Earnings Call: H1 2021

Aug 17, 2021

Good morning, ladies and gentlemen, and welcome to this video webcast on the Medalltis 2021 First Half Year Results. We will use the presentation slide deck, which was published this morning on our website together with the press release and our half year report. In particular, I would like to draw your attention to the disclaimer on Page number 2, which also applies to the forward looking statements during this webcast. On the following slide, you can see today's agenda, which will then be followed by an answer and question session. Today, I would like to welcome our new Chief Financial Officer, Dirk Keesden, who has started at Medartis in his role at the beginning of March of this year. I'm also joined by Fabian Hiltbrand, our new Head of Corporate Communications. Let's go on the half year highlights. I'm very pleased to report that The acceleration of our growth momentum has continued into the first half of twenty twenty one. We have achieved a growth in revenue of CHF73.6 million, which is a revenue growth of 29.2% in constant exchange rates versus prior year and 20.6% versus 2019. I'm also very pleased to see that all the regions and all the key markets have contributed strongly to the strong growth with the U. S. Market leading at 46% versus prior year and 31% versus 2019. The strong growth in top line has also delivered on a record in EBITDA of CHF14 1,000,000, which in addition to efficiency gains, we report an EBITDA margin of 19.2%. The headcount has slightly increased to 649, which is an increase of 5% versus prior year. We have mainly added new jobs new employees in the area of sales, R and D and quality and regulatory to comply with the MDR requirements. We've been very pleased with the strong growth in all the regions, in all the markets across all the segments, especially leading in the key markets, the U. S. At 46%, where we have seen the investments that we have started in the second half of past year are paying off now not only in the U. S. Market but also in the other key markets. During the first half year, we have seen also an easing of the pandemic restrictions, but we still notice some uncertainties and the caseload is still not at 100%. The uncertainty, especially in relation to the delta variant, remains also during the second half of this year. The profitability has increased strongly on all levels. The trust and also the care and medical portfolio continues to receive very positive feedback from our surgeons and in relation to the distribution of the Kary Medical that has started during Q2 in occupied Germany and U. K, we can note that still on the low level, we are ahead of plan. The completion of our product portfolio continues. We have added new projects for global and also for the U. S. Market and are building R and D capabilities in the U. S. To further strengthen our innovation pipeline. We have also gone live with an AU supply chain hub in Germany successfully, not only to comply with MDR regulations but also to mitigate the risk as a result of the cancellation of the framework agreement between Switzerland and the European Union. So the strong first half year performance allows us to look more positively into second half year and is the reason why we raised our full year sales growth guidance to at least 20% in constant exchange rates. The growth momentum we have gained in the second half of 2020 has continued to accelerate as a result of market investments and is driven by search and conversions, new product introduction and also a higher surgeon activities in the elective surgery field. With those comments, I would like to hand it over to Dirk Kirsten to give you a financial and a business review. Thank you, Christoph, and good morning, everybody, also from my side. Let me start my presentation with giving you an overview on our regional business development. As you can see, Medartis has grown 29% versus prior year. The U. S. Grew 46%, APAC did grow 35%, Europe, our largest regions, grew 22%, and even LATAM, which was heavily affected by COVID, grew 32%. In this chart, you also see the growth rates versus 2019 as last year was strongly affected by COVID in H1. The figures show you that with the exception of Latin, all of the regions also grew materially against 2019. If we go more in detail into the regions in H1, Europe was still affected somewhat by COVID. Especially in April May, when the 3rd wave came through, many hospitals delayed elective procedures wherever possible in order to reduce capacities for COVID cases. In the U. K, the NHS was at case levels of only 70% towards the end of H1. This led to lower than expected growth. On the flip side, some other countries, for example, in the DACH region, in the German speaking countries region, grew strongly even within the remaining COVID uncertainties. France was a country with specifically strong growth in H1. Also our distributors in the region generated good growth and the introduction of our new Carico medical products was very successful. In the U. S, we've grown 46% year on year and 31% versus 2019. Our highly motivated team has become stronger and faster and successfully converted many hospitals to work with mid artist. We feel that the momentum has increased and we received a lot of positive feedback from the market. We will now, as COVID allows it, also visibly increase our activities in training and education, enforce our U. S. Ibra chapter and also intensify our work with the regional fellowship programs. This goes along with the further buildup of our sales force as well as investments into infrastructure such as supply