Welcome to the Vimian Group Q2 Report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Patrik Eriksson and CFO Carl-Johan Zetterberg Boudrie. Please go ahead.
Good morning, and welcome to our earnings call today. I'm here with Carl-Johan, and we're gonna jump straight into it. Thank you for joining us. We have a strong quarter, great organic growth with margin expansion. The profit that we are delivering is in line with our financial targets. Our three main segments, which makes up about 95% of the business, all delivered very strong performance and all made good progress on our strategic priorities and execution. We finalized the capital raise in April, so our leverage is now down to about 1.4x , which puts us in a really good position for further acquisitions. We're continuing to develop our M&A pipeline, and we have several ongoing dialogues there. So all in all, a good quarter for us.
Let's jump into some of the details here. We reported 11% organic growth, double-digit growth in all three largest segments. Our adjusted EBITDA improved by 200 basis points from 25% to 27.2. This was driven mainly by our Specialty Pharma and our MedTech business. We go jump into MedTech, sorry, to Specialty Pharma. Strong performance here of 13% growth. Very solid execution of growth from all the therapeutic areas in Specialty Pharma. It was exceptional with 24% in the Specialty Pharmaceuticals part. About 1/3 of our revenue in this, and the growth in this area came from our key strategic initiative in terms of cross-selling and internationalization.
This is where we take products from companies that we bought in one part of the world and sell it somewhere else. It's good to see one-third. It's about the right balance, and that continues to be very positive and good momentum there. The margin development is also strong in the business here. It's driven by a positive mix, and we continue to see benefits from the integration work we're doing with the acquired businesses. Growth of the Adjusted EBITDA was 27%, so significantly higher than organic growth. I'm pleased to see the momentum, very positive momentum here in the Spec Pharma business. We take a closer look to our MedTech business. We delivered 10% organic growth here.
We recovered the sales that we expected from the Annual Order Program as planned in the second quarter. The margin improvement we see in this business is mainly driven by the evening out of revenue throughout the year, which has a positive effect on our earnings overall. We have nice growth here in adjusted EBITDA of 24%, again, significantly higher than our organic growth. Both our U.S., EMEA, APAC regions continued to deliver good organic growth in the quarter. As we flagged earlier here in the report, we're seeing a softness and a slowdown in the U.S. surgical market that started in the beginning of the summer. We're countering that with an increased commercial activity.
We go to our existing customers and try to gain share on those and cross-sell more of our product portfolio to them. We already have a relationship, and we also intensify and add a number of new education events to bring new doctors in, and also train the ones that are doing surgeries to do more procedures and different procedures. Overall, we have a strong global position here, and we're a leading provider of veterinary orthopedics across the globe. We then turn to Veterinary Services, 18% growth here, with good and positive development across all of our key geographies. We continue to add new memberships here. 400 new member clinics were recruited during the quarter.
Our co-owned clinics that we have accelerated their growth in the quarter and are now double digits, which we believe is ahead of the veterinary clinic market. So we're very pleased about that development. The improved profitability in this segment is driven by obviously, growth in revenue, but also we're getting good leverage on our scale here. And the Adjusted EBITDA grew 25%, again, well over our organic growth. We've seen stability in the trends here in the Veterinary Services businesses for many quarters. We expect that to continue, and we're very pleased with the good momentum we have in this business. And then turning to Diagnostics, this is now 5% of our total business, so the smallest segment that we have. Our revenue here declined by 9%.
The market we operate in here continues to be challenging, and our performance here is a reflection of that. As you might recall from our Q1 conversation, we decided to invest and reallocate some of our earnings from the livestock market to roll out our new parasitology test, device and solution into the companion animal market. So that's what's driving the lower earnings in the segment here. So with that, I want to conclude the summary of the quarter. Overall, a strong quarter. I want to hand over to Carl-Johan, who will walk us through some of the details.
Thank you very much, Patrik. Let us take a more detailed view on the financials for the second quarter. The adjusted EBITDA in the second quarter was EUR 24.7 million, at the margin of 27.2%. This is a clear improvement from 25.0% for the same quarter last year, supported by positive margin development in all our three largest segments, as we see effects from integration, economies of scale, as well as mix in the quarter. We report operating profit of EUR 13.2 million, a year-over-year growth of 30%, well outpacing our double-digit revenue growth.
