Ladies and gentlemen, welcome to the Straumann Group 2018 Third Quarter Results Conference Call and Live Webcast. I'm Sherry, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. Conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Marco Gadola, CEO. Please go ahead, sir.
Good morning, ladies and gentlemen, and thank you for joining us for this conference call on the Straumann Group's 20 18 9 months results. We are using the presentation slides that were published on our website this morning, and we kindly ask you to take careful note of the disclaimer regarding forward looking statements on Slide 2. As usual, I will begin with the highlights and then Peter Hackel, our CFO, will share the performance and financial details with you. After that, I will say a few words about some recent product and expansion initiatives that will help to fuel our growth in the future. As usual, we will conclude the presentation with our outlook, after which we will be happy to take your questions.
But first, let me begin with the highlights on Slide number 4. In the 1st 9 months of 2018, group revenue grew 23 percent to almost CHF 1,000,000,000. The currency effect was neutral and excluding the effect of acquisitions, our organic revenue increased 18% both in the 1st 9 months and in the 3rd quarter. North America was a main contributor and together with Asia Pacific contributed almost 60% of our growth. The latter continues to be our fastest growing region with 9 months organic growth of 33%.
We brought several innovations to market in Q3, including our 2 piece pure ceramic implant and the new mini implant system for adventurous patients. However, the most exciting moment was when we unveiled Straumann's fully tapered BLX implant system a few weeks ago at the EAO in Vienna. This implant will carry on driving the strong premium implant growth that we have generated with BLT over the past 4 years. In addition to bolstering our premium business, we are also strengthening our foothold in the third tier implant segment by taking control of T Plus in Asia. Based on the strong performance so far, we are raising our full year outlook for the 2nd time this year and now expect organic revenue growth to reach the high teen percentage range.
As you can see in Slide 5, we added a little more to our strong first half momentum in Q3, thanks to accelerations in North America and Asia Pacific. The pace in EMEA eased slightly, while LatAm had to contend with the difficult economic environment in the 2 largest markets, Brazil and Argentina. Nevertheless, with all our regions achieving double digit growth, we again outperformed the market significantly and thus gained further share. Once again, I would like to congratulate and thank all our employees for the excellent job they have done in achieving these great results. And now for the details on our business and regional performance, I will hand over to Peter.
Thank you, Marco, and good morning, everyone. As you can see in Slide 7, our reported 9 months revenue in 2017 amounted to CHF 801,000,000. The FX tailwinds measured down from CHF 10,000,000 in H1 to just CHF 3,000,000 over the 9 months period. The acquisition effects of ClearCorrect, Dental Wings and the Turkish distributor add a further €34,000,000 bringing the adjusted revenue base in 2017 to CHF 838,000,000. In the center of the slide, you can see the regional organic growth rates, while the regional contributions to overall growth are shown on the right.
North America and Asia Pacific each contributed 29% to overall growth. Our largest region, EMEA, provided the biggest contribution despite its lower pace, which is still significantly ahead of the market. Asia Pacific was the star performer over 9 months with revenue increasing 30%. North America edged up to 19%. Latin America also developed positively and achieved growth of 18%.
Slides 89 provide more insight into the individual regional performances. I'd like to begin with EMEA, which posted organic growth of 12%. This was expected to be less than in Q2, which benefited from the timing of the Easter break. The performance was fueled by excellent growth, especially the Nordics and Eastern Europe as well as the Middle East, where we rolled out the Neodent and Ontoge brands in selected markets. In North America, our performance was consistent throughout the 1st 9 months and we gained further share in the U.
S, which is the world's largest market. We further strengthened our competitive position in the premium tech segment as well as in the non premium market. Both segments grew at double digit rate. ClearCorrect also progressed well and added to the regional growth. During Q3, we resumed sales of our tissue repair product, Emdogain, which, together with the clearance of backorders, also contributed to regional growth.
Apart from this, we took advantage of the annual conference of American Academy of Implant Dentistry in September to support the U. S. Launch of Neodent's Brandmall's fully tapered implant system. Moving on to Asia Pacific. We achieved another dynamic performance in Q3 with organic growth reaching 33% on top of a more challenging baseline in the prior year.
