Ladies and gentlemen, welcome to the Straumann Group Q1 2023 Results Conference Call and live webcast. I am Alice, the conference 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 a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead, sir.
Thank you very much, good morning or good afternoon to you all. Thank you for joining this conference call about Straumann Group's first quarter results for 2023. Please take note of the disclaimer in our media release and on slide 2. During this conference, we are going to refer to the presentation slides that were published on our website this morning. As usual, the presentation and discussion will include some forward-looking statements. The conference will follow the usual format. As shown on the agenda on slide 3, we will first give you an overview of our good Q1 performance, and then Marcel Kellerhals, our Head of Investor Relations, will share details about the financials. After that, I'll provide you with an update on strategic initiatives and our outlook for the future. As always, we will answer your questions at the end of the presentation.
Let's start with our highlights and move directly to slide five. An exciting first quarter lies behind us, considering the anticipated challenges. In the first quarter, the group's revenue reached CHF 596 million, building upon a very strong comparative basis from the previous year. Patient flow remained good in most countries, leading to a dynamic growth rate in all regions and an overall organic revenue growth of 3.4% for the group. As expected, the developments in China had an impact on the overall Asia-Pacific performances, driven by both the volume-based procurement process, VBP, and the COVID-19 lockdown, which I will come back to later. A special first quarter highlight was that we presented our new digital solutions, which we have invested in over the last two years, to build a unique customer experience.
This includes Smilecloud, a smile design collaborative platform, and a Straumann FALCON dynamic navigation system. ClearCorrect launched another important software upgrade, ClearPilot 6.0, to give providers a more intuitive and user-friendly treatment planning experience amongst a series of new developments, allowing clinicians to treat more advanced cases. We confirm our full-year outlook. We expect organic revenue growth to be in the high single-digit percentage range and profitability at around 25%, including growth investments. Moving on to slide 6, you can see the regional organic revenue growth rates for the first quarter, as well as the percentage of the regional contribution to the overall revenue of the group. Patient flow remained good in most countries, and especially EMEA, the group's largest region, had a particularly strong first quarter.
EMEA grew organically by 9.2% compared to the first quarter of 2022, accounting for CHF 287 million. All segments contributed to the regional growth, including our core implantology business, which was complemented by a strong contribution from orthodontics. Intraoral scanner continued to show high revenue growth, particularly in the Eastern and Southern Europe, as well as in the Middle East. Germany, being the largest country, drove revenue in absolute terms, while Turkey continued to show a very strong growth rate. The North American region reached 7.2% organic growth in the first quarter, with a revenue reaching CHF 182 million. The region delivered excellent growth on top of last year's extremely high baseline. Growth was driven by immediate implant solutions, the challenger brand Neodent, and intraoral scanners.
Orthodontics pursued its development and showed solid growth in the first quarter. The performance of the Latin American region is a continuous highlight. The region grew 20% organically with a revenue of CHF 47 million in the first quarter. All segments contributed strongly with Latin America home brand Neodent, complemented by the Straumann premium implantology segment. The Virtuo Vivo intraoral scanner market penetration contributed to the strong revenue growth. While still at a low base, the orthodontics business grew very rapidly in the first quarter across the whole region. The region's largest market, Brazil, grew strongly, while Mexico, Argentina, and Colombia also showed very good growth rates. From a general perspective, the Asia-Pacific region performed well in the first quarter. Among the standout successes was the growth achieved in Japan, in Australia, Thailand, and India.
Also, newly established countries such as Vietnam and Malaysia are accelerating growth. However, due to the expected strong negative headwind coming from China, which hampered the region's results, the Asia Pacific performance reported negative organic revenue growth of 23.5% and accounted for CHF 80 million in revenue. Moving on to slide 7, you can see the different dynamics that affected the business in China during the first quarter. At the beginning of the year, COVID-19 significantly limited the patient flow in the country. This effect tapered off towards Chinese New Year in the middle of February. Meanwhile, the impact of the volume-based procurement process gradually became stronger. The new pricing has been quickly implemented, both in the public and private segments, driving average selling prices to a much lower level.
As expected, the pent-up demand generated in the past few months, combined with the lower average selling prices, resulted in a significant acceleration of the patient flow, which led to important increase in implant volumes towards the end of the quarter. With this, I will hand over to Marcel to provide additional details on the business and regional performances.
