Good morning. Welcome to the Straumann 2014 First Quarter Results Analyst and Media Conference Call. I'm Alice, the Karofka 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 and broadcast. At this time, it's not like to hand over to Mr. Marco Gadola, CEO of Straumann. Please go ahead, sir.
Yes. Good morning, everyone, and thank you for joining us for this conference call revenue. We'll be referring to the presentation slides that were published on our website earlier this morning. And before we begin, I'd like to point out that our discussion will include forward looking statements. So please be careful of the disclaimer on Slide 2 of the presentation and at the end of our press release.
I will begin with the highlights and then Thomas Dresendorf, our CFO, will share the regional details and business performances with you. After that, I'll tell you about our strategic progress, our outlook and our all our program of new solutions and then we will be glad to answer your questions. As you can see on Slide 4, the main story this morning is that we have made a promising start to the year, posting our best quarterly increase in 3 years. Group revenue reached CHF 180,000,000 and we grew 6% in local currencies. This reflects the successful outcome of our investments in high growth markets, the launch of new solutions and the soft comparative baseline from last year when we contracted 6%.
Also the economic recession seems to have lost its thing, its effects are still with us. In developed markets, consumer confidence remains fragile and competition is equally intense. However, our continued improvement throughout the past 4 quarters shows that we are working on the right things with the right people. For the first time in 2 years, we grew in all regions. Europe returned to growth and contributed over 40% of the top line improvement.
The rest of the world was the best performing region followed by Asia Pacific and North America, which continued to perform solidly. In addition to bringing new solutions to market, we have taken bold steps to be more competitive. Our new price structure in Europe underpins our excellent price to quality ratio. We have also invested boldly and have created partnerships to further penetrate the value segment as we strengthen our presence in regenerative dentistry. Finally, we have continued to leverage our unique relationship with the ICI benefiting from their prestigious World Symposium event in Geneva to promote new research, products and solutions.
As you can see on Slide 5, the World Symposium was attended by some 4,200 participants confirming its status as de leading academic event in oral implantology. More than 2,000 dental professionals came to our corporate forum, which covered our new ceramic implants and rock solid implants. I tell you more about these and other launches in a minute, but first I would like to hand over to Thomas for the regional and business details.
Thank you, Marco, and good morning, everyone. Looking at the sequential development on Slide 7, you can see that we have sustained solid growth over the past 4 quarters. And we performed well compared with our main peers. Our top line growth improved to 6% compared to the average 3% achieved over the preceding 3 quarters. The improvement is encouraging and shows that despite significant restructuring, we have continued to drive sales and defend market share.
At the same time, we have brought new innovative products and solutions to customers and patients. On the next slide, you can see how the different regions contributed to our top line performance. Our overall growth in local currencies was 6%. Currency headwinds, mainly from the yen and the dollar, reduced this by 3.1 percentage points or CHF 5,200,000. As Marco mentioned, we grew in all regions and all businesses, including Europe, which has suffered considerably over the past 2 years.
With a rise of 4%, the European region was our main growth contributor as you can see on the right hand side of the chart. Despite this good news, we remain cautious about our sustained recovery in Europe. Many of the structural economic challenges have not been solved and patients are still reluctant to undergo treatment. On slide 9, you can see that nearly all the European countries returned to growth with the Nordics and Spain delivering strong performance. The latter benefited from improved market conditions and the Eksterbergendal Trade Fair in particular.
But to be fair, I would like to point out that Q1 growth also reflects the low comparative baseline in the prior year, which was due to the early Easter break and our poor start to the year. No doubt you're wondering how our new pricing strategy in this German speaking countries is growing. I'm pleased to report that our initiatives to upgrade customers to a new premium implant material, Roxolus, has been well received and a large proportion of customers have upgraded. At the same time, it has enabled us to make inroads into competitive accounts. Importantly, it has stimulated the business in the important German market, helping to stop erosion in Europe's largest market and to return to growth.