China continued to be the main powerhouse. Also an estimated 1,400,000 implants were sold there in 2017. The penetration rate is still relatively low and the full market potential remains to be exploited. We also achieved strong performances in India and Japan. Now let me give some color on our performance by business segment.
Implants contributed more than half of the group's 9 months growth, fueled by the continuing success of our BLT implant range. Year on year, our premium tapered volumes grew more than 40% and our SL Active share progressed positively. Further impetus came from the non premium brands, most notably Neodent, Medensica and Onsofir. The growth in implants was matched by the restorative business. Our abutment to implant ratio developed well as we saw strong demand for our barrier based abutments.
Digital, which includes CATAM hardware, software, consumables and clear aligners achieved the strongest growth over the 1st 9 months, thanks to healthy growth in intraoral scanners and 3 d printers. In Biomaterials, demand performance, bone graft and membrane products was strong in all quarters, while Emdogain sales rebounded in Q3, as mentioned before. Our clear aligner business continues to grow dynamically as you can see in Slide 11. The number of cases grew 60% in Q3 and our average selling prices remained unchanged. We expanded our customer base over the 9 months period by 10%.
We successfully completed our pilot programs in Europe and are now building a sales team to prepare for launch in 2019. In Brazil, preparations are also well underway for a launch early next year. To meet current and future demand, we have expanded capacity at ClearCorrect's production facility in Groundwork. Apart from this, ClearCorrect began promoting its aligners in North America together with the remote monitoring system supplied by our partner Dental Monitoring, which is an important USP that provides a remote interface to the patient and can reduce treatment duration. And with that, I will hand back to Marco.
Thank you, Peter.
Our sustained strong performance and market share gains underline that our strategy is effective. Following our entry into Orthodontics, we recently modified our 3rd strategic priority from tooth replacement to aesthetic dentistry, which reflects the fact that our solutions also restore aesthetics in addition to function. Slide 14 provides an example of our continuing strategy to target unexploited growth segments. 4 years ago, we launched our apically tabled strong DLP implant, which enabled us to make inroads into the immediacy segment. BLT still offers significant potential, but it does not address the entire range of indications in this segment, which is the fastest growing and now accounts for 1 in every 4 implants placed.
Also we have been gaining market share in the non premium fully tapered segment with Neodent's new GM line. We have not had the product for the premium tier, which comprises close to 2,000,000 implants and offers a huge opportunity for the Straumann brand. To fill this gap, we have been working with the world's leading experts for 3 years to develop a differentiated implant system. The result is Straumann BLX, which is designed for optimum primary stability in all bone classes, for simpler restorative workflows for predictable outcomes even in complex cases. Its novel design combined with RockSolid and SL Active creates a unique new generation implant system that is well positioned to win significant share in the coming years.
Slide 15 lists some unique selling points and key benefits of BLX, which we presented for the first time at the EAO in Vienna. We also shared the initial experiences from our preclinical and clinical programs. So far, we have supplied nearly 5,000 BLX implants to clinicians. As you can see in Slide 16, our online case tracker, which involves more than 100 clinicians shows that users like it very much. Based on the excellent response so far, we have started a limited market release to selected customers and are planning a full release in March next year.
In Q3, we also started the full release of our pure ceramic 2 piece implant, which you can see on Slide 17. It complements our existing mono pipe design and is made of the same high performance ceramic that mimics the appearance of natural teeth. The 2P solution adds prosthetic flexibility, facilitates handling and is suitable for guided implant placement. Also ceramic implants currently represent a niche market, their popularity is growing. In the leading market Germany, they already account for 5% of the total market and we are convinced that greater prosthetics and flexibility together with increasing clinical data will strengthen this trend.
Our new mini implant system in Slide 18 offers cost effective immediately and minimally invasive solution for edentulous patients with reduced bone. It is a premium quality implant made from roxolid with a diameter of just 2.4 millimeters. It also features the Optilog connection for exceptional long term performance and low maintenance. In 2017, more than 1,000,000 implants were sold globally. Their popularity is high in North America and is growing rapidly in other markets.