Thank you, Guillaume. Good morning and good afternoon, everyone. Let's move to slide 9, where we can see the breakdown of the revenue development. There is no doubt that this was a solid quarter given the strong comparative base from last year. The currency effect in the first quarter was impacted by a negative development mainly related to the euro, the Turkish lira, the Japanese yen, and the Chinese renminbi. The impact amounted to CHF 21 million on our first quarter revenue. The effect of mergers and acquisitions from PlusDental and Nihon added CHF 8 million, bringing the adjusted revenue base to CHF 576 million. In the center of the chart, you can see how the different regions contributed to overall growth. EMEA offset the negative result in Asia Pacific, which was due to China, as Guillaume explained.
North America and Latin America both contributed to a solid growth, which leads to a 1.1% in CHF or 3.4% organic growth in group revenue. With this, I will give back to Guillaume.
Thank you, Marcel. Let's talk about our numerous achievements and strategy and move directly to slide 11. With a clear ambition to become a digitally powered oral care company, we have defined an investment roadmap for our digital transformation, which we talked about in February. We are very pleased that in the first quarter of this year, we were able to present software solutions that will contribute to delivering a unique customer experience across all digital touchpoints. On slide 12, you can see the summary of the several new digital solutions we have presented at the International Dental Show in Cologne in March. All those launches are the results of the continuous investments we are making in this area. Looking at the clinician journey, digital impression taking with intraoral scanners is the major entry point to the digital workflow.
Offering intraoral scanners at three different price levels, Straumann introduced a new software solution for its entry-level Virtuo Vivo intraoral scanner, which improves the speed and accuracy of digital impression taking, delivering benefits such as precision and efficiency during clinicians' daily practice. In addition to Virtuo Vivo, the self-development of the new TRIOS 5 intraoral scanner from 3Shape launched during the last quarter is participating in our overall digital dynamic. The intraoral scans are connected to the Straumann AXS digital platform, which is providing a seamless integration to the different Straumann solutions, eliminating the need for entering patient data manually in different applications along the treatment journey. Moreover, we have been very excited to launch Smilecloud, a smile design and centralized collaboration platform for clinicians during the International Dental Show in Cologne last month.
Available in Europe for the time being, Smilecloud will also be integrated within the Straumann AXS platform together with our coDiagnostiX implant software to create a seamlessly integrated implant treatment software suite. All this will help drive our Smile in a Box service in the future, which is already available on the Straumann AXS platform in North America. We plan to launch Straumann AXS in Europe by the end of this year. To dive a little deeper into Smilecloud, let's move on to slide 13. In October 2022, we have entered a partnership with Smilecloud to help doctors with patient acquisition, treatment planning, and increased patient conversion rates. This platform was designed to address three common challenges in dentistry. Firstly, the problem of fragmented data is making the collaboration between all dental professionals difficult along the patient journey.
Secondly, in dentistry, design follows a nonlinear process which creates unpredictability for the end result. A third challenge is the disconnected workflow and the habit of specialists tending to work in silos, which also hampers collaboration. Smilecloud was created to solve those challenges by streamlining the process towards optimal treatment outcomes. The platform provides a centralized space for data that is accessible anytime and on any device. With the ability to create a virtual patient, Smilecloud helps bring a more holistic view to the clinical stakeholders. Moreover, the design process has become more intuitive and less time-consuming by adding automation to it. The platform uses AI, photorealism, and also biometrics to engage patients better, resulting in faster processes and more realistic visualizations.
Smilecloud also fosters collaboration by combining outputs from different software, allowing specialists to connect and work seamlessly together towards the same treatment goal to deliver the best potential results. On slide 14, I would like to talk about Straumann FALCON , our first dynamic navigation system, which we have developed in partnership with Mininavident. It's a powerful tool to help dentists monitor their surgical activity in real-time during surgery. With 3D visualization of the instrument in real time, it allows the use of freehand technique and gives surgeons the flexibility to adapt their approach during surgery. It combines CBCT and IOS scans to plan treatments, and its smart glasses allow clinicians to see physically and digital information simultaneously. Furthermore, it is compact and portable, which is significantly increasing the ease of use in different surgical operatives.
Straumann FALCON is also changing how dentists approach surgery by documenting their procedures. This allows clinicians to make more informed decision when treating complex cases while keeping patients engaged and reassured during every step of the treatment. At the end, Straumann FALCON is designed to increase efficiency within practices, ultimately leading to better oral care outcomes. Let's continue with slide 15, where I would like to highlight that our digital transformation across all our brands as we are continuing to invest in digitalization to leverage our core businesses. This enables us to integrate our digital solutions, such as clear aligner treatment planning and Smile in a Box, which will boost efficiency when it comes to patient treatment. Our digital solutions are available across all implant brands, which is driving the right synergy for technology investments. Let's turn now to our orthodontics business on slide 16.