In North America, we have achieved mid single digit growth in both Canada and the U. S. RockSolid and the bone level implant range were the main drivers of this increase in volume. Adbuttons increased solidly and offset soft CADCAM equipment sales. Asia Pacific benefited from the market recovery in Japan, where sales were lifted by the launch of Ethyl Active on our TCE level implants.
In addition, there were strong orders ahead of value added tax increases on the 1st April. China continued to grow but less than in quarter 4 when we had received exceptionally strong orders. Apart from this, orders were also somewhat erratic in distributor markets in Southeast Asia. While we enjoyed good growth in local currencies, we suffered from the depreciation of the yen and other currencies, which collectively reduced growth by almost 11 percentage points. And finally, a comment on our smallest region, the rest of the world.
Our Q1 sales climbed impressive 29% in local currencies with the most pronounced increases in Brazil and Mexico. And speaking of Brazil, Neodent also started 2014 well. Sales rose in the double digit range and that excludes the Straumann distribution business of Nerevent in Spain and the U. S. Looking at the performance by business.
Implants expanded strongly across all regions, driven in particular by the increased share of our new premium standard RockSolid. This was achieved through making all our Revlon's range available in the new material and combining the launch with ConFAME focusing on the minimal invasiveness of smaller and shorter rock solid implants. With regard to our value brand portfolio, NielDence was launched in the U. S. In March following its debut in Spain in October.
Both businesses performed well, but they're obviously still at a very early stage and thus have no significant impact on our overall growth rate in the quarter. Restoratives returned to growth as a whole. The demand was mixed. Growth in implant aesthetics, including customized abutments and the new Straumann vary based abutment, more than compensated for slower sales in tooth borne prosthetic elements and in lab scanners. The smaller regenerative business achieved modest growth led by the tissue repair product end of day.
And now back to Marco.
Thank you, Thomas. I will now say a few words about our strategy to penetrate the Global Value segment. As we told you in February, we have purchased a convertible bond for CHF 6,000,000 from Biodenta. This is a globally active company based in Taiwan and Switzerland and specializing in comprehensive solutions for dentists and labs with a focus on emerging markets. In March, we followed this deal with the purchase of a convertible bond for CHF 27,000,000 in MegaChain, one of Korea's fastest growing implant companies, which is outlined on Slide 13.
MegaChain offers a broad range of implant systems supplemented by digital and regenerative tools and products to support implant procedures. The injection of capital will accelerate the expansion plans. We have an option to obtain a majority stake in MegaGen by converting the bonds into shares in 2016. Both Legashen and Viadenta are important additions for Straumann's value platform because they offer access to the value segments in Asia and in emerging markets such as India, Taiwan, Russia, Turkey and the Middle East. Both companies will operate separately as different brands with their own philosophy, sales force, production and value proposition.
Last week, we announced our intention to combine strengths in the regenerative field with Spotys, the 2nd largest provider of oral regenerative products in Europe. Our goal is to provide the most complete oral tissue regeneration range worldwide. The terms of the agreement are outlined on Slide 14. Straumann will have exclusive distribution rights for bottis products in most major markets, where bottis will have rights to distribute Emdogain in Germany, part of Eastern Europe and the Middle East. We also have a call option that will enable us to acquire a 30% stake in Botis in 2017.
Botis is a fast growing entrepreneurial company with an extensive range of proven high quality solutions, which we will start to sell in Q4 of this year. Slide 15 gives you an idea of how broad their range is. In addition to standard membranes and graft materials, Otis provides other innovative products like the MaxGraft Bone Builder, which is a customized bone block produced by CATKAM. Slide 16 shows how our partners and associated companies line up in our platform of brands that cover both the value and premium segments. I would now like to tell you about some of the exciting launches that we announced in Geneva last week.
To address the challenging needs of edentulous patients who want reliable, aesthetic, full arch dentures that are fixed rather than removable, we are introducing a new range of screw retained implant abutments that offer increased flexibility. In addition to having low profiles, the new abutments are available with 17 degree and 13 degree angulations for challenging situations where the posterior implant has to be tilted. We are also preparing the launch of new custom milled framework components for final fixed prosthesis. This means that we can offer a highly competitive solution to all on-four type fixed edentulous treatments. Moving on to Slide 19.
