Welcome to today's webcast with OssDsign, where CEO Morten Henneveld and CFO Anders Svensson will present the report for the first quarter of 2023. If you have any questions, you can send them in via the form to the right. With that said, I hand over the word to you, Morten.
Thank you very much, welcome to the first quarter 2023 webcast. My name is Morten Henneveld, I'm the CEO of OssDsign, and with me I have our CFO, Anders Svensson.
Good morning.
Today we want to walk you through our Q1 results and highlights for the quarter. As always, when we do these presentations, the normal disclaimer. Before we go into all the details, really the key takeaway from today's presentation is what you see here. OssDsign is now delivering exceptional growth everywhere in the business, Anders will walk you through the details later on. As always, I want to start off with what we're trying to solve as a company, which is that today, current bone replacement products fail to heal a wide range of skeletal defects. For cranial, 10% or perhaps even more of implants that are used end up becoming infected, of which many need to be removed. For spine, we see that one in five patients do not achieve a so-called fusion.
Ultimately for both patient groups, it means they must undergo revision surgery, which is not only painful for the many thousands of patients that this happens to, but it's also extremely costly to the healthcare system, and therefore the society. When we look at the highlights for first quarter, we had another record quarter, and we're very pleased with the momentum we see in the business. The growth we're seeing is not only sustainable, but it's also accelerating. We are now also increasingly becoming a U.S. company, which, as you know, is highly accretive to both top line and margins in our industry. Also outside the U.S. in our focus markets in Germany and France, we continue to build momentum and witnessed in Q1, a continued very strong growth rate.
As you also know, lead time on our cranial business has been a hurdle. In the quarter we managed to reduce lead time by up to 40%, which now means that we can deliver an implant, patient-specific regenerative implant, everywhere in the world in less than three weeks. Last, but certainly not least, as you saw earlier this month, we announced that we have achieved the milestone of 1,000 OssDsign Catalyst patients being treated in the U.S., which is a number that has doubled since the beginning of January, and it is a testimony to the acceleration we see in the bone graft business. With that, I'll hand you over to Anders to walk you through the financial results before we go into some of the highlights in a little bit more detail.
Thank you, Morten. If we turn to the results for the first quarter, we reported 21.5 million SEK in sales, which equals an outstanding 203% growth on the same quarter last year. If you adjust for currency effects, 177% growth on a constant currency basis. Of course, the comparable quarter, Q1 2022, was a weaker quarter due to Omicron, especially in the U.S. However, that does not take away the fact that we're showing substantial growth all throughout the company. Moving to the growth development, as Morten mentioned, we are seeing both sustainable and also accelerating growth in the business. What you see here in the slide is the last five quarters, where the bars are the quarterly sales and the line showing the growth rates in constant currency against the same quarter previous year.
As you can see, both the sales and the growth are increasing at a very meaningful rate. Now looking at where the sales, the growth is coming from, you can see that the U.S. business accelerated again in Q1. 14 million SEK sales, continuing the very strong momentum we saw in Q4 and even before that, and came in at a spectacular growth of 399% growth for the quarter. This is now the fourth consecutive quarter where we have triple-digit growth in the U.S. The share of total revenues from the U.S. has increased to 65%, compared to 40% in the same period last year. Now encouragingly, also the markets outside the U.S. showed very strong growth in the first quarter, 74% versus the same period last year.
All in all, very strong quarter again. As usual, we talk a lot about the U.S., it's a very important market. I want to deep dive a little bit in it just to see how the U.S. is not only taking off, but it's also showing sustainable growth with more hospital approvals, more customers and more repeat customers. This is clearly driven by the acceleration of OssDsign Catalyst. What you see in this bar chart is the last 12 months or LTM sales in each bar. We started to see this trend in Q2 of last year, now this has accelerated further in the first quarter 2023.
That also means that this last quarter alone have contributed more in incremental terms than it took the company to reach in the first five years in U.S., which clearly highlights there's an exponential momentum that we have in the U.S. right now. Very strong development, we're really satisfied with that one. More on the U.S. This is a quite a shift in the company over just a few years. In line with our strategy, we're becoming an increasing DE U.S.-focused company. In 2020, about a third of the business was U.S., now in Q1 2023, two-thirds of the business, the global business, are U.S., we expect this to continue over the coming quarters and years. One might ask why this is important. Well, the U.S. has considerably higher prices in that market.