The non-recurring items of EUR 5.8 million continues to be on a higher level in the quarter, with more than half of the total amount relating to legal costs for the U.S. patent litigation, as we have been in intense phase in that process during the quarter. The net financial items, a -EUR 5.5 million, consists of three main elements: finance expense of -EUR 5.0 million, with an average interest rate of 6.3% during the quarter, offset by EUR 0.8 million interest income on cash. Quarterly discounting impact of -EUR 1.5 million, and no impact on probability adjustments on contingent considerations. And lastly, a positive impact of EUR 0.2 million from exchange rates.
The income tax expense for the quarter amounted to EUR 2.7 million, and in total, this results in a net profit for the quarter of EUR 5.1 million, an increase of 57% from EUR 3.2 million in the same period last year. Cash flow from operating activities reached EUR 5.9 million in the second quarter, with net working capital impacting negatively. Going forward, working capital is an area we are increasing our efforts in to ensure we drive more efficient operations and cash generation. Net working capital amount to EUR 82 million euro at the end of the quarter, equal to 24% of revenue. That's an increase from EUR 75.3 million at the end of March, which equaled 22% of revenue.
The increase of EUR 6.7 million compared to the end of the first quarter is driven by an increase in inventory of EUR 4.6 million, with equal contribution from MedTech, Specialty Pharma, and Diagnostics. Accounts receivable declined EUR 2.1 million, as MedTech AOP customers pay their monthly installments, offset by higher accrued revenues in Veterinary Services. The lower current liabilities is primarily reflecting a timing effect of tax payments in Specialty Pharma. Cash flow from investing activities was -EUR 11.2 million, primarily reflecting earn-out payments of EUR 13 million and capital expenditures of EUR 2 million. The capital expenditures is split between EUR 1.6 million investments in intangible assets, and EUR 1.4 million investments in property, plant, and equipment. The main areas for the investments are capitalization of R&D and expansion of laboratory capacity in Specialty Pharma.
Cash flow from financing activities of EUR 8 million, where the proceeds of the rights issue of EUR 142.7 million has been used to repay EUR 133.5 million of debt in the quarter. At the end of the period, net debt amounted to EUR 144.1 million, which is down from EUR 287.4 million at the end of the first quarter. External lending is also down to EUR 169.7 million, following repayment using the proceeds from the rights issue. Our leverage, as a consequence, in combination with the increased profit, has now gone down to 1.4x, compared to 3x at the end of the first quarter, putting us in a strong position to pursue value-creative acquisitions.
With this financial review of the quarter, I would like to hand the word back to Patrik for concluding remarks before we open up for the Q&A session.
Oh, thank you, Carl-Johan. So how do we summarize this? I think the maybe best way to do it is to do the following: You know, I, I'm satisfied with the second quarter from a growth and an earnings performance perspective. I think we have work to do when it comes to our cash flow generation. I'm encouraged to see how we're making progress on our strategic initiatives and priorities across the different segments of our business. I look at the market overall, it's a very healthy market that we operate in, with great underlying trends for growth that is sustainable for many, many years to come. I see we have significant runway for growth in the business. We captured some of it through cross-selling this quarter.
We have immense wide space to continue to go after and capture as a result. If we look at our key priorities going forward, it's driving organic growth and continue to do that in the pace that we have today and do it at healthy margins. I think we demonstrated this quarter that we have good organic growth, and we have the ability to deliver a better margin profile. We have firepower to do acquisitions. When we think about those, we think about them as being strong in terms of strategic fit and also acquire them at defendable multiples. But just as a reminder, so what is it that we're really looking for here?
Well, first, we're looking for product portfolio expansion opportunities, adding capabilities to our existing Specialty Pharma, Vet Services or MedTech businesses, to expand the portfolio and be a more attractive partner to our customers. We are also looking at opportunities for geographic expansion, either into a new territory that has an attractive marketplace that we don't operate in, or doubling down in geographies that where we already exist, but have higher and better coverage there. We're also looking for new therapy areas, particularly in MedTech and Specialty Pharma, to further expand and branch into new areas there. So when we look at operational improvements, we've acquired over 50 companies since the company was founded, and we have great opportunities here to continue to operationally be much more lean. So we're introducing lean principles in different parts of the business.
We're doing that with a mindset of continuous improvement, and that's gonna be a long-term plan play, and it's gonna be a grind. And then lastly, it's important for us to attract, develop, and retain top talent in this industry. And we're doing that by creating the best place to work and make sure it's something that you are attracted to come and work for Vimian, and we can do great things together. With that, I wanna thank you for joining our call at this segment so far, and I'd like to open up for the Q&A at this point. Thank you very much.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Adela Dashian from Jefferies. Please go ahead.
