Ladies and gentlemen, good morning. Welcome to the Straumann 2014 Third Quarter Results Analyst and Media Conference Call. I'm Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session.
The 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.
Yes. Good morning, ladies and gentlemen, and thank you for joining us for this webcast and conference call on Straumann's 2014 9 months results. We will be referring to the presentation slides that were published on our website this morning. And as usual, I would like to draw your attention to the disclaimer on Slide 2 regarding forward looking statements. Before I take you through the highlights, I would like to begin with the personnel announcement.
As you will have seen in the press release, our CFO, Thomas Dresendorfer, has decided to leave Straumann at the end of June next year in order to be close to his family in Germany. Thomas has contributed significantly to Straumann's recent turnaround and has played a major part in the acquisitions that have built our multi brand platform. I would like to already take now the opportunity to thank Thomas personally for all he has done to bring Straumann back on track. In the coming months, Thomas will support the transition to the incoming CFO, Doctor. Peter Hochl, who will rejoin Straumann next month.
Peter Hockel is currently Chief Financial Officer of Oerlikon Drive Systems. He is well known as Straumann having spent 6 years here in various roles, the last of which was Head of Group Controlling and Member of the Executive Management Group. Kisse brings a valuable combination of financial and business expertise to Straumann and we are looking forward to having him back with us. Our Executive Vice President of Incident Management and Strategic Alliances, Doctor. Sandra Mato is also leaving Straumann after having served as a member of the executive management since 2002.
Over the years, Sandro has made a major contribution to Straumann's business and product portfolio and he has contributed significantly to improving the standard of care in implant, restorative and regenerative dentistry, both through Straumann and the ITI. His successor will be announced in due course. We are sincerely grateful to Sandro for his many valuable contributions to our company and we wish him all the best for the future. Now let me tell you about the business highlights. Then Thomas will take you through the numbers and the business performance.
I will conclude with a summary of our recent growth initiatives, other news and the outlook. And after that, the lines will be open and we will be glad to take your questions. We will begin with slide number 5. I am pleased to report that we have built on our solid first half performance and improved further in the Q3. Revenue growth accelerated to 7% in local currencies, lifting growth over 9 months to 5% in local currencies and 3% in Swiss francs.
The performance was driven by growth across all regions, both in Q3 and over 9 months in local currencies and in Swiss francs. North America and Asia Pacific were the star performers and both achieved double digit growth in Q3. At the product level, customers have been converting in increasing numbers from titanium to rock solid implants, which has driven volumes and revenues and has been a main contributor to our performance. I'm also pleased to report that we have made further progress with our strategy to become the full solution provider of choice, adding new products and services to our portfolio. We also took several small, but significant steps towards our goal of becoming a global leader in the value segment by extending InstaTent's international footprint.
And finally, as I'm sure you have noted in our press release, the improved performance has prompted us to raise our full year guidance and I'll tell you more about each of these items in a moment. But first, let me hand over to Thomas for the details of our business performance.
Thank you, Marco, and good morning, everyone. Looking at the sequential development on Slide 7, there are 2 things that stand out. The first is the fact that in Q3, we achieved our strongest top line improvement in 15 quarters. And the second is that we've been growing faster than our main competitors. Although we will have to wait until everyone has reported before we can confirm this.
Looking at Slide 8 and the left side of the chart, you can see that at this year's currency rates, our 9 months revenues in 2013 would have been CHF 13,000,000 lower. Using this corrected figure as a comparison basis, our net revenue in the 1st 9 months of 2014 increased 5% in organic term. The currency effect was mainly due to a depreciation of the yen and the dollar against the Swiss franc, although the effect eased steadily. Reported 9 months revenue in Swiss francs was just 2 0.6% higher than in 2013. On the right, you can see that all regions contributed to growth with the largest contributions of €9,500,000 in each case coming from North America and Asia Pacific.