Accelerating in the U.S., it'll, first of all, be key to generating future revenue, but equally important, it will be highly accretive to future margins and therefore profitability in the company. Moving to the sales by franchise. We started reporting on this last quarter, or a couple of quarters ago, we still continue to see very healthy development in both businesses. If we start with Cranial, we reported 12.7 million SEK in sales, accelerating the business even further. For this quarter, we reported a 100% growth. That's a significant acceleration, even despite the weak market that we still see suffering from a low level of elective procedures. Moving on to our bone graft franchise, we saw a further acceleration during the quarter. Very good momentum. That's very much a result of more hospital approvals happening.
While I wouldn't pay too much attention to the actual growth numbers, it's more than 1,000%, it's so early that the comparative base, of course, is very small. Reporting SEK 8.8 million in sales during the quarter, clearly indicates the scalability and the transformative potential that we have with OssDsign Catalyst. As you can see here, the pie chart shows now we're up to 41% of sales for Catalyst. It just continues to become a larger and larger part of the business, as we know that it has a higher gross margin, this will positively impact both the profitability and also the cash flow in the future. By that, I will now hand you back to Morten, who will talk to some of the other key highlights and achievements we've seen.
Thank you very much, Anders. I wanna start here, as I said before, after the quarter ended, we announced that we've now treated more than 1,000 patients with OssDsign Catalyst. This is a great milestone to reach because it resonates strongly with surgeons. I think we all know we are still early in the commercialization phase, and surgeons will ask who else is using and is it safe to use, as we've mentioned before. Broader usage clearly mitigates the risk and the concerns that surgeons may have. It also clearly is a testimony, as I said before, to the very high interest we are seeing in the product. It wasn't the only milestone that we reported during the quarter.
We also hit a number of milestones on our Cranial business, where we now reached and accumulated 750 implants in Germany. We also hit 200 accumulated implants in France, many of which have actually come in in the last one-two years alone. As already mentioned, we've optimized our manufacturing process, so we can now deliver a regenerative patient-specific cranial implant in less than three weeks worldwide. I also want to take the opportunity here to give you a brief update on our clinical progress, which, as you know, is one of the top five strategic priorities in the company. For Cranial PSI, we continue to focus on two things, our post-market surveillance data and building a cranial registry.
The next updated post-market surveillance report will be published as usual at the end of the year, we hope to launch the prospective registry in the U.S. in the third quarter. As some of the previous publication have shown, we know that the more publications we have, the stronger the evidence on Cranial PSI. For our bone graft franchise, no update on the TOP FUSION as such. We have, as you know, completed all patient enrollments, the last patients are now coming up to one year, we expect to be able to publish the data from this study in the early part of 2024. I also just want to remind everyone that this is a first-in-human study on 17 patients for 50 evaluable.
You're not gonna see a large statistical report, but it certainly will allow us to talk to both the safety and the efficacy of the product. PROPEL is also going as planned, I would say. We continue to roll in more sites and therefore also expect that patient enrollment will continue to increase. The sooner we collect the clinical data, the faster we can generate publications with clinical evidence. This remains a top priority for us. Now, as a final comment before we go to question and answers, I wanna take the opportunity to take a step back here and look a little bit on our strategy and the achievements that we have on our top five strategic priorities. As you can see, the progress that we are showing in the company is clearly following the strategic priorities.
Our first priority is to win in the U.S., as Anders mentioned. We focused a lot in the U.S., and we're delivering to that plan. The business has now been running in an exponential growth mode for several quarters. Rolling 12-month momentum is up nearly three times. U.S. is now 65% of revenue, and therefore creating a much healthier mix effect in the business. We're seeing the growth being sustainable with a broader customer base and more return users. The second priority was to build an orthobiologics business. You know, with SEK 17 million in the first year, SEK 8.8 million reported now in the first quarter, and more than 1,000 patients treated, and the fact that we've attracted some very leading surgeons as ambassadors are all testaments to a very successful launch.