The final item of product news is on Slide 19 and concerns Emdogain. In August, we received FDA approval for the change at our manufacturing facility and were able to resume regular sales in the U. S. After interruption of 4 months. In September, we signed agreements to gain control of T Plus in Taiwan by increasing our ownership from below 50 to controlling stake.
T Plus provides us with the products and registrations to penetrate the 3rd year segment in China and across Asia, where more than 2,000,000 third year implants are sold annually. T Plus also provides us with a modern certified manufacturing facility. We expect to consolidate the business later this year. As you can see in Slide 21, we continue to extend our geographical footprint and opened our 6 subsidiary in Latin America to serve customers directly in Peru. That brings me to the outlook, which as always is powering unforeseen circumstances.
Based on our continued strong performance, we are upgrading our outlook for the 2nd time this year and we expect fully organic revenue to grow in the high teens. Apart from this, the outlook remains unchanged as you can see in Slide 23. Looking a little further ahead, I would like to share some early insights into a pilot project we are conducting with a view to increasing our scope. Slide 24 provides an overview of our current business portfolio, which covers implants, prosthetics, CAT scan materials, biomaterials and clear aligners. All of these are covered by an end to end digital workflow, including the software, cameras, 3 d printers, milling equipment and related services.
Slide 25 shows where we see growth potential. The pie chart on the right shows our addressable market by segment. As you can see, preventive dentistry could add as much as CHF 2,000,000. Slide 26 explains what we mean by preventive dentistry. The life of a tooth begins on the left of this chart and ends in the center of the various stages of disease.
If the tooth is lost, we provide complete ablutions to replace it. However, implants can also be susceptible to destructive inflammatory processes that lead to bone resorption and in the worst case the loss of the implant. In our press release this morning, we announced that we have obtained distribution rights for a number of innovative products for treating diseases that lead to decay, tooth loss or implant failure. All of these treatments address the needs of general practitioners and we have begun to pilot approaches for selling them through the same channel as our clear aligners, TU SPON Cap Can Prosthetics and other GP products. The pilots are running in the UK, Germany and Italy.
I will provide you with further details in due course. And with that, I would like to open the question and answer session. If you are dialing in by phone, please make sure you have a good phone connection. Kindly limit yourself to in order to give everyone the chance to ask questions. Webcast participants who wish to ask questions anonymously can use the tool in the audio webcast.
So operator, can we please have the first question?
The first question is from Ian Douglas Pena, UBS.
UBS. So the first question is on guidance, particularly your EBIT margin guidance. I'm surprised you haven't upgraded that. It seems unlikely that you would now deliver flat margins given the operating leverage that the additional sales you're expecting must give. Secondly, could you respond to Align's announcement of their or communication that they are offering some discounting.
Are they in your opinion, are they doing that in response to you? Are you going to be forced to respond to that in turn? And so we're going see prices decline? Maybe you can just talk through that. Thanks.
Peter, you want to first take the first question on the EBIT margin?
Yes, I'll take the first question. You are right. We have not changed our EBIT and EBITDA guidance, which is always a full year guidance that we issued at the beginning of the year. As I have explained, when we were discussing the sales, we had a significant headwind on the FX side in the 3rd quarter and the translation impact on the top line melted down from a positive impact of SEK 10,000,000 to only a slight positive impact of SEK 3,000,000 after 9 months. And if the FX rates stay as they are currently, then I would expect an even slower lower impact for the full year on the sales side.
If you look at the impact on the margins, then you I might refer your attention to our half year presentation, where we had a positive FX impact on the EBIT margin of 1.2 percentage points. Given the FX tailwind that we experienced in the Q3 that significantly melted down and for the full year, I only expect a very small positive FX impact on the EBIT margin. In addition, as we have raised our outlook for the full year, that means that we are overachieving our sales targets, which obviously also leads to a higher payout of respective sales only to the salespeople, which is in principle a positive development. And the higher revenue also allows us to invest more into the buildup and to invest more into specific projects such as, for example, the buildup of the sales force for the Ortho business and the marketing people for the Ortho business that we are going to roll out in 2019 in Europe.