Good morning. A couple of questions from me. First, if we start on the margin improvement, I mean, this is a good development in the quarter, better than at least I had anticipated, and I appreciate all the color on the driving mechanisms of that. But if you look further ahead, is there any areas in specific that you feel like this is where we could leverage up and drive further upside to current levels? Any divisions in particular, is it gonna be integration efforts? Yeah, any color on what you can do additionally to get it further higher than what it currently is, would be great. Thanks.
Thanks, Adela. Good morning. It's a good question. You know, we've had a good mix and scale and the strategic initiatives starting to take hold, and that's why we're seeing a margin improvement. There's more to do there. I think we actually have more to do across the board. But I don't wanna call out a specific area for us because it's a number of streams that we're just going after. You know, the cross-selling opportunity is great. We have high margins products in our Specialty Pharma business, and we can sell those and leverage those in existing sales channels. That gets a very good scale leverage. The same is true in Veterinary Services. We get more customers in there.
To add the 400 customers, the cost structure associated with adding those 400 is not that big, and we immediately get scale advantages of it. So, you know, those things kinda tie together with driving growth, I think, is how you're gonna see this. There's also a talk, whereas I don't want us to think about margin improvements continuing forever. There's a point where we would wanna invest and over-invest in further growth to accelerate our growth instead of maybe delivering further margin improvements. But we have a little bit more we can do, for sure.
Yeah, that was gonna be my follow-up. I mean, it's a good level currently, but as you continue to grow and then obviously need to service the overall business, and then as you make acquisitions, I mean, acquisitions have historically been some with margin diluted, right, in the past. So do you feel like that's a threat to current levels, to make it sustainable?
Yeah, you know... No, it's a great question, you know. So, we're debating where we think this level is, you know, and we haven't come to a firm conclusion yet. We'll keep improving the margin until we feel like we're making some bad trade-offs. Our priority, and that's why we wanna talk about our priorities, organic growth is our number one priority. That drives a lot of goodness through the whole business. So you have good organic growth, let's invest in that while we're doing it at decent margins. We look back at the acquisitions we've made. Most of the acquisitions we've made have come at a lower margin than when they operate today. Actually, I think, in fact, almost every single one of them.
So when we buy a company today, I would expect them to have lower margins, and then we'll put them into our program, and we'll gradually improve margins in that business, both through scale and through operational improvements.
How long does it typically take until you see the full effect from synergies?
I think it depends a little bit on what you buy. You know, some companies that we have bought have been very well run but maybe didn't have the scale. Then you can actually fairly quickly get the margin improvement when you unlock the cross-selling opportunity. Other businesses have been maybe fairly complicated and complex in its structure, and that takes a little bit longer. If you need to replace ERP systems, you need to, you know, streamline their supply chain, warehouse structure, and all those other things. That's, there's a little bit more heavy lift that takes a little bit longer to get through your P&L.
Okay. And then on the surgical market, is it... I mean, what, what's really driving the weakness here? Is it the macroeconomic conditions that are still challenging, or is there anything else? And the educational efforts and the commercial efforts that you're currently putting into place, to improve at least your ability to capture more share in the market, how long does it typically take for that to really come through, as you're educating, bringing up awareness with that segment?
Yeah. So, you know, in the beginning of the summer, we started to see a decline in softness in the market for surgeries. And so this is for, you know, knees and hips and those, which typically is one of the most expensive treatments you can go and ask a vet to do for you on your companion animal. And, you know, there's probably a little bit of a hesitancy. You know, do I wait, do I, you know, save a little bit more money before I go ahead and do this, or do I choose an alternative treatment or maybe not treat my pet at all? So we think that's the kind of driving dynamics in the clinics. So, you know, from time to time, we've all been operating in markets that show softness. You can respond differently to that scenario.
Our response, in this case, is that we talk to hundreds of customers every week. Every time we speak with them now, we're making sure that they get a larger portion of our product portfolio offered to them very deliberately to expand our share of wallet, if you like. And that's a very dedicated, deliberate kind of intensity from a commercial standpoint. That can take hold very quickly. You know, we have hundreds of those calls every week. We can move the dial relatively quickly. On the education piece, it's a longer play, and we try to attract two different participants there.