That means that we are well on the way and have set up the company for continued acceleration. On the third priority, to innovate the portfolio, new product development in the med tech field takes time, as you know. Having said that, we've already launched the line extension, as you know, on Catalyst, the 1cc, which means that we have a full-size family now to take to market. Our fourth priority is around clinical. We've already talked to some of that. The reason we wanna talk about it here is because we are making some very significant strategic investments in this area. This is not only about doing more, but it's also to fundamentally operate with a new clinical agenda to do programs in the markets we operate in with real surgeons and real patients.
The rapid uptake we've seen in the market on OssDsign Catalyst clearly confirms the large potential. To fully capture that opportunity, we will need clinical evidence to support its differentiation going forward. Therefore, we are consciously making strategic mid and long-term investments to produce clinical evidence as cost effectively as possible. By combining a small clinical study, TOP FUSION, with a prospective multicenter registry in the U.S., we are building stronger clinical evidence in a fast and cost-effective way. Of course, these investments, short term will have an adverse impact on operating profit, but we believe this is a very well-balanced approach that will enable us to drive the growth of OssDsign Catalyst, building a substantially bigger and more profitable business to come.
The fifth and the last priority is driving operational efficiency, and as we mentioned, we have now cut lead time on OssDsign Cranial PSI by 40%. To sum it up, as you can see, we continue to deliver on the key promises in the strategy. We are certainly accelerating the value we are building in the company, and we're also building a much stronger company with much greater scalability. With that, I wanna thank you all for listening to the presentation and hand over to the operator for questions.
Thanks so much for the presentation. We got a lot of questions. I think we'll go straight ahead. Start with them. The first one is, U.S. seems to be really going well. Can you give us some more details?
Yeah. Absolutely. I can probably talk about the U.S. all day. I mean, clearly what you're seeing is an impact of launching OssDsign Catalyst and the scalability we're seeing in that business. Having said that, as we also said, which seems ages ago when we acquired Sirakoss and we decided to focus on the spine business, this is a business we know well. We know the dynamics, we know how to differentiate, we know the competitive products, we know surgeons, and we know the processes of getting into hospitals. All that, of course, has been working in our favor as we took the product to market. I think largely because of that is why we are seeing this very strong uptake so early on in the commercialization phase.
Catalyst is accelerating fast. Can you explain what is driving this and what we can expect going forward?
Yeah. Well, maybe it's a little bit what I just said. It is going well. It's a great product. It has differentiated features clearly, both in terms of what we call the mechanism of action, but also very importantly, on the handling capabilities, which is extremely meaningful to surgeons. We're executing well on that plan. Now, relative to the future, we are certainly expecting a continued acceleration. We expect to see, as Anders said, that Catalyst will continue to grow and very likely during this year become the biggest part of sales in the company or at least getting to a more 50-50 level.
You talked about how you're doing strategic investments in clinical, which of course drives the costs. Can you give us an idea of the level of spending here?
We're not really prepared to divulge line item costs also for competitive reasons. I can say though that if we were to stop all clinical programs tomorrow, you would see a very meaningful improvement on the profit line.
There seem to be many factors, impacting your cash flow in the quarter. Can you explain this?
Sure. Sure. To make it a bit simplified, there's really two main factors, and they're both within the net working capital. One is the, we had a much higher sales quarter than we had last year, which just simply generates higher receivables and ties up more working capital. That's a natural effect, and it's a positive one, even though it ties up capital temporarily. The second reason there is that we had very high accruals at year-end 2022, which were due for payment in Q1. As we paid those, cash went out and our liabilities went down. That's also an effect of working capital.
It's unavoidable, and I would say it's a pretty normal effect when you compare a Q1 to a Q4, and the combined effect of those two is minus 6 million SEK. If you then talk in relative terms and comparing to Q1 2022 only, then you also have to add the accounting effect that we had between those two quarters of the revaluation of the U.S. dollar hedge. That's another SEK 1.3 million.
Thanks. The delta in employee growth seems to be slowing down. Are you now comfortable with the organization, and could we see the personal costs remaining at around SEK 20 million?
We certainly will not see the same sort of growth that we've seen so far. There could be minor increases. I would say this is a pretty stabilizing picture we see right now on the personnel costs.
Well, if we move on a bit, you seem to be gaining a lot of ground in France, and if my math is somewhat correct for France growth support, Germany and U.K. is relatively slow. Could you comment on the national dynamics in those countries?