We announced that our full range of roxolid implants is now available throughout Europe. Our innovative ceramic implant has now entered a full market release in Europe under the brand name Straumann Pure. This represents a first step into the interesting field of highly aesthetic ceramic implants. We also announced further enhancements to our CADCAM system with new software, streamlined solutions and broader product combinations. The Care's Extreme workflow, which significantly reduces turnaround time and shipping costs, can now be used for our VarioBase abutment.
The potential of these products and the segments they target are shown on this chart, which we have shared with you on previous occasions. It shows some of the exciting growth opportunities we are pursuing across a wide range of indications and with various levels of sophistication. As you can see, there are still some white spots and not all bubbles are filled out completely, but we are working on all of them. So that completes the news roundup. You can find out more about these products in the latest edition of our customer magazines Target and in last week's press release.
That brings me to the outlook, which has not changed. Based on the good start we have made, we are keeping to our full year guidance. The 2nd quarter will be softer because Easter fell in April this year. I should perhaps add that the number of lost treatment days is often higher than the actual number of lost working days. Nevertheless, we expect the global implant market to develop positively over the full year and to grow in the low single digit range.
We will continue to invest in growth markets and we'll continue to work on extending the reach of our non premium offering if corresponding opportunities arise. With the full impact of last year's cost reduction measures, we expect to expand operating margin in 2014. In the midterm, we aim to achieve solid growth with further operating margin improvements. And now I'd like to open the question and answer session.
We will now begin the question and answer session. The first question comes from Lisa Klais from Sanford Bernstein. Please go ahead, madam.
Good morning. A few questions. First, what was your growth rate in Germany in Q1? Or rather, if you don't want to give some specific country, could you indicate whether it's still negative and maybe give us some general comments on the broader market because I know the whole market's been tough? Number 2, just on your guidance, why are you still only guiding to low single digit revenue growth when you posted 6% this quarter?
Obviously, there's a help from an extra trading day, but there was also pretty miserable weather in the U. S, which hopefully will see a recovery in Q2. Number 3, if you do manage to get to mid single digit revenue growth, could you give us some sort of guide on what we should expect in terms of margin expansion? Your guidance is pretty vague on that. I guess it just would be helpful to understand the operating leverage that you think you could get.
On your first question, Germany was positive. So positive growth in Q1. Your second question, why are we still rather cautious on the full year outlook? As mentioned, Q2 will be softer. Easter is one of the reasons.
And as you understand, more than 50% of our revenue is in Europe. So the Easter impact will have a significant impact on our overall net revenue development in Q2. On top of that, we had the VAT change in Japan effective April 1. So ahead of that change, quite some customers stocked up. So we also anticipate a weaker Q2 in Japan.
So overall, we still believe that the market will grow. However, not double digitally and as pointed out already in the last call, we believe that we will outgrow the market. So we stick to our outlook for the full year and to the commitment to outperform the market. Based on this, I don't think it makes any sense to speculate how the margins would look like if we actually would grow between 5% 10%. And finally, in terms of our margin guidance, that is exactly the same as we actually commented when we actually met last time in March.
We are committed to deliver more than 20% EBIT margin in the midterm.
Okay. And then just lastly on your CADCAM business, you continue to cite a decline in tooth borne prosthetics, which is obviously a very competitive part of the CADCAM market. Could you just give us an indication of what proportion of your consumable sales are tooth borne today? I was under the impression that this was never a big part of the business and that your CADCAM business had always been much more geared towards implant borne. So I'm just a bit confused as to why this is a headwind that's big enough to be worth noting.
I'm not sure where you got this information from that actually most of our CAT TAM elements business was implant borne. It has always been predominantly Husqvarna. So I excuse you and I'm sorry that you were in a way misled in the past. This is a little bit different to Nobel. Nobel's business, obviously, the percentage of adoption or implant borne catchem elements is higher than the tooth borne percentage.
But in our case, it was always the other way around.
