Earnings Call: H2 2020

Mar 10, 2021

Ladies and gentlemen, welcome to the publication of the Annual Figures 2020 Conference Call and Live Webcast. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by Q and A session. Webcast viewers may submit their questions in writing by the relative field. You have also the possibility to enlarge the webcast screen by pressing the arrow located on the bottom right hand side of the presentation. Conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Chris Bourniman, CEO. Please go ahead, sir. Good morning, ladies and gentlemen. It's a pleasure to welcome you to our conference call for the publication of our 2020 full year results of Medartis, which we have published earlier this morning. My name is Christoph Brenneman. I'm the CEO of Medallist, and I'm joined on the call today with our CFO, Dominik Leutwille and our Head of Investor Relations, Patrick Christ. It's our pleasure to have you all in the call today. Let's start the presentation. In this session, we would like to walk you through our full year results presentation, which is available on the Medalti's website. You can also follow it online if you have joined this call via the link we provided in our invitation. After the presentation, we will be happy to answer your questions. Please also note the disclaimer on Page 2. And furthermore, I would like to inform you that our call is being recorded, and a replay will be available on our Medartis website later today. So let's start and go directly to Page 4. Our full year results at a glance. We have achieved A sales revenue of CHF124,700,000 which is minus 4% in Swiss francs, But it's 1% growth in local currencies. Our EBITA margin has slightly improved to 16% or in absolute figures CHF 19,700,000. We have also increased our head count compared to end of 2019 by 27 employees, and we're now at 6 36 employees for the company worldwide. If you look at our 2020 sales growth of 1% in local currency, It clearly comes from a fast recovery after the lockdown in the second quarter, mainly to building a strong sales momentum in the in the second half of twenty twenty. Our second half in local currency posted 9% growth for the company, Whereas our direct markets grew 13%, especially strong performance was noted in the dark region with year on year 12%, Asia Pacific growing at 23% with an excellent performance in Australia at 27%. The Latin American region with the direct markets and also the distributors continue to be impaired throughout the year by the COVID-nineteen pandemic. The new sales management team in the U. S. Has created a good sales momentum in the course of the second half, achieving above 20% growth in the 4th quarter and for a full half year growth of 18% in local currency. While mitigating the financial risk, We continue to invest in our strategic and growth opportunities. Selective cost savings have successfully led to a slight increase of our adjusted EBITA margin of 16%, while we continued to invest by reallocating funds and reallocating savings into market accelerations and growth initiatives. So we have launched 5 new innovative product systems and fully achieved the business plan of €4,000,000 for all the launches. We have strengthened the executive management board and the organization and selectively invested in markets with growth momentum, Namely, the U. S. Posting growth or achieving growth at the end of 2020 was 20% of the Australian market achieving a half year growth of 27%. We continue to invest in our most recent markets like Japan, China and the building up of Spain where we are going direct as the beginning of this year. We have also taken the opportunity to refine our strategic framework, which led to the investment and the strategic partnership with Kary Medical. The partnership includes a distribution agreement with Kary Medical for the comprehensive portfolio in hand and risk as well as a joint development agreement for the developing of new products in the future. We are now in a very competitive position to offer a comprehensive portfolio in our key segment, Hand and Risk, where we see a huge potential for future growth. I will get into the Kary Medical collaboration and the strategic framework in more details later in the presentation today. With this, I would like to hand it over now to Dominik Leutwyllen to walk you through the full year financial review. Thank you, Christoph. And also from my side, I would like to welcome you all to this conference Call. I start on Slide 1 to give you the overview of the key financial results. I will walk you through the adjusted number 2020. The adjustment upfront are impairment on intangible assets of 1,700,000 and additionally inventory provision of 600,000. The sales in constant currency ended at €131,200,000 That's a plus of 1%. On the gross profit and OpEx. I will show you the details on the following slides. The EBITDA at constant currency Adjusted ended at CHF 22,400,000. That's a plus of 12%. And the margin EBITDA at 17% compared to 15% adjusted in 2019, that's a plus of 2%. The operating cash flow increased by 40% to CHF 12,600,000. The cash flow used for investing activities is CHF 22 €900,000 