We're trying to attract existing surgeons that may not be able to treat all kinds of cases, to teach them to treat more cases, to actually enable them to treat more animals in the clinic, which is good for them and good for us and good for the animal. And then, we also want to attract and continue to unlock the wide space. You know, in med tech, we've talked about before, wide space is a really big area, and we wanna unlock that. And that's just continue to double down on education to bring more surgeons into play here. That takes a little bit longer to... You know, some can go to a couple of trainings, and they're ready to go. Others will go for a full year before they feel comfortable placing their first implant.
It's a little bit different depending on who's there.
Okay. All makes sense. Thanks a lot.
Thanks.
The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.
Good morning, and thank you for taking my questions. I was following up a bit on the MedTech business. Can you elaborate a bit on where you think you will shake out in terms of growth going forward here for the remainder of the year for the MedTech business? You mean, you had a nice bounce back in Q2. You're still down 3% year to date. Seems like surgical volumes in the U.S. are trending sort of negative, low single digits so far this year. So maybe if you could give any indications of where you think you're gonna shake out in this dynamic. Thank you. I'll start there.
Yeah, thank you, for your question. We think of med tech as a growth business in 2024. The softness in the market that we've talked about is isolated to North America or to U.S., very specifically. Europe and, APAC are, are progressing very well. We're countering it with the things I just mentioned and from a commercial, intensity standpoint, so we're trying to mitigate any potential, backdrop or backlash that can come from the softness.
All right. And follow up on sort of the growth expectations for the year. Do you think you're gonna reach high single-digit organic growth for the group for the full year? Is that sort of a reasonable range for full year?
Oh, I-
Hi. Morning. So if you look at the... And Patrick gave some color on MedTech. If we look for the group for the full year, and as we presented here, we see good momentum in the business looking at the first half. We have very good momentum both in Specialty Pharma, growing in all our therapeutic areas... We also have seen very good momentum in Veterinary Services. MedTech have continued to have a good, good pace in the quarter, even though, as you said, there's some slowdown, in or we see some sort of slowdown in the U.S. market that we are countering, as Patrick said. All in all, with the good momentum that we see in our largest segment, we are confident for a solid full year for 2024.
All right, and on diagnostics side, you know, how long should we expect the sort of single digit EBITDA margin profile? And, can you give us any form of indications or data points on how the Ovacyte launch is progressing?
Yeah. So we're building a new kind of capability in that business to go after companion animals. And, you should think about, the way I look at this and think about, we're investing in that this year, so I expect the margin profile to be about what you see now for the remainder of the year. And as we ramp up, which, you know, it's, it's a ramp stage, I don't anticipate to see a whole lot of kind of groundbreaking revenue this year, but, you know, that's for 2025.
Okay, so limited the top line impact this year.
Yeah.
Clear. Yeah, and finally, just to get a final point in. Should we expect items affecting comparability at similar levels for the remainder of the year? I think, you know, it's been standing out relatively high versus expectations, at least in the market. So maybe just a quick note on that one would be helpful as a final question.
Yeah, absolutely. One first comment to that, as you say, it's been a little bit higher than consensus. One note on that, there's a number of analysts that sort of doesn't model non-recurring items. So I would say from that perspective, you could say it stands out a little bit because it's not modeled in. Having that said, as we highlighted, it's been slightly higher in the quarter. That's primarily driven by continued high legal fees in the U.S. litigation case, and that's a consequence of the second quarter being a very intense phase in the process. As you know, we also settled with two of the parties in the second quarter. So, the costs for that legal case have been relatively high in the quarter.
We do expect the non-recurring items to go down and be a little bit lower for H2 than what we've seen in in H1. One, as a consequence of the legal process, sort of going into a different phase. And there's a few other elements where we expect the non-recurring items to be slightly lower in the second quarter or, sorry, second half of the year than first half of the year.
Perfect. Thank you for taking my questions.
The next question comes from Kavya from UBS. Please go ahead.
Good morning. Thank you for taking my questions. I had two, please. The first one was around Specialty Pharma. So obviously, there's a great quarter. Are there any stocking effects that we should be aware of here? And also, mix-wise, do you continue to expect a mix benefit in this division to driving continued margin expansion throughout the year, specifically for Specialty Pharma? And is this really coming from sort of Bova or dermatology or the allergy segment, I suppose, because nutrition is quite a bit lower in terms of its margin profile, I understand. And my second question was around the MedTech division. Just in terms of scrapping or downsizing the Annual Order Program rather, so that used to give you visibility, that's now gone away.
