Thank you very much, and welcome to Vitrolife Interim Report January-September 2021. The presenters today is Mikael Engblom, CFO of the company, and myself, Thomas Axelsson. Please go to page number 2, and I will do a quick summary about the quarter. It is a very good quarter with successful activities, and in numbers, it is sales of SEK 406 million. That is growth of 27%. The increase in local currency is 30%. If we are looking upon the complete organization then with the operation and EBITDA, we had corresponding to a margin of 40%, adjusted to 42%. Overall, a good quarter from a financial and operational side.
Strategically, also from operation side, a very good period, where we have agreed to acquire 100% of the Igenomix business. At the end of the period, it's also important to then mention, together with the Igenomix acquisition, that EGM has approved a non-cash issue of SEK 6.4 billion. Also that a new CFO will be appointed from January 1. His name is Patrik Tolf. Please go to page 3, and I will try to give you a better feeling for the IVF market overall, and of course, also about how we have done in this market. First, I would like to say that it is a good growth. It is 30% then in the local currency.
To be humble, you know, the growth this year is positively impacted by the fact that the third quarter previous year was negatively impacted by the pandemic. By saying that, I would try to do, you know, a coordinated, let's say, explanation about the business itself and also about the cycle numbers and where we are on that. Let's start on our region segment, then region Japan/Pacific. Good growth, 17%, and it was SEK 54 million. I don't think that it's been anything specifically within that territory this year. If we compare it then with, as we do here, with last year's quarter, it is 17%. If we are then going into Asia, it was sales of SEK 93 million, a good growth of 26%.
In EMEA, it is a growth of 35%, and it is actually in real numbers SEK 181 million. Finally, Americas, a growth of 33%, and it was SEK 78 million. Okay. The organization during this year has been working under a condition where they've not been able to go to exhibitions. They've not been able to travel normally, and we have not been able to do installations and those in a, let's say, normal way. We have not done some of the forward-looking activities, but I would like to say that the virtual thing of working works extremely well. The market contribution with this growth is quite good.
We can see into the market contribution then per segment that, for instance, the largest territory, EMEA, has reached a market contribution of around 50%. Okay, let's put this into perspective on the market. What should we compare with? Should we compare with 2020? Yeah, to some extent. That's what we are doing in this report, because the market was picking up in Q3 last year. Japan/Pacific was the region back then that was least impacted. If I compare with 2019, the growth in Japan/Pacific is around 10-11%, and that is definitely in line with the market. I don't have any clear market growth numbers, but we feel confident that we are doing very well in that region. Coming into the region about Asia.
Asia is the biggest market for us with China, not the biggest market, but the individual geographical region is China. Last year, it was impacted, of course, by COVID. It was impacted a lot by COVID in India and in Thailand and those markets. Some of those markets are large from IVF tourist point of view. For instance, the Chinese is going to those territories. So that we are having a growth of 26% is of course great, but however, we are, I think, well informed that the region has not bounced back to a normal situation. It is mainly those markets that I mentioned, Southeast Asia, partly India, that are behind in cycle numbers compared with 2019. EMEA very good growth. We are growing with 35% in comparison with 2019.
We are growing extremely well. What we see within the EMEA is a good growth within the consumables and also within the time-lapse business. The changes within the market in that territory with some consolidation and also that IVF clinic change are then consolidating the market, and we are able to have discussions with them. It has been quite successful for us. The growth is very good, 35%. Americas and U.S. are definitely back. It is a growth of 33%. It is a situation when we are talking to the customers in the U.S. that it is a big pressure on the clinics from the patients, which is good, and it is a capacity situation.
For instance, we have heard that there are some shortage of trained staff and the outcome of that is that some clinics are starting to consider how they will deal with the standardization and also how they will deal with the workflow. Those two things, you know, the workflow and standardization, can be very good combined with our product offering and also with our technology side with time-lapse. The growth of 33%, if I compare that with numbers of Q3 2019, a normal year, we have been growing with 22%. What am I trying to say? Trying to say that the market is back. There are some territories like the U.S. and some EMEA markets that are doing more cycles than before the pandemic.