Okay. Okay. So it's still tooth borne is still safe to say the majority of the consumable sales today?
Yes.
Okay. Thank you. That's thank you for clarifying.
The next question comes from Daniel Jallofsen from Bank of Waboo. Please go ahead.
Good morning gentlemen as well. Question is regarding North America. You had a very good run rate in the second half last year of about 10% growth in local currencies. And now you have sort of 5%, which is still good, but it is a sequential slowdown. Can you give a little bit more color on why that happened?
That's the first question.
We are actually happy with the performance of our North American business to grow over 5 percent, I think that's a respectable performance.
So we
are not worried that actually we are not growing adequately in North America. And if you compare our performance to some of our peers, it's clear that we also in North America outperformed the market. I don't want to actually take the weather conditions as an excuse or as an element when it comes to our growth rate in the Q1. Again, overall, we are happy with the development.
No. It's of course, it's a good growth. But just to understand the lower pace of growth, was it also maybe related to the regenerative business, which was a bit softer than compared to the last two quarters? Is that maybe a reason or?
Yes. But you're right, the regenerative business was weaker in Q1 than in Q3 and Q4. However, the percentage of our regenerated business also in the U. S. Compared to our implants and prosthetics business is rather small.
Okay.
We're at 6%, which is you can't always be at 10% and 15% sometimes. At the end, you have to see the trend over the last quarters, and that has been very positive in the U. S. So we're very happy with the performance.
Sure. And follow-up question on Japan. In an interview, you said that Japan grew double digits. So according to my calculation, that means that the rest of the Asia Pacific must have grown about 4%. And I think you mentioned that especially China and Southeast Asia distributed patents are always volatile on a quarterly basis.
Was that the main reason or?
Yes. Exactly. That's the main reason. We grew well above 10% in Japan. We're very happy with the performance over there.
Obviously, in these markets, we also have distributors. And there, it's very difficult to control their order pattern, and they move between quarters. And you suddenly have quarter gets slowed down on these things and these are the key reasons. And then let's say, the other countries like Australia, which is a very high penetration, not growing that strong as the other countries also pulling down the mix. But we are very happy with Japan where we clearly outperformed all the competitors.
Okay. And the last third question is regarding Italy and France. You haven't mentioned them, but obviously they must have grown as well. And your competitor mentioned that those two markets declined. So is that true?
And what exactly might be the reason that you have a different pattern in those two important markets?
I think what we see in Spain is that the economy has turned. It is going up. You see that also in other industries, and we are very lucky happy with the development in Spain. We have excellent growth rates in Spain. The same applies for France, where the situation is slightly different.
You have an underpenetrated market, which will help you to build up and to create a bigger potential over there. We also had very strong high single digit gold rates in these countries.
And also Italy was positive. Now to comment on our competitors' development that's we normally don't do that. We are happy with our numbers and hopefully we will see the strength continuing over the next couple of quarters.
Okay. Thank you.
The next question comes from Henrik Lofeud from HSBC. Please go ahead, sir.
Yes. Good morning, gentlemen. I have three questions in relation to your new pricing strategy in the former SLA former SLA portfolio or whether it's your customers focusing on the cheaper oxalic implants? Second question would be, do you have a visibility if you're taking share from the value players or if you're more entering the other premium competitors? And finally, given that you seem to be quite happy with this strategy, could there be a role model you could implement in other European countries as well?
As you pointed out, the reduction in terms of price for our bread and butter titanium SLA SL Active range we just implemented in the German speaking countries in Europe. Interestingly, if you look at the development in Germany, we have seen very little kind of impact on the overall ASP due to this move. We have seen the majority of our customers moving from titanium SLA to rock solid SLA or from titanium SL Active to rock solid SL Active. So in other words, no downward trading in terms of pricing. And interestingly enough, we've also seen actually an increase of our SL Active overall share.