Our largest region, Europe, also contributed to growth, having declined in the previous year previous 2 years. Looking at the quarterly performance by region and Slide 9. Europe reported a positive 3rd quarter although growth was only moderate and the individual country performance is on mix. Scandinavia and the U. K.
Continued to post good results and Italy also made a positive contribution. The largest subsidiary, Germany, maintained sales above the prior year level, while revenues declined in Switzerland. In North America, revenue jumped 11% in Q3, driven by strong demand for implants and lifted by bone graft and implant abutments. RockSolid and SL Active helped us to gain share of wallet and new accounts. A small contribution also came from our new tapered implant line, which Marc will tell you later more about.
Slide 10 shows a steady improvement in Asia Pacific throughout the year, reaching 17% growth in Q3. The main drivers are China and Japan, where the market for implant dentistry is clawing its way back from the declines experienced in recent years. In addition to this, the rollout of our FL active implants enabled us to grow ahead of the market.
In the
rest of the world, which contributes 5% to the group total, regional growth increased by 3% in quarter 3. This may seem modest, but this was achieved on a baseline of 35% in the previous year when sales were boosted by large distributor orders. Our associate company Neodent, which leads the Brazilian market, posted low double digit growth in Latin America for the 9 month period. Looking at the performance from a business perspective on Slide 11. Growth was driven mainly by implants, including RockSolid, Adelactive and the various new lines such as our pure ceramic and 4 millimeter short implants.
Demand for catchem prosthetics and cost effective Mario based abutments was good, but not strong enough to fully compensate for the decrease in standard prosthetics. As a result, we were not able to grow the Restorative business in line with Implant. Regenerative achieved good growth driven by Emdogain. The BOTIS product were launched in October and did not yet impact our Q3 results. And with that, I will hand back to Marco.
Thank you, Thomas. Please turn now to slide number 13. Straumann has worked hard this year to bring new products and solutions to customers. We presented several at the Eye Care World Symposium back in April and followed with launches in September at the EAO in Rome and at the Botis Bone and Tissue Days in Berlin. The latter event was new for Straumann and provided access to more than 800 dental professionals, many of whom are new to our company.
It was an ideal setting to announce the European rollout of the bodies range through our network. As you can see on Slide 14, the regeneration system is comprehensive. It includes soft and hard tissue solutions and features both innovative and standard products to cover all indications, needs and preferences. Having established the logistics chain, we launched the Bodys range on October 1. Slide 15 shows you what the current rollout status is and which markets are still to come.
On Slide 16, you can see 2 additional regenerative products that we have licensed in to fill gaps in our regenerative portfolio in North America, where BOTIS is not yet registered. 1 is a resorbable collagen membrane called Straumann membrane plus and the other is a bovine sourced own augmentation material, which we sell as Straumann xenograft. Both products have excellent clinical profiles and handling. Moving on to Slide 17. I would like to tell you a little more about our new bone level tapered implants.
We are quite optimistic about the product for three reasons. First, tapered designs now make up nearly 60% of the implant market and their popularity is expected to increase as you can see in the chart on the right. Secondly, we are now able to effectively address the attractive market for immediate fixed full arch tooth replacements. And thirdly, we are entering this segment with a differentiated new generation product that offers a tapered design combined with the proven benefits of rock solid and SL Active. Based on initial clinical results and very positive feedback from clinicians, we have begun the controlled market release in Europe, North America and Australia.
And we expect to proceed with the full release in the first half of twenty fifteen, except in parts of Asia and Latin America, where launch times will be determined by regulatory approvals. 1 of the most popular indications for bone level tapered implants is immediate full arch tooth replacement using screw retained prosthetics for instance in the Marluclinic protocol. And this brings us to Slide number 18. The implant itself is just part of the solution. What is equally important is to have a flexible abutment system with various angles and heights and to offer high performance screw retained fixtures.
