Hi, welcome to OssDsign's webcast. Morten Henneveld, who is the CEO of OssDsign, will be presenting today. My name is Martin Westerlund, and I'm from Finwire TV. If you have any questions to Morten, you can ask them in the form on our website that is located to the right. If you're watching this on YouTube, you can find that form in the description. With that said, I'll give Morten the stage.
Good afternoon, welcome, everyone, and welcome to OssDsign Q3 earnings call. Very pleasing for me also my Q1 call here. Welcome, everyone. To summarize the quarter, I think the best way to put it is that it's been an extremely exciting and also a very busy quarter. We have had a strong sales growth despite the global uncertainty. We're delivering a operating profit in line with expectations. As you know, we've had a very transformative event happening, a number of those actually, after the close of Q3 with the acquisition of Sirakoss and the direct share issue of SEK 65 million. If we zoom in on the results for Q3, then you can see, and as you read this morning in the statement, we delivered sales of SEK 6.5 million, which equals a year-on-year growth of 34%.
If you adjust for currency impact, that underlying growth is actually 39%. When you look at the first nine months of the year, we are now delivering SEK 18.1 million in revenue, which corresponds to a 53% year-on-year growth. We are still maintaining the high above 50% growth. Operating profit, as you can see, for Q3, minus SEK 18.5, and for the first nine months, minus SEK 59.2, both are in line with our budget. I think it's also important to note as we talk about growth, that we're not only comparing year-on-year, we're also comparing quarter-on-quarter, as you know. Here we are seeing a very strong recovery from the all-time low, or at least the lowest for a period of time when you look back in April and then into September.
We're reporting a 66% growth quarter-on-quarter, and you can also see how September ended significantly better. We feel confident about the path that we're on and the growth that we are on. Just to put that into a little bit of more concrete context here, what you see on the left-hand side is the volumes of our cranial implants. Here you see that volumes are actually returning back to pre-COVID levels, actually very close back to our January, which was an all-time high volume month. That's something that we are extremely pleased with. I'm extremely proud of the organization that despite all these circumstances or the uncertainties that we are dealing with at the moment, that we are able to do that.
Of course, you can also see that revenue and sales are not at the par despite volumes actually being on par with pre-COVID levels. That simply just what we call a mix effect. Because the U.S. has been subject to a larger shutdown over a longer period of time, and we have been extremely successful in Q3 in Europe, that simply just gives us a what we call a mix effect. We are simply selling more volumes from Europe that comes at a lower ASP and also with some FX headwind. That explains the delta and essentially why we are not reporting a net sales on par with Q1. As you can see, very promising recovery. Some really hard work. It is obviously not easy these days, you need to think carefully about which customers you are prioritizing.
I do think that we are on a good track here. As you can also see the red line, which is the 12-month rolling average, it does keep going up and up and up despite the COVID situation. We just summarize on some of the Q3 highlights, of course, as you know, I started on the 1st of September. We look at Europe, Germany is doing extremely well, 158% growth year-on-year. The rest of Europe, largely driven by France, is up 124%. Some really strong momentum in Europe. Similarly, we're also seeing a strong recovery in the U.S. We are up quarter-on-quarter more than 100%. Of course, both these developments show something about what we've been saying about the fundamental momentum in the business is there.
Once we start to see openings, of course, that will also translate into sales. For Japan, as you know, we signed the partner agreement with Muranaka, we are expecting the first sales to come in towards the end of Q4. As you also know, we published, it's a small study, it's an interim data, but essentially showing what we've been doing in terms of our material, in terms of some of our clinical results on the cranial side, we were actually able, by and large, to replicate that in the oral cavity. Some very promising results. It's still early days. It's not real clinical data as such yet, it does show something about how the technology is a platform that has multiple spaces of application. As I said, some very important events happened after the period.
The acquisition of Sirakoss being a very big one and being an event that sets up the company and transforms the company, and gives us a completely different opportunity in the future. We were also extremely pleased with the SEK 65 million director share issue, which was heavily oversubscribed. It's always nice as a company when you're working hard that there are also people who really want to invest in your company. As another testimony to the capabilities and potential of our technology platform, we did get another publication in a very renowned publication, again, showing the material's regenerative capacity. We now have multiple publications out there, and they're all saying the same things and supporting the same claim, which is that we have a very strong capability to regenerate bone in line with what our vision is to become.
If we just quickly recap, I know we also talked about the Sirakoss acquisition last week. It is a very transformative strategic acquisition. We're buying a 510(k) clear product, it's a product we can sell in the U.S. We will target, as we said, the market for spinal fusion, which was specifically $2.6 million and 70% of that being in the U.S., it gives us a completely different playground in the U.S., much stronger footprint, a much higher relevance, and access to a larger customer base. The bone graft market is large, it's attractive. Total value is $4 billion US, typically operating with gross margins above 90%, it's scalable.