During the first quarter, we launched a series of new developments addressing our customers' needs and supporting them to improve the revenue stream and profitability of their practices. On the one hand, these new features allow doctors to treat more advanced cases, enlarging their group of potential patients and lifting their revenue stream. On the other hand, they are designed to make treatment planning with ClearCorrect more efficient, helping the profitability of practices. As you can see on the slide 17, we have added new clinical features to the aligners, making it easier to treat patients who have missing or growing teeth. Pontics, bars, and eruption guides are different shapes of placeholders for missing or growing teeth, which can be built into the aligners to accommodate patients of different age groups and orthodontic conditions. This complements a series of important clinical improvements we have made over the last few years.
On the software side, the new upgrade of our ClearPilot treatment planning software with its 6.0 version, as shown on slide 18, is one of the ways we are making treatment planning easier for clinicians who work with us. The interface of the software has been redesigned to be cleaner, simpler, and at the same time, provide additional features needed to plan complex cases. Point-to-point measurement helps to make treatment plans more predictable. Improved gingival morphing, as well as collision and space editing, help to visualize the outcome of a treatment plan. Those features are designed to make the planning process intuitive and efficient for clinicians while improving the predictability of the treatment plans for the benefit of the patients. The same is true for the improvements we have made to the doctor portal, which you can see on slide 19.
The enhanced dynamic prescription form is a digital decision tree, which guides the clinicians towards optimal treatment protocols during the case setup. The collaborator suite now enables doctors to order treatment planning services directly through the portal and easily get support and assistance on their cases as wished. Slide 20 shows how all these new launches are coming together to improve our value proposition and form a seamlessly integrated digital workflow for orthodontic cases. Our devices, services, and software support customers during their treatment journey to facilitate fast and X-ray diagnosis, speed up treatment planning, and support doctors in treating cases from simple to advanced. As you can see on slide 21, we already executed on our new brand strategy at the IDS in Cologne to continue building upon our strong and globally recognized brands.
Although IDS was one of the largest shows, we have also implemented the new branding strategy at several events globally during this first quarter. On slide 23, you can see the market potential as a reminder. While we are well underway with our growth strategy, our addressable market is still huge and constantly growing. The CHF 19 billion market potential leaves us with massive growth opportunities in all the different business areas. To ensure we keep capturing a significant share of this market potential, we will continue to invest in future growth and innovation. This takes us to our outlook on slide 25. Microeconomic uncertainties remain, geopolitical tensions did not ease up during the first quarter. However, we have seen that the patient flow remains stable.
With an estimated globally addressable market of CHF 19 billion, remain confident that we will continue to gain market share and progress in all our strategic priorities. Despite the impact of the Chinese volume-based procurement process, which will require a year of transition and readjustment in China, we will continue to invest in our growth and transformation. As a result, we confirm our full-year outlook and expect organic revenue growth to be in the high single-digit percentage range and profitability at around 25%, including growth investment. With this, I would like to open the question-and-answer session. If you have a question, please press star one on your phone to join the queue. As usual, we kindly ask you to limit the number of your questions to two in order to give other participants a chance to ask their questions within the available time.
Alice, can we have the first question now, please?
Our first question comes from the line of Maja Pataki with Kepler Cheuvreux. Please go ahead.
Yes, good morning. Thanks for taking my questions. Guillaume, you have mentioned during your presentation that the patient flow remains dynamic in most markets, and I was wondering if you could give us a bit more color on what you're really referring to. Are you talking about a slowdown in implant patient volume in some markets, or are you referring to China? That would be my first question. My second question on China specifically. Now at the end of the quarter or actually in May already, has anything surprised you with regards to China or have the developments been broadly in line with what you were expecting in February? Thank you very much.
Yeah. Good morning, Maja. Thanks for the question. Well, no, when it comes to patient flow, it's actually quite dynamic in most geographies. When I was saying most geographies, I was excluding China for the beginning of the quarter. That was only the kind of a twist here. But we have seen a very good patient flow in Europe, all EMEA. We have seen a good patient flow in North America, even though again, like a little bit Q4, still some questions to doctor on the treatment plan and trying to negotiate a little bit more prices than in the past.
Still, we have seen that, at the end, patients are really taking the treatment, and we don't see any downtrading at all from a brand standpoint. Latin America has been very dynamic, and all countries in Asia-Pacific except China have been also, you know, very dynamic. I would say only Korea, because of the very strong inflation versus the fact that the population is living quite a lot at credit, then we have seen some slowdown in Korea. That's why. For the rest, it's a pretty healthy dynamic as we speak.