These are all features of our new solution, which we are branding as Strong Pro Arch. To give you an idea of how seriously we take reliability in the development program, these new abutments went through more than 5,000 hours of tests, simulating more than 280,000,000 human biting cycles. In order to offer complete solution, in addition to the abutments, state of the art CADCAM is needed, which is why we are continually improving our software and have just released the KS9.0 update. And finally, you need to offer reliable full arch bridges like the example on Slide 19 and this is where Createch comes into the solution. Creaatech specializes in high end implant prosthetics including CAT CAM bridges, spars and abutments, which can now be ordered through Straumann.
Also, we own 30% of Krayatech. They also manufacture for other systems. Like BOTIS, Createch belongs to our technology platform as you can see in Slide 20. The company offers its solution not just for Straumann, but also for other main implant systems. Moving on to Slide 21.
Straumann Bone Level Tapered, Pro Arch and a broad range of other solutions, including our Insulin platform played an important part in winning ClearChoice as a new customer. ClearChoice performs more implant procedures than any other facility or network in the U. S. And their affiliated doctors will also have access to our insulin brands. We will begin to supply ClearChoice in 2015 and are increasing capacity in preparation for this.
Slide 22 shows our pure ceramic monotype implant, which we launched in a 4.1 millimeter diameter version in May. Since then, we have completed the development of a 3.3 millimeter small diameter version for use in narrow spaces, which we launched at the EAO. Being fully ceramic, these implants address the needs of patients seeking metal free implant solutions. They are highly aesthetic and highly predictable, thanks to our unique Settle A surface for enhanced osseointegration. They are also very reliable, thanks to an innovative manufacturing process and a 360 degree strength test, which is applied to every single implant.
These features all contribute to successful clinical outcomes and the first clinical study yielded 1 year success and survival rates of close to 98% with 0 breakages. Before I come to the outlook, let me give you a brief update on the progress of our value business and I would like to ask you to turn to Slide 23. In August, we announced the creation of a business platform to drive the distribution and internationalization of the various brands in our value portfolio. The name of that platform is Instradent. The main news today is that Instradent has established a subsidiary in Italy and is preparing to launch the Neodent and Medentica brands there early in 2015.
Insolent subsidiaries are also in place in Iberia and the U. S. With a view to adding Medentica products to the current range of Neodent products in the U. S. And as you can see on Slides 2425, InstaDent has recently built and launched its own website in addition to creating an e shop.
Slide 25 gives you an idea of how the various brands will be handled commercially within the incident platform. And that brings me to Slide 26 and our outlook, which is of course bearing any unforeseen circumstances. In summary, we have raised both our top line and margin guidance. Based on the positive developments, we now expect our full year revenue growth in local currency to be in the mid rate rather than low single digits. And despite investments and thanks to cost optimization, we expect to deliver our operating profit margin target of more than 20% already in 2014.
On that note, I will move to the Q and A and I will ask you kindly to limit the number of your questions and sub questions to 2 and then to rejoin the queue. So operator, can we have the first question, please?
We will now begin the question and answer The first question comes from Lisa Clive from Sanford Bernstein. Please go ahead madam.
Hi. Two questions. First, your nice pickup in growth, and you mentioned it's a bit hard to tell seeing as we still have some companies to report. But how much do you feel is from market improvement overall? And how much do you think maybe from market share gains?
Second question, just looking at Slide 18 on the Pro Arch, there's been a
lot of criticism from dentists around
the potential risks from perioimplantitis because in these systems, it's largely impossible to reach the implants to actually clean them when problems develop. Could you just comment on how much of an issue this potentially is? And if there's any specific design features that works around this?
Okay. On your first question, Lisa, we estimate that the market in 2014 will grow between 2 percentage points and 3 percentage points. So mid 5% roughly growth would actually mean that we would gain market share in 2014. On your second question on the design of our pro arch system and the question related to peri implantitis. We have with SL Active something nobody else has.
So SL Active obviously accelerates the OSA integration process and is actually a safer option when it comes to these type of indications compared to every other solution which is in the marketplace.
So just to follow-up on that. So basically you think the implant surface will be enough to sort of reduce the risk of peri implantitis?