Yeah. Well, I think it a little depends how you define growth. Of course, Germany has been by far the biggest market for a long time in Europe. Maybe on a percentage, clearly France will be growing faster, but that's more a result of coming from a lower base. We have two focus markets. As you know, we restructured the sales force last year to focus on Germany and France. U.K. initially, when the company went to market many years ago, was one of the key focus market. What we see right now is a very poor state of the healthcare system, and it seems to be deteriorating.
We already started to see this about a year, a year and a half ago. That essentially means that at the moment we don't see the U.K. as a focus markets in the company. It is increasingly difficult to do business there. Also we're simply to see a healthcare system that is suffering so heavily on elective procedures and staff shortages and a range of other problems.
If you can tell us in rough terms, given current outlook, when do you expect to turn cash flow positive? Is it the first year, second half year of 2024 or start of 2025?
I think as we've said, before, once we are ready to come up with that update, we will certainly do so. At this point of time, that's not something we answer.
Do you intend to revive the plans to seek a standalone clearance for Catalyst? If not, is there a possibility to get clearance for mixing a smaller proportion of autograft with when doing a spinal fusion?
Yeah. Sorry, I'm laughing a little bit here. We seem to be getting that question. I'm not really sure why there is this preoccupation with, or why some people are so preoccupied with the standalone clearance. The fact is, yes, that there are other products on the market that has a standalone. The reality is that virtually every surgeon will always mix in some shape or form, either with what is the, has been the gold standard, iliac crest, so harvesting from the hip or using local bone from the surgical site. Yes, as we may be doing clinical studies going forward, then we would certainly see if we can get a standalone clearance.
It is not something that I think is that necessary, to be honest, to build the business knowing the surgical habits and how they tend to do the surgeries anyway. I don't know if that was the answer to the question, I think the answer is both yes and no.
Yes. Is all of OssDsign U.S. sale subject to a 30% commission, and are the commissions included in other external costs in your quarterly report here?
Well, I can confirm that virtually all of the U.S. sales is subject to commission 'cause it goes through distributors, or they are involved in the process. Yes, those costs are certainly part of the other external costs. I can't comment on the exact level, though.
Roughly what percentage of the U.S. customers that started using Catalyst for a spinal fusion a year ago or earlier are still using it?
Well, I don't think we want to go too much into operational details. I can say that the vast majority of surgeons that started using are still using it. You have natural fluctuations. There are surgeons that retire, that maybe move hospitals where the product is not approved, so you're always gonna see those kind of swings. We're seeing a very, very good stickiness in the usage of the product.
Thank you. You had a phasing effect in Q4, pulling about, SEK 0.7 million from Q1 sales due to faster deliveries of cranial. If you now further improve lead times during Q1, does that imply pull forward Q2 as well?
Can we just?
I'm not sure I understand the question.
Yeah, I can read it once again. You had a phasing effect in Q4, pulling about SEK 0.7 million from Q1 sales due to faster deliveries of cranial. If you now further improve lead times during Q1, does that imply a pull forward from Q2 as well?
There could be an effect like that, yes. I mean, once you've had the effect in one quarter, it's likely to stabilize, so you won't see it every quarter. At some point, we hope to see that effect.
If the question is, if I can just comment, what happened last quarter is that we had implants that were scheduled for delivery in January that we managed to pull forward. That's why we communicated in the report that there was a SEK 0.7 million impact. That has not been the case. I think what we will see with an underlying improvement in manufacturing is that all things equal, we will be able to get things out of the door faster.
Thanks. Moving on to the last question here. To give some context as to the acceleration in Europe on cranial, how long did it take to get to 100 patients in France, and when was that reached, and how long did it take to get to 500 patients in Germany?
I don't think that's necessarily numbers. It's not so numbers necessarily that we want, we wanna tell to anyone. We will communicate when we reach certain milestones, which I think is what we are doing. As I said in the beginning, we have seen a good portion of the implants in Germany and France coming through in the last couple of years. If you're asking me if we are seeing an acceleration in the last couple of years, in Germany and France, the answer is very clearly yes.
Thanks for the presentation today, and thanks for answering our questions. Good luck going forward. Thank you all for tuning in.
Thank you very much.
Thank you very much.