There are still some markets that are trying to get back into normal things. The projections going forward regarding COVID is something that we can't do. We see that clinics are trying to keep open, and we also see that public clinics, hospitals that are doing fertility treatment, they are also have a big intention to continue the IVF treatment. Going through then the sales and going into the different divisions, it's a similar thing here. What I would like to say about the operations is, I'm very pleased about the planning. It's difficult to plan in a situation like this, so our supply and planning for keeping up with a high, very high service level has been successful.
Our cost this period for instance keeping a high service level with a difficult planning, if that would be the case and we would not be successful, then we would have a scrap. It is a period of very little scrap. The only thing that really is a challenge is the freight situation, and it is of course impacting the profitability. But it's also another risk, and that is that some of our product, they do need cold chain, and if there's a delay in that side, the products can not then be delivered to the end users. Consumables, we have had growth in every product area. Technology, a great growth, and I would like to say that the growth is 81%.
We should take into consideration that technology can go up and down depending upon our ability to do installations, and those then need to be in line with how the clinics are maybe shutting down or doing some repairs so we can go in and do installation. Really good quarter for the technology. If we compare also with genomics, a good growth in that area. When it is genomics and the biggest market there is for us, U.S., and then of course we have the EMEA market, that's more following the clinics that are on the front side, on this side and are doing PGT-A.
Seeing this information regarding the market itself, you know, sales, seeing about the different divisions, our thoughts and expectations are that the market has come back, and it is going to continue in that route, at least what we can see going forward. Strategically, we have talked about that, we are driving towards a situation of serving the clinics better. We are talking about, you know, how can we do that together with the consolidation, together with the clinic owners, together with also the ones that are running the daily life. In that situation, we have got through our business normally, through our business also by selling PGT-A kits, as in a situation where we can see that customers are also asking for services within the genetics.
During this period, we have come to an agreement to acquire 100% of Igenomix. As I said, you know, the reason is to better serve clinics, professionals and patients. By joining these two strong platforms, we are aiming for what we will do to create the leader in reproductive health technology. The situation also that business that is changing due to technology and also due to many other things like reimbursement and other things, it is important to keep up with R&D and product development. We see a good integration opportunity with Igenomix and have better outcome from the research with Vitrolife in combination with the great research from Igenomix. Scalability towards customers and have one view of the customers is the key integration thing for us.
You know, that was also the reason why we have made an agreement to acquire Igenomix. It is around the overview of the customers to look into the situation that we have had as an overall goal, and that is to reduce the time to pregnancy, you know, to have a healthy outcome of this kind of treatment. Similar to the situation and what has been the culture and values within Igenomix. That's the reason why I believe that these two entities can do a good job together. By that, please change to page 6. This is just an example. This is about the embryo evaluation and the tools that we have had for a long time, and we are market leader, and we are running the algorithm development regarding embryo evaluation from morphology.
We have also stepped into only a situation where we are selling kits for the sequencing of the chromosome PGT-A. Combining the situation on what kind of information is it that you need to have a successful outcome. You know, the situation is that you need a good embryo. You will also need a situation where the embryo will be accepted by the endometrium. It is about not only a good embryo, it is also about window of implantation. Combining then the test that Igenomix has, like, non-invasive to PGT-A, to PGT-M, and also within the testing for ERA and other testing, we believe that we will have an opportunity to expand into the high-growth IVF and also diagnostic testing sector. I would like to say that Igenomix are not only, you know, IVF-oriented.
They cover a wide spectrum of the genetic diagnostics in reproduction, of course, but also within personalized medicine. Overall, good sales, good profitability, a good return of the market within the IVF, and also a strategic acquisition that we hope that we will close within a time period going forward. Mikael, please go through the kind of structure and terms then, and change to page number 7.
