Earnings Call: H1 2020

Jul 22, 2020

Dear, ladies and gentlemen, welcome to the conference call of Medactor Group S. A. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Medacta's CEO, Mr. Francesco Sicardi, who will lead you through this conference. Please go ahead, sir. Good afternoon, ladies and gentlemen, and thank you for joining Medacta's H1 unaudited top line figures. I will be presenting most of the slides today. And for the Q and A, I will be together with Corrado Faucette, able to answer any questions you might have. So if we go through the slides, we can, I think, jump after the disclosures, Corrado, on Slide number 4? We have been, of course, affected during the H1 by the COVID situation. As we all know, this has caused elective surgeries to be deferred in many countries. The impact of these orthopedic surgeries deferral has been very different from country to country. And this clearly reflects on the differences across the geographies mainly, although there are very significant differences across the product lines as well. In terms of revenue, Medacta was able to generate revenues ahead of our expectation around 135 €1,000,000 This represents a minus 12.2% versus prior year, well below our original pre COVID scenarios. And of course, this is due to the COVID situation. So as we were saying at the beginning of this COVID crisis, those patients, which have been deferred, are generating waiting list. And those waiting list will be recovered over time, at least in the short term period. See this as a dynamic that is already happening. And in fact, if we go over the different months, we did disclose already the quarter 1 qualitative results, which were characterized by a very strong January February numbers in terms of growth. March was already negative. And in the quarter 2, we still had a very negative April with actually, it's the most negative month of the semester with minus 70%. May was already slightly better, but still heavily impacted. And June was the 1st month where we actually did see this effect of backlog recovery. And in June, we were able to record already a double digit growth. We are, of course, aware of the 2 extra business days that we have in June, but was mainly related across all geographies to this backlog recovery effect. What we were able to do in H1 was to continue to have new surgeons acquired. Those were surgeons that were somehow contacts that were generated at the end of 2019, beginning of H1. And we managed to continue the momentum and transform those potential marketing activities, both in terms of pure marketing and communication, but as well in terms of medical education. And this is something we're going to detail in the next slides. If we go on the next slide, on Slide 6, we can see the different impact by region. We can see that Europe has been definitely the area that registered the largest countries like Italy countries like Italy, France, UK, which were heavily impacted, while other areas, especially Germany, Switzerland and Austria, the so called DACH area, was affected the least, smaller valley and shortest in terms of timing. In the U. S, we did record a minus 14%. Again, it was mainly affected in the month of April May. March started to negative just in the last few weeks. And the U. S. Was the country that registered the strongest acceleration already in June, which is, of course, a very positive sign, although we know that the situation in the U. S. Is far from being totally resolved. What we have seen in the U. S. Is a successful focus on our ASC activity, which is in line with our strategy and in the current condition is clearly a winning strategy because patients prefer to have day surgeries whenever they have to have a surgery rather than spending days in a hospital. Asia Pacific did very well. We managed to have a very small impact both in Japan and in Australia. We were growing with a very strong momentum in the second half of twenty nineteen, and we still managed to maintain a decent growth around 6% in those two countries. The situation again is very fluid. And we know in Australia, they just had a new lockdown in Melbourne area. So this is part of our uncertainty moving forward. Distributors market were heavily affected. They basically could rely on their existing stock in order to cope with the decline in demand. So that's one of the reasons why we see this significant percentage wise number, although the overall exposure of Medact is relatively limited. Latin America and South Africa are probably the biggest concern moving forward. At the same time, we are adding additional countries in the pipeline of the distributors that could potentially help us moving forward beginning already in the second half of the year. If we analyze revenues by product, that's on Slide number 7, we see a huge difference between the core product lines, hip and knee, the joint segment and the extremities and spine. So we believe this is mainly linked to the different growth rate that those lines had coming into the H1 of 2020. So we are suffering more with the lines which are growing at the lower pace. And Extremities and Spine did manage to still deliver a solid and impressive growth, spine at around 12% and extremities above 40%. But if you compare the growth rate we had in 2019, both in terms of H1 or full year, you