That's including the investment in Kari Medical of €10,000,000 and additional sets for our business of €5,000,000 The net working capital increased by 5% and the headcount ended by 636 people, that's additional 27. On the next slide, I would like you to walk you through the different regions. The biggest region with 55% of The sales with €68,200,000 is EMEA, where we have in local currency 0% in increase. We had a strong 12% growth in half year 2 in DACH, Switzerland, Germany and Austria. In U. K, it's still a difficult situation due to the COVID-nineteen. Good performance, we achieved in markets like Netherlands, Ireland, Slovenia. However, distributors are behind the direct markets overall due to the corona related restraint investments. For Europe, we had a solid 4% growth in half year 2 and minus 4% in half year 1 year over year in local currency. The market in North America, that 70% of our sales ended with 21.3%. For the full year and increased by 4%. We strengthened the management team with Lisa Thompson. The territory alignment with focus on sales quarter and heat mapping. Additionally, we grow had grow impact in new collaboration with selected distributors. Overall, we had a dynamic 18% growth in the half year 2 and minus 10% in half year 1. Asia Pacific ended with 25.4%, that's 20% of Sales increased by 12%. We had an outstanding performance in Australia with 27% in half year 2 year over year in local currency. A strong performance in the JCI Beauty markets, Japan for the upper extremities, South Korea and Thailand. We launched of the business in China in quarter 4 2020 and the good momentum in the new Japan subsidiary for the lower extremities. Overall, a dynamic 23% growth in half year 2 and the stable in half year 1. LatAm, we ended at €9,700,000 that's 8% of the market with minus 18. The sale strongly affected by the difficult economic situation combined with the pandemic. Brazil and Mexico had a strong quarter 4 year over year in local currency, but clearly behind the previous year. In Costa Rica, the distributor won a major tender. Overall, we had a minus 9% growth in half year 2 A minus 26% in half year 1. On the next slide, I show you the business segment by product. The biggest segment, the upper extremity, is 72% of our sales. We had there a solid growth in wrist, the largest line, A strong full year elbow growth despite COVID-nineteen, thanks to a training and sales offensive. With significant sales above plan. 8% growth in half year 2, minus 5% in half year 1 year over year, plus 1% for the full year. In the lower extremity, that's 50% of our business, we ended €18,800,000 That's a plus of 8%. We had a dynamic growth in half year 2 in all lines. The market launch in half year 'twenty one for midfoot and correction and distal ankle fracture system based on excellent market feedback. The introduction of the CCS compression screws extension in June with a good momentum. Overall, a dynamic 21% growth in half year 2, minus 4% in half year 1. On CMF and orders, we ended at 16,600,000, that's 13% of the total Medalltiv sales, overall minus 8%. That's the most affected business segments by the impact of the corona pandemic. Revenue declined of around 25 present in elective CMF procedure due to deferral of elective cases. In April, the new Motors 2 product generation was launched as planned. 1st complex cases were supported by the CMX Digital Planning and 3 d Printing Platform. Overall, 3% growth in half year 2, minus 19% in half year 1 year over year. On the next slide, some words about the gross margin. On the top right side, you can see the gross margin from 2017, 2018, 'nineteen and 'twenty. We had an outstanding margin 2019. This positive effect from 2019 leads to the manufacturing efficiency gain and the high production output for the start of the 5 new product lines. For 2020, We and onwards, we are expecting an improvement in the gross margin. Corona related reduction in demand and related introduction of short time working in 2020 led to a temporary decline in the production capacity utilization. On the next slide, the overview of the OpEx costs. Overall, the OpEx went down by 6 presented in Swiss francs. On the research and development, we ended at 15,500,000. At the same level as the previous year. We have ongoing investments into the innovation. The MTGR readiness affects the cost base and cost savings through the disciplined cost management. On the administration cost, we ended at 21.8%. That's a plus of 2%. We invested in the subsidiaries for process improvements in U. S, Australia and for new countries as China and Spain. We are enhancing the end to end digitalization process, and we maintained the due diligence capacity for M and A projects. The selling and distribution ended at 16.2%, that's minus 10%. We strengthened the sales organization with 19 additional employees. Digitalization of the education and Congress result in cost Saving and restricted access to hospitals lead to short term work cost savings. Anyhow, we had cost saving in local currency of 3,600,000 from the headquarter and in the existing DOG reached by €2,800,000 On the other side, we invested in markets where