Thank you. Yes. As communicated earlier, the acquisition is 100% of the shares in Igenomix, and the total consideration is EUR 1.25 billion or equivalent to approximately SEK 12.7 billion on a cash and debt-free basis. These shares are then purchased from the sellers, where the major seller is EQT. We plan to finance this through a mix of share issue in kind directed to the sellers, a directed share issue to institutional investors, and the current cash balances in the company, together with newly committed debt facilities. The directed share issue was carried out in July, and the amount was approximately SEK 3.6 billion.
In October, an extra general meeting of shareholders decided to approve the proposal to issue the shares in kind to the sellers of approximately SEK 6.4 billion. This issue in kind will then be carried out in connection with the closing of the transaction. The closing is subject to customary closing conditions and regulatory approvals. We estimate that closing will happen around year-end. We have done all regulatory filings that we have identified, and we have received some approvals, and we're waiting on some approvals. We do not see any issues in obtaining approvals from where we stand today.
The combined group is expected to have a pro forma sales as of last 12 months, as of June 2021 of approximately SEK 2.5 billion and to have an EBITDA of SEK 864 million. That corresponds to an EBITDA margin of 35% for the combined group. With that, please change to number 8 for some financials regarding the third quarter. The gross margin was 65%, up compared to 62% in the same quarter last year. The main explanation is economies of scale following increased sales. The EBITDA margin was 40%, compared to 42% the year before. But the EBITDA includes, as Thomas mentioned, about SEK 8 million of acquisition-related costs related to the Igenomix acquisition.
If we would exclude those costs of one-time nature, the underlying margin was 42%. The net debt in relation to EBITDA was minus 7.6, and the reason for this high net cash position is, of course, the directed share issue that we carried out in the summer, and that we are keeping the money in the bank waiting for paying for the purchase. When it comes to transaction costs, provided that the transaction closes in fourth quarter, we expect another about SEK 85 million of transaction-related one-time costs to be accounted for in the fourth quarter as a cost. And that is, of course, an estimate based on the total cost. With that, change to page number 9, please, for the outlook.
The outlook is essentially unchanged. We expect long-term market growth of 5%-10%. As before, we expect the same drivers for that, the demographics, the social acceptance for IVF to grow in middle class and that parents-to-be wait longer with having children and then hence in need for more fertility treatments. We will focus on sales expansion and product broadening the product offering. As before, it will be both organic and through own development. We have development initiatives in all our divisions as well as acquisition with an example with the Igenomix as an example that we mentioned. With that, operator, we are ready to take questions.
Please, operator, we are ready to take questions.
Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star one on your telephone. The first question is from the line Ulrik Trattner from Carnegie. Please go ahead.
Great. Thank you very much. This is Ulrik Trattner from Carnegie. Good morning, Thomas and Mikael, and congratulations on a stellar quarter. A few questions on my end. First one relating to the recovery in IVF cycles in Europe. By your approximation, how are we currently in Europe, if we were to look at Europe in total, and specifically if we can do a deep dive in important markets such as Spain and Turkey, how does it look like?
Okay. Hi, Ulrik, it's Thomas then. Specifically on different markets, you know, it can look quite different. We know that Spain is a market that has IVF tourism, of course, and that is impacting the Spanish market. If it is a market in Europe that has not recovered the normal way, it is Spain. You're also mentioning a really troubled area as Turkey. Turkey due to, you know, well, the exchange rate, and that was even, you know, a disaster last week, Turkey customers. Those two countries are still below normal cycle numbers in our view. If we are then looking into other, you know, territories, we can see, you know, U.K. or France or Italy or, you know, Poland or even Russia. They have come back quite well.
some of them, you know, it's also mentioned in earlier quarter reports, the private ones are very busy. Overall, I do believe that the EMEA market itself, compared to 2019 in cycle numbers are maybe a little bit more than flat, but not more than that. Then, yeah. Okay. That was EMEA.
Great. Thank you very much. Just continuing on the recovery trend or perhaps even the pent-up demand, looking at Americas or perhaps more specifically the U.S., are we to consider that the U.S. market is still above the average growth trend in number of cycles, as it's been for the last three, four quarters?