understand that this is still a huge decrease compared to our trajectory. We have seen, particularly in the spine segment where Medacta has all sterile products, which is quite rare in the spine segment, a strong increase of demand in the MySpine minimally invasive procedure. And we have seen as well an increase in ASC activities, especially in the U. S. Market. We believe as well that both extremities and spine were driven partially by the smaller impact that the DACH countries had during the COVID crisis, and that's where we registered continue to register the significant growth compared to the previous year. If we move to the Slide number 8, we can talk about a little bit what we changed in terms of marketing strategies and education implementation. Of course, we had to cope with several restrictions in terms of ability of surgeons to travel at the beginning both nationally internationally. Those situations are changing very rapidly. But during the 8 weeks of total lockdown in Europe, we managed to redesign our marketing, focusing everything on web based webinar, 1 on 1 surgeon to surgeon activities all web based. We launched Medacta TV, which was a new streaming platform to give access to all Medacta medical education programs. We changed in a very, very short period of time from physical international learning centers to mobile trucks learning centers, where we basically were able to bring Cadaver courses to the surgeons rather than asking them to fly. We continue to deliver education through web based expert meetings and a big more national event we planned in Medaxa USA was converted into 4 edition web based Congress on personalized knee replacements and kinematic alignment, which is still ongoing as we speak. In the last few weeks in certain countries, we were able to restart the surgeon to surgeon physical education. And in certain countries, we have already restarted the classic caravar courses and learning centers to continue to train our surgeons on the innovation and innovative products that we continue to deliver. There are other initiatives to cope with restrictions in the pipeline for Q3 and Q4. And I have to say that many of those emergency type of solution are here to stay and will be part of an increased momentum of marketing activities that we continue to plan moving forward. If we go on the Slide number 9, we were talking about product innovation. As you know, in May of 2020, it was originally planned the switch from the old MDD to the new medical device regulation. This is the reason why we had so many new products either CE marked or FDA cleared in H1 of 2020. We had more than 25 new products. Parts of them are important products, completely new. Others are line extension. And in this slide, you can see just a short highlight of the most important one. On the hip side, we are renewing our primary implants offering. We are expanding our revision portfolio, especially on the femoral side, which is one of the gap we had and now is getting resolved. And we have as well introduced a new 3 d HIP Planning and Execution Software, which are called MyHeapPlanner and MyHeapVerifier, in order to continue our strategy around personalized hip planning and the ability for surgeons to execute in a very simple way. On the knee side, we launched a new knee system, a new GMK revision solution that will address the potential patients that suffer from metal sensitivity. On the shoulder, we expanded into revision with the long diastasis solution and as well in the minimally invasive and bone preserving solution with a stemless metastasis that got both C Marked and FDA clearance. In spine, we expanded our portfolio, both in the cervical space and in the lumbar space. And in the sports meds, we did announce several products being cleared in different geographies, and we start to be able to expand our activity in this new segment of the market. And although it was not part of our H1 cleared products, we wanted to talk the next era of the market, our new augmented reality platform that got cleared by the FDA a few days ago. This is clearly an important milestone for Medacta. It is something we were to basically have been able to respect this timeline with the product, which is extremely innovative. Medacta was able to internally develop this technology partnering with our partners, but it is something very unique. It is actually the 1st augmented reality based total knee replacement platform. This is perfectly in line with Medacta philosophy of trying to bring it to the market innovation that both delivers in terms of potentially improving patient outcome and at the same time remaining very sustainable in terms of healthcare system. That's why we went in this direction. Nexstar requires a very low upfront capital investment. It's a very low cost per case, especially when compared with other technologies, robotics, navigation and so on. We have the ability to really push the envelope in terms of advanced personalized planning. We have really a unique soft tissue assessment potential and, of course, a very accurate surgical execution. We have developed this single use proprietary tracking system with the Nexstar TS. It is something that it's really unique and it is revolutionizing the infrared tracking system technology. As I said, the Nexstar Total Knee arthroplasty is