chain, Automatization of processes and similar. Overall, we are very confident to grow significantly in the ski market over the next periods to come. Also in Australia, we have seen significant growth beyond 35% in the first half of the year. As in the U. S, we have a highly motivated team there, are winning new accounts on a daily basis and we're increasing the business with existing customers as well. The plan was behind plan, which was due to the COVID situation in the country. The activity level was still limited as COVID restrictions were very tough. We believe that we are about 1 quarter behind plan. In China, we have further established our footprint, won a couple of tenders and selected additional distributors. We expect that sales would increase in the coming months as well. And so the entire APAC region, we've seen distributors still holding back larger orders and remaining cautious on inventory buildup. Also here, we would expect that the situation in H2 will improve, always assuming no further turbulences from COVID to occur. Which leads me to LATAM, a region with enormous growth potential, but also a region which has suffered even stronger from COVID. Especially in Brazil, our largest country, the COVID situation was very severe during Q1. Many public hospitals didn't do any selective business or anymore. Our teams navigated carefully through the CPA and impressively kept the team more high within this very difficult time. Due to the low comparison basis from 2019, Brazil still strongly grew Asset Mexico on a smaller basis, selected distributors in the U. S. And strong growth in lower extremities comes in Australia and U. S. This is strategic for us, and we will also try to accelerated growth in products where designed to be more efficient over the age of the year. In upper extremities, we've seen strong growth from the standard CCS portfolio. And in countries such as Germany, Austria and also the U. K. Where we introduced the U. K. Medical products, We've seen also strong demand and promising initiatives. Training and education will be a very important growth driver going forward. This will allow us better to present our new products in physical meetings due to our customers, which unfortunately wasn't possible so far due to COVID. CMED, which is mainly elective business also grew nicely with almost 30% here we have continuously replaced the former 1 with the new MODIS 2 system, which was introduced last year. Also, we have supported the growth of our customer specific solutions and digital planning for surgeons, which we call the so called CMX platform. Within this context, let me make the overstatement that we believe our product portfolio is one most comprehensive and innovative in the market. We will use this competitive advantage to systematically gain customers and talent We want to work with Medartis in setting quality benchmarks in the industry. And with that, let me quickly move to the P and A On Page 12, gross margin has improved 160 basis points to now 83.6%. This is due to regional mix effects from countries with higher ASPs, but also from increasing production efficiency. We are running our business at higher capacity utilization than 1 year ago. Also, we did have a couple of nonrecurring elements in last year's P and L, which had diluted the margin. I would say that the margin is now at sustainable levels of around 84%. Slide 13 shows the operating leverage of our business. When top line picks up, you see an immediate improvement of our OpEx ratios. As the majority of the operating expenses is from FTEs or other fixed costs. As you can see here, we have increased the level of spending in absolute terms again of the last year's special situation in corona. We will even increase further these spendings for meetings our customers training, education and similar, all directly to the market. Also, we are committed to research and development in order to drive further innovation. With respect to general and administration, we remain cautious. But of course, also we need to strengthen the group infrastructure further, serve an increasing number of countries and also work on processes, which are impacted, for example, by regulatory or similar. As Christoph has mentioned before, We have established a new European supply hub in H1 in order to fulfill with the new MDR requirements. This has added complexity and also caused some increase of G and A expenses. The important aspect is, however, But the higher absolute expenses still leads to a lower, what I call, OpEx to sales ratio. It was 80% in H1 2019 due to corona. It increased to 85% in 2020. Now in the first half of twenty twenty one, it only stood at 75 percent. It's our ambition to sequentially improve that ratio without forgiving the necessary investments into our group, especially on the market side. Slide 14 puts everything together, better gross margin, better OpEx ratio, both combined leads to 10% higher EBITDA margin than in 2020. We had guided for at least 16% for this year. In the first half of the year, the underlying margin was clearly better. Assuming less restrictions from COVID, we now spend slightly more money in H2 for customer activities. And directionally, I'd say We are confident to accrete this margin readily towards the 20% level and beyond, which is in line with top line growth in the further periods to come. Two technical comments, A, currencies didn't play a big role in 20 and 21% in the first half of the year. And we also received a small income from Care Medical, for whom we took a stake, Remember, the 25% towards the end of last year. With that, let me summarize For net profit