So there have been quite some customers now upgrading from an SLA surface to an SL Active surface because they feel the overall offer now with rock solid, with the new transfer piece is actually justifying the premium when it comes to the surface. Your second question in terms of where did we actually gain share from, I think you are all aware of the numbers of Cinema 3i and Nobel. And if you look at the numbers of 3 out of our 4 key competitors and you compare these numbers to our Q1 growth rates, it's evident that we have taken share away from some of our core competitors. Your third question is the German example kind of a hint that we should embark on the same route in other European markets. That could potentially be the case.
We have actually not reduced prices on titanium SLA in other European markets. We first want to make sure that we convince our existing customers that they upgrade from titanium SLA to rock solid SLA or to rock solid SL Active. And once we have convinced our customers that this is the right way to go, we may potentially also consider to be more aggressive when it comes to pricing our titanium SLA range. But that has not been decided yet. Based on the numbers we've seen coming through in Q1 in countries like Thomas commented, Spain or Italy and France, it looks like there is not really such a big need for us to reduce prices on titanium SMA.
Okay. One follow-up, if I may. If you say that you've seen little impact on ASP, could you give a bit more numbers behind on what we should expect for gross margin after the price cuts?
We basically have this price cut since 1st January. And what we see is that we are able to maintain our gross margins.
All right. Thanks.
Next question comes from Michael Jungling from Morgan Stanley. Please go ahead, sir.
Good morning and thank you for the time. And three questions, please. Firstly, on the margin developments. 6% growth probably is perhaps also better than you thought. And the question that I have is, are you willing to let the operational leverage feed into your profit numbers this year?
Or will you hold some back for the investments let's say into NIIID and Spain, U. S. And so forth? That's question number 1. Question number 2 would be on Megagen.
Can you comment on the profitability of this business? And in the press release that you had made, what do you mean by a double digit sort of EBITDA valuation? Are we talking here in the low teens? Or are we talking here in the high teens? And then also on Megagen, are you as a result of the bond, does it give you the right to limit their investments for instance in Europe and in North America not to perhaps cannibalize some of the efforts that you're trying to achieve with Neodent?
And the third question that I have is in relation to the Germany. If you are now growing a little bit and you're taking share from the premium guys, it hasn't really solved your problem of let's say tackling some of the value segments like Medentes. What do you need to do to perhaps also move into accounts that you've lost business to in the value segment? What do you need to do to achieve that in Germany? Thank you.
Good. Your first question. I can again I want to again refer to our midterm commitment to deliver more than 20% EBIT margin and that's actually including our investments into Megachem, sorry, into Neodent. So building up the Meltan businesses outside of Brazil. Your second question on Megachem, profitability levels of megachan are not yet where we actually expect them to be.
That's why we have this for us very favorable structure in place with the convertible bonds. We believe that the potential to bring profitability levels up to what we expect to get out of the business like MegaChain is there. And we also believe that once we have the opportunity to convert our bond into shares in MegaChain, profitability levels will be at expected levels. The restrictions when it comes to spending the $30,000,000 they are clearly defined. A large part of the $30,000,000 will actually be used to reduce debt.
We also have for our bond adequate securities. So we have assets against the $30,000,000 convertible bond. And the remaining part after paying back part of the debt, it's clearly defined for which projects MegaChain is allowed to spend the €20,000,000 And clearly, it's not the priority for us and MegaChain to take the €30,000,000 and to build up a competitive offer against what we have built up in Europe. That's not the primary target. Primary target is to expand the base in Asia Pacific with a clear focus on China.
Your last question on Medentis. Honestly, I don't want to compare Straumann to Medentis and we never want to ourselves to Medentis. I'm sorry, that's not really the right benchmark. If you talk we'll talk Camelot in Germany, yes, that's a challenge for us, clearly. Camlok is, when it comes to volumes, potentially already the leading play in the German market, not value, but volumes.
And obviously, we have to take this competitor very seriously. With the new pricing policy in place, with our new titanium SLA pricing, with more value campaign when it comes to rock solid, the new transfer piece, when it comes to our new titanium base range, which we also launched in Q4 of 2013, we believe we have now much more weapons to actually fight against Camelot and to actually penetrate the upper part of the value segment in Germany.