It's an important contributor absolutely, yes.
Okay. Thanks very much. I'll get back in the queue.
The next question comes from Michael Jungling from Morgan Stanley. Please go ahead, sir.
Thank you and good morning. Two questions please. Firstly on the EBIT margin, it seems you've got plenty of sort of financial accounting flexibility of delivering maybe this year a 20%, 21% or a 22% EBIT margin for 2014. I mean where would you like to see consensus? Because in the end, you've got tremendous amount of flexibility as to what you can do here.
And then the second question is on North America. The North American growth seems to be much stronger than I thought. Are you benefiting from some integration challenges or at least some headline merger developments between some of your competitors? Are you already getting some benefits from ClearChoice? Initially, my impression was you may get some benefits already in the Q4, but maybe you're already getting some benefits in the Q3.
Some sort of explanation as to why the North American growth for you is so strong?
I'll pick up the first question and then I'll hand over to Mark on the first question. Obviously, I will not take the flexibility what you have there. Your sales are growing tremendously and you see that we're outperforming the market most probably significantly and we're adding market share. And then you will have, let's say, this impact also dropping down to the bottom line. So we're expecting, let's say, EBIT margin somewhere around 20% to 21% for this year.
And if sales continue in quarter 4%, very good, let's see what happens. That's really sales driven for the majority.
And on your second question, Michael, to the U. S, In the Q3 results, there are no Clear Choice sales included yet. The development is mainly driven through more efficient selling behavior of our sales force, we have we've made a couple of changes at regional level. So regional heads, we exchanged in underperforming regions, and that's now starting to pay off. We also had some positive headwind through the limited market release on the bone level tapered implants.
We've already sold a couple of 1,000 implants in Q3 in the U. S. And we also underwent a new training concept for all our sales force, the so called challenge of sales training. We've done that in Q1 and Q2, mainly in Q1 of this year and this is now actually bearing fruits and is yielding the anticipated benefits.
Okay. Thank you. And then for the margin again, if given that comps are a little bit easier in the Q4 than they are in the Q3 plus you might get some more benefits from ClearChoice, some more product rollouts. Is it feasible to assume that you may grow 7% in the 4th quarter and therefore that you may beat a 21% margin? Would that make mathematical sense?
If these assumptions come true, that could make sense. You know our market is and sometimes they're not predictable. You have the feeling that your quarter 4 is running or is going the right way and suddenly it turns the other way. You know how quickly these things can change. And just think about the euro prices, these things react very quickly, where sales may pick up in the U.
S, but sales in Europe will impact the overall top line. But we are in a lucky position that we are on a good run on the sales side, and this will be impacting our reported EBIT margin. We assume currently between 20% 21%. If things turn out to be better, great.
Okay. Thank you. Very helpful. Thank you.
Our next question comes from Henrik DelFruitt from HSBC. Please go ahead, sir.
Good morning, gentlemen. Two questions from my side. Firstly, kind of getting back to market growth. With the recent downturn in consumer confidence and macroeconomic headwinds. Do you see or do you have any feeling about whether this could already result in a near term headwind for your business?
And secondly, given that the bone level implant is just about to kick in. What are your expectations for this product for the next quarters? And how are you going to handle a possible cannibalization to your current portfolio?
Obviously, we will enter into another financial crisis in Europe. This this might also affect our business without any doubt. But at the end, we don't have to question the ball here to determine how overall the economy will develop. We still believe that in 2015, the overall market will grow around 3 percentage points. The overall dental implant market, a little bit better even than what we anticipate will be the development in 2014.
However, obviously, if there will be major economic terminals either in Europe or wherever on this planet, this might also affect our business. On your second question regarding bow level tapered, the fact that more than 60 percent of all implants placed today are tapered implants in a way already describes the potential we have with the bone level table implant. Obviously, not all of the sales will be incremental sales. Clearly, we will see some cannibalization because some of our current parallel walled customers, they might also try to tapered implant, and they might come to the conclusion that they like the tapered better because of different handling, because of the opportunity to reduce the time to choose because more immediate loading protocols, etcetera, are possible. So not all of our sales will be incremental.