we had an excellent momentum like Australia, an additional €1,500,000 the U. S, an additional €600,000 and new markets as China, Japan and Spain, €1,000,000 The last slide shows the EBITA margin 2020 where we had increased by 1% from 15% to 16%. We had a solid sales in the second half year and the disciplined cost management lead to a slightly improved EBITDA margin from 16% versus the 15% in 2019. As mentioned, we were able to relocate headquarter savings to market. The net profit 2020 adjusted of of NOK900,000 compared with the net profit of NOK1.8 million in 2019. The main impact is the FX loss of CHF 5,400,000 versus CHF 2,400,000 in 2019. And now I will hand over to Christoph Ronneman for the next part of the presentation. Thank you, Dominik. Our midterm view of the market potential remains unchanged. The potential continues to be driven by demographics and the need for innovation. So hence, our priorities remain on enhancing the sales focus, expanding our innovation pipeline and reduce time to market and continue to build our U. S. Business. We have made progress on our growth initiatives. 1st on enhancing the sales focus by adding and appointing Lisa Thompson to lead the North The focus of our sales force much more towards converting new accounts, launching new products and hence Make changes and adaptations in the incentivization system, which has now been incentivized much more for growth. We have also invested in the internal and external education through the appointment of Peter Colony as Head of Education, And we have taken the time to extensively train our sales force in product indications and also new products to be launched during the lockdown of last year, which we believe was one of the reasons for the strong recovery and building the sales momentum in the second half of last year. 2nd, we continue to expand the innovation pipeline. We have appointed Emmanuel Scheer as the new Head of R and D as Chief Technology Officer. Also, he will be and is a member of the Executive Management Board. With the launches we completed further our plate and screw portfolio in all areas, upper extremities, lower extremities and also in the head. We have started with a pipeline review under the new strategic Framework and under the U. S. Market needs and also continued to become ready for the go live of the new MDR regulation during the year 2021. The 3rd initiative we continued to pursue our strategy to become very local in the U. S. Market. Liisa has expanded its sales management team from 4 to 5 sales areas, and the management team has taken a territory analysis and the heat mapping that has already resulted in territory alignment in our distributor and direct sales force. The new growth oriented incentive system is ready to be rolled out. The U. S. Leadership team has now laid the foundation for a continued sales force expansion and hence expected sales acceleration in the U. S. The team has built a strong sales momentum in the course of the Q3, but especially into the Q4 of last year and has been able to take the sales momentum in the beginning of 2021, which I believe indicates that the U. S. Team is on the right track. In the upper extremities. We are going to focus the direct sales force on the upper extremities plate and screw portfolio and we'll add the Kary Medical portfolio as it becomes available through registration. In the lower extremities, we're going to continue to Respond and scale our sales using distributors or mainly distributors and will complement the portfolio with the full launch of the foot and ankle system in the first half year of 'twenty one. The R and D pipeline is under review to better address the U. S. Markets, and we have and we will continue to expand our U. S. KeyOL network for development and also education in upper and lower extremities. We have also established Ibra with a U. S. Chapter, which is now becoming the training partner of the medical associations, and we have added QLs to our faculties. We are now ready to significantly increase our course offerings in the U. S. Once the situation normalizes and courses will be feasible again. In the meantime, we are currently offering a combination of digital faculty and local workshops. We have and will continue our M and A activities focusing on innovation that has the potential to change The standard of care to complement our extremities portfolio. We'd like to give you an update on our launches, where I'm very proud that we have achieved the full year target for all the product launches Despite the challenges during the COVID-nineteen pandemic, especially the difficulties that we had accessing the hospitals And getting new sets installed in the various hospitals. We have fully launched the forearm fracture system and the clavicle system of the CCS compression screw extension in EMEA and at the end of the year in the U. S. We are now covering and increasing the range of indications with our well known and established CCS screws in the upper and also in the lower extremities. During the lockdown, we already have made the decision not to go into a full launch with the foot and ankle system, which is the mid hindfoot correction