On your second question is on Align. It would be obviously, it would be great if actually Align would have to decrease prices because they peel us in the neck. That's not yet the case, to be honest. Just remember, we are only present in the U. S.
Market with ClearCorrect so far and a little bit through distributors in Australia and the U. K. We are about to launch ClearCorrect in the European markets beginning in 2019 and also in Brazil, where we are launching ClearCorrect during COSPI in January. But the reaction of Align is not a direct kind of consequence of us gaining significant share. In their press release, they are mentioning that they increased their WIP discount.
And I think the second impact is due to customer mix. Allain also gained some quite significant DSO contracts over the last couple of quarters, like, for example, Aspen or Heartland in the U. S. And obviously, these contracts are coming at lower ASPs compared to the rest of the business, but they are obviously also helping to boost volumes. That's our interpretation of the situation.
Very clear. Thank you very much.
Next question from the phone comes from the line of Markus Gola, MainFirst. Please go ahead.
Hi, and thanks for taking my questions. So my first one is on China. It seems that some European companies benefit in China as U. S. Companies are disadvantaged on the back of the current trade conflict.
So do you also see any benefits from this situation given that most of your important competitors are U. S. Companies? And my second question is on your 2 piece ceramic implant. I believe you have already introduced this implant on the IDS in 2017.
So is this a different implant? Or have you changed something material here? Or why it took it so long to launch this product on Aburascale? Thanks.
Good. Thanks for your questions, Marcos. First question on the Chinese market. Keep in mind that our key competitors in the Chinese market are the quite
some
quite some competition from the German implant manufacturers like ICX or Bagel or even Camlok. We also don't see any kind of negative consequence due to the trade war when it comes to the businesses, for example, Noble Biocare or 3i or SIMO. But to be honest, we also don't consider them as our peers as competitors in the Chinese market. On your second question on the 2P ceramic implant, just keep in mind that we only showcased the pure 2P ceramic implant back in 2017. And we also, at that point in time, we clearly pointed out that there is still quite some development effort to be done until this product will actually reach a market maturity.
We are now obviously convinced that the product will deliver what we expect out of it and that's why we entered a full market release phase at EAO this year.
Very clear. Thank you very much.
Next question comes from the line of Michael Jungling, Morgan Stanley.
I have two questions. Firstly, on the BLX implant. Can you comment on your pricing relative to Noble Active and whether the gross margin post the royalties that you have to pay are above or below your current dental implant margin? And secondly, when it comes to clear aligners, can you comment on the sort of the competitive offerings coming out of 3 ms with Clarity aligner, x-ray with SureSmile and Henry Schein with SLX. It seems to me that lots of new products coming to market.
Just curious how you view those and how your products perhaps differentiate themselves to those offerings coming up? Thank you.
So on VLX, we will actually price VLX competitively. Obviously, Noble Active will be the benchmark. So we will position it slightly below or maximum at Noble Active prices, list prices. You are right, we are paying some royalty on the product. But with the targeted list and ASPs of BLX, we obviously we want to generate more absolute gross margin for every single BLX sold compared to the other premium implants we have in the portfolio.
So we want to use this as an opportunity to also generate more absolute gross margin per premium implant sold. So there will not be a dilutive impact on our gross margin. On your second question, yes, but it was very clear that the clear aligner market is such an attractive market, such a fast growing market that once the patent cliff in October has been passed that other companies will also enter this market like the Henry Scheins or the dense supplies of this world. We believe that we have a very good positioning with ClearCorrect because it's a product that caters very well to the needs of general practitioners. This is actually our core targeting group.
It really delivers and we have now enough evidence all the pilots we have been running throughout all major European countries, Japan, Brazil, other Asian countries that is fully in line with expectations of general practitioners. So we are confident that the rollout of ClearCorrect in other geographies outside of the U. S. Will be a success.
Great. And a follow-up on BLX. Can we assume that perhaps you will offer major volume discounts to win large business from Noble Biocare through Noble Active? Meaning, are you willing to gain incremental absolute EBITDA if it actually means that your margins actually are lower?