Yes. In discussions with customers, what I think is this is a key thing for going forward. Is this something that is COVID or related? They have an ability to work from home, some of them. They could go down and have some consultants discussions together with the clinics, or what has happened. We don't really know. The clinics see a large flow of customers, patients that are asking for treatments or asking for what they could do. Also, when I'm looking into other fields where we can see if IVF or, let's say the reproduction business is growing, it's difficult to get supply as an example from the sperm banks. It's not only the IVF clinics, it is overall an interest in the IVF field.
Is that partly also due to this coming more mandated states? Is it partly due to that we have more companies that are introducing some kind of benefit for the employees to do IVF as part of their package? That's difficult to say. The only thing we see is that the market is growing. Customers—some customers are having a challenge regarding the inflow of patients. So for sure, U.S. is the market that the last year has been bouncing back quickest and are also overachieving in number of cycles.
Great. Thank you very much. On the technology segment, really strong development in the quarter. Has there been any large order or is this to be considered widespread demand? How much can you say to be related to the new iDAScore in terms of interest for time-lapse, or is that hard to say at this moment?
First, what's good with this quarter is of course, you know, the growth with 81%. You know, that's compared to last year. What's especially good, you know, if we look into the operations, is that this period we have not had any huge single order, so it is spread between many, many customers, and especially then within the EMEA side. Is that part of iDAScore? I would like to say that yes, partly, but not only. There is an acceptance for time-lapse and more and more clinics are seeing the advantages of it, and also the beauty of having a quick selection tool that is not expensive for the end user. Some of it is due to iDAScore.
Not that they are using it is that they are challenged and very positive to the situation that our current AI support guided animations has helped those customers. Those customers that see that has helped them, they are of course interested in the next generation of it. Sales-wise, no, we don't see any direct consequence of it. Indirectly, yes, I do believe that part of this growth is due to that they would like to be on board and have the opportunity to have better clinical outcome, but especially more efficiency within the workflow at the IVF laboratory.
Great. Two more questions on my end. Gross margin-wise, good performance in this quarter. Are we seeing similar effects on freight costs in Q3 as we did in Q2? And should we interpret the improvement sequentially in gross margins on volume? Or are you seeing the freight costs slowing off or sort of the accelerated freight costs due to COVID slowing off?
Well, the freight costs are still quite high compared to before the pandemic. The consequence of the improved margin in the third quarter is more to do with the high sales.
Is it hard to predict when these sort of freight costs are to go down, or that's more dependent on the pandemic and not really something that you can foresee?
Yeah. I mean, that's, it's difficult to predict that. I think the whole world is seeing these freight costs in all industries at the moment. Your guess is as good as ours.
Okay. That's great, Mikael. Thank you. Last question is perhaps a bigger picture question, and it's on the Igenomix acquisition. Just how much customer overlap do you currently have? Essentially, how many more clinics or customers do you serve compared to Igenomix, given that would be the major driver of cross-selling synergies, I would assume.
Yes. You know that we are selling to most customers, and you know, it is not yet closing, so we are not able to look into their numbers that way. By doing a good guess from what we know about the market and we have full control, you know, at least of our own situation, is that I can generalize and say like this, that Vitrolife's biggest customers are also large customers. It is clinic chains, it is customers that has more than at least 500 cycles. In that situation, you know that if they are quite big, they have their own IVF laboratories. The situation that we are having an ambition to help all clinics to get more efficiency and also to be able to do genetic testing.
Where genetic testing that is currently sold from us, you know, it's only the kits. They are sold to larger clinics. They're also sold to some genetic laboratories. Igenomix, they have a mix there, but I would. A good guess is that their customers are generally smaller than our customers. So the service that they do for smaller customers fit well into a situation with Vitrolife's that the services is a larger part of their external cost. So by combining an offer and being able to go in and support those mid-size to smaller customers, that's where I see that the. That's the customer segment where we would have the best integration opportunities to have a combined offering there. How many are they? Are they 1,500? Are they 2,000?
Are they 800? I can't really tell you.