System at the distal ankle fracture system that you see here on the slide, we postponed the launch into the first half of this year just for the fact that during the lockdown most elective surgeries had been postponed and we did not see enough documented cases to support a full launch. In CMF, we have launched a new CMF motor system in the DACH market, And we have also made available the CMX platform, which allows for 3 d planning software and cutting guides. I would like to take the opportunity to thank all our teams for the professional and for their agility to make the success in launching our product systems despite a challenging environment. Let me comment on the strategic framework. We have taken the time to review our strategic framework. And as Medartis will continue to be positioned as a specialist in upper and lower extremities and CMF. We built the framework on 3 pillars. 1st and foremost, Our confidence in plates and screws where we play in our core market in excess of SEK 3,500,000,000 where we see substantial opportunities ahead of us. But going forward, we would also like to add new technologies and Respond our portfolio beyond the screws and plate, so build a suite of technologies around our surgeons that will help them to treat all the indications of their patients going forward. 2nd, we want to become more than just The product company, especially with the launch of the CMX platform, Medartis has entered the market for digital planning, 3 d printing, cutting guides and patient specific implants and will drive the expansion of the CMX platform across all the indications in the upper and lower extremities included. We're going to offer individualized solutions for our surgeons that will help them to improve patient outcomes, shorten surgical time and reduce inventory. 3rd pillar of the strategic framework is our global footprint, whereas the building up of the U. S. Business remains our top priority, But we're going to continue to gain market share in our key markets, especially in Europe and also in Asia Pacific. As opportunities arise in the midterm, we will also take the opportunity to go direct in distributor markets as we did at the end of last year starting with the Spanish subsidiary. Let me comment on our investment in Kari Medical, where we exclusive distribution rights for the entire carrier medical products in selected markets, namely Germany and Austria we have started at the beginning of the month, The U. K. Will be followed in April and U. S. Market and Australia will follow as soon as we receive registration for the portfolio of Kary Medical in those markets. The second level, we see the financial support for market access for the first dual mobility CMC1 prosthesis, which is used to treat osteoarthritis in the thumb. There we see an opportunity to enter into new markets, but also given the high prevalence of CMC1 osteoarthritis and the very low penetration of Archer plus T devices. We see a huge opportunity not only to penetrate but also to expand The market for small joint replacements. The 3rd level is the collaboration agreement where we believe there's an ideal complementation of I will screw and plate's confidence with the Kary Medical competence, especially in Nitinol technology, Soft tissue fixation and arthroplasty devices. To give you an overview of the Kary Medical portfolio as it stands today, 1st and foremost, the TouchPalis Prosthesis, which is the 1st dual mobility Prosthesis to treat the osteoarthritis of the thumb. It has a superior outcome, which is supported by clinical studies and clinical data, especially in the fast recovery time of the patient, but also in the mobility and the strength, which is enormously important for the outcome as the mobility of the thumb and the strength in the grip allows the patients to go back to their and quality of life. The KariFlex is a new silicon based implant, which is designed for the treatment of osteoarthritis of the finger joints and has been designed with leading international surgeons. The portfolio also includes Reoxone, which is a chitosan nerve tube, which is used for transacted nerves. And also, This product line is supported with clinical outcome studies that suggest a superior outcome in the nerve regeneration. And last but not least, KariFix and KariLock are small joint suture anchors that are used for soft tissue management in small bone surgeries. We believe that the market for small chain replacement has a huge potential and is currently underserved. We see many opportunities to expand a fast growing market through a significantly increased outcome and changing and the potential of changing the standard of care for patients with the touch prosthesis. On the left hand side, if we look at the prevalence of osteoarthritis in joint in the population of 55 to 70 4 years old age group, we can see that the prevalence of osteoarthritis in the hip is only 3%. In knee it's 10%, in the foot 40, climbing up to 70% in the hand. Despite the low prevalence of osteoarthritis in the joint, about 50% of the patients receive a joint replacement. In the hand, it's completely opposite. We have a high prevalence of 70%, but only