As we also said last week, there are some very strong commercial synergies between the space that OssDsign historically has operated in, which is the CMF, the craniomaxillofacial, and the bone graft market, specifically where we target spinal fusion, because there is a large customer overlap, both on a hospital and clinic level, but also on a surgeon level. Strong synergies on the sales channel. As I also talked to a little bit to last week, there are multiple people in this team already, in the management team, in the wider organization, in the U.S. sales force, and on our board who have proven track records with the bone graft business and the spine business. That was a little bit of a recap for that. Of course, we can get around also talking about COVID-19 and the outlook.
I think our view is that there's still a high degree of uncertainty out there. I think we saw an improvement during Q3. We saw some of the last states in the U.S., Texas, Florida, slowly starting to open up. Of course, the second wave that is now coming in, not just in the U.S., but definitely also in Europe, of course, that does give uncertainty into what we can expect. We fundamentally believe that the underlying demand is there. I think Q3 is also testimony to that. The minute we see hospitals opening up, you see a direct translation into higher sales and higher volume. I think we've proven that our demand is out there, and people will buy from us whenever they can.
We are also generally hoping that some of the experiences from the first wave, and the ability to navigate that uncertainty from a government perspective, that results in less negative effects, slightly less restrictions than maybe what we saw in the spring. Of course, this is our view, and time will tell. I think with that, given that we also spoke last week, and I presented the Sirakoss and the acquisition and the director share issue last week, we wanted to keep this a little bit shorter today and just focus on the Q3 results. With that, I'll hand over to moderator again.
Thank you very much, Morten, and now it's time for the Q&A. If you have any questions for Morten, you can ask them in the form that's on our website, and I'll ask them to Morten if time allows. If you're watching this afterwards or don't have time to answer your questions, I'll make sure to send them to Morten. The first question is, Morten, where do you see the cost base in 2021?
No, I think we'll see a burn rate, at least from an OpEx level, that of course, will go up slightly. We are taking over four people as part of the Xerocort acquisition. Of course that adds some cost to the cost base and the run rate. We will also engage in some very specific activities related to the Xerocort acquisition. Most notably, at least short term, is the start of a number of registry and clinical trials and other related things to access the data we need to build a bigger pipeline. There will be an increase in burn rate relative to 2020.
Okay. The next question is, do you see any progress in France?
Yes, we see. I guess there are two ways to answer that question. I think on sales, we're doing extremely well. It's been very difficult to operate. We do have an agent there that operates today, and he's doing extremely well. As we also mentioned last time, we are in dialogue. We are pretty far on closing a distributor in France, but we simply haven't been able to meet because of the COVID situation. We are still talking with them, and I think it's a matter of time before we get it closed, but we do need to meet face-to-face to really wrap things up.
Understood. The next question is, who will be your direct competitors for the Osteo3 ZP putty products in the U.S.?
I think those will be some of the bone grafts that are out there, and there are multiple of them, to be honest. Some are more first generation and some are second generation. I think we'll be competing with the products that are out there. I don't think we'll have any one such competitor. It will be the products that are on the market. Of course, with the Xerocort product being a synthetic and with some of the capabilities it has, it will be in the mid to the higher range, higher end of the market. Those are the ones we will be competing with.
Can you talk about the investments needed in clinical and commercial efforts in Osteo3 ZP Putty before launch in the second half of 2021?
Yeah. Maybe I just need to make one thing clear. We don't need to develop clinical data or anything needed to sell the product. I think that's important for everyone to understand. The product has a 510(k) clearance. It is done on an animal study using something called a Boden model, which is a rabbit study. We can go out and sell it. Of course, we also have high ambitions, and if you want to be a more dominating player in the future, then of course you need to establish clinical results. You need to establish registry data on your product to show its performance over time.
All those things are, of course, things that we will engage in, but it's just very important for me to get across here that there is nothing preventing us from actually selling the product once we get the 510(k) clearance.
Okay. The last question is, the strong development in Europe, is it relating to the new customer's order or larger order from existing customers?
It's actually both. I think what we've seen is we have managed to get a number of new customers, in particular in Germany, a few in France, but in particular in Germany. We have also seen some of the customers that came on board early in the year and also some of those that came on board last year, that they are also becoming more continuous users and repeat users of our products. I would say it's both.
Okay. Thank you very much, Morten, and thank you to all of you who followed this webcast today. I hope that we get to see each other soon again.
Thank you very much. Have a good day.