Okay, great. And then on the Dentist, the question on valuation on the in your press release, you mentioned double digit. Is it high teens or is it low teens? In low teens. Low teens.
Okay. And then briefly on Neuodent, can you give us some sort of guide of what the lowest amount of money that you would need to pay to exercise the next option in terms of total value, some sort of guidance as to what that number could be so we can start modeling it more precisely?
I can just tell you that actually the multiple which we will have to pay for the second and the third tranche is considerably below the multiple of the first tranche.
Can you give us an absolute number?
Honestly, I don't know yet how 2014 in terms of EBITDA will look like of Neodent because at the end that's actually the driving parameter.
But this is sort of model or so where you predict the EBITDA will be this year?
Yes, yes. We have more. I'm not going to disclose that at this stage, Michael.
Okay. I understand.
Please understand that.
All right. Thank you.
Of course, we don't remember.
All right. Thank you.
Next question comes from Chris Greffler from Credit Suisse. Please go ahead, sir.
Yes. Thank you. Good morning Marco. Good morning Mr. Dresendorf and Fabian.
I have also three questions. I mean to start off in Q1 is this in line with your budget or above?
It's above.
Above. And
then maybe if we move on to the new products, could you give some more precise feedback on what your customer thought about Straumann 1 and the ceramic implant in particular?
The ceramic implant was extremely positively received at the World Symposium in Geneva. We've sold at the World Symposium more ceramic implants than during the 1st 3 months overall. So the reception of that project has been very positive. And in a way, we were surprised by this positive feedback because we only have a 4.1 millimeter monotype implant in the market yet. So we don't have a 3.3 yet monotype and we don't have a 2 piece ceramic implant yet.
Obviously, these are projects we are working on. But overall, the ceramic implant has been overwhelmingly positively received. On your second question on Straumann 1, to be honest, the development in Germany has been a lot of disappointing so far. We launched a product in January. We are not in line with what we planned and budgeted in Germany.
On the other hand, in the U. S, it's actually a real success. So I think it's not related to the idea or the product itself. It's more about how do we actually steal our sales force because Straumann 1 is clearly a product to make new customers. It's not a product which you sell into your existing customer base.
And the Turman colleagues have been very busy the 1st couple of months in converting their existing customer base from a titanium SLA to rock solid SLA. And potentially or probably the focus has not yet been enough on actually making new customers. But we are aware of this, and we are taking the necessary measures to turn this trend also in Germany around.
It was probably a bit too much at the same time.
And then the
last question is or the second best question on Neodent Spain. Could you speak about the sales rep productivity there that you have seen and how happy you are with that?
The sales rec productivity is improving or increasing month by month, but that's also not a surprise because we started at 0. So we need to see monthly positive developments to make the business case. Very encouraging is that we are actually gaining a lot of new customers. And even more encouraging is that quite some of these already repurchased. So that shows us that the price quality ratio of the Neodent product range is quite appealing.
Okay. And then maybe
the last question on the China distribution setup. Is there any progress there?
Yes, but slower. This is a complicated process. To change the distribution distribution setup in China. You don't do that overnight, and you have to be very careful when you touch this. But we are continuously working on this and this is one of our key projects for this year.
Okay. Good. Yes. Thank you. Have a good day.
You're welcome. Thank you, Chris.
Next question comes from Tom Jones from Berenberg. Please go ahead, sir.
Good morning. I have a couple of hopefully fairly simple questions. Just firstly on your European performance, very nice performance. But you mentioned that you grew in nearly all countries. I wondered which countries you didn't grow in, and what your expectations and plans are for those markets.
And then just a follow on question
in Europe. You've been fiddling around
with your pricing in German speaking markets. And typically, dentists, when they see changes in pricing and structure, have a natural tendency to think it's a one off offer that may not continue. And therefore, there's always a bit of an incentive to stock up a little bit. Based on your what you're seeing in your German speaking markets in Q2, would you agree or disagree that there's been any kind of stocking related bump up to a European performance in Q1 as a result of your changed pricing structure?