When it comes to China and specifically, I spent the whole week, past week actually in China, which was also very interesting and important to realize what's going on directly on the field. Actually the thing or unfolding so far as we have planned, we have seen an implementation of the VBP pricing very quickly done on the private side, while the public is implementing as we speak. It's a little bit longer because of the administrative side of it in the public area. The patient flow got very dynamic in the second half of March, thanks to, of course, the pent-up demand and the fact that those prices are now attractive for a larger part of the population.
I would say the forecast or the expectations we're having from a patient flow and a volume growth for the China market when we discussed in February are intact on our side. We do believe that we will see that very strong dynamic in implant volume in the remaining part of the year.
That's great. Thank you very much.
The next question comes from the line of Christoph Gretler with Credit Suisse. Please go ahead.
Thank you, operator. Good morning, Guillaume, Marcel. I also have another two questions. You know, first, you know, would you be able to rank, you know, the growth, you know, by business line? I think, you know, in the past you had some good charts, showing, you know, kind of implant, auto, digital and, you know, biomaterials, you know. That we may get a bit of a better sense about the relative growth, you know, of these, four businesses. You know, that would be my first question.
Yeah, Chris, that's right. Yeah, we were talking, we were using some pluses or. That's a good point, Chris. Thanks for the reminder, and I could use that actually. I would say for our approach on implant, it would be I would say 2 pluses or 3 pluses. For auto it would be 2 pluses, and for digital it would be 3 pluses. Biomaterial is following the implant side. I think it's pretty dynamic as well.
Okay, that's very helpful. Just on China, I wanted to ask, you know, could you maybe discuss, you know, what happened on the private side, you know, more specifically, and in particularly on pricing after the VBP now?
Yeah, I think on this side, the private side has been very reactive as planned. Actually, we were really clear saying that we were seeing a private that would implement that all across the board, and this is actually what has happened. Then all the prices on the mainly DSO side that are a large part of the private side in China, are implementing those new prices and are all obviously trying to find a way to benefit from this very large volume gain that they are going to have. They are working a lot on efficiency.
That's why we are helping them out a lot on education, on trying to also put processes in place, you know, that they can answer the demand that they are having right now on their side. Yeah, we see the private side are going to drive volume also. That's why we want to be a strong partner of those customers in the very short future in China.
The pricing was more or less, you know, what you expected to happen on the private side?
Yes. Prices. Yes. They immediately applied the VBP pricing. Some tried to bargain a little bit and even go a little bit lower because, you know, in China it was more on the public side that we were having much higher prices because of the fact that the doctors were the best educated. Then the trust of the population in China for health in general, but dental in particular, were more into the public side. Then the private were always wanting to attract patients with lower prices.
They were trying to implement a little bit this, but they see that they don't need to implement lower prices for the time being than public, because the patient flow is very dynamic as we speak.
Mm-hmm. Okay, thanks. Very helpful. Appreciate your comment.
The next question comes from the line of David Adlington with JP Morgan. Please go ahead.
Morning, guys. Thanks for the questions. Again, I apologize, just again on China. I just wondered, given the dynamics between volumes and pricing, just wondered if you were able to point towards a point in time-wise where you might return to revenue growth either in China or in wider Asia Pacific. Secondly, just in terms of the size of the price cuts, just wondering how you're feeling about margins within the Chinese business. Thanks.
Hi, David. I think we see the obviously the price cut being very important and exactly in alignment with what we just said also in February. I think it's all unfold again on this side also as planned. It's a 40%-45% down in ASPs. We were planning again a volume growth for 2023 around something like 25%. I think we might have some upside on the volume side, which would be really good news in order to absorb a little bit the overall effect of the margin cut.
Now we have also, of course, restructured China in order to be able to face a little bit those new market dynamics and being able to serve customer in a more efficient manner, which is what we have already executed during Q1. I think I'm very pleased with how the team has reacted and with the speed with which we have been able to implement our approach here. That was. That means that for the 2023, I. We are not there to say that China is going to grow for the total year. I don't think it's going to be the case. Let's say the effect of the VBP could potentially be a bit lower that plan if we continue on this trend.
Still to be seen on the patient flow side, obviously, because there is a big part coming from the pent-up demand. What's going to be the regular flow in the months to come, I think we will start to have a kind of an idea when we will see June, July, where it will give a little bit of a better perspective of what would be the potential growth rate volume-wise. As you know, Q2 has been also impacted by some COVID-19 lockdown in April. The real information from patient flow dynamic and volume gain will be June, July, August. I think in those months we'll be able really to realize what is the new situation in China from a patient flow standpoint.