about 1% of the patients received surgery with a joint replacement. This is why we believe we have a huge opportunity not only to penetrate but expand the market with a superior product. In absolute numbers, There is about 40,000,000 patients affected in EMEA and about 20,000,000 people affected in the U. S. Suffering from osteoarthritis in the hand. If we translate those numbers into a total market, we look into about the market potential only in the U. S. Of about SEK 300,000,000. And with even a low market penetration of SEK 5 rising up to 50%, There would be a potential opportunity to grow top line up to SEK150 1,000,000. But the big opportunity that we see is increasing that 1% of the patients that receive a joint replacement up to 10% or even higher. A few comments on our CMX platform. It is a web based portal, which allows the surgeon to upload CT scan and to plan very complex cases from the very beginning until The OAR technique. It also allows for the manufacturing or production of patient specific plates for complex reconstructions. Right now, it's indicated for mandible plates, for reconstructive procedures of bridging load bearing bone segments in the mandible, but we will expand the indications across the entire portfolio offering also in the upper and lower remedies. The portal also allows for 3 d printed cutting and drilling guides, which help the surgeon We also have the opportunity to print bone models that could help to illustrate the intraoperative planning and also helps the surgeon to visualize how he wants to proceed with the procedure. The orthopedic patient specific Market is estimated to be currently around CHF 500,000,000, but please note that this market is growing faster than the standard product market. With those comments, I would like to conclude and summarize and give an outlook for 'twenty one. We assume that 2021 will not be back to business as usual, but we are going to continue to execute our strategy and invest in our key markets and innovation While maintaining an eye on managing the COVID-nineteen situation, we will be focused on continue to build the U. S. Business, expanding sales force, focus on the U. S. Specific market needs, but continue to build the search and network of QOLs, but also continue to develop our most recent markets, especially Japan, China and Spain. The 3rd priority continue to launch our products, especially the foot and ankle system now in the first half year, expand the CMX platform across Optus Wrist and expand the CMF offering in the second half of this year. And we will continue to review our pipeline in light of the new strategic framework and assess potential M and A opportunities going forward. On the outlook, Based on the results delivered for last year, managing the COVID-nineteen pandemic by focusing on the growth initiatives delivering 16% of EBITA margin in 2020, the solid growth of 1% in local currency and especially building the growth momentum in the 3rd and the 4th quarter and taking it into 2021, We are confident to issue a guidance for the full year 2021 where we expect a sales growth of at least 15% in local currency and stable EBITA margin. You will understand this is all subject to any unforeseen events, especially from COVID-nineteen. Thank you very much for your attention. I would like to open it up for questions now if you have any Question is on the phone. I requested to use only handsets and eventually turned off the volume from the webcast. Webcast viewers may submit their questions in writing by relative The first question comes from the line of Ms. Daniela Bogta with ZKB. Please go ahead. Yes. Good morning, gentlemen. Thank you very much for taking my questions. The first one may be a little bit on the current business environment. I remember in early November, you said that for November December, you were expecting markets to be down 20%, again, because of strict The markets to be down 20%, again because of stricter lockdown measures. So when did we stand here now? And how was the January February, which you We have some first insights and numbers already. And in general, how long would you expect, based on the current market environment, to for these headwinds to persist? Then the second question on your U. S. Operations. I mean, you have quite ambitious expectations there in the mid- to long term, and you want to continue Sales was there to, yes, to reach market level in terms of importance for the overall group. And now you also mentioned you have a proper management, a new management in place, And all that sounds quite promising. So when do you expect these targets Now to be realistic and gentlemen, how do competitors react? Don't they see net artists because of the relatively small size? Or Yes. Do they invest also more in innovation? Or how do you see the market situation in the U. S. At the moment? That's it. I'm mindful of the beginning. Thank you very much. Okay, sure. On your first part of the question, yes, we did see a recovery of the markets during the Q3 getting into the Q4. But then also with selected lockdown measures and slowing down the postponement of elective surgeries, We did see a contraction again