development, operating profit was also supported by an improvement from the financial result, which had been more challenging in the first half of We have recently started to derisk FX as much as possible and install the program there. Taxes are slightly higher than last year. This reflects also that we are back in a profit making and also we have grown 30% versus the prior year. So a result of that, the net profit margin was almost 10% for the first half of the year. Our absolute net profit has increased from minus CHF6 1,000,000 to plus CHF7 1,000,000 year on year. To finish my presentation, you can also report an increase of cash versus end of last year. Our group has sufficient cash reserves to support further growth, be it on the working capital side, for example, with consignment inventories for our customers, or be it for CapEx, which also includes the set investments for our customers, and of course R and D. We do also have sufficient cash to drive small to midsize M and A projects if and when such should occur. Thus, we believe we are well prepared to grow faster and stronger also in the future. With that one, let me hand back to Christoph. Thanks very much. Thank you, Dirk. Let me give you an update on our strategy and business. Our strategy for the long term growth remains the same. We will continue to play in a very attractive market, which demographics will continue to be the key driver. We also expect the global extremities market also post COVID to continue to grow at an attractive mid single digit growth rates. Our priorities also remain enhancing sales focus, continue to target investments in key markets such as the U. S. As a first priority and then also accelerate the time to market Post MDR certification, we continue to deliver fast and differentiated solutions to the market. This should help us to become an establishment artist as an innovation leader in global extremities. As we execute on our strategy, we have also initiated a culture journey. Let me explain how we move forward on our culture journey. We have undergone significant changes in the organization. We have made changes over the past 12 to 18 months in our executive leadership team, but also on regional teams. Also, the pandemic has changed the way we interact, the way we collaborate internally, but also collaborate and engage our surgeons, may it be in R and D project, in professional education, but also in our sales process, how we introduce new products to the market. And that digitalization will remain as we go forward as we hopefully now return to what we call the normality. We're going to reconnect our employees, but also want to reconnect with our surgeons as we start with face to face professional education events during the course of the second quarter. But with all those changes and the complexity and to cope and adapt to those, we believe that a learning culture becomes even more important to position Medaris as a responsive, flexible, agile organization where people are valued. We have started with a culture journey and the first workshops and engaged the top management, And we will also roll out concepts and workshops to engage the entire organization in the course of the second half year. So let me comment and give you a little bit of an order of magnitude of the changes that we have seen by going more towards digital content. The virtual training and education offerings at Medartis and Ibra has tripled on a year on year comparison in 'twenty one. Also the webinars, trainings and live surgeries have increased by almost 50% with very positive search responses, especially in the far reaching countries in Latin America and Asia Pacific. But online formats have also established themselves in the engagement of surgeons as part of our sales process, where new offerings to existing customers, new products, but also the engagement in R and D project has changed. We have also seen an increase of 50% of our eyebrow membership, which is the biggest increase of its foundation over the past 17 years. So as we believe those digital platforms and content will remain, We're now also going to reactivate the face to face education and marketing activities in the course of the second half year. The U. S. Remains our key priority, and we have made clear progress. In the sales network, investments also in infrastructure and product development and also investments in training and dedication. Let me go through in more detail. As communicated in the full year 2020 results in March, We have continued the reallocation of sales territories, to increase the distributor network and made changes in our direct sales organization. Investments of surgical set continues, especially as we launch new product, And we have gone live now with the new compensation plan in the U. S. Sales force. We are now in the hiring phase. We are now in the hiring phase of building up R and D capabilities in the U. S. To support a regional innovation pipeline for the U. S. Market. But we also need to continue to invest in supporting infrastructure in back office and logistics to accommodate anticipated growth. The regional chapter The IVRA is up and running, and we are continuing to onboard key opinion leaders to expand our training and education offering, but also engaging key roles in the future development of our portfolio. In the second half year, we anticipate or plan for the following launches. In August, we are all about to launch a new minimally invasive distillate display with the 1st patient specific application in the wrist osteotomy, which is a 3 d printed drilling guide and cutting guide. Also in September, we will