I was just wondering as to whether forecasting internally for this MedTech business is becoming easier or more difficult, and what's the kind of ongoing revenue visibility you get for MedTech versus revenue progression in your other businesses? Thank you.
Morning, and great. And let me start with the margin question, and Patrik can give you some more color on sort of the MedTech outlook and forecastability. Looking at the margin, and as you say, it was a very good quarter from a margin perspective. We delivered higher profitability growth in all our three largest segments than revenue growth. Seeing a margin expansion, as we said, that's a consequence of scale, operational efficiencies and also mix. And especially if we look at Specialty Pharma from mix perspective, we saw solid growth from all therapeutic areas in Specialty Pharma.
But as you say, there are some effects from mix, as Specialized Nutrition continued to grow at a solid pace in the quarter, but came down from, call it extraordinary growth, especially during 2023, where we saw growth in most of the quarters in the 30%-40% range. And just as you pointed out, they have slightly lower margins than the other therapeutic areas within Specialty Pharma, so that had a mix impact on the margins. We also saw, as we highlighted, very strong growth in Specialized Pharmaceuticals being a high margin area. So yes, there are some mix positive mix effects in Specialty Pharma, but the majority of the margin improvement in Specialty Pharma is a consequence of, you could say, internal margin improvement because of the internalization and integration and cross-selling across our entities.
... Thank you.
Then maybe, I can cover your question around the, Annual Order Program and MedTech. So, the reduction of that AOP program is giving us much better visibility. You can think about it this way, you know, the AOP program was an Annual Order Program, so we had one order point per year with a customer. That has now moved to be either a quarterly or a monthly order point. So we have a tighter connection with the customers and a better visibility. The result of this, which is, I think, your, your second part of your question is, what kind of visibility do we have? We now have very predictable daily run rates we can look at. And, of course, it changes day to day, but if you take an average over a number of days, that is a very stable number now.
And that's thanks to not having, like, very large one-time orders coming in and kind of disturbing a little bit of the pace there. So, that helps us be much more predictable with this. It also allows us to much sooner identify customers that have maybe weakness in their business, and we can then countermeasure that and act more intensely to help them with their business, and also help us deploy further countermeasures to drive growth.
Thank you. And, is that similar visibility to what you get in, specialty pharma and vet services and diagnostics, or is it better in terms of?
It's, we have good visibility across those three segments. Everywhere where we sell directly to customers, which we do in most of these segments, we have very good visibility. Some of our business goes through a distribution channel, and obviously that becomes a little bit more lumpy, and we look at sellout with them instead of our own sales in. But, yeah, feel, feel good about the opportunity we have here to better follow and understand the business on the MedTech side as, as a result of the change in AP.
Sorry, just maybe coming back to your first question, to make sure that we cover all your questions. In terms of stocking effects, we haven't seen any and been made aware of any stocking effects in the quarter. We see a continued good momentum in our business.
Sure. Thank you very much.
The next question comes from Patrik Ling from DNB Markets. Please go ahead.
Great, thank you. Just a couple of short questions. First of all, could you remind us a little bit about the earn-outs going forward? I mean, they were, as you had talked about before, they were pretty high this quarter. What should we expect for the coming quarters?
Yeah, sure. I think in, in total, the, the earn-outs were, yeah, quite higher in the quarter due to a number of, some of the acquisitions when an earn-out component is based on the, on the full financial year for 2024. And as a consequence, when, when sort of everything is ironed out for, for previous year, and we see where we stand, earn-outs are paid, and the majority of the earn-out paid in the quarter is relating to specialized nutrition in, in the U.S. and the acquisition of Global ONE. If we look in, in total on the contingent considerations that we have, we currently have around EUR 44 million. If we compare to the same period last year, that's downward with EUR 10 million compared to last year.
Of this, the contingent considerations in total EUR 44, it's roughly, not completely, but roughly you could say half is current and half is non-current on the contingent considerations that we have left.
Okay, great. Thank you. And then I also had a question on Veterinary Services. I mean, you continue to recruit new members at a good pace there. Are you considering moving into new markets in that area, or should we expect you to continue to build volume in the markets where you are active as of now?