towards the second half of the fourth quarter, so November December. Yes, we did see the slowdown. We are probably running at about 85% to 90% caseload for the year ending. And we assume it's about the same caseload getting into the Q1 now. We still see Difficulties accessing hospitals in Germany, France, the UK is still slow. We have also some slowdowns in Switzerland, regionally in the U. S. As well, the Latin American region remains to be depressed. So I would say we will continue or we estimate that we will continue about at the caseload that we have seen until about the Q1. We would expect that in the spring, as of last year, April, May that we should see a recovery, hopefully getting back to a more normal caseload. That is also related to Less lockdown measures, more people getting out, the higher mobility of the people, more leisure time activities, 1st of all. And then second of all, we would also expect that some of the elective procedure will start to catch up during the Q2 of this year. That's for the COVID assumptions. For the U. S. Team, yes, we still hold on to what we We announced last a year ago that we want to quadruple the sales. I think last year, we said 24, Probably now it's going to be 25,000,000,000. So we're still holding on the same plan. It's going to be shifted out for 1 year. I believe, yes, we have the management team. The management team has put the The management team has put the right measures in place. We have seen the momentum building up in the 3rd and the 4th quarter. We see the same momentum to continue into the 1st few months of 2021. This is for the entire group. So this is also why we are confident that we are running As planned that we have put in place, which led to the guidance. Do we see competitors reacting to this? Yes, absolutely. We see it's been noted that we have significantly gained market share in some of the key markets. In the U. S, I would say we're probably still at the lower share, but in the regional level, we are noted. But I think what the advantage was for us is focusing on the agencies, the ambulatory surgical centers, where we probably had about 60%, 65% of our business. We have seen during the lockdown that trauma surgeries have been moved from the larger hospital to the ambulatory surgical centers. That's where we have a stronger position and that's also where we have a strong presence. So As the big competitors are also now following the trauma indications trying to get into the ASEs, It absolutely helps us that we have a much better presence in those centers than the large competitors. Does that answer your question? Yes. Thank you very much. That's very helpful. Sure. Any other questions? The next question comes from the line of Dylan van Hoeften with Bryan Garnier. Please go ahead. Excellent. So thank you very much for taking my questions, and congrats on the results and the solid outlook. And just as a small aside, Dominic, this is your last results presentation. So all the best and hope to run into you in the in a hopefully less Zoom based environment. So just on my questions, just 2 from my side. Just Could you tell us a bit about sort of the LatAm exit rates? And if we can sort of see a rebound emerge already in the Q4? Or if it's going to remain challenging for A prolonged period and we shouldn't count on anything material coming from that angle. And just on the EBITDA level, if we look at the gross margin, There was a roughly 2% GAAP year over year, but also EBITDA performance was actually quite good this year. Do you expect that with growth increasing that brings us roughly flat as you reinvest into the business? Or do you expect we could see some operating leverage coming in this year as well? So thank you for your question. The first question is the situation in LatAm. We are expecting that This region, due to the COVID situation, still becomes challenging for the next year As this mutation of the virus are there, we have seen in the second half year an increase in Brazil of 2%. And the issue is also on the distributor side where we have minus 43%, where they stopped to invest in Dilawo products. On the side, on the EBITDA margin, we are expecting that Gross profit is slightly increasing. But anyhow, we want to invest in our new markets As China started just in quarter 4 from 2020, so to continue to build up this important market and also to start further on the Japanese market. And also our focus U. S. That we want to invest in those markets. Therefore, we have planned to have a more flat EBITDA in our forecast. Answer that your questions. That's perfect, Dominik. Thank you very much. Thank you. Any other questions? The next question comes from the line of Chris Gretler with Credit Suisse. Please go ahead. Yes. Thank you, operator. Good morning. Good morning. I have 3 questions. Good morning. How is it going? I just have three questions on this Carrie, collaboration, could you give some insight by when you actually expect the Yes, I can. If we look at the entire portfolio. The PIP, the KariFix and the Kari Flex It is expected to be submitted now in the over the next 2 to 3 months. So we would expect an FDA approval, which is a five 10 