go into the full launch now of the ANKU trauma system, which is currently in the limited release, followed by a new addition of the KariMedi portfolio KariFuse, which is an intramedullary arthrodesis device for the finger joints. And we will conclude the year with the launches of a patient specific application for orthognathic indications in November as well as an addition in our hand portfolio with the CMC1 Fusion plate. That will conclude the launches of Medartis in the second half Austria, Germany and the U. K. Is off to a good start. The sales level are still on a low level, but we are already ahead of plan as we have experienced some delays in the distribution in the U. K. We are now underway of the registration of Care Medical portfolio for the U. S. Market followed for the Australian market. The MDR has been a multiyear journey or project, whatever you want to look at it. We are now in the final steps to conclude hopefully. We are scheduled now for the 2nd audit on the MDR regulation in September, and we anticipate the registration of the self certification on the CE Mark under the MDR in the first half of twenty twenty two. I would also like to draw your attention to the proposal of the Board for new Board members. Sierra Romer and Nadia Tharoli Schmidt have been proposed for the election at the AGM in 2022. Sierra Romer has more than 30 years of experience in the medical device industry, he has held leading executive positions at Synthes and then in J and J and has been a former board member of the EYO Foundation and UCOMit. Mrs. Taroeli Schmidt is a registered Swiss attorney at law, tax expert and has extensive experience in business law with specific skills in the areas of taxation and Social Security. This leads me now to our outlook for the full year 2021. As I have mentioned, based on the strong performance in the half year, 1, And despite a more challenging baseline in the second half year, we expect a full year sales growth in constant exchange rate of at least 20%. This also assumes a further improvement of the corona pandemic environment, which should especially lead to more elective surgeries. Furthermore, we also confirm, as Dirk has presented this morning, our assumption of a stable EBITDA margin as we continue to invest in our sales force, product pipeline and assume a gradual pickup of the training and marketing activities in the remainder of this year. With this, we conclude our presentation. I suggest now we open up the Q and A session. Our first question comes from the line of Dieter van Hatten from Berenbergen and Co. Please go ahead. Good morning and sorry, congrats on a very strong H1, Dirk and Christophe. Just a few questions from my side. Maybe first for you Dirk, Could you quantify in very broad terms sort of the COVID impact you've seen in terms of surgical capacity? And perhaps if the distributor markets are back to 2019 levels and talking in absolute sales figures? And my second question would be on the exit rate trends you're seeing in June and if there's any reason to think that the second half would be softer excluding the slightly tougher comparison base? Good morning, Brian. Thank you very much. I hand it over to Dirk for the questions. Yes, good morning, Hans from my side. I think the question the first question was also the run rates, especially the COVID impact and whether you can quantify that a little bit. It depends the answer is it depends from country to country. We say that on overall probably we have capacities which is slightly ahead of 90%. Of course, it depends on the countries. If you look at the U. K, it's probably slightly lower, 70%. If you go to other countries such as in Brazil, we're lower. Then on the flip side, we have the U. S, where the momentum currently is very, very nice. Also in Germany, I think the situation picked up, And it's a little bit volatile. So we've seen that through the second, through the 3rd wave. Hopefully, there's no 4th wave to come. So That's very important. Where do we see the second half of the year and how much will be softer? We are confident that we can further grow. We see also from the months after the half year Closing, we see that the momentum is increasing or it's going on, on a similar level. So we're confident also to close the second half of the year in similar levels. As Christoph and myself have presented to you, we are focusing very much on the U. S. There's Terrific momentum in the market, and we're sure we can also capture further market share here. So confident on the second half of the year. That's also the reason why they increased the guidance on a top line basis for the second half of the year and for full full year. Excellent. Thank you very much. And then maybe just 2 more on my side. One would be on have you seen any market share gains so far? Or is this still largely penetration growth, new product growth. And my final question would be on the touch prosthesis, if there's any regulatory interaction with the FDA you could tell us about so far. Okay. Thank you. If you look at our growth, yes, we have converted surgeons, we have certainly gained market share across all the segments in all our key markets. And in relation to the touch Proseasis, we are now in the or Kary Medical actually is in the submission and presentation of the documentation. We have had some conversations as to how we want to approach the registration. So using the European data that we have and submit the documentation to the FDA. So we are still in that submission process, so we have not heard yet Any feedback on the registration documentation from the FDA? Excellent. Thank you very much. I