However, again, you know, with this implant, we are actually getting access to over 60% of the world market.
Thank you.
The next question comes from Daniel Gjellofgren from Bank and WorldView. Please go ahead sir.
Yes. Hello. Ozan from my side. Two questions. First of all, the ProArc, can you quantify a bit the market potential?
I mean, I guess, it's the system is available only on 4 implants. And if yes, how much is that of the market currently your assumption? And the second one in Italy, is there a specific reason why you turned around the business there? Or is it like it was the case in Spain where it's just the base effect of many negative quarters? Those are the two questions.
Yes. So on the Pro Arch, we estimate that roughly 10% of all cases are edentulous cases, which at the end are candidates for a ProArge solution. Obviously, you can also put 6 implants in. Even if you want 8, it doesn't make sense. So it's not restricted to just for it.
So these are a lot of the impacts go up. So this to you is the first question. The second question related to Italy. Italy remains a difficult market, to be honest. We anticipate that also in 2014, the market is still with negative development.
And what we have done in Italy like in the other European countries, we've launched the so called big bang initiative. I guess you are very much familiar with that. So we gained quite some competitive customers and were able to bring them over to Straumann because we were able to offer them a great discount at the moderate and very acceptable price.
Okay. Thanks.
The next question comes from Mrs. Yudan Wang from Deutsche Bank. Please go ahead.
Thank you very much. Maybe just one question. I mean top line is clearly developing very well and it's driven by a number of moving parts. And it would be helpful for us to understand what the EBIT contribution of the top line coming from these various parts would be And how as a manager for the company, how you would balance that versus what you have coming through in the premium brand at the moment that will be great? Thank you.
Thomas, do you want to take
this question? Not sure if I fully understand the question.
I will rephrase. So effectively your top line is developing very well, but it's coming from it's not just coming from your premium brand as we know it's coming from various sources. So your initiative in the value segment for example and going forward more contribution from the regenerative alliances that you've made etcetera whereas the financial benefits of those additional sources of revenue is different to how your premium revenues will have been historically. So it's really a question to understand how the financial benefit of these new sources of revenue are set up and how they would come through and how we should think about the margin of the business going forward relative to the revenue growth that we're seeing?
I'll just take 2 examples. We have premium which is growing that we have an 80 percent gross margin on that. We have a certain cost structure behind that too, delivering us a margin of let's say 20%, 21% in that range. We've always said that if sales continue to grow further, we'll also reinvest. So you wouldn't expect that the margins will go up.
On the value segment, just if you take very two simple things, and we've been communicating that also very clearly. Take NIO then. We're going to consolidate Niel then next year. Niel then has a gross margin of 78% or something on that, and the EBIT margin is between 35% and 40 percent. So I would not say that we have significantly different lower profitability drivers going forward with the value segment.
The companies we've been choosing like Videntigo or like Neodent are no EBITDA margin or highly accretive. They're going to add value. For that reason, we're doing that.
Yes. So for the value segment renewed and kind of special in that it has such high market share in the just in one single country, whereas your value revenues the value revenues we generate from other countries will have less operating leverage. So can you comment on the EBIT contributions of those value revenues and also the EBIT contributions of your regenerative revenues?
Again, I will not go into details, but just again take the concept of what we're going for. We have, let's say, New Zealand, U. S, New Zealand, Spain, Italy all the same. We have the cost what we have there is the incremental customer facing cost. Everything else, the back office is stronger.
We're not adding costs. We're not adding people over there. So there's no reason to assume that it will be dilutive. You will have and that's what we said as always. Going forward for the 1st 2 years, you're going to have, let's say, a plusminus0 gain, maybe the 1st year slightly negative.
But as of year 3, we're going to be positive adding to the 20% to 21% reduction.