Absolutely. But we have done the same with BLT 2, Okay. So also BLT, a large part of the volumes we achieved with BLT was with competitive accounts. And obviously, if we have large customers buying hundreds of implants, clearly, they get better commercial terms than customers just buying 10 or 15 implants.
Okay. And are you able to show that your BLX implant is superior to Nobelactive? Have you got some early data which shows that the various surfaces that you have on there is a better product than Nobelactive?
We don't have a head to head study yet, but I can tell you one for example, just one characteristic of the BLX implant, you can do all indications with the 3.75 millimeter diameter, okay? The Noble the smallest diameter Noble Active product for all indications is 4.3. It's obviously a clear differentiator. And also if you look at and we will actually put more spin on the advantages of BLX compared to Nobel Active when we will go into the full market release. Just understand that at this point in time, we don't want to actually kind of really disclose all the unique selling propositions of BLX.
We will do that once we're going to go into the full market release.
Thank you. Very helpful.
Next question comes from the line of Kit Lee from Jefferies. Please go ahead.
Thank you for taking my questions. I have 2, please. Just firstly, on the discount implants that you acquired from T Plus, how do you plan to roll out the product? I understand that you probably would go into Taiwan and China first, but do you plan to bring this product to other markets as well? And then my second question is just on your new preventive portfolio.
Can you just talk about the rationale of having a separate sales force to sell this rather than just adding the portfolio to your existing sales teams that you have?
On your first question on T Plus, you know the so called 3rd tier segment, we know now that this is actually a very important half of the total dental implant market. We estimate that roughly 10 out of the 25,000,000 implants, which are sold annually are third tier implants. And we have now 3 third tier brands available. We have, you know, Synodent, which is our brand for emerging markets. We have Equinox in India.
And we have now with T Plus, a third tier brand, which at the first market we're going to target after Taiwan where it is already an established brand is China. Our idea in China is to launch that through a network of sub distributors, so we will actually not sell that directly to dentists in the Chinese market. And we are also looking at other markets in especially in Southeast Asia. Many of them, if you look at markets like the Indonesia's of this world, they are 3rd tier markets and we believe that with C plus we have now a solution to go after that potential. On your second question on preventive dentistry, the pilots we do right now, the primary objective of these pilots is to test if the products are successful and have really a market and are actually coping with a demand with an on sales demand by dentists, by general practitioners.
That's the purpose of the GP pilots. In Italy, for example, where we are running a pilot, clearly, once we have certainty that the portfolio is delivering what we expect, then we would actually have this portfolio being marketed by our full sales force in Italy. So we would in Italy, for example, do not build up a known separate sales force just to sell the preventive dentistry range. So today, pilots' purpose is to test all the products delivering, all they're actually up to the expectations of the dentists. Once we have that certainty, then we will obviously tailor made, tailor structure to the go to market of that portfolio in the specific geographical regions.
Okay. That's very clear. Thank you.
Next question comes from the line of Julien Dormois, Exane BNP Paribas. Please go
ahead. Hi, good morning all. Thanks for taking my questions. I have 2. The first one relates to the competitive landscape and whether you have seen any change on that side.
I'm referring to the implant side specifically. For example, we know that Danaher has announced that they would be willing to float Nobel Biocare next year. So have you noticed any change in the attitude toward pricing or maybe aggressiveness? I don't know. And the second question just relates to the tough comps you are going to face in Europe in Q4.
I think last year in Q4, you had strong sales on the digital side. Does that mean that would you still expect double digit growth in the region in Q4?
Okay. And I take first question, Amor, Peter, you can take the second question. What we see when it comes to the competitive landscape, Julien, is that the consolidation is continuing to take place. And if you look at Henry Schein, they were very active over the last quarters in acquiring value and third tier companies. They acquired a majority stake in ICX, which is one of the larger players in the German market, but they also have, for example, an interesting position in the Chinese market.
They also acquired Intralon, which is a U. S. Based implant company. They acquired a distributor in the Netherlands. So what we see is that the consolidation in especially when it comes to dental implants is actually continuing.