Okay. That's great. Thank you, Thomas. Just a follow-up on that. Are you predicting a general trend where more is done outside of their own IVF labs, given that do they have the capability and know-how to run these tests to the same extent and quality-wise as Igenomix in-house? Or should we expect more of these services to be moved to decentralized service solutions such as Igenomix?
I think I would like to answer this. You will see more of all of it. You will see more of that, clinic change or in territories where they are regulatory-wise being allowed to do PGT-A, that those larger clinics will then set up their own laboratory. For instance, if it's going to be regulatory more accepted in Japan, the likelihood that they will buy from laboratories or let's say set up their own laboratories, then I would say that it's probably in Japan are more likelihood that they will go for their own laboratory since the clinics are so big and they would like to control the information. However, you know, when they're setting up that, they are only covering part of the Igenomix portfolio.
It is a little bit, let's say, I wouldn't say dangerous, but we have to consider that when you're setting up your own laboratory, it is often for doing PGT-A, but it's so much more that the customers are asking for. They could ask for PGT-M. They could be in a situation where they would like to have ERA testing or even other tests. In those cases, they will have their own laboratory, but also outsource those tests that they can't do themselves. There is a mix. There is a gray zone between those. Finally, why do I believe there's going to be more growth within the existing laboratories? Let's say that the reason is that PGT-A is growing and there is an unmet demand in many, many territories.
You know, we are sitting in just, you know, Sweden right now and, you know, that's not allowed here. If it would be allowed here, then it would at least, we would sell a little bit more in this market. We have customers or not customers, we have patients that are traveling from Sweden to other markets just to do this. It is a situation, decentralized laboratories, yes, centralized laboratories, yes, and also growth within the market, and fourthly, the width of the portfolio.
Great. Yeah, just one last question following up on that. Are you seeing any territories or markets where we are to expect some more positive view on accepting PGT-A in the near term?
Yes, there are. I mean, it is overall a change in the regulatory side. The second biggest market in number of cycles is Japan. There has a discussion been going on and you know, together with many other things that is happening within the IVF market in Japan, the situation regarding PGT-A and other testing are definitely on the table and they're already approved for a certain amount of clinics to actually do PGT-A and also to have outside laboratories. It's still, let's say, at the beginning of the usage.
Great. Thank you very much. That was all questions on my end. Once again, congratulations on a good quarter and, Mikael, good luck into the future.
Thank you, Ulrik.
Thank you for your question. The next question from Björn Olander from Murgata. Please go ahead. Your line is open.
Yes, I suppose that was Björn Olander from Murgata Equity Research. Thank you for taking my questions. Of course, many of them were already asked by Ulrik Trattner, but I'll circle back to some of them. Some markets have not recovered yet, but those who have, do we know to what extent that has been driven by pent-up demand from couples who haven't been able to receive treatment? Or how much is just a sort of normal market growth or dynamic?
No, that's something we don't have numbers on. I think no one will have that kind of number. A pent-up demand, you know, when the clinics are opening up, they've been working to get rid of that pent-up demand of course then. It's also a situation where it's important that we also take into consideration it is a timing situation for the couples or the individuals that want to do this kind of treatment. There are also signs from clinics when we are discussing with them, when I'm discussing with them that couples has dropped out. I mean, they feel it's taking too long time. They feel that they have decided then to not continue this race.
There is a pent-up demand, yes, but there is also a situation that it is also an increasing dropout rate. Those combined still is that it's a bigger interest than the dropout.
Okay. Interesting and in a way, quite tragic. I would also like to circle back to the challenges with logistics and transportation and so on. In the second quarter, you mentioned, you specified the SEK 3 million impact on the COGS line, impacting around 1 percentage point on the gross margin. Is it a similar level now, or why don't you specify that? Would you expect that to be sort of the new normal with higher logistics and so on?
Yeah. Well, I would say that it's probably, I mean, it is in that same region as last year. We didn't specify it specifically in this report, but it's in the same region as in the second quarter. Sorry, not last year.