will hop back in the queue. I just wanted to build on the market share gains. Look, one of our branded competitors came up with an estimation that the extremity market grows somewhere between 6% 10%, which is a huge range, depends on the region. If that is the case, then we clearly have 1 market share, for example, in the U. S, but also in Australia or some of the European countries. So yes, we do believe that we have made some progress also in relative terms. The next question comes from the line of Daniel Buchta with Societe Cantonal Bank. Please go ahead. Yes, thank you very much. Maybe three questions from my side. The first one on the new compensation system in the U. S. That you mentioned. I mean, you mentioned before as well that you are hiring a couple of people there now again. In the past, it was a risk that you lost Good sales reps again due to competitors paying better than you. How can you avoid that issue now in the future? And yes, how is your new compensation system in that regard designed? Then maybe a question on DURK. You mentioned this FX derisking, what does that mean a bit more specifically? And how can we see that then in the future in terms of Yes, margin influence and things like that. And then maybe the last one on sales and marketing. I mean, you have kindly shown how Sales and marketing relative to sales have developed. And last year first half and also the prior year first half was roughly 50 2%. Now it was roundabout 45%. Into the second half and especially into 2022, Is it expected to go kind of back to this 52% -ish level or because of the material efficiency gains from Virtual trainings and education, is that going to be lower than that? How can we expect that to develop? That's it from my side. Good morning, Mr. Buchta. Thank you for your questions. Let me start with the first one and then hand it over to Dirk for the other two questions. The compensation scheme in the U. S. That we have changed is mainly targeted towards growth. So what we have seen in the past, and that's also what you're alluding towards, why we did lose sales rep, they're not only left the company at the very beginning because of competitors paying more. The main reason is always when you start with a sales rep, if you have not a complete portfolio that supports and a full year income of a sales rep, then you need to overpay him in the big salary. And especially for a rep, not having a full portfolio, That's over time, it's frustrating. That's probably the key reason why reps are leaving because they're not competitive in the office, in the surgeon, in the OR with a full range of portfolio. Now in the meantime, especially in the upper extremities where we have a competitive and also complete portfolio, That has changed, 1st of all. 2nd of all, we are now coming from less fixed towards more compensation towards variable pay, especially in the U. S. Where we have increased the variable pay, reduced the fix with giving a higher target. So that means the sales reps are more incentivized with the stronger growth. So an uncapped commission on growth with a higher target that allows them to make more money if they achieve the objective versus just maintain the business. And that drives the behavior change of our sales organization in the market to get more focused driving more and more aggressive growth. That was the fact and that's the intent of the entire change in our exchange rate. For the other two questions, I would hand it over to Dirk. Yes, good morning all from my side. FX de risking, What we haven't done is started into any complex hedging programs at this point of time. We think that's just not the situation we should do right now. But what we do, we're a little bit more cautious on what currencies are we holding our cash. Can we sell it back into square also for the first half of the year. When I'm talking about a program, I'm looking deeper into the organization, And I'm also looking at the supply chain. As you probably know, our supply chain is quite complicated, selling the sets important fact for customers, we have a lot of inventory also on a consignment basis with our customers, which we are fueling where we're trying to grow, When we put that inventory and also the sets into the countries, what that means is that there is a lot of implied FX risk. So managing FX risk for me means also to simplify the supply chain and take out risk which is more related to the processes, and that's what we're continuing to be doing also going forward, number 1. Number 2 on the ratio with sales and marketing in the 45%. Look, the important figure here on Page 13, I believe it's with SEK33 1,000,000 in absolute terms. And we're back on the level where we were in 2019. Having said that, it comes down as a margin because the top line has increased. Now what do we plan for the second half of the year? We have established a program which is called Medanthus Reconnect, which is especially after corona important that we do get close contacts to our customers again on a social level, but also when presenting the new products, introducing the new features we have and getting very close to those customers back. So Yes, that will increase costs again in the second half of the year. This is not a guidance, but maybe in the range of CHF 2,000,000, CHF 3,000,000 for the second half of the year. And it means that the 45% is probably at the lower level. I would more assume it to go back to 47%, 50%, but don't take this as an absolute number. We're still in a COVID environment and nobody knows what's happening just 1 month as we speak. So this is just to give you an idea of what we plan