just the first application of a new platform technology, which will be extended to hip replacement, shoulder replacement, spine procedures and down the road potentially even further. It is definitely an excellent alternative to much more expensive technologies. I'm sure it's going to have a positive impact on patient demand. And it's perfectly designed to suit the U. S. Ambulatory surgical center, ASC and as well the more challenging markets in Europe and in other parts of the world. If we go on the next slide on Page 11, We can talk a little bit about the outlook in 2020. We said that sales in H1 were heavily affected by the COVID. It is the first time in the company's history that we had a negative growth rate. The lockdowns, of course, at the end of Q2 were lifted in almost all the countries, but we are all aware about the negative evolution in other countries that could seriously affect the speed of recovery in H2 as well. So if we analyze the geography, we can say that at the moment, the U. S. Is back on track, but we still have concerns about the speed of recovery. We know there are states which are still trying to manage extraordinary situations linked to COVID. And so we are still concerned and affected as we speak by elective surgery being then in some of our accounts. In Europe, again, very different situation. Countries like TAC have been showing a very fast recovery. I think the situation in Europe is slightly more under our control, although after the summer, we are all going to see if this is completely over. I believe the potential impact on the elective surgery might be better managed by the politicians, given the fact that in many countries, hospitals have been shut down without really being inundated by COVID patients. So I think this would be managed potentially differently. Japan and Australia had the lowest impact. But as I was saying before, we are concerned about what's happening in Australia. Of course, winter is coming in Australia and this has potentially more impact than the summer. So we'll see what's happening in H2. At the moment, the only area in Australia that is negatively affected is Melbourne. And of course, in the rest of the world, in the distributors area, the Latin America is still the biggest question mark because the situation is getting worse every day. And we will see if this could lead to potentially a bigger negative impact on H2. This is the reason why we remain very, very cautious in the ability to provide a forecast for the remaining of 2020. If we go to the last slide of the deck, we basically are not able to give you an outlook for the remaining part of 2020. We have seen June with a very good sales performance, clearly showing that a rebound is possible, is actually probably faster than we were expecting and many of you were expecting. We have seen countries performing at rates, which are clearly linked not to new or not only to new customers, but mainly to a rebound and recovery of waiting list patients. And this is encouraging, but we still have to be very, very careful about the H2 2020 and even frankly on 2021 because we definitely had a slowdown in the generation or potentially generating contacts. But this is a new area, new segment of our marketing activities and we still need to measure how effective those activities are in refilling our pipeline of new accounts. I believe this was the last slide, and I will be more than happy to open for Q and A session. Ladies and gentlemen, we will now begin our question and answer session. Medakta. Ch. One moment please for the first question. And the first question we received is from Alex Gibson of Morgan Stanley. Your line is now open, sir. Please go ahead. Hi, thanks. Good afternoon. Thanks very much for the clarity and information you provide. It's helpful seeing the exit rate of growth in double digit territory. But you do caution about a slowdown in the second half. Have you seen those 2nd wave dynamics come through already? Just some background there would be helpful. And then I have some follow ups. Alex, Thank you for your question. So unfortunately, we did see some situation which we can qualify as 2nd wave, at least in Australia. We were not expecting a lockdown again, for example, in Melbourne. This has been clearly, again, reducing elective surgeries, but differently from the very first lockdown where basically all the elective surgeries were shut down completely. What we see at the moment in Melbourne is that they have reduced our time for each surgeon to levels which are probably around minus 40%, minus 50%. And this is not across all the state, but is more regional. So this is what I would call a second wave management. Very differently, frankly, is what is happening in the U. S, where if you look at the numbers with the exception of New York, where you clearly see a peak, there are states which never reached the peak. So it's not really a 1st or second or third wave. We see it more different approach to the management of the expansion of still wave. But we do still have hospitals in, for example, Northern California that simply stopped elective surgery again or others that are ready to stop on a weekly basis. So they are unable to plan in the, I would say, short term longer than a week because they want to retain the flexibility to cancel. And this, of