Good morning. Welcome to the Straumann 2014 first quarterly results analyst and media conference call. I'm Alice, the Corporate 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&A session. You can register for questions at any time by pressing star and one on your telephone. Should you need assistance, please press star and zero to get an operator. 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 of Straumann. Please go ahead, sir.
Good morning, everyone. Thank you for joining us for this conference call. Revenue. We will be referring to the presentation slides that were published on our website earlier this morning. Before we begin, I'd like to point out that our discussion will include forward-looking statements. Please be careful of the disclaimer on slide two of the presentation and at the end of our press release. I will begin with the highlights. Thomas Dresendörfer, 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-eye program of new solutions. We will be glad to answer your questions. As you can see on slide four, the main story this morning is that we have made a promising start to the year, posting our best quarterly increase in three years.
Group revenue reached CHF 180 million. 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%. The economic recession seems to have lost its sting, its effects are still with us. In developed markets, consumer confidence remains fragile and competition is equally intense. Our continued improvement throughout the past four quarters shows that we are working on the right things with the right people. For the first time in two years, we grew in all regions. Europe returned to growth and contributed over 40% of the top-line improvements. 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 ITI, benefiting from their prestigious World Symposium event in Geneva to promote new research, products, and solutions. As you can see on slide five, the World Symposium was attended by some 4,200 participants, confirming its status as the leading academic event in oral implantology. More than 2,000 dental professionals came to our corporate forum, which covered our new ceramic implants and Roxolid implants.
I'll 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, Good morning, everyone. Looking at the sequential development on slide seven, you can see that we have sustained solid growth over the past four quarters, and we have performed well compared with our main peers. Our top-line growth improved to 6% compared to the average 3% achieved over the preceding three quarters. The improvement is encouraging and shows that despite significant disruption, 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 headwind, mainly from the yen and the dollar, reduced this by 3.1 percentage points or CHF 5.2 million.
As Marco mentioned, we grew in all regions and all businesses, including Europe, which had suffered considerably over the past two 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 nine, you can see that nearly all the European countries returned to growth, with the Nordics and Spain delivering the strongest performances. The latter benefited from improved market conditions and the Expodental trade fair in particular.
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 are wondering how our new pricing strategy in the German-speaking countries is going. I'm pleased to report that our initiatives to upgrade customers to our new premium implant material, Roxolid, have 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.
Roxolid and the bone level implant range were the main drivers of this increase in volume. Abutments increased solidly and offset soft CAD/CAM equipment sales. Asia-Pacific benefited from the market recovery in Japan, where sales were lifted by the launch of SLActive on our tissue level implants. In addition, there were strong orders ahead of value-added tax increases on the 1st of April. China continued to grow at less than in quarter four, when we had received exceptionally strong orders. 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. 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. Speaking of Brazil, Neodent also started 2014 well. Sales growth in the double-digit range, and that excludes the Straumann distribution presence of Neodent 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, Roxolid. This was achieved through making all our implant range available in the new material and combining the launch with a campaign focusing on the minimal invasiveness of smaller and shorter Roxolid implants. With regard to our value brand portfolio, Neodent was launched in the U.S. in March, following its debut in Spain in October.
Both businesses performed well, but are obviously still at a very early stage and thus had no significant impact on our overall growth rate in the quarter. Restoratives returned to growth as a whole, but demand was mixed. Growth in implant prosthetics, including customized abutments and the new Straumann Variobase 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 Emdogain. 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 million 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 million in MegaGen, one of Korea's fastest-growing implant companies, which is outlined on slide 13. MegaGen 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 their expansion plans. We have an option to obtain a majority stake in MegaGen by converting the bonds into shares in 2016.
Both MegaGen and Biodenta 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 botiss, the second-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 botiss products in most major markets, while botiss will have rights to distribute Emdogain in Germany, parts of Eastern Europe, and the Middle East. We also have a call option that will enable us to acquire a 30% stake in botiss in 2017.
botiss 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, botiss provides other innovative products like the maxgraft bonebuilder, which is a customized bone block produced by CapTan. 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 30 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 prostheses. 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 the 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 CAD/CAM system with new software, streamlined solutions, and broader product combinations. The CARES X-Stream 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. That completes the news roundup. You can find out more about these products in the latest edition of our customer magazine, "STARGET", and in last week's press release. 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 second 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 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 mid-term, we aim to achieve solid growth with further operating margin improvements. Now I'd like to open the question-and-answer session.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from a question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Lisa Clive from Sanford C. Bernstein. Please go ahead, madam.
Good morning. A few questions. First, what was your growth rate in Germany in Q1? Rather, if you don't want to give specific country, could you indicate whether it's still negative and maybe give us some general comments on the broader market? I know the whole market's been tough. Number 2, just on your guidance, why are you still only guiding the 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 we'll 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 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. As you understand, more than 50% of our revenue is in Europe, 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 1st. Ahead of that change, quite some customers stocked up, we also anticipate a weaker Q2 in Japan. Overall, we still believe that the market will grow. However, not double-digitally. As pointed out already in the last call, we believe that we will outgrow the market. 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% and 10%. 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 mid-term.
Okay. Just lastly, on your CAD/CAM business, you continue to cite a decline in tooth-borne prosthetics, which is obviously a very competitive part of the CAD/CAM 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, your CAD/CAM business had always been much more geared towards implant-borne. 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 CAD/CAM business elements was implant-borne. It has always been predominantly tooth-borne. I excuse, 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 attachment or implant-borne CAD/CAM elements is higher than the tooth-borne percentage. In our case, it was always the other way around.
Okay. Tooth-borne is still, it's safe to say, the majority of the consumable sales today.
Yes.
Okay. Thank you for clarifying.
The next question comes from Daniel Jelovcan from Helvea SA. 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. Now you have 5%, which is still good, 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%, I think that's a respectable performance.
Sure.
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 first quarter. Again, overall, we are happy with the development.
Of course, it's a good growth, 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?
You're right, the regenerative business was weaker in Q1 than in Q3 and Q4. However, the percentage of our regenerative 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. We are very happy with the performance.
Sure. A follow-up question on Japan. In an interview, you said that Japan grew double digits. According to my calculation, that means that the rest of the Asia Pacific must have grown about 4%. I think you mentioned that especially China and Southeast Asia distributor patterns are always volatile on a quarterly base. Was that the main reason, or?
Yeah. 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 we suddenly have a very strong quarter, and the next quarter it slowed down on these things. These are the key reasons. Then the other countries, like Australia, which has a very high penetration, not growing that strong as the other countries, also pulling down the mix. We are very happy with Japan, where we clearly outperformed all the competitors.
The last, third question is regarding Italy and France. You haven't mentioned them, but obviously, they must have grown as well. Your competitor mentioned that those two markets declined. 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. We see that also in other industries, and we are very, let's say, 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 under-penetrated market, which we're helping to build up and to create a bigger potential over there. We also had very strong, high single-digit growth rates in these countries.
Also Italy was positive. Now, to comment on our competitor's development, 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 Hendrik Lafond from HSBC. Please go ahead, sir.
Yes. Good morning, gentlemen. I have three questions in relation to your new pricing strategy in the German-speaking countries. First would be whether you are actually seeing most impact in the former SLA portfolio