ks approval by around midyear towards June. So we would start with those product lines probably in the course of Q3 in the U. S. The touch prosthesis is still unknown as we are still clarifying what's the most efficient regulatory pathway for the prosthesis will be. Okay. And then just on the pipeline review you mentioned, what does This likely kind of now will lead to and will this reduce the number of projects or Kind of now leads to complete kind of reshaping of The pipeline portfolio here. I understand that you focus on the U. S, but I don't know what does it likely mean specifically? Okay. It means that we will rather expand the number of projects and therefore also invest in additional R and D resources. So we will continue to focus on the completion of our plate and screw portfolio in the upper and lower extremities. So as an example, reworking the hand system, Investing in a minimally invasive distal radius plate, but in the lower extremities complete our portfolio for the arthrodesis of the joints. Those are the big systems. Now looking into the U. S. Needs, especially the lower extremities, The U. S. Market demands, as an example, the hamilton implant, 19 ole staples, which is more addressed towards the DPN market. So those are type of projects that we include in our pipeline. And now we are assessing what of the technologies Do we bring? Do we do in house? And what are maybe projects that we can work with external partners together where we may not have the competency. And this is also how we look at Kary Medical, where Kary Medical has development capabilities, Especially in the 19 oil range, in the joint replacement and also in the soft tissue. So this is why we also entered into joint in the Joint collaboration for R and D. So it's not only in house, but also working together with partner external companies where we do not have a core competency. That's how we want to complement our pipeline going beyond just plates and screws. So that answer your question. Yes. Thank you. And then just on the last Fine. Also on the U. S, how do you think about kind of with respect to kind of using agent So it's now building out your direct sales reps now at this stage of the development. Yes. It's still the same year. I think in high value territory where we have a complete portfolio, Our preference is to have a direct grip. That's where you have a much better control. That's where you own the surgeon interaction. In portfolio where you may not have a full portfolio as we did in the past in lower extremities as an example, Using distributor reps will help to scale much faster at the lower end. So maybe about up to €20,000,000 €30,000,000 sales. It makes absolutely sense to use mainly distributor reps for the lower extremities, Faster scale and then start placing direct in the high value territories. At the end, if you look at the U. S, covering the entire U. S, There is most of the companies, even the big ones, they have a combination of direct reps and distributor reps. That's how we look into it. This is why I made the comment that The direct reps that we have, we want to focus them exclusively on the upper extremities. We want to expand and scale fast in the lower extremities using distributor reps and then over time start adding direct reps also in the lower extremities. Okay. Thank you. I appreciate your comments. You're welcome. Are there any other questions? We have another question coming from the line of Sybille Bischoffberger with Vontobel. Please go ahead. Good morning, everybody. Good morning. I have a question about Tucci, you say that the aim is to offer surgeons a comprehensive implant portfolio that covers all their indication needs. But this does not mean that you are going out of the extremities to new areas or does this also include new areas additional to craniomaxillofacial and extremities. No, absolutely not. Thanks for asking and clarifying the point. This is why I made the comment. We remain upper lower extremities in CMF. But expanding the portfolio, an example that I can give you is often a fracture or an injury in the hand, in the distillators, for example, is not only related to the bone. With the plates and screw, we treat the bone. But in most times in injuries, there is also making a rupture in the tendon. There might be a rupture in the nerve. This is why we want to add These technologies to the portfolio so that the surgeon in the very same OR that he can treat the bony injury, but also the soft tissue using an anchor system or a nerve tube. By adding joint replacement like the touch prosthesis, now we give the surgeon an option to either use a plate and screws for the arthrodesis of the joint Or the replacement of the joint. And in most of those cases, there is also some soft tissue injury or certain soft tissue strengthening that needs to be done. So we want to complement the bag to cover more share of the same surgery by the same surgeon. But we main focus upper extremities, lower extremities and CMF. Zach, clarify? And then Yes, absolutely. I just want to make wanted to make sure. Then the second is the start of MDR of 1st May. Had anything changed? And are you completely ready? And