And on your question, Ynon, on the regenerated and different products, at the end, let's assume and I don't give you here exact numbers, but let's assume that the bottoms range is only contributing 50% gross margin, we don't have any additional investments. We already have the sales force there, okay. We may have to produce 1 or 2 marketing players or we'll have to give out some samples or whatever. But it's still highly accretive in terms of EBIT margin. Okay.
So The infrastructure is already there. We don't actually build up a separate sales force just for the bodies range.
Okay. That's very clear. So if I may sum it up. So effectively what you're saying is that your base margin for the business as it stands is running at about 20%, 21%. But with incremental revenues, your margin on that incremental revenue is higher.
So should we expect as you get actually more and more robust sales growth that the overall margin of the group will increase? Or should we think that you will continue to make investments and the amount of investments you will make will largely offset the higher contribution. So your margin at the group level will be flattish at about 20%, 21%.
I have to ask you to be a little bit patient here, Yudong. In February, we will actually come up with the guidance for 2015. We will also then obviously communicate again full P and L for the full year. I'm not in a position today to give you a guidance for 2015 2016. What we are actually telling you is that the 20% EBIT margin we will already achieve this year, which is earlier than what we anticipated, still a couple of quarters ago.
And all the other information as mentioned, we will communicate February of next year.
Okay. Thank you very much.
The next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead madam. Good morning and thank you very much for taking my questions. The first one is just related to the incident activities. And I was wondering if you can give us a sense for the North American and European growth excluding InstaDent.
So just trying to understand if it's making any material contribution to what we saw in the Q3. And my second question is obviously since you last reported we've had some further consolidation in the market around June. I'm just wondering what your thoughts are as you look at your competitive positioning. Are you happy with your share? And as far as cash deployment is concerned aside from Neodent, anything we should be thinking about over the next 2 to 3 years given the changes in market structure?
Thank you.
On your first question, the contribution of the InstaDent business in Europe and in North America to the overall growth is still immaterial. So it's not material yet. On your second question related to the recent developments in our industry, Obviously, we are very much in detail following what is going on in our industry. And the recent announcement of Danaher acquiring Nobel is something we also have to give some serious thinking into. So at the end, we don't believe that this will actually change the competitive landscape in the short midterm.
If longer term, this is a threat or an opportunity for us, I think it's still premature to come to a conclusion here. Fact is that we will be the only pure play remaining in this business. And I can tell you that a lot of our customers and a lot of dentists, they like to advantage for us in the short, midterm. But how this always play out in the longer term, I think today it's premature to make a statement on that.
Okay. And any future priorities for cash deployment from your side? Or should we just be thinking about Neodent in terms of the priorities in the short term?
No. As you know, our ambition and that's not new is that also in the value segment, we want to become one of the global leaders. We have started to take the Neodent brand and also the Medentika brand outside of their home countries. So we on one hand, we have an organic approach. We actually build the business from scratch in certain countries.
But that doesn't mean that we are not continuing to look at the opportunities which may emerge on the M and A front. So we are constantly looking at opportunities.
That's terrific. Thank you very much. I'll jump back into the queue. The next question comes from Tom Jones from Berenberg. Please go ahead sir.
Good morning. I have 2 hopefully fairly quick questions. The first was just on your Asia Pacific growth rate, very nice growth you achieved in that market. But I just wondered how much if any of that growth was connected to changes in your distributor setup in China? Effectively was there any significant stocking either positive or negative in China in the quarter that boosted your Asia Pac growth rate?
The second question I just wanted to pick up on the comment you made about Straumann and Instradent ramping up capacity. When you say ramping up capacity, do you mean ramping up production? Or do you actually mean ramping up physical capacity? I was under the impression that a significant part of the operating leverage in your business is based on the premise that you had significant potential to increase output without any real increase in fixed cost. Has that changed in some
way in the last couple
of years? Just some clarification there will be great.