course, has not only a negative effect on the logistics and the efficiency in the hospital, but as well on the psychology of the patients. I believe only the most urgent patients decide still to get surgery done. Okay. Yes. So to clarify that, these areas that have stopped orthopedic surgeons, there was always some belief that once they had started canceled in the U. S. And Australia. You're not so much seeing that in Europe though. Is that fair? No. We didn't see those situation in Europe. I personally did not check if those little areas in Germany that were partially locked down had a hospital where we were active, but those would be the only area where this could have happened, but it's definitely not something which is reported to me. Just as a side note, we talk about surgeries being canceled. Those are again deferred. And that's the biggest hope we still have and this is the reason why we were able to post double digit growth rate in June, while we still have countries or regions, which are not active at all. So we had states or countries, which were clearly growing, thanks to the recovery of those different surgeries. Okay, great. And my next question is just on the margins evolution. And I know we're not talking about margins here today, but if you could give some clarity on maybe the magnitude of expected cost savings you're going to make this year and whether any of those cost savings could be longer lasting or permanent because of changes in business protocol. Do you have any early insights into that? Yes and no. I mean, we don't have yet the ability to talk in details about margins. We will in September once we have the full P and L audited for H1. Under a qualitative point of view, we have been able to significantly reduce marketing costs, which are very relevant costs for any medical device company. The all the congresses travel accommodation have been completely canceled for, I would say, almost 4 months out of 6. This is a very massive impact. In terms of fixed cost, labor, employees, we could take advantage, especially in Switzerland, of a very effective and flexible government support. This is the so called reduced workload. This was applicable as well in many other countries, in France, in Germany, U. K. In many countries, we simply reduce salaries with the support of all our employees, which I would like to thank personally them again for helping all of us. But the cuts have been very, very prominent. Of course, some of those savings in terms of marketing activities could potentially stay in the year to come. I believe some of the meetings and events would probably not restart, at least in the way they used to be. I believe we're going to travel much less. So this could potentially affect travel and accommodation costs down the road. And I believe think that this will be as significant as it is in this very special 2020. Okay, great. And my last question is just on the augmented reality system. Could you talk a bit about your monetization strategy for this product and what sort of adoption you're expecting to see this year? Yes. So this is very early for us. What is important is that the cost the industrial cost of this product is allowing Medacta to have a very, very flexible go to market strategy. So we don't have to cover significant cost. We can be very aggressive in terms of go to market strategy. We are going to have more than one scenario. And of course, especially once the platform will be enriched with all the other application, we will be even stronger in terms of go to market strategy. But this, just to give you an idea, could be sold, could be provided at no cost versus volume commitment mixed between the 2. So we have the full flexibility provided by the fact that there are very, very little investment required and the cost per case is basically in line or lower than the cost per case. I'm talking about disposable associated with classic navigation or robotics. So we have a lot of flexibility there. Okay. Thank you. I'll jump back in the queue. Thank you, Alex. The next question we received is from Chris Keidler of Credit Suisse. Your line is now open, sir. Please go ahead. Thank you, operator. Good afternoon, Francesco Corrado. I essentially have now 3 questions actually. The first is, we saw this very encouraging trend in June that you reported. I hate to ask, but is there also kind of a similar continuation into July? Or was this really kind of a burst after some of these kind of supported also maybe kind of into the second half? So that will be my first. Yes. So it's of course, we are 3 weeks into July. But if we do the math, it's very clear that the double digit growth in June is not representative of the minus 70% of April. So there is still a lot of backlog that needs to be recovered. So we need to make sure that the conditions that allowed the June to recover this backlog are here to stay. For the moment, July is allowing us to work in the same condition with, again, exception the one we mentioned in certain areas in the U. S, in certain areas in Australia, where on the contrary, we are accumulating again backlog. So this recovery trend, I have the suspicious is not going to be linear. It's going to be a little bit of up and downs. But so far, we are in the ups. Okay. That sounds good. And then the second question is also on