And on your second question, I would like to hand that over to Peter on
the comps in Europe. Yes, you are right, Julian. We have a higher comparative base in the last quarter overall and especially also in the EMEA region. Last year sales were driven, as you rightfully said, by digital equipment. If you see at the year end such a higher level of digital equipment this year, again, that needs to be seen, and we are not issuing a guidance at regional level.
But as we have increased our outlook, we definitely expect a strong Q4. And the European region on average has also always been around 10% or above 10%. They would not expect a significant change in the pattern in the European region compared to the previous quarter.
Very clear. Thank you very much.
Next question comes from the line of Christoph Grechler, Credit Suisse. Please go ahead.
Yes. Hi, good morning, Malco. Hi, Peter. I just wanted to quickly come back to this preventive care initiative. Actually, could you discuss I mean, you're talking about this €2,000,000,000 market with the products now you have under contract.
How much of that addressable market actually you can reach? And adjacent to it, I mean, how much how significant is this initiative cost wise? So if you could give an indication there, that would also be interesting.
The
main target of our portfolio, the preventive portfolio is obviously caries treatment and periodontitis treatment. And these are the bread and bottle kind of treatments in a general practitioner practice. And they are actually making up the majority of the SEK 2,000,000,000 potential, which we are actually outlining in our presentation. So we believe that we have a rather interesting portfolio when it comes to actually supporting general practitioners with these disease treatments, caries again and periodontitis. The pilot we are running, obviously, these are incremental operating expenses, and they are fully actually considered in the guidance for 2018.
Again, what we are trying to find out through these piles is do these products really deliver? Are they really as innovative as we believe? Do they have potentially a chance to actually remove traditional treatment methods, which are applied to general practitioners. And only once we are sure that the portfolio is actually up to expectations, then as already outlined before, then you would actually go into an LMR, limited market release and then from an LMR into what we normally do a full market release, which actually then the full sales force or it might be that in some specific countries like the U. S, a special sales force selling these products.
A side aspect of this whole pilot is also to actually put together a meaningful portfolio to justify in certain countries the costs for setting up a dedicated general practitioner sales force. And so far, we have obviously clear aligners, which is a GP product. We have internal panels. We have tooth replacement solutions. Now with the preventive portfolio, we are adding caries, periodontitis, but we also, for example, adding other aesthetic treatment options like tooth whitening.
So all this together might give us the critical mass when it comes to product portfolio to justify in some countries even a dedicated GP focused sales force. But it's still premature at this point in time to make other statements or more statements related to this initiative.
Okay. Maybe could you also discuss the competitiveness of this particular market segment? To be honest, I'm not too familiar with it. And looking at the companies, you've got these distribution rights from they are not very common household names, so to say, maybe you could discuss whether that's more a technology driven market and maybe that will be helpful as well.
Yes. So when it comes, for example, to carrier treatment, today, still the majority of the dentists, they apply the drill and fill approach. So even if we say white spots or with soft carriers, very often, they take out the drill and they actually put a hole and they fill the hole with filling materials. Now we have now products in the portfolio, in the pilot portfolio, which on one hand allow dentists to actually treat not yet severe carriers without having to drill a hole. This is, for example, this corodone repair from Credentis and that's a clinically proven product.
All we have, we have products in our portfolio that allow the dentist to actually charge how severe is the carriers already. So is it really necessary to drill a hole? And then we even have some products, some innovative products in the portfolio, for example, for children, for teenagers who are very afraid of actually going to the dentist and getting a hole drilled. And that product allows to actually soften the enamel of the teeth and to actually like with the spoon to take out the carriers. So the whole portfolio is not just a me too kind of copy of what's already existing.
The whole portfolio and that's also why internally we call it next generation dentistry is targeted at actually bringing more modern treatment options to general practitioners. And to your question, who is the competition on that? Interestingly enough, there is no company yet out there marketing to general practitioners a holistic portfolio and a holistic jump you know, to actually take share of this €2,000,000,000 market and to position ourselves as really the total solution provider for aesthetic dentistry.
Sounds exciting. Thank you for your thoughts.
You're very welcome.
Next question is from Carla Bensker from Togo. Please go ahead.