That's helpful. Thank you.
The next question comes from the line of Veronika Dubajova with Citi. Please go ahead.
Good morning, and thank you for taking my questions. I have 2, please. The first one is just, Guillaume, if you can remind us how you're thinking about the phasing of growth from here through the remainder of the year, both from a group perspective and also specifically for APAC, that'd be helpful as we think about modeling. I think on the prior call you had talked about margin progression or, you know, margins being very much second half weighted. Just curious, given the performance that you've seen in the first quarter, whether you're still comfortable with that assumption. Thank you.
Hi, Veronika. as explained in February, we have seen, yes, our, let's say, planning for 2023 back-end loaded. This is what we are still very much planning. We are actually very much in line with what we were planning and what you guys were seeing as well. I think that's that's coming from a comparative period that are going to be easing as we move along the year. You know that Q1 was very, very high with a 27% growth there. We are going to have then better comp as we go in Q2, Q3, Q4.
For China and Asia Pacific, Q4 was also very much impacted by the strong lockdown that we had in China in November, December. We are really expecting to have higher growth rate as we go. I think a higher growth rate in Q2, Q3, even higher in Q4, and we think that we are going to land as planned on our guidance, which is going to be high single digit. For the time being, all is very much in line from a top line perspective and with the guidance we have provided. On the margin side, yeah, we are also still in line with our expectations so far.
We are balancing, of course, those lower growth rate, but still wanting to keep investment at the necessary level when it comes to both our digital transformation, as you have seen some first outcome at the IDS, but also still planning for expansion in our manufacturing side, because you can imagine that being able to embrace 30%-35% potentially higher volume growth from China is also putting a lot of the pressure we're seeing in operations that we need to cope with. We have our investment plan that are in line, and at the moment, as top line is in line, you know, we are managing the margin as we were expecting from the beginning of the year.
We are pretty confident here.
That's very helpful, Guillaume. My second question is just around the digital solutions that you've introduced at IDS. Obviously quite differentiated. Just curious what's the traction that you have seen so far, and what's been the feedback from dentists? Thank you very much.
We have been really, really pleased with the feedback from IDS. A lot of our customers and partners have really noticed our significant progress on digital solutions and really differentiated solutions. As I answered a bit earlier, we have a 3 plus on our digital solutions. I would say for Q1, strong market penetration of IOS still, thanks to our 3 different price point. Vivo is working very well. Partnership with 3Shape is going very well. Their technology is also very well welcome. Now we are ready to guide all our clinicians that are using those tools to the Straumann environment where they can get then the digital solution on the ortho side or the implant side.
You know, this is just the, the beginning for us, I would say, in driving this kind of a Straumann environment and platform. The, the feedback from the clinicians with regard to their experience has been really, really positive. You know, our Straumann AXS platform has been launched in the U.S., for the time being, and we have seen that, thanks to the customer experience, our Smile in a Box has been moving to the new platform immediately, because they have seen a huge benefit of this.
So far, we are really happy with the fact that clinicians have been not only pleased with the outcome, but already adopting a lot of the new capabilities we gave them for gaining efficiency.
The next question comes from the line of Oliver Metzger with ODDO. Please go ahead.
Good morning. Two questions from my side. First is on the solutions. Can you remind us on the pricing? How do you want to make money on your basically new investments? Do you think more about one-time payments or ongoing license fees? Second question is also a comment on the price development in the discount segment. On the IDS, some discount players have offered implants for even EUR 25, which is significantly lower than the level of EUR 40 we saw two years ago or EUR 60 we saw four years ago. We thought some years that the lower level
The lowest level is already reached, now it's even lower. How does this negative price development impact your view and strategy on the discount side?
Thanks, Oliver, for the questions. Digital solution, that's also a good question here. How do we make money for this? First, there are two ways we are looking at it. The first one is that, you make money with the equipment that we are selling, and IOS is of course a very dynamic segment for us, through both our own product, Virtuo Vivo, and with our partner portfolio 3Shape and Medit to some extent. We have a strong top line and gross margin that are at a good level. I think that the first one is, equipment sales.
The second one is obviously the pull-through, which is coming from those digital solutions to our consumables, implants and clear liners, which is a must to offer a unique customer experience to still be in the game. I think it's going to be in the future, one of the most important differentiation in between the different competitors. I think there is a must to offer a very sleek and seamlessly integrated solution. The third one is about providing additional services when you are on the platform.