this next AR. What is basically the timelines for any approvals now in the other major markets like EU, Australia and Japan? And also maybe kind of the time lines now for the hip and spine indications? Yes. So we are still working on the European submission. We will take advantage of this postponement of the MDR MDD. So we were able to change our go to market regulatory strategy in Europe, thanks to COVID. This was one of the positive few positive aspects of COVID. So we will submit this CE marked request, I believe, around October, November this year. So approval in Europe should be expected in basically April, May next year. That's qualitatively, as we know that the MDR, MDD is creating quite a lot of pressure on the notified bodies. So but this is qualitatively an answer that I'm happy to give on the knee application. And most probably both spine and shoulder and hips, we will try to maintain more or less the same window in order to take advantage of, again, this MDR, MGD opportunity. So basically end of this year, we should be submitting everything else and then next year new platform should be available. Okay. That sounds encouraging. And then the last question is just kind of could you give us an update what is kind of the percentage of hip and knee that you provide into ASC in the U. S? Yes. So what we have seen in this period of time was simply that the percentage we were doing, especially in the month in the Q2, was significantly higher than the 25% to 30% that we were seeing at the end of 2019. This is clearly linked to the fact that patients did prefer to get their surgeries done in ASC rather than in hospital. We have cases in the U. S. Where surgeons switch almost completely and entirely from hospital to ASCs because patient request was clearly there. So the numbers we didn't do we should do, if you want, the numbers on the last few months. And we actually did it just on the semester. So I believe in the last few months, it could be even up to 40%. And what we have seen as well is that spine, which we were not expecting to follow so closely the ASC strategy, we actually had slightly over 10% in ASCs, mainly linked to either cervical procedure or minimally invasive MySpine MC, which is, of course, a very, very positive sign and in line with our new strategy and I think it's a good result so far. Okay. Fantastic. And thanks again for providing these updates. I think it was very helpful given the dynamic situation we are in. With that, I step back. Thanks. The next question we received from Brad MacDowell of JPMorgan. Your line is now open, sir. Please go ahead. Good afternoon. Thanks for taking my questions. I've got 3, please. The first one, just in terms of the dynamic between knees and hips, surprised to see knees performing better than hips. That's contrary to what we'd see from the larger peer, larger orthopedic competitors. Is there something to do with your portfolio that's seen your knee portfolio perform ahead of hips? And then along the similar lines, can you give any kind of indication about what has led the rebound in June? Was that led by knees and hips? Or was it other parts of your portfolio? I'll ask the others as follow ups. Yes. Thank you for the question. So I believe the difference the key difference between hip and knee performance is linked again to the pre COVID growth rate. So if you compare two lines which are growing at a significantly different growth rate, when you stop them equally, you will see, in any case, a difference in terms of impact. So I believe that we're simply comparing 2 situations which are different to begin with. I would expect that if the growth rate of hip and knees would have been similar, the impact would have been similar. So that is, at the moment, our main explanation. On the knee side, it is true that we do have a slightly a slight advantage, if you want, compared to our competitors with our single use instruments, which have been increasingly used during COVID. But I don't think that this is the primary driver of the difference between the two lines. Okay. And in terms of the June rebind, has that been equal across all product lines? Or has there been a particular product category that led the rebond? No. This has been equal across all the product lines. It has been not equal across all the geographies. We still have countries which are significantly down compared to last year, but we had the countries which were up big countries which were up 30% plus. So it was much more a geographic effect than a product line effect, especially if you look at those countries bouncing back up, you could see that this was impacting basically all our product lines in that particular geography. So I would say the geography is more responsible for the rebound than the product life. Okay. And then my second, just on the gross margin. It sounds like mix could product mix could be quite positive given the better performance of Spine and Sports Med, but obviously volumes are dragged. Can you give any kind of indication perhaps Gerardo on gross margin dynamics in the first half? Yes. Maybe I will ask Corrado to give a qualitative about our gross margin drivers because this is something we checked quite in details. And we have seen that more than the product lines alone is relevant to the mix between product lines and country