Okay. That makes sense. I mean, what we hear from all the companies. Is that also? I mean, I noticed the inventory level are coming up quarter by quarter. Is that due to? I mean, are you building inventory for sort of raw materials or finished goods to sort of ensure that you can deliver? Or is this just a normal impact from higher sales levels?
I would say it's a little bit of both. We increase sales, and now we're increasing our inventory levels. We have also, you know, for those raw materials where we see a risk of supply, we have tried to build the stock. It's both.
Okay. Finally on Igenomix, when it closes, hopefully before the year-end, what kind of information will you provide then? I mean, of course, the market will look for, I mean, pro forma figures, and I suppose the nine-month figure is available at that point. What will you provide when you close that, or do we have to wait for the fourth quarter to arrive?
Yeah. I think we'll have to come back with exactly what kind of financials we will present. I mean, there are, you know, guidance in reporting when you do an acquisition. We will of course report accordingly. We will look into that a little bit more in detail and come back on that.
Yeah. Of course, the stock market always wants to have historical figures if possible and preferably on quarterly levels. We can see also the sort of seasonal patterns and so on. That's yeah that's up to you, of course. Yeah, that's all from me. Thank you.
Thank you.
Thank you for your question. The next question is from Patrik Ling from DNB Markets. Please go ahead.
Thank you. I actually have a few follow-up questions as well. First one to Mikael. I mean, you mentioned approximately SEK 85 million in one-off costs in Q4. Is that all we should expect, or should we expect that there will be some one-off cost when you integrate Igenomix next year?
Yeah. I mean, this is the transaction-related costs that I'm mentioning. Of course, integration cost. I mean, our plans is to continue to operate Igenomix in the same successful way as has been in the past. We don't foresee any, you know, huge integration costs. Of course there might be some integration costs, but that is something we'll have to come back on in that case.
Okay, great. Could I also ask, I mean, about transportation cost? I mean, I seem to remember that you said once or a couple of times before that freight costs has more or less a neutral impact on your EBIT line, since you also, you know, charge clients for freight revenue and stuff like that. It's about the SEK 3 million impact on COGS. Is that total net effect, or is that sort of just related to your transportation internally in the company?
Exactly. The cost for sending our goods out to customers, that's being recorded as a marketing and sales expense in our P&L. We invoice that cost to our customers. That means that that is kind of cost neutral or EBITDA neutral. However, we do have costs for bringing home raw materials, and that's being recorded in the cost of goods. We also have costs for transportation between our factories of raw materials and finished goods. That is also being recorded as cost of goods. Those costs are not being, you know, invoiced to customers.
They impact the cost of goods, and that was about SEK 3 million in second quarter, and something like that in the third quarter as well.
Okay, great. Could you also ask? I mean, I noticed that the tax rate in Q3 was slightly higher than what we've seen before. Was there any specific issues in the third quarter, or is this a one-off, or should we expect something that Q3 is the new normal?
No. It was some one-off items in the third quarter related to the acquisition of Igenomix. Some costs were not deductible, and it was also related to the Igenomix acquisition that we did a couple of years ago. Those were kind of one-off effects. We should expect effective tax rates to come back to previous levels if we exclude for these kind of one-off items.
Okay, great. I know that we talked quite a lot over the last year about these markets in Asia and in Europe, where you have a lot of IVF tourism. Do you think that is a phenomenon that will come back to old levels, or do you think that patients rather do this at home because, you know, people are afraid of traveling, and traveling, you know, might be at a considerably lower level going forward?
Difficult question. IVF tourists, those customers that are, let's say, and it isn't so big, you know, but those customers are, number one, they can afford it. Number two, they have decided to get better treatment than what they can get within their own, let's say, territory, their own country, or within their own town. They are in a situation where they are asking for treatment that is not allowed within a country. I do believe that IVF tourists will continue. I could also do my own conclusion, and that's maybe even higher because the awareness and the openness regarding what you can do within the IVF field.