Yes, good morning. My question is around restorative solutions that you now offer for the ceramic implant. Can you maybe quantify a bit how many or what percentage of cases you can now address with the ceramic implant? And the same for BLX, will you launch it with the full restorative portfolio? And how does that compare to the launch of the BLT at the time?
Thanks.
The ceramic pure 2 piece implant, if you look at it, it's a parallel walled tissue level implant. And to be honest, the range of indications you can do with a parallel tissue level implant, it's relatively, I would say, limited. And also, if you look at the diameters which are available, so for example, for aesthetic treatments in the aesthetic zone, We don't have a full fledged ceramic portfolio yet, which we could actually really market as something alternative to, for example, our BLT or even our BL portfolio. It's still a relatively limited portfolio and that's also why we are not, I would say, overwhelmingly kind of bullish that we will take a large part of the dental implant market with this solution. But it's actually, obviously, a step a further step in actually building a meaningful ceramic portfolio ceramic implant portfolio.
With BLX, we are in the limited market release right now, and we have now a limited amount of prosthetic or restorative options with BLX. But in March, when we're going to launch it fully, so when we're going to enter the full market release, BLX will come with a complete and comprehensive portfolio of prosthetic options. Classical treatment options, but also fully integrated digital workflows with everything that's needed, including guided surgery. So it will be a much more ample prosthetic portfolio at launch compared to when we launched BLT.
Okay. Many thanks.
Next question is from Maja Wataki, Kepler Cheuvreux. Please go ahead.
Yes. Hi. Thanks for taking my questions. I would like to start with the initiatives that you've implemented earlier this year in the Nordics, Germany of rolling out the Neodent portfolio? And by that, just addressing also the value segment through Neodent in the European markets.
Can you give us an indication of what you're seeing and how this has changed the sales behavior of dentists, also maybe giving an indication on the online offering that you have? And then my second question would be also surrounding this new initiative that you're taking in the GP market. Of course, it is early days, but could you give us an indication of how your thinking is around margins should that business be successful? Would it be margin dilutive for the group in the long run? Or would it be at par of the current business?
Thank you.
So your first question on the Neldent rollout in Europe, and you specifically mentioned the Nordics and Germany. Germany, very well received. And in Germany, we have a so called key account manager approach. So we have dedicated key account managers, and they are carrying all the different implant brands. So not only Straubman, but they also carry Neodent and they carry the Medentika brand.
And And the results in Germany are extremely encouraging. In the Nordics, we started a little bit later. In the Nordics, we have mainly Neodent, so the Neodent range. And we waited until we had GM available. We didn't want to start with the Centimeters range.
We waited until we have GM fully available. And also in the Nordics, the first results we are seeing out of countries like, for example, Denmark and Sweden, especially Denmark. Denmark is a market with already a relatively high percentage of nonpremium implants. So also there, the results are rather encouraging. On your second question, as you have seen, most of these products are actually trading products.
We will actually add to the range the flatbed Emdogain product in Q1 of next year. This is obviously our own product. It's actually a non surgical alternative or a non surgical version of the Emdogain, which has been in the market for many, many years. The other products are trading products, but with margins above 50%. So we are not actually anticipating that the addition of this portfolio will have a negative impact on the margin levels.
So we will potentially have to add additional salespeople in certain countries, especially when it comes to specialist markets. So if you look at the UK, for example, or the U. S, but in markets like, for example, Italy or other more GP markets, the whole sales force will carry the portfolio. So there, the additional operating expenses will be relatively limited. When it comes to the U.
S. And the U. K, just to give you 2 specialty markets, the exciting perspective of this preventive portfolio is that together with now being able to offer clear aligners, being able to offer full digital workflows to general practitioners. We're also working on a 3 d printing solution, for example, for dentists. So to be able to offer full digital workflows to general practitioners, we believe that we can actually justify a direct to GP sales force in these markets.
And that would be really exciting because honestly, if you look at the U. S. Or other specialist markets, our share in the GP segment, and I'm not talking implants necessarily. Implant is just kind of a side product. I'm talking here really the bread and butter business of general practitioners, which is caries treatment, which is periodontitis treatment, which is more and more ortho treatment, which is tooth whitening, so that we have a full range available, which allows us to penetrate more the attractive and for us on the penetrated general practitioner segment.