Yeah, I think, you know, we continue, we see great opportunities to continue to gain membership in most of the markets that we operate in today, so there is a lot of growth opportunity left there. But we are also looking at, you know, what is the next geography that we should consider moving into? And that's a process that the team in Vet Services have been going on for a long period of time. You know, we've recently moved into Brazil and Belgium and other places, so that is an ongoing consideration as well. So you should expect to see growth from existing markets, and, you know, one day we'll announce that we're have opened a new market as well.
Okay, great. Thank you. That's all for me.
Thanks.
The next question comes from Sten Gustafsson from ABG Sundal Collier. Please go ahead.
Good morning, two questions, or one question and one maybe clarification, but if we start off with the MedTech division, you talk about a slowdown in the U.S.
... could you give us a little bit more detail about the reasons about this slowdown, if it's what it's coming from, and yeah, more background on the reason for the slowdown, basically, in the U.S. would be helpful.
Yeah. So, I'm happy to take that. So, you know, for quite some time, the number of clinic visits has been trending towards, say, low single digit. And, we have not seen that impact the surgical portion of the business at all. The clinic revenue has, at the same time, been trending positive low single digit, if you look at North American U.S.-based clinics. But in the beginning of the summer, we started to see a decline of that trend when it comes to high-end surgical procedures. And remember, our MedTech business is doing hips and knees. And if you look at the services a veterinarian supply to its customers, those are both on the top 10 most expensive procedures you can do.
So, with the, you know, disposable income economy and maybe some uncertainty, people are getting a little bit more hesitant to do big-ticket items. And as a reminder as well, the insurance situation, in the U.S. market is that, you know, probably 3%-4% of dogs are insured in, in America, which is a really, really low insurance rate, so you don't get any help there. So this is all out-of-pocket costs. So we think that's the kind of core fundamental driver. That can change, in the future when people get a better maybe view of their own personal economy or changes their, their, their point of view of the future and the outlook. So, we're monitoring this incredibly closely.
Back to Adela's question, you know, we track our daily sales, and we can see that, and we talk to customers and get a kind of color on this all the time.
Thank you very much. That's very clear and interesting to hear about the low insurance level in the U.S. How is that different from Europe? Maybe there's not sort of a broader average, but I guess it differs massively between different countries, but
Yeah, it's very different, you know. So I think Sweden, for instance, is one of the highest, if not the highest, insurance rate, and the estimate is that about 2/3 of animals in Sweden is insured. I think the U.K. is very high, too. It's about 50/50 or so. So if you think about that and compare it with something where it's like low single-digit insurance rates, that's a significant different market dynamic from an insurance and coverage standpoint.
Yeah. No, so the U.S. market then is very much dependent on the consumer confidence in their own economy, so to speak.
I think they get tainted because, you know, because I think that impacts the consumer behavior to a much-
Yeah
... larger degree, 'cause you get no help from anybody. You have to write that check for the full amount of the treatment.
Yeah, that makes sense. Coming back to the Diagnostics business and maybe a clarification, but did you say that you expected the rollout to have an impact on revenue in 2025, but not in 2024? Was that-
Yeah, you know, it was in conjunction with the investment. We're continuing investing in that. We're gonna invest at the, at similar levels to what you have seen in the second quarter. We'll do that for the remainder of the year. We will have a ramp of revenue and, you know, this, that business grows every month. But it's, you know, it started from zero, so, you know-
Yeah
... You know, before it becomes like a meaningful amount that maybe is worth for us to talk about in calls, I don't think that's gonna happen until sometime in 2025.
So unless there are any major outbreaks happening in the remainder of the year, we should expect a bit slow growth or negative growth in Diagnostics in the second half as well?
We continue to see, I think the, livestock is still a challenge, sort of a challenging market, especially, we've had some, call it negative geographic mix impact, given we're, we're stronger. We have a stronger base in Europe. There's other regions that have seen a sort of less challenging market than Europe. So we have some negative mix impact from, in that as well. But livestock is a challenging market. We haven't seen that market has turned a corner yet and expecting sort of a big boost from a market uptake. Having that said, we do see opportunities to continue to grow. We think we have a good, sort of portfolio of products.
Besides Ovacyte, we also launched a new solution within livestock diagnostics, a product called the IndiMag 2, that we started to roll out. And so we see positive things happening in our diagnostics business. Having that said, we don't foresee, we foresee sort of, hopefully some growth in the rest of the year, but, in low numbers, low single digits for the remainder of the year in diagnostics. From a margin perspective, as Patrik said, we are continuing to invest in our companion animal diagnostic solution, and that will continue to have a weight on margins while we expect to continue to have same additive margins for the rest of the year in diagnostics.