On your first question, the Netherlands was still slightly negative. However, if you look at the trends compared to the last quarters, it's extremely positive development that is still slightly negative. Yes, on Q2, I don't want to spoil the here, but that's also why we are a little bit cautious when it comes to Q2. And we maintain our full year 2014 outlook when it comes to the overall market growth and our growth. It could well be that also in Germany, not only due to Easter, but also due to potentially some customers placing a relatively large initial order on rock solid SL Active that we may see in the Q2 in Germany and also in Switzerland a slight slowdown of the growth rates.
Could be.
Okay. Perfect. So was Netherlands the only country or the only significant market in Europe that was going backwards in Q1?
The Netherlands? Yes. Is
that the only one? Or were there any other significant markets that were going backwards in Q1?
No. That's actually the only one.
Okay. That's quite encouraging. And then just one sort of to my general follow-up question. Your Europe based friends seemed pretty relaxed about the potential merger of 2 of your competitors, Zimmern Biomet. I just wondered what you thought, not specifically about the deal and whether it's good for Zimura Biomet or vice versa, but just what impact do you think that may have good, bad or indifferent on the dental implant market as it currently stands?
First of all, it's not yet really clear if actually similar we hold on to the dental assets. And they haven't actually made any comments on 1 or the other into 1 or the other direction. But let's assume that they actually they hold on to the 3 anti semodental asset and they actually embark on the same exercise that then supply it with Ostrach combining the structures, trying to exploit synergies, etcetera, etcetera. On the such scenario, we believe that short, mid term, this may even be slightly favorable to the other global players as we have seen out of the Dentsply, Austria case, a lot of internal focus, a lot of security among the sales force for quite some time. However, midterm, once they have actually completed this exercise, obviously, they will be much stronger together than if they would act as individual companies.
And that's neither for us nor for, I think, the other global players an advantage. So I think short, mid term, probably potentially even a chance, an opportunity. Mid longer term, it's a fierce competitor in the marketplace.
Sure. Okay. That's helpful.
Next question comes from Ms. Yudan Wang from Deutsche Bank. Please go ahead madam. Thank you. I have also three questions.
The first one is regarding the value strategy. You have obviously been extremely busy with the organic and external opportunities for the value segment. How much risk is there that you're spreading yourself too thinly? You'll have less time for your core premium price businesses and that when it comes to it later on that scrum's results will be negatively impacted. So with these what measures have you put in place to manage these risks?
And how closely are you monitoring the performance of these assets that you're getting stakes in? And I presume you haven't stopped or haven't completed. There will be more of these assets coming in the pipeline. And then the second question is on the subject of cost management. Obviously, this year, you'll get the full benefit of the program that you announced in 2013.
How should we think about the development of Straumann's cost base here? Is there much scope for you to be even more cost efficient than you are currently? And how much investment do you need? And where would those investments need to be? And then the third question is on the subject of new products.
The ceramic and Straumann 1 product seems to be coming along. But I see that on one of the slides you showed at the full year, there are quite a few other bubbles that are potentially much bigger than these 2. So can you give us some sense of where you are on some of those projects, not necessarily telling us exactly when you're going to launch them, but some sense of what impact we could see from those rigs?
Okay. On your first question, premium segment, the Straumann brand, that's 99% of our focus and our attention. So we are not deviating our focus and our attention from the Straumann brands to actually the value segment. And the innovation pipeline and the innovation we've presented in Q4 brought to the market in Q4 and we were talking about during this presentation. And also the growth rate, I think, we've delivered over the last 4 quarters should actually, in a way, show you that the focus clearly still is and will be on the premium segment.
We have internally separated the 2 structures completely. So we have the Straumann EMD focusing on the Straumann brand 110%, And we have a small structure completely separate separated from the Straumann structure focusing on developing the value segment. But this is really a very small structure, a couple of people and as mentioned, acting completely separately from the green colleagues. Currently, there are no concrete additional deals planned. As mentioned in the script.
