harvesting bone from a donor. And unfortunately, there are repeated cases. There was a very big tuberculosis case not long ago, in the U.S., where 8 patients died, I believe, and 135 patients got infected. And these happen all the time. So we are experiencing a general concern and a reluctance even to use allograft, which basically means that more surgeons are choosing a synthetic bone graft because it comes with good safety, high efficacy, and without the risk profile associated with allograft. Then, as we've also said a number of times, the bone graft market is very crowded in the U.S.
There are many products on the market, but there are also many products which we would classify as old. So, as I mentioned, we belong to the fourth generation category, we typically compete with third generation products, but there are actually many first and second generation products out there, technologies and products that are up to 20-25 years old. And all data indicate that the latest generation synthetic bone grafts are just performing at a better rate. So we are seeing also surgeons moving from old technologies into the new technologies. And that just means that with these trends, OssDsign Catalyst is exceptionally well positioned to capitalize on the tailwind that this will bring.
As I also mentioned, there is no doubt by now that the orthobiologics business is incredibly scalable, which is proven by the acceleration we've seen since launch, since launch. What you see on this slide, and I think it speaks for itself, is essentially a comparison between cranial and orthobiologics, from time of launch until they reach a certain sales level. And as you know, we report in the second quarter, now orthobiologics is the largest one. And looking at this, what took approximately 10 years to reach on cranial, we did in less than two years, actually more like 18 months in practice. So I think there's no doubt, should be no doubt, that the orthobiologics business is incredibly scalable, and that is also why we want to focus on it, because we think that generates a lot of shareholder value.
That's the sales development. If you were looking at this from a profit level instead, gross profit, then the development would have been even faster for biologics business. And we mentioned in Q2 that we see a blended margin in the company of about 77%, and we have generally guided to that the orthobiologics business tends to be above 90% margin. We can now just confirm that this is what we see as well. It's also not a target for what we want to achieve in the future, but that's actually what we see in our business today on the orthobiologics side. So what this will lead to in numbers, well, first of all, we already see the higher gross margin, and with the strategic shift now, we also will see reduced cost base.
Provided sales continue to grow, this will unavoidably lead to improved operating leverage and also in turn, an improved cash flow. If we're looking at this on a 12-month basis, we expect to lower OpEx by about SEK 30-40 million . There will be about 25 positions potentially affected by this shift. Also, we will have no in-house production, so lower structural cost, and we will focus on the U.S. market only, so much improved focus for, for us going forward. All this combined will undoubtedly lead to improved cash flow going forward. We don't want to guide on exactly what this will have in terms of cash effect for 2024. That also depends on some investment decisions that we are contemplating.
But we did model this on the first half year of 2023, and if we had been doing what we're doing now a year ago, if we would have started in January this year as an orthobiologics business, then we would have, in the first six months, have had about 30% improved cash flow.
Good. And of course, when we do the strategic shift, there is a big focus on the numbers and the margins, what this will bring. I think it's equally important to focus on what it also brings from an operational point of view. And becoming a pure play orthobiologics company means that we will be operating a significantly simplified business, which will allow us to focus, and therefore, all things equal, also increase the chances of further acceleration. We will have a much simplified sales and marketing setup. It is a much more light touch sale to sell a consignment product like an orthobiologics than it is to sell a cranial, where there are many people in the company involved from start to finish. It also means that we can focus our R&D effort and our pipeline development.
We will significantly reduce the regulatory burden and cost by not being operating in Europe. That means that we are freeing up time and capacity to focus on what really matters, which is OssDsign Catalyst in the US. And last but not least, as Anders said, we will now have a fully flexible outsourced production setup, no in-house production, which of course drives a variable cost structure in the company, and it also means that we will have capacity to start future-proofing that and really thinking in terms of optimization and automation of that production. So all in all, we see this as setting up the company for further acceleration. As a result of this, we also revised our strategy and our financial targets.
And really, there are some key words in the strategy here. This is all about driving long-term value creation, and we see an ability in a pure play orthobiologics business to do this with profitable growth. We will see high-quality earnings, we will see scalability, and we will inevitably also see faster operating leverage. I don't think there's a lot of rocket science into the strategy because what we've been doing really works, but so it is a focus on winning in the U.S. It is an increased focus, I would say, on really driving high-value innovation through our R&D pipeline. We need to continue to prove clinical performance, both in existing and potential new clinical programs. And then this move also gives us an opportunity to really build scalability in every corner of the company.
As a result of this, we also updated our financial targets, which is now to reach sales of SEK 150-200 million in the medium term, which is also the point where we would expect to become cash flow positive. So that was the presentation we saw today. I hope we made the rational and the motivation for focusing even more on the orthobiologics business very clear. We clearly see this as the way to significantly increase shareholder value creation in the company, both now and also in the future. And I think with that, we will say thank you for listening in, and we will hand over to the operator for questions. Thank you very much. Well, I can confirm that we have been trying to sell cranial for a period of time.