That means that when you are selling an implant, you may ask for adding a surgical planning which is done for you, or you want to have a surgical guide which is printed for you. You have different elements that you can add to the mix, which is helping to upsell clinicians with regard to the relationship we have with them for each transaction. The last one is about, yes, licenses. We have licenses for coDiagnostiX or surgical planning software. There is licenses on Smilecloud platform. We are moving from, I would say, on-premise-based systems to cloud-based system, where then that's where you have your subscription fees.
You get away from the pure license system that you have to track and pay every year. You have like a we are all doing with our apps or whatever, it's this cloud-based subscription fees that we have implemented already with Smilecloud actually. This is going to be a small revenue stream to start with, but if we're able to grow it as planned, then it might represent something that will be a good help for top line growth in the future. When it comes to price development, we have seen at IDS some low prices, but you know, Oliver, we have seen that every IDS, and we see that on the field every day.
You have a lot of competitors that are not adding anything to offer than only price because they don't have any differentiation on the technical side or the product per se. They don't have any differentiation on the service side. They are also not able to participate in any kind of platform or ecosystem. The only way for them to try to win is price. We see that pricing is not today, one of the major driver for market share gains. It's a lot about innovation, service, and of course, technology. It's not so much different than what we have seen before. We are not seeing our ASP from challenger brands impacted by this. On the contrary, I would say.
To answer your question very directly, some of the prices we have seen at IDS are not at all changing the strategy, the strategy that we have in mind and that we are currently executing.
Okay. That's helpful. Thank you very much.
The next question comes from the line of Daniel Jelovcan with Stifel. Please go ahead.
Exactly on the pricing discussion, I think you have implemented general pricing increase as of the 1st of January. How has that been implemented? I think it wasn't in all regions at the 1st of January. If you can give us an update there. The second question is on China VBP. As far as I have in mind, a third was or is public, and now it seems like a third is on the private side who adapts VBP. The other third is private without VBP at all, where you sell Roxolid BLT, BLX, which is not included in VBP. Is that correct or part of assessment? Thanks very much.
Yeah. On, on the price increase, you're totally right. I think the price increase has was phased in different regions. We have been implementing all the price increase as planned. Now, if we look at the situation from today, we have already seen some of the positive impact allowing us to offset some of already the effect of the China VBP than the significant price cut. We did not get any major pushback from clinicians, generally speaking, on this more important price increase than usual. We are continuing to execute on this one, and monitoring also discounts to make sure that we are going to have an effective average selling price increase step-by-step along the quarters.
When it comes to China VBP, let me try to help here, because it has changed over the quarters as the Chinese authorities were planning their VBP process. At the beginning, it was only for the public area, and the public area was around 25%-30% of our total business. Then step-by-step, and that's why the process has been delayed, the China authorities wanted to apply that to almost all markets. They have been seeing a lot of the major DSOs representing the private side in China, and they're onboarding them on the VBP process in order to ensure that the price, the new price, will be implemented across the board.
The outcome at the beginning of the year has been that the VBP that has been presented was already involving more than 60% of the total market, meaning all the public and a very large part already of the private sector. Finally, when you have a DSO, which is going to implement the new pricing, the rest of the private sector has some really challenge to stay at the former pricing. That's why we were already planning that most of the private sector will also apply the VBP pricing. All in all, what does it mean?
It means that if you want to use percentage, I would say that today 80% of the market is already under the new VBP pricing, and I guess that by the end of June, by the end of the first half, the whole China market would have moved to China VBP pricing. When it comes to product portfolio, we have been submitting new prices for a lot of our portfolio, except Roxolid. It's not about BLX or BLT, it's not about the implant design, it's about the material per se, Roxolid. Roxolid is not in the VBP because we want to keep higher pricing than the VBP proposal. It's still down versus its original pricing because that everything is going down 40%-45%.
Our Roxolid pricing is also going down significantly, but not to that extent, allowing us to have much more margin on the Roxolid than on the rest of the portfolio. We are going to leverage Roxolid to allow DSOs, especially in the private sector, to offer a differentiated solution to patients in order to be able to upsell also on their side. There is a significant part of the population, especially in the urban areas or the tier 1 cities, that have the possibility to pay more than what is currently required from the VBP for their dental treatment. We want to keep that opportunity to sell at a higher pricing, having higher margin for us, at higher margin for the distributor, higher margin for the clinics, and of course, play also the volume game from a VBP standpoint.