where these products are sold. But maybe Corrado can give you more flavor. Yes, sure. Thank you, Francesco. So let's say the following. There are positive drivers for our profitability and gross margin. One is for sure the mix in terms of product lines. As we said in the past, new business lines are positively contributing to increase the profitability of the company. And there is another positive, they contributed to the increase of profitability, which is the increase in revenue in the highest price markets like U. S, Australia, Japan, Switzerland. Of course, now it's too early to give you any quantitative information in this regard. And it is also difficult to say how the profitability will be at the end of the 1st semester because of there is a very, very complex mix of trends in terms of both geographies and product lines. So we think that the profitability of our business in the 1st semester will have an impact from this situation because the mix of revenue is significantly different from the last period compared to the last period. But again, first, it's early to have this final information. And second, in this conference, of course, we are not going to provide any quantitative information. But flavor I want to give you in terms of qualitative information is this one. Okay. Then my final question, a bit longer term, I guess. Obviously, a big part of the IPO story was expansion into the U. S. Where you were under indexed. Can you give any kind of comments at this stage whether the pandemic is impacting your investment plans into the U. S? Or perhaps the macroeconomic backdrop in the U. S, is that having any kind of impact on your investment decisions into that geography? Yes. Of course, I would say that in the immediate short term, we are more cautious in engaging new fixed cost until the situation does not become more clear. It doesn't mean that we are not still hiring good sales people, agents. And whenever there are opportunities, we what we are doing is basically to vet them even more in order to make sure that those are good opportunities. So we are just a little bit more cautious in the very short term. But on the other side, we believe that the current situation is actually providing us with more opportunities than before. We have seen some small and mid players facing bigger problems. We have seen companies like Zimmer Biomet completing their merger. So there are quite a lot of opportunities in terms of new sales people, distributors, particularly in the U. S. That we are constantly vetting and expanding. So we did continue to hire. We did continue to invest in implants and instruments production in order to cope with a very high potential demand. And this is potentially affecting our immediate short term growth rate in the U. S, but definitely not mid- and long term for sure. Super. Thank you for your answers. Thank you. And the next question via the phone is from Daniel Iryvkan of Mirabaud Securities. Your line is now open sir. Please go ahead. Hello, Ozawa from my side. Just one question. Other medical device companies active in the more elective world say that there is the pent up demand is going to last until September, so there's quite a big backlog. What is your view in your business? Do you know the insight? How much is really, let's say, backlog in Europe then let's assume that there is no second wave, is then already building the normal people to go to surgery? Or how big is your visibility to go to the last quarter into the year? That's my question. Yes. Thank you for your question. I think it's, again, very difficult to answer if you take Europe as a country because we all know that it's very different. So if you for example, if you compare the situation in Switzerland, Germany with Italian or France situation, it's completely different. In Italy, they are still generating waiting lists because they are significantly behind previous year. While on the contrary in Switzerland and Germany, we start to see these rebounds happening. So to state that this rebound will take until September, maybe it's potentially true for more the DACH region, so Germany, Switzerland, Austria. It's definitely not true for Italy, Spain, France and definitely the UK, which it's a country where they just restarted. We have very little exposure there, but it's I mean, we have been probably impacted the most in terms of a percentage of droppage was really the UK. So I would say it's impossible to say that or it's wrong to say that July, August, September will be the pent up for Europe. It is potentially more accurate to say that this would apply for a DACH and maybe definitely longer, I would say, for the rest of the Southern European countries? And then what you've just said about the hypothesis and need to remain very clear in our head is that this is provided that no second waves or other lockdowns are affecting this scenario. But we don't see it as clear as you were saying it 3 months and that's it. That's very clear. For instance, in Italy, where you say that there is still a waiting list building, But how big is the waiting list? I mean, is it for the next 3 months? If it's normalizing, Europe, you have 3 months of backlog? You know what I mean? Yes. So if you do your own math and you take 3 months with Italy in particular was maybe minus 70% for almost 3 