To this date, it has not resulted in a transaction, and therefore, I can also not comment on what a potential transaction would be. Of course, right now, we are announcing that we are closing the business, and as we said in the press release, we are still seeking a total or partial sale of the cranial assets, and that can come in many shapes and forms. So, we will still continue to seek, but we also believe that now is the right time to draw a line in the sand and focus the company.
No, it's based on Catalyst.
Yeah, are you hearing me?
Yep. Yep.
Yes. Okay, why don't we do it like this? You ask the questions to us, and then we can repeat the questions for the audience. Yeah, so I'll just repeat the question. So the question is, do we have the sales force infrastructure in place to reach 150-200, or do we need to reprove? I think that's a pretty straightforward answer. We will continuously, as we are growing the business, of course, need to expand our U.S. presence. And that is certainly also what we will continue to spend the money on that we also raised in this successful directed share issue last night.
But we have a really good infrastructure, we have a good coverage, we have a broad distributor network over there. So we're not talking, you know, having to triple overnight or anything of that nature. It's gonna be slowly, steady, consciously decisions about improving our coverage as the business is growing. The question is, in the press release, is talking about acceleration of the R&D portfolio and whether we can elaborate. No, that is, we do not. Since this is a public call, we have no intention of disclosing how we are thinking about the R&D portfolio and which products we are working on, and when we expect to take them to market, for obvious competitive reasons. Yeah, that was a long question to repeat, but maybe Anders, do you want to answer that?
Well, I guess the main question is, do we need any more? How much we will need any more cash to input in the company to reach cash flow positive, and how much? Well, we. And also with regards to the current sales development and OpEx level. Well, the OpEx level in the question is really for the current business. We're gonna reduce that OpEx level quite significantly going forward, so I don't think that that really makes sense to look at that one. Sales development of SEK 150-SEK 200, yes, it will, we believe it can take us to cash flow positive and also break even. Whether we need to take in more funding, we will. It could happen. It could also be that this is sufficient.
It all depends on a lot of factors, like, how the sales development, how fast the sales development will go. Yeah.
I mean, you know, I think we've all learned in the last couple of years, you have to be very careful about issuing any guarantees, because the world can change. But from what we can see, just confirming what Anders is saying, is that, this could very likely have been our our last, capital raise, and we certainly see an opportunity that this could take us to, to cash flow positive. No, that's fine. I got it. So the question is, what would have happened to the sales development, in the first half of this year if we had had the interbody clearance already from January the first? The honest answer is we don't know. I mean, that would be pure speculation.
Since we know that they are already using products generally in the market off-label in this space, it's really hard to quantify what exactly and how fast and in which ways it's gonna drive acceleration. So that would be impossible for us to talk about. What we can see is that this clearance puts us in a very elite category of synthetic bone graft, and it is a window. There could be other companies following, but we also don't believe that. We firmly believe that there will be many companies out there in the marketplace that, as you know, is categorized by not having invested a lot in clinical data throughout the years, that most likely will not be able to get a claim like that.
So we could see a tiering of the market into a tier one and tier two, split by whether you have an interbody clearance, or not, down the line. But, how it would have impacted the sales, that would be pure speculation. So I think we can't give any answer to that. Yeah, yeah, no, that's fine. So the question is whether we can elaborate on the feedback we've been getting. I assume the question relates to post the announcement of the interbody clearance last Monday. Listen, it's a week ago. Unfortunately, the world doesn't move so fast that you start to see immediate impact on your sales numbers. I can tell you this has been exceptionally well received.
We certainly took the market by surprise, both surgeons but also competitors who have been in the market for many years and still do not have this clearance. It certainly has already opened a few doors for conversations with larger hospitals and other things of that nature that we didn't have before. So yes, we have seen very positive news, as you also saw from the presentation. Some very noteworthy surgeons have actually already come out leaning forward and given their view, testimonials on how important this is to OssDsign Catalyst and OssDsign. Are there any more questions? Yeah, we can hear you now. Well, I think there is a specific reason why we're saying medium term. So it's not short term, and it's not long term.
It's in between, right? We don't want to link up to a very specific date. It will depend on how the development, what is the real impact of the interbody clearance, if we can continue the very strong momentum we are seeing right now. So, we don't want to go in and specify any years, but it is in that midterm category. So the question is, and apologies I didn't repeat it before, the question is, besides a quarterly report, what kind of news and milestones can we expect? Well, I guess my answer is, you will know when we announce those. It's not something that we want to disclose upfront what we expect that may or may not come.
Once we hit some of these things or any material news, if we have any material news to share with the market, we will of course do so in an efficient manner. But we can't sit here and speculate about what may or may not come. That will be announced when it happens. So we were told that there are no more questions. So I think with that, we want to thank you all for listening in.
We hope you are as excited as we are about not only the strategic direction of the company going forward, but also the fact that we secure this very strong capitalization of the company last night, which certainly gives us a very good run rate combined with the much slimmer more efficient, more profitable company going forward. So thank you very much for listening in, and we look forward to updating you all maybe first time after our third quarter results. So thank you very much for today and have a good day.