Understood. Just a follow-up question. Do you have exclusive rights to those products?
Yes. As long as we for most of them we have, as long obviously as we actually cope with the minimum sales quantities. If we don't sell what we have contractually agreed, then you're going to lose the exclusivity. But that's not what we anticipate obviously.
Great. Thank you.
The next question is from Veronika Dubajova, Goldman Sachs. Please go ahead.
Good morning and thank you for taking my questions. I have 2. The first one is on the impact of BLX that you, Marco, anticipate for next year. Obviously, BLT was a tremendous accelerator in your growth rate as you think about 2019 2020. Can you maybe help us think through how we should be thinking about the impact from BLX on either organic growth or absolute revenues?
That would be very helpful. My second question is a follow-up question to the preventive dentistry strategy.
If I look at some
of the other players that compete in the market, the traditional players, they've seen a bit of disruption from sort of online platforms like Amazon. Clearly, your portfolio here is specialized and you do already have an online store for the implant business. But I just wonder if this becomes a bigger part of your strategy, how would you think about online distribution in the GP channel? And is that something that you might entertain? Thank you.
To your first question, we estimate that the market for fully tailored premium implants that, that segment is roughly 2,000,000 units. So it's if you look at BLT, BLT is obviously bigger than the target market for haptically tabled premium implants, where actually VLT obviously plays in is roughly SEK 3,600,000,000 is roughly SEK 4,000,000. So it's half of the potential which we have able actually to tap into this BLT. However, we believe that now with BLX, we really have something very differentiated. BLT honestly, BLT is okay.
It's rock solid, obviously, and it is with Zelleactive that differentiates it from other premium apical tapered implants, but the design itself is nothing really, I would say, earth shattering. Now with BLX, we believe we have really something also unique from a design point of view and from how the implant works. So if you take the €2,000,000 implants and let's say we're going to get 50% share maybe in the 1st year and then we go to 30% share in that segment in the 2nd year, that would mean 300,000 incremental implants in year 1 and would actually mean another 300,000 in year 2. On your second question on preventive, yes, obviously, we are also going to sell these products through our e shop clearly. The products are innovative and that means you need to explain them to the dentist.
So it's not just another filling material or another drill. These products are really differentiating. They are innovative, and that's why we believe they have to be explained. And also, we don't only want to sell one specific product, we want to actually sell a holistic treatment concept. For example, when it comes to treating caries or when it comes to treating periodontitis.
That's very clear. Thank you very much.
Today's last question is from Daniel Bruchter, Vontobel. Please go ahead.
Yes, thank you very much. Just one question remaining from my side. I mean a bit broader picture. Given the uncertainties we see, for example, in Latin America and the moderate impact we have seen on the numbers in Q3 now, Is there anything that worries you that 2019 for the organic growth potential might be significantly softer than 2018? Just to check, I don't think so because you have so many growth initiatives.
Dieter, do you want to answer that question?
Well, I think you are right. There are some trends currently that there's a certain insecurity. I mean, in Brazil, we just had the election of last week, and then I would expect a positive impact on the economy and especially also on the currency of sandwich that we have already seen from the pre election where the Brazilian real got stronger again. If I look at the fundamental growth story that we have and that the all the growth initiatives, be it on the innovative and product side with launches that we have presented at the EAO and be it on the further rollout of the nonpremium business across the different geographical regions On the buildup of the auto business and the internationalization of the auto business across the different regions and the new initiative on the preventive side. There's nothing that worries me that I would not expect a continuation of the growth story also in 2019.
But as mentioned earlier, on 2019, we will give you more color with the release of our full year results of this year and the issuance of the guidance beginning of next year.
Of course. Thank you very much.
That's very helpful.
Okay. So in closing, I would like to draw your attention to the Investor Relations calendar and our latest analyst recording, which you can find on Slide 29. To help us improve our service to you, we will be conducting a events. Thank you, and have a good day.
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