does something change in May for you as minorities. The only thing that has changed at the date of Golar I was postponed from May 2020 to on May 21. Other than that, nothing has changed. We remain on the same schedule. We have Completed now all the documentations, the validation for sterile packaging. The entire portfolio is now updated to meet the MDR requirements. And we will go and we have already scheduled the 2 foldeds now for this recertification. So we still expect to be fully MDR ready beginning of 2022, I believe. That's where we have scheduled the audit. So there is nothing changed. It's only postponed by a year. Thank you. And then the next question is there was a trend to single packaging. Could you tell me what happened in the second half year? And how do you see the trends now? That means mainly the sterile or effects of sterile packaging with a single package for screws. There is some markets that are higher in the adoption of Sterile Pact, which Mainly the U. K, which is probably the market which is the furthest advance. So we are already in process of exchanging changing portfolio offering sterile pack solutions. There are other markets that are adopting it a bit, which is in Italy. Also, Germany has started. But it's not a significant increase that we have seen. So it's not a significant shift in our portfolio. We will be ready to offer both sterile as well as on sterile package. But right now, we do not We expect that there will be a very steep change in the near future. Thank you very much. You're welcome. Any other questions? There are no more questions on the phone at the moment. We'll now move to questions coming from the webcast. The first set of question is coming from Mr. Daniel Yalovcan with Mirabeau. The first one is, while only guiding for flat margin in 2021 despite such strong expected growth? The second one would be, where was the slowdown in Q4 as you flagged that the USA and Australia was very strong? And then the last one is, was the U. S. Business with such a strong 18% growth in H2 not at all affected by COVID restrictions? Yes. So I'd like to answer the question. I think question 1 is already answered. Question 2, where was the slowdown in Q4? That's mainly coming in Europe with the direct markets With the exceptions of Switzerland, Germany and distributor markets, especially Spain. On question number 3, the business with a strong 18% growth in half year 2 Was comparable year over year. So we are comparing half year to twenty nineteen that was pre COVID With the 18% now in half year 2. Therefore, it's not affected when we look on the comparables of the 18% with the COVID restrictions. Are there any more questions? Yes, thank you very much. We have another follow-up from Mr. Yelevkan from Mirabeau. Can you elaborate for the Chinese district launch distribution launch. Where priority in big cities first or just on East Coast or all over the country? Thanks. Okay. Thank you for the question, Ms. Yellofchang. In China, we have started focusing on 3 cities, which is Beijing, Shanghai and Guangzhou. That's where we have submitted for the tenders. And once we get tenders awarded, We will start with distributors, but those are the 3 cities we will focus on at the beginning. Any other questions? Fund. There are no more questions at this time. I would now like to turn the conference back over to Mr. Brunieman for any closing remarks. Thank you very much. I would like to conclude if there are no more further questions, and I would like to conclude on a personal note. I would like to thank Dominik Leutwyll for all his contributions over the past 20 years to Mediatel as he has led Medard is in many different functions, not only CFO. And as he has decided to leave the company, I would like to wish him all the best going forward. It's with great regret because losing so much competence and success is always a significant change, but I would like to wish him all the best for his private and professional endeavors. Stay healthy, and I wish you all the best. Thank you, Dominik. Thank you, Christoph. I would like to thank the Board of Directors, the Executive Board, the team and my colleagues. They have been wonderful and enriching years that they have given me a great deal of pleasure. I remember back in December 2004, the first 3 Lock Z delivery where this 3 Lock today is a key technology for Medalltis and the IFRS conversion project as one part of the IPO in 2018 where a lot of you guys listening were also part of. Thanks a lot. I wish Medalltis all the best and much success in the future. And I'm sure not only as shareholder that Medallt's success story will continue. Thank you. Thank you, Dominik. On the same note, I would like to welcome Dirk Kirsten as the new CFO of Medartis as of tomorrow. I wish him a great start and lots of success and also fun in the new EMB team. At the end, I would like to thank you for your attention and interest into Medalltis. And in case of any questions, as usual, please feel free to contact Public List directly. And with this, I would like to conclude our conference call, And I wish you all a great day and stay healthy. Thank you very much and goodbye.