to do. And hopefully, we can spend the money. Hopefully, in the long term, it's obviously beneficial for your investment case. And maybe one quick follow-up Afterwards, I mean, you mentioned how the market dynamics, for example, in the U. S. And in Germany are. So that means At the moment, based on the rising incidents in various countries like Germany, also like the U. S, You see no bigger impact yet on non, I would say, non urgent or elective procedures, nothing yet? Again, it depends. Nothing major, honestly, yes, Absolutely. I think it's also what we see that the countries and the hospitals are dealing with the different waves in different matters. As we went into the lockdown in spring 2020, most of the countries went in a complete shutdown of elective surgeries and reserve the capacities for the treatment of corona patients that at the end didn't come. So now with the 2nd, 3rd or whatever 5th wave in the meantime, the hospitals are still trying to mitigate COVID patients, trauma and elective surgeries. So this is also why the overall case load has appreciated again and is in the range as we estimate, as Dick has mentioned, at the 90% level. So now with the delta variant that came up and started to come up a few months ago. We have seen local shutdowns in Australia, for example, has been open and has in a very low caseload. All of a sudden, our Australia has started to slow down and shut down. So Australia has closed elective They continue to do trauma. Other countries like Germany and also Switzerland are more pragmatic. So we don't see a significant impact now for Delta, but it remains at the market sort basically for the second half of the Okay. That's very interesting. Thank you very much. You're welcome. The next question comes from the telephone and is from the line of Christopher Grebler with Credit Suisse. Please go ahead. Thank you, operator. Good morning, Christoph, Franz Jorg, Fabian. Good morning, Christoph. Good morning. I still have another three questions, maybe starting kind of north on Ibra. Could you maybe Disclose how many followers do we have here? And what percent of those now are in the U. S? On the I don't have transparency to members, the actual numbers, but I can follow-up and let you know how many memberships that we have. In the U. S, of course, it's a new organization. We have established hybrid chapter now in the U. S. In the course of the year. And now we are also gaining not only new members, but also onboarding key roles to add to our faculty. But I can follow-up separately and let you know what the total numbers of members are. Okay. Just to put again the 50% increase somewhat into perspective. But I appreciate. And then on headcount, kind of it was, I think, 5% up, so it's about 30 persons or 30, 35 kind of employees. Could you maybe kind of disclose in what area kind of Those are in like R and D manufacturing sales also? I'm obviously particularly interested in the sales force. No, we have I mean, in absolute numbers, 5% seems to be low. But don't forget, we have Many changes. So we have shifted all the headcounts from one department to another department. So mainly, what we have built is Sales management, sales force on a global level. We have also added and are still in the hiring of R and D engineers, but also project managers for our innovation projects and then also quality and regulatory. And quality and regulatory, as you can imagine, as the activities are ramping up or have ramped up now for the MDR Audit now in September, that's a crucial function to be compliant and also maintain the compliance then on the MDR regulations. Okay. And then kind of the last topic maybe on M and A, now kind of for some I missed kind of that in your presentation. So maybe could you give an update on kind of your current pipeline of protect and kind of how you see the environment right now for you? We continue to look at, again, technologies To add, to complement our lower extremities portfolio, we're looking at technologies, which are in an adjacent segment to our plates and screws, mainly in the U. S, but we are open for any technologies that is scalable in the extremities, so technology that we can not only use in the lower extremity, but also for example, in the upper extremities. So we still and continue to evaluate technologies, but we are not in a position to comment any more specifics at this point in time. Okay. So let me step back. Thanks The next question comes from the line of Daniel Jelovkin with Mirabeau. Please go ahead. Yes, good morning gentlemen as well. Good morning. Just a question on the U. K. And China. I mean, in China, I guess, it's still relatively small within The Asia Pacific region and then these you mentioned that you won several hospital tenders. I guess The margin there is also pretty low or is that a correct assumption? That's the first question to China. And the second question in the U. K, I'm a bit puzzled by your comments. I mean, in the slide, you say that the U. K. Growth is lower. In the press release, you say that it has recovered nicely. Is that because of the strong distributors? Or I mean, In general, if you can add a bit more color on the UK business. I mean, how important is it within EMEA, I guess it's not the biggest country, of course. And also why is NHS still at the 70% caseload. I mean, I guess it's just because it's the NHS. I mean, otherwise, the vaccination is good. I mean, the country should be Good. I mean, it's just yes. Yes. Let me start with China. Yes, China is still on a very low level. We have won tenders, that's correct, and we continue to win tenders. Once you win, and I think it's important to understand the sales process in China, and that's also learning curve for us. Once we have one attendee, then we start Working with a distributor who supports and serves the hospital at the end. And at the end, it's not a guaranteed volume that we can get once we have won the tender. 