Thank you. Very clear. I'll jump back to the queue. Thank you.
Thanks.
The next question comes from Arvid Necander from Carnegie. Please go ahead.
Good morning, and thanks for taking my questions. A couple, if I may. So as previously mentioned, I guess, U.S. industry data remains on the softer side, with clinic visits and revenue growth continuing to trend slightly down for clinics. With consensus expecting an uptick to slightly below 11% organic growth for 2025, is it fair to assume that we need to see a shift in the clinic activity fairly soon in order to realistically be able to meet this? I'll start there. Thanks.
Yes. So if we... And as I said, so I, I think we can all see the same, data. If we look at it from that perspective, and that if we take the clinic visit data, that's been something where we've seen, sort of a softer trend in the U.S. for quite some time. So it's not something that just on the clinic visit side, that's appeared in the last, last quarter, last few months. So that's actually a trend that we've seen. Now, specifically, we've seen, maybe some more softness in the surgical data and what we see from a, from med tech perspective in U.S. But coming back to we've seen clinic visits being softer for some time, but we've continued to drive a good growth in the U.S. in the last couple of quarters and last couple of years.
So we are positive about the development we can achieve in the U.S., also going forward, even though there may be some softness in the market data and market statistics.
Okay, fair enough. Thanks. And secondly, on the increased marketing activities in MedTech, should we expect them to remain at similar levels, or should we expect further ramp up, on the back of the weak surgical activity?
Sorry, Arvid, you'll have to repeat the beginning of the question there. I didn't quite catch that.
Okay. You mentioned sort of increased marketing activities as a key driver for growth in med tech. So should we expect investments to remain at similar levels going forward, or could there be further ramp up?
You know, we will invest a little bit more, but it's not something that will impact our the earnings profile or anything like that. You know, there's a way to be much more efficient as well, deploying a lot more seats into the trainings that we're currently doing. We are also expanding the number of times and the number of trainings we're putting out. We have a very cost-efficient model for this, and, you know, part of this, participants also pay for it. So therefore, it doesn't have a big earnings impact for us when we turn this up. I don't think you need to kinda think about it that way. It's, this is, call it, cost neutral activities that will help drive and intensify our actions in the market.
Okay, great. Thanks for taking my question.
The next question comes from Marco Pires-Cox from Barclays. Please go ahead.
Hi there. Thank you for taking my question. I just have one, please, just to follow up on the U.S. MedTech business. Could you remind us of the size of this business versus your activities in Europe and other areas of the world? And then also, as a follow-up to that, are there any differences we should be aware of on the margin profile here, again, versus Europe and APAC? And then finally, in a scenario where, you know, interest rates start to come down in the U.S. significantly, do you have a sense of the timeline for this to start flowing through into clinic activity and softness in the MedTech business? Thank you.
Okay, good morning. If we start with your first question in terms of the size and relevance of our North America business in relation to the rest of the world in med tech. So for med tech, and if we look at the second quarter, of the total sales EUR 16.5 million derived from North America of the total EUR 28 million. So if we look from a sort of last twelve months perspective, roughly 70% of our business derives from North America. We've seen continued good growth in APAC and Europe, so I think slowly but steadily we're gaining market share outside of North America as well. And so that mix is shifting slightly.
From a margin perspective, I would say there's similar margin profiles in our different regions. So there's not a big impact from a margin mix perspective, but U.S. or North America is still the majority of our business in that area. And sorry, your second question?
Thanks. So yeah, my second question was just around the scenario where, you know, we start seeing an improvement environment in the U.S., rates coming down. Do you have a sense on how long this will take to then flow through into the med tech business there and, and start to see a recovery in the, in the US softness?
Thanks, Marco. That's a great question. It's not that easy to answer it, but, I think what the dynamic here is that, I think the general consumer is very keen to take good care of the health of their companion animals. We've seen that in many studies, and I also believe that when that consumer feels like the future is brighter and when they have a little bit more disposable income at hand, which would be the consequence of, a rate decrease, et cetera, I think this can fairly quickly change the trajectory in the clinics, too. And the willingness to pay for more expensive treatment out of pocket, I think can really take a turn as well.
Great. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay. Thank, thank you so much for joining us on the conference call today. We delivered a strong quarter. We appreciate the questions and the chance to talk a little bit about Vimian. We're looking forward to see you again in October. Take care, and have a wonderful day.