So on your first question, Tom, in China, no, there is no impact yet of actually us absorbing the margin of our distributor. We are still in the process of changing the model from a single distributor to a multi distributor setup. But we have not yet changed any business or taken any business away from our to date single distributor, Beijing Focus Medical and have reallocated that to other distributors. But this will question, I'm not really sure due DLP. I think
it was not the ramp up was in the context of DLP launch. So we are as said before, we are ramp we are launching the VLC in the U. S. And then we're going to continue in Europe. So for that, each change we obviously have to have up the production.
You will see that impact on the inventory at the end of the year.
Okay. You put the comment on the clear choice slide.
Okay. Yes.
That's the same.
Okay. Now what we have to do Tom obviously is we want to make sure that we can actually provide the full solution. So also the CAT come in actual bars, bridges, hybrids, etcetera for indications like ProArch. And we don't have these manufacturing capabilities yet fully in place. So we are expanding our Arlington production site over the next couple of quarters to actually be in a position to also offer this part of the ProArts solution to clear the other customers in the U.
S.
Perfect. So just to be clear, you still have significant ability to ramp up output of dental implants without really putting any additional capital into the business. Is that correct?
It is correct.
Perfect.
Next question comes from Carla Benckaar from Bank of Tubbo. Please go ahead madam.
Good morning, gentlemen. I just have a follow-up question on the big bang. Can you give us an indication how much of the European growth is thanks to this initiative? It's probably a bit hard to predict, but what just to get your feeling about this? And also maybe how far are you in the process of this?
Do you see other countries where you really go to introduce it? Or is it now set up like it is?
A large part of the growth or the development in Europe is thanks to Big Bank, to determine. But it's a significant part of the development of the growth in Europe. We do not yet have rock solid with the new transfer piece, LogSim, registered in Asian markets. So in Japan and China, our 2 largest Asian markets. And we also don't have it registered yet in Brazil, which is also a significant large market for us.
So once we have the registration in place, then we will obviously also look at potentially replicating what we've done in Europe in these markets. But we have to wait until we have registrations in place.
Okay. Thanks. That's very clear.
Next question comes from Maja Pataki from Kepler Cheuvreux. Please go ahead madam. Yes. Good morning. Thanks for taking my questions.
I actually think I have only one and apologies if that has been addressed because I was slightly late the call. Your view on the changes in the industry is that you don't think that there are there is any negative impact in the short to mid term, but potentially long run you would take a look at it. But then if we look at it from a different side, could you already feel in Q3 that some of the salespeople at 3i and Zimmer and potentially also at Nobel Biocare were kind of demotivated and therefore it was in combination with your new product actually even an easier sell to make to gain new customers?
It's an interesting question, Majer. Honestly, I cannot give you an answer on this. There is no news that has arrived at my level indicating this that 3i or SIMO or Noble have now demotivated the sales forces in place. So I don't have any feedback neither from our sales force or from our country management teams that this
is the case. Okay. Thanks.
And we were also not kind of swamped by applications of competitive sales people wanting to join Straumann. So that we have also not seen a tendency into that direction.
Okay. That's very helpful. Thank you. The next question comes from Oliver Metzger from Commerzbank. Please go ahead.
Hey, good morning. Thanks a lot for taking my questions. The first one is just on your test of price elasticity with a more attractive offering in the German speaking countries. In the past, you've stated that the initial feedback was positive. Probably you could comment how that has developed over the last two quarters and also how probably competition might have reacted?
Second question is on the Japanese market. So Q1, Q2 were impacted by this change in VAT. Do you think at the current pace, which you have described, is more a kind of recovery from Q2? Or do you think it's more a true underlying growth?
Let me try to answer question 1. Just to keep in mind, we have actually not reduced prices except for the fact that in Germany, we replaced year end bonus through a reduction of the list price. But at the end, overall for the customer, in terms of pricing, nothing has changed through the big band. I think it's very important to realize that and to state this once again. What we have done is actually giving our customers a better product at the same price they actually were able to buy an inferior product in the past.