10 is basically a license to sell in the hospital for the portfolio that we have won the tender. So now we have equipped the distributors, mainly in the Shanghai area where we have won the first tenders, and those distributors are now starting to sell in the hospitals. This is why it is a slow pickup even following a tender that we have won. So we expect now to win more tenders as we go forward. And as a result of that, over time, that we also start the depreciation of the sales, but still on the low level for this year. Concerning the U. K, First of all, let me explain the regimen that NHS has put in place as a part of the COVID mitigation. The NHS has started to change the regimen in the OR. So that means the patient, which is normally prepared outside of the OR, moved in for the surgery and then moved out to getting ready for the station, all that procedure remains now within the OR. So that means that the turnaround and the over time is extended and the over capacity is reduced. So as an example, a 45 minute surgery may easily now turn into an hour and a half and two hours until the next patient may come in. So that reduces the capacity of NHS, extends the rating list, especially for the elective surgeries. With that regimen has not changed despite the fact that the pandemic, the corona situation is normalizing In the U. K, the regimen in the OR remains. And our comments are related to the strong decrease as a result of the NHS regimen as a result of the cancellation of elective surgeries and the lockdown also resulted in less trauma cases with the 1st lockdown in 2020. So the U. K. Remained on a much Slower level compared to Germany, France or Switzerland. And that regimen remains. So now what we have seen is with The easement of the lockdown measures with more activity and mobility, the trauma cases are coming back up. So we're now estimating that the U. K. Caseload compared to pre COVID is around in the high mid-70s, letting hopefully closer to the 80%. This is why our comment is we have seen now, especially in the second quarter, a faster Yes, we just want to apologize for the technical difficulties, but we can hear you now clear and loud. So I would suggest we go back to the next questions. There are no more questions from the telephone. We'll now go to the webcast question. We have a question coming from Franz Jurgens with UNO Investment Partners. In your 3 business segments, how would you rate the completeness of the variety of your product offering, completeness of the portfolio? And how do you see the number of products Let me The completeness, we certainly are complete in the CMF portfolio. We are very And the least complete is the lower extremities portfolio, where we now launched foot and ankle and the osteotomy sets in the next weeks months, which will give us a significant completeness in terms of the plates and screws for the lower extremities. Going forward, Looking at technologies. We have certainly gaps in the lower extremities. So that means technologies like small joint replacement, Maybe intermetullary devices or total ankle replacements, also soft tissue management and staples are gaps that we still have in our lower extremities portfolio. In the hands and wrist, we will continue To add the Kari Medical portfolio, which is in the soft tissue, which is anchor systems and also small joint replacements, I think we will also continue to advance. So we will come out with a new hand system, which will give us an improved instrumentation and also adding new plates for this particular fractures in the hand and in the wrist. So we will also continue in the elbow and proximal humerus. So there will be an over design of existing portfolio in combination with new technologies and with line extensions on our current blades and screw systems. So as an innovation company, we will continue to launch new products, which also help us not only to extend the indication, but also give more options to the same surgeons to treat the same indication. And that's how we want to position Medartis as a specialist, as an innovative company in the hands and for the hand and lower extremity surgeons. Does that answer your question? Thank you. There are no more questions from the webcast and no questions from the phone. I'll now hand back over to you, Mr. Bereneman, for any closing remarks. Okay. Thank you very much. Thank you for the questions and your interest in Medalltis. And before we terminate the webcast, I would like to draw your attention to our upcoming investor events, which are listed on Page 30. You will also find the updated contact details on the same slide. Our full year results conference will be March 8, 2022, and we hope we will be able to meet you again, hopefully then also in person. I'm also pleased to be able to introduce to you a new and familiar face. After 2 years in the consumer industry, Fabian Hiltbrand is back in the medical device industry, and we will be able to benefit from his relationships and experience. At the same time, I would like to thank Patrick Christ, our former Head of Corporate Services, for his valuable work, not only during the IPO, but also in the years after the IPO. And Patrick will assume a new role within the organization, And I wish him for his future, a lot of success and continued satisfaction in his new role. But for now,