months in a row. Even in June, it was still affected significantly. And It's clear that in order to cope with this waiting list, it takes much longer than 3 months simply because there are no resources, infrastructure to reabsorb this demand. What is relevant as well, which I believe we don't have to forget is that during those 3 months, new patients have not been screened by surgeons. So depending on the countries, the longer the lockdown has been, the longer the number of new patients which have not been seen and not been diagnosed with an elective case is increased as well. So there are those two effects which are relevant. So waiting list, those are patients which have been indicated to get surgery done and not being treated. But there is as well a backlog of patients that still need to be seen and that has not been seen for months in Italy, for example. You can go see it after if you have 2 very positive different elements going forward, assuming there is no more lockdown, right? I would say elective surgeries in general have our markets with a very rigid demand. So those patients, they don't disappear. They are there. They just need to reenter the system and then they will be the usual percentage of patients coming in. So if it's not September, it's just a question of time. It's those are patients that are going to be treated sooner or later. So if it takes 3 months, 6 months or 9, I think it's going to be much more in the 9 to 12 months before we really see a normalization, not only because of the backlog, but because as well what I was saying that patients still need to go to the doctor because in many countries they choose not to go and wait, but this would not have been the case in the normal scenario. Okay. So there are some factors we should consider. Yes. Thank you. The next question we received is from Alex Gibson of Morgan Stanley. Your line is now open sir. Please go ahead. Great. Thanks for taking the other question. I just have one more on new surgeon starts and how you think that will impact your growth over the next couple of years. You talked about some concerns on 2021 because of the uncertainty of new surgeons ramping up. If we're and it's hypothetical, but if we take 2 years out, so end of 2021, if the lockdown measures continue as they are today, the backlog is able to come through, can you actually anticipate you still being on track with your pre COVID expectations by 2021? Or do you just have to be resigned to the fact that you haven't been able to get new surgeons on board as quickly as you'd like. And so you've effectively lost maybe 6 months of new surgeon starts. So we'd be a bit delayed in that sense. Just some comments around the new surgeons would be great. No. This is, frankly, the number one focus of our activity because we did lose or let's say, we were forced to change our ways to refill the pipeline of new surgeons for almost 4 months. We were not able to engage with surgeons in the way we used to have. I was very pleased by the fact that we were able to come up with new methods to remain engaged with the existing surgeons, with surgeons that were starting to use our products. And we still manage, as I said, that we have surgeons starting in May June that never used Medacta products before, but those were surgeons already in the pipeline. So what we have to check now is how faster we can go back to the original way of creating the pipeline of new surgeons and how effective we have been in utilizing the new opportunities we created in the month of the lockdown. And this is something we will start to see in the second half of this year. And I will, of course, do as much as we can not to lose momentum, especially in the hip and knee business. We see that shoulder and spine, they continue to grow, but we were growing much faster than this. The not losing momentum and making sure that the overall absolute number of surgeons that are in the pipeline remains in line with our plan is our number one focus moving into H2. And as I said, it's not too much for the results of 2020, but it will have an impact on 20 21. So just to say, no, we go back to 2021 numbers, nothing happens, I think is too optimistic. I believe we need to be conscious of the fact that for many months, we were not able to engage in the way we used to. And the new activities marketing wise still need to be proved in terms of conversion rate, etcetera, which is what we are checking right now. But we have much less visibility than our new areas. Yes. I guess, well, that was going to be my next question is because you seem to have got quite a lot of engagement on your new platform, online platforms. Is there any chance that actually that could have helped you expand your reach to new surgeons that you didn't have before? Or is that also would be too optimistic and really it's this is just better than nothing? The problem of web based initiative is that you quickly have a lot of numbers, but you have to recognize what is noise and what is signal. So what is really meaningful contact from what is just somebody that was had 10 minutes to lose and registered for your website. So I would say in the past, we were extremely focused with very targeted approach. On the web based activities, we still have some of the participants which are targeted, but then you have 100 more which