This is the thinking and the philosophy behind Big Bag. On the second question
The VAT impact, which will have 1st April. We had a VAT impact obviously in Q1 because the it was March. All the people ordered more due to the VAT increase as of 1st April. You can assume that the current, let's say, Q3 run rate, we have the active launch, we had it for tissue level, we're going to have it now for the bone level. You could assume that for at least for some quarters, this growth rate may be slightly lower because you have some pipeline filling all these things that could be sustainable.
Yes. Coming back to my first question, it's absolutely you're offering a better OEM for the same price. But have you seen some reactions of competitors which think, oh, probably Straumann has makes a good result from this more attractive offering? So as our reaction we reduced price, have you seen something like this?
Not from our main competitors, though, we have not seen any significant moves when it comes to list prices. At the end, average selling price is a different topic, but this is not something we are privileged to actually have insight into. Obviously, the market is marketplace is becoming much more fierce. Competition is becoming much more fierce. And obviously, for larger customers, discounting or bundling or giving packages, which are very attractive, this is not something new that has always been the case.
But just looking at the list price developments of our competitors' list prices, we have not seen any significant moves there.
Yes. Okay. Thank you.
So we have now the I think the last question, okay?
Yes. We have a follow-up question from Mrs. Lisa Klaive from Sanford Bernstein. Please go ahead Madam.
Hi, thanks. Two final questions. Lastly, just because I think there seems to be a bit of confusion on this. Could you just clarify, at the moment, my understanding is most of your discount endeavors because you have minority stakes, you're not actually consolidating that at the revenue line. So therefore, your growth really is driven by the pickup in premium sales this quarter.
And then second, also just trying to tease out the core premium implant sales growth. You mentioned that CADCAM was below implant sales growth, but was it in fact negative? And how long do you think it will take to get the CADCAM business in total back to growth? And could you remind us of what percent of sales it is today?
Okay. On your first question, you're absolutely right. Our investments into Neodent and into Medentika and the other investments or convertible bonds, which we have outstanding, nothing of that has been consolidated and has been contributed to net revenue down to EBIT. Obviously, we have to show or we are showing the results under the financial results line as associates. But up to EBIT, nothing has been included yet except for our own organic efforts.
The instrument U. S, the instrument Iberia and future also the instrument Italy. However, as I pointed out before, the contribution of these businesses to top line and EBIT has been insignificant so far. On your second question, when we talk about CAT scan, we have to make sure that we differentiate between TU SPON and implant borne. If you look at our implant borne CAT scan franchise, that business is actually even over proportionately to our implant volume growing, Where we obviously see a decline is everything that's TUSPON.
So the TUSPON franchise, so single crowns bridges 2 spawn place, which is still the larger part of our CAT Can business, this part of the business has been declining already for a couple of years due to the trend to chairside milling in lab milling.
I guess my question is, I understand those are the 2 big trends and the same thing happened to your largest competitor as well. I'm just trying to figure out at what point we hit that intersection where the growth from the implant based business is doing well enough and that proportion of sales from the implant based business is doing well enough to offset continued losses of tooth borne. And again, if you could just tell us what percent of sales is that is the total CADCAM overall?
You mean including scandals and everything or everything?
Yes.
It's still relatively small.
I mean it's sort of 5 ish percent.
Now Lisa, the question is and I don't want to avoid to give you an answer here, but CAT scan, Vario based, if you take Vario, the Vario based business, is that CAT scan or is that standard prosthetics? Because more and more, if you actually restore a tooth, you actually have a tie base and you put actually a CAT scan crown on top of it. So it's different also to cut whether you want to make the cut, what is actually CAT CAM and what is not CAT scan.
Okay. That's fair enough. Thanks very much.
Good. So thank you once again for your interest and participation in this call. You can find our reporting calendar at the end of the presentation. And we look forward to speaking with you again at the Full Year Results Conference in Basel on February 27. If we were not able to answer all your questions, please contact our Investor Relations department.
So until we meet again, I wish you a pleasant day and goodbye. Thank you.
Ladies and gentlemen, the conference is now over.