We are using that with our titanium, implant, whatever the implant design, but that's the way we have structured our market offering to make the most out of the current market dynamic in the Chinese market. Hope it helps to have it described like this.
That was extremely helpful. Thank you so much. I guess it would be a stretch to ask how much the Roxolid penetration is or will be in China, right? That's all right.
Yeah. No, but that's, you know, on this one, it's a good question. We cannot really answer at the moment because, of course, the fact that we have not included it at the VBP, we are going to lose some volume on the public side, especially because they will not be allowed to use it or in specific cases like the non-single implant. On the other side, we think that we are going to win market penetration on the private side. Honestly, at the moment, this is really a work in progress.
Those are some of the more information we can give in the, I would say in the, at the end of the first half or maybe at the, at the third quarter results when we have a kind of a six-month history on how the different product line have been moving, in the, in public and private.
Excellent. Thank you very much.
The next question comes from the line of Robert Davies with Morgan Stanley. Please go ahead.
Thanks for taking my questions. The first one was just really on, coming back to the comments you made earlier around, I think it was volume up 25%, pricing down 40%-45% in China. Just be curious to pick up your comment you made about, taking some cost out there and how you're balancing that against the need, obviously, to have 20%-25% higher volume through the factories. How are you kind of navigating that balance at the moment?
Yeah. I think there is some activity that have been done in China to make sure that we can answer the demand because that's an opportunity that we don't want to miss. On the other side, we want to make sure that we are taking cost-efficient measures in China, in the rest of the organization to gain in efficiency. And that's just the balance about making sure that we are aggressive enough for capturing most of the volume, which is going to come out of this opportunity, and also then paying attention to cost structurally in order to answer those needs in the most efficient manner. So far, I think the team has reacted very well.
We are also looking at having partnership with distributors that are allowing us to get some caution effect here, working on some distribution platforms. You know that there are a lot of distribution platform in China that have been used by a lot of pharmaceutical company and orthopedic company. I will give just a name and example, which is Sinopharm, as an example. They are working as a platform that are taking less margin for distributing the product, but they are also offering less services.
It's all about trying to define the mix, or the, let's say, the extended offer in between product plus service to the right target group, which is going to help us to square the circle here and being able to have still an interesting and profitable business in China while still needing to make some of those investments.
Thank you. Maybe just as my follow-up question, just on the current trends between the value versus the premium segment, what are you seeing in terms of growth rates between those two buckets at the moment?
Well, I would say, within China, we see good trend on both sides. As China, we were mainly premium. Obviously that, that is really making then now a huge difference between premium and challenger, where challenger is very healthy and growing everywhere, and premium growing everywhere except China, which is the one which is taking the most hit. Our growth has been a lot generated by challenger this quarter, and much less by premium, which is a reverse versus what we are used to see from an absolute value standpoint.
Looking at the volume growth we are getting on premium, in China, and this is what is interesting, is I think, we are going to gain a lot of volume on premium in China because the price difference now in between the different competitors has been significantly reduced, and the attractivity of Western brand, and especially Swiss brand in China in the healthcare segment is very significant. We believe that, our premium, brand will get back on track and will, for sure take the lead in the quarter to come.
Okay, thank you.
The next question comes from the line of Falko Friedrichs with Deutsche Bank. Please go ahead.
Thank you and good morning. My first question is on the organic sales growth in the EMEA and North America regions. Can you share the split between price and volume in the first quarter? My second question is on your clear aligner business, and whether you can talk a bit about the price and volume development there in the first quarter. We saw your large competitor seeing some small sequential volume declines, offset it by price increases, very curious to hear how your business developed. Thank you.
EMEA, they implemented price level, but it's mainly volume. It's still mainly volume because the price increase has not been implemented at the same time in all those different countries. It has been spread through the whole quarter. It's mainly volume. In North America, we say it's also significantly volume. Example, it's going to be volume all across the board, including digital solutions. On the clear aligner side, we have seen, yeah, we have seen some volume gain on the B2B side. You know, our ortho business is divided in between two areas. We have our B2B and we are having our B2C. This year we are playing then this differently right now.
The B2B is of course a good support from price increase on the one hand, but also on volume gain. I think we have had some significant increase in case start that came from all the different regions, actually. Again, from a low base. That's why, you know, we have a little bit less of course affected by the microeconomic uncertain situation at this moment in time. On the B2C side, we are playing the price side because we want to continue driving this business profitability. We are fine by doing less volume but more price.
That's the interesting, let's say, structure of our top line, which is allowing us to be able to play the different volume and price differently depending on the go-to-market approach that we have and the target group that we serve.