If something should arise, which looks interesting and which could be a good add on to what we already have in place, we for sure will have a look at it, but there are no concrete additional deals in the pipeline. On your second question, when it comes to cost optimization, cost efficiency potential, all 20% EBIT margin in the midterm, and we will actually stick to that. Obviously, if we see chances to actually invest into promising growth opportunities in growth markets, we will go after these growth opportunities and we will be ready to invest the corresponding resources to exploit the growth potential. For you, I think, again, important our commitment to deliver more than 20% EBIT margin in the midterm remains untouched. And your third question in terms of the white bubbles.
If you look on Slide 19, fixed immediate eventual solutions, One of the bubbles, we just launched the abutments, the undulated abutments. We will come up with also a CAT cam assortment, which will allow to do all on 4 type solutions. And obviously, what's still missing here is corresponding implants. And we're also working on that to actually make the whole offering when it comes to this public fixed immediate Edential Solutions complete. Simple Edential Solutions, there we are working on similar concept like Straumann 1.
So there, there are projects in the works. And we also have projects ongoing to obviously fill the other white spots.
Okay. Just a clarification on the 20% margin. Is that including the benefit of the boost you get from consolidating Nodent or excluding?
No, that's excluded.
Thank you. The next question comes from Veronika de Baileva from Goldman Sachs. Please go ahead, madam. Good morning, gentlemen, and thanks for taking my questions. I have 3, if I can.
The first one is just on Neodent and the rollout in the U. S. I appreciate you're early in the process, but if you can give us a sense for how that has progressed so far and thinking about now you're in at the end of month 2, what kind of uptake you're seeing? What is the competitive response like so far? That would be really helpful.
The second question is, can you clarify what the impact you estimate to have been from the VAT demand pull forward in Japan? Just trying to get a sense for what the headwind is likely to be in Q2 if people have stocks up ahead? And the third question is just a quick financial question. I was hoping you could comment on what the financial impact is going to be from the MegaGen Convertible and the bottas stake. Thank you so much for the bottoms collaboration.
Thank you.
Rodica, you may appreciate. We launched NILDA in the U. S. Mid of March. So it's still too early to actually have a full assessment on the situation.
Positive is that we actually are gaining customers on a daily basis. We've also seen in the U. S. Already some customers repurchasing. So we are confident that the price quality offering, which we have is now then in the U.
S. Is appealing to a broad potential customer base. On the VAT in Japan, this is actually poor. In our case, it's very difficult to assess this because we also have this effect of SELACTIVE. We launched SELACTIVE end of February.
So March was a very strong month in Japan on the one hand due to the SEL Active uptake and on the other hand due to the VAT change as per April 1 that you pointed out. So most of the over proportionate growth rate in the month of March is due to the VAT change and which one is due to SL Active is tough to tell.
But the important thing is that we have with SL Active a clear differentiator to all the other players, which will hopefully continue to boost our sales in Japan.
And the third question, Thomas?
The impact of Negagen, obviously, it's a convertible bond. You will see that in the balance sheet. We're going to convert that. Let's say, suppose the conversion will work out in 2016, we'll then be able to consolidate these numbers. So impact wise, at the moment, you're not going to see anything from MegaGen.
On buses, we have a collaboration, as the press release says. So you'll see incremental revenue going forward. We are in the process of defining the portfolios for each of the countries and having the rollout plans for these products. And then when we come to 2017, where we have the option to get a stake into that, we'll give you further feedback on how we will reflect that in the financials.
And the negative bond is 2016. Is interest bearing 3%. 3% interest bearing. So it's And it's in U. S.
Dollars. It's not in Korean.
Yes, exactly. That's in U. S. Dollars, not Korean. 1, it's above the average interest what we pay here in Switzerland.
So we have a positive impact out of the interest earnings.
Understood. Thank you, gentlemen, very much.
You're welcome. Good. So that brings us to the end of our session here. Thank you for your questions. And in closing, I'd like to draw your attention to the Investor Relations calendar, which you can find on Slide 24 and on our website.
And thank you again for joining us. Have a good day and goodbye. Thank you.