For instance, if you have bad sperm quality and you are within one country, I don't wanna say what countries, there are a lot, you can't buy donor sperm. Then to have the kind of treatment, if you have a situation where everything is positive on the female situation, they go to another country, and that's IVF tourism. There are underlying situations that will be drivers and also the continuous business within the IVF.
Okay. Got it. Thank you very much, guys.
Thank you.
That's all for me.
Thank you for your question. The next question from Jacob Muilinki from ABG Sundal. Please go ahead. Your line is open.
Hi, thanks for taking my questions. Just first on sort of the market comeback. I believe you sort of stated the same wording that the markets is at the same level as pre-pandemic at the Q2 report. I was just wondering if you've seen sort of any delta now since the Q2 report, if there's any markets that's sort of materially improving since last quarter.
The consumable business, yes, it goes well. It is a similar situation there. It is the technology that I would like to maybe emphasize that we can see that, the willingness to invest. First coming out of the pandemic, customers was having an issue regarding their own, balance sheet, and especially the cash. Growing then, going back to normal cycles, predicting the future, then, time-lapse is of course technology are picking up the interest quicker, let's say that, from a low level, since consumables has had a very stable level with the growth of cycles and with our ability to take new customers.
Okay. You mentioned sort of a capacity shortage in the U.S. market. Should we think of that as sort of translating into higher growth in the technology segment near term?
In the near term or not, that's a situation what the customers are dealing with. If there are different ways of solving it. You know, one way is, of course, to work harder. Another way is to work with the educational program so they can get more trained staff. An easy way of doing it is to go into changing the workflow. From our side, yes, we see a situation in U.S. where regarding time-lapse and morphology, they value time-lapse differently than what they do in Europe and in Asia. In Europe and Asia, it is regarding the clinical outcome and the easiness of doing morphology. In U.S., it is partly those, but also that it makes a very efficient workflow.
Okay. My last question is on Igenomix. Just if you can give an update if they're still doing sort of material COVID-19 testing and if you suspect that that will continue into next year.
You know, since we announced the deal, you know, we are in a silent period. It is a terrible situation for us, you know, that we wanna deal and get into this and work together with them. Due to all regulations, we are not getting that kind of information. You know that they had a good COVID business. We have not calculated on the COVID business as part of our long-term business. It's good of them to have had that kind of skills to use the opportunity. Let's say our calculations and what we will do is not to focus on COVID-related testing.
Okay. Thank you very much. That was all for me.
Thank you.
Thank you for your question. We'll have the next question from Johan Unnérus from Redeye. Please go ahead.
I had a bad line there temporarily. I think it's been enough questions, but one question perhaps we could take anyway, and that's the huge improvement in Europe, not least in terms of earnings margins. It's a huge improvement. Could you expand a bit on that?
Yes. One is of course the scalability within the sales organization where it has been difficult to maybe keep up with the demand from sales to recruit new people and have a better market presence. We are behind a little bit there and are recruiting more and more people. That's let's say an efficiency due to the COVID about the recruitment and training of them. The second thing is of course the scale, the scalability, and especially around if you are selling more of products that has a high gross margin and consumables, and part of the time-lapse is having a very, very great gross margin. Especially consumables are higher than what it is within the normal business, let's say the total business.
Since we have had good growth in those two areas, that's an effect of selling more products with the right profitability mix and unfortunately not from my side good, but maybe from the sales force, they would like to have more people on the street.
Interesting. Perhaps also expand a bit on the digital business support that involves or both your own executional business and I believe some support in your solutions and services provided. Isn't that the case?
Yes. That has been. I'm sometimes saying that I like what the COVID has done towards vitalizing and changing the structure. All of that was done before on site by people. Currently, you know, we have built up the what we are calling Vitrolife Academy or those kind of training programs and also pre-training programs that are direct and interactive between the audience or the clinic or the person and our staff. Going forward, that kind of training will be done more virtually than before. Yes, there are maybe some of those concerns, but we have never had so many sessions than what we currently have in trainings about. I wouldn't say simple things, but things that are within the daily work for an IVF lab. It works extremely well.
Excellent. We're looking forward to 2022.