Okay, thank you. If I can squeeze in a quick follow-up. Can you quantify the decline in China in the first quarter and also give us the APAC growth excluding China in Q1?
I will not give you precise number, but I can tell you that, excluding China, we are double-digit growth in Asia Pacific. That's why we were saying we are very pleased because you see all our regions really working very well in all geographies. Just China being, you know, impacting the overall results, but the rest is very healthy. And the China situation also something to remember, which is a very strong decline for Q1, a lot is coming from COVID January to mid-February. It's also not only or mainly driven by VBP. It's a lot driven by COVID-19. That is why we have a very significant hit that was potentially not foreseen, but it has been almost stopped activity in January.
That's explaining also why China has been impacting so much Asia-Pacific.
Okay, very helpful. Thank you.
Today's last question comes from the line of Julien Ouaddour with Bank of America. Please go ahead.
Good morning, everyone. Thank you for taking my question. I have a couple. The first one is just a follow-up on your comments in China about the potential better outcome this year. Is there a scenario in which the pent-up demand would be stronger than expected and basically volume grows above the sort of 25%, 30% despite some capacity constraint in the country? I mean, just what's the blue sky scenario in terms of demand for China this year? The second question, in ortho, with ClearPilot 6.0, what's the new proportion of treatment that you can do today versus before? How do you differentiate from competition in this field, so on the digital side, in particular versus Align and Spark? Thank you.
Yeah, thank you, Julien. When it comes to a better potential outcome on China, I will, yeah, I think we have the possibility to look at a better outcome. I think from really the time I spent on the market here, I felt that we have possibility to see a higher growth for the total year, but it's still very early. You know, nobody knows how much is the pent-up demand and how much is going to be the consistent growth rate that we are going to have when the pent-up demand will be done. We have the possibility to do or to see the market doing more than 25%-30%.
Again, I think that more than 40% growth, we have a limitation on some of the capability, the surgical capability in the market. Now, what we see for us, that we want to play and that we're, you know, investing in China is still important. There are some, a little bit, less pricing difference in between competitors, we see opportunity for market share gain. Would boost also our resource versus the market, as this is always what we're trying to achieve. We want to do much better than what the Chinese market is going to be ending up with, we are seeing some opportunity here.
It's too early to say what it would represent from a growth percentage, but this is where we need to evaluate that with the team and playing that as much as we see those opportunities unfolding, where I think there will be some. When it comes to Ortho 6.0, yeah, I think there are two side of it. One is the much better interface that has been significantly required by clinicians, making it easier to navigate, making it easier to find the different features of the software, making it more realistic also from a gingiva standpoint in order to present that to customers. That would increase the efficiency and the conversion rate.
The second one is about then the clinical feature that are helping to treat more cases, especially coming step-by-step on the teenager cases, because eruption spaces and pontics are very helpful for those cases. That would help us to step-by-step, again, go to the same level of capabilities using the ClearPilot 6.0 than some of our competitors. We still don't have a lot of the bells and whistles, I think that we will be very close, as we said, by the end of the year, able to approach specialists because our software will allow them to treat most of the cases they are treating today.
With this, you know, we obviously want to continue to develop and invest. It's not going to be the end of it because we still have a lot to do. We believe that our Ortho ClearPilot 6.0 is really positioning us as a very strong competitor. Once again, I want to highlight an important fact from my perspective when it comes to clear aligner. The clear aligner is a very under-penetrated market.
Obviously, when we are going to have a better microeconomic outcome, environment, the growth, you know, of the total market will be still significant in my view, meaning that we are going to have way to grow even without, you know, eating competitors, but just by serving all the market better, with all the cases that are around and that dentists are not treating. We have those two ways of growth for us, which is then very beneficial. We participate in the market opening, but we are also able to gain some shares on clinicians that are happy to start working with us on services and the synergy they can get with implant.
Perfect. Perfect. Thank you very much. Just a very quick follow-up. Should I understand for the clear aligners market, the mid to long-term fundamentals, that you still believe this market will grow at, let's say, 20% growth rate or something?
20% growth rate, I don't know, but double-digit growth, yes. You know that we are in a double-digit growth mode in Straumann, and we think that this part of our business will grow double digit through some of the market growth. I think so.
Perfect. Thank you very much.
Thank you. With this, we conclude our conference. We look forward to meeting you at one of the upcoming financial conferences or during our virtual meetings, which are outlined on slide 26. With this, thank you once again for joining us today, and have a great end of the day. Thanks, everybody.