are not. And so we have to understand well how many of those surgeons that did participate in many of our activities are going to become customers and how many are not. So that is the big question mark we still have in front of us. And I think it will be partially at least addressed and resolved and understood in H2 because we're going to be able to go and get in contact with those people and see what else needs to happen under a marketing point of view before they start. Yes. Okay. And very last one is, of your sales growth pre COVID, how much was that driven by new surgeon start? Was it like 30% of your sales growth per year, constant currency sales growth in new surgeons? Or was it a smaller proportion? Yes. When we talk about growth at Medacta, we always refer to the base customers that are growing or declining or hit by price pressure, etcetera. Then there are what we call the carryover, so surgeons that just started the year prior and now they contribute to the full year growth. So that's usually the largest part because there is a ramp up and because they're going to contribute for 12 months, while in average in the previous year, they contribute for 6 months. And then there are the brand new surgeons of the year, which are usually contributing for much less than 30% because they just start on average for 6 months. And usually when they switch, they do it in a step by step approach. So there is a ramp up there. So the pure new customers, they don't impact a lot in the current year, but they usually are important on the next year, which is why I'm concerned about 2021 more than 2020. Yes. Okay. Okay, that's clear. Thank you very much for your time. Thank you, Alex. And the next one is from ladies Justine from Press Agency. Your line is now open. Please go ahead. Yes, hello. I don't know if I heard well because my line wasn't functioning very well, but I heard that you spoke about reduced salaries. Correct me if I'm wrong. Is this was this on a voluntary basis? And you were speaking about hiring new people? Are you on the other side considering reducing employees in different locations regarding to COVID and its consequences? Thank you. No. So in many countries, the salary reduction was supported by government programs. So the total impact was somehow offset by government. This was particularly the case in Switzerland. In terms of salary reduction, for example, in the U. S, we're so first of all, we did not reduce number of employees of Medacta during COVID at all. What we did in certain countries where government support was unclear or not possible to be used, they did on a voluntary basis some salary reduction for a short period of time. For example, in the U. S, they did reduce their salary for around 2 to 3 months, if I'm not wrong, 2 months and a half. But thanks to those activities, we are absolutely able not to lay off or furlough any of our employees. Did I answer your question? Yes. Thanks. And so for the future, you're not planning on reducing costs regarding to employees due to COVID situation? No, we don't. And on the contrary, we will most probably continue to hire because what you don't see in terms of revenues is that although on the full year, we will still most likely post a negative growth if things are continuing to be positive like June, we will have monthly sales, which will be significantly growing compared to last year, which will require some additional efforts in terms of employees, sales support, logistics, etcetera. So we still probably are going to continue to hire. We did continue to hire in certain countries like Japan, where as you could see from the results, the company did continue to grow. So it's very local what we did, but we did not lay off anybody in any country and in certain countries we continue to hire. All right. And last question around Nexstar. Are you already able to provide perspectives about the turn on investment and how important do you think it's going to be for the next semester of 2020? I think for the next semester of 2020, it will be important for Medacta to understand how effective the system is in the OR. We have already several centers across the globe that will start to use it either because the product is cleared or through pre CE Mark studies, same in Australia. So we will work with our customers to understand how best utilize this product, its strength and weaknesses. And we'll continue to develop it and improve it in the months years to come. So I don't think in terms of sales, we're going to see an important relevant impact in the second half of twenty twenty, but it will be an important fine tuning both to define the go to market strategies in the different markets and to create the future teaching centers in order to fully launch the product in 2021. All right. Thank you very much. Thank you. As far as we receive no further questions via the phone, I hand back to the speakers. Thank you. Thank you very much. I believe we had a very long Q and A session. I think it's absolutely necessary given the situation and the conditions and given as well the amount of good news we have to discuss. I very much look forward to our next call in September and hope to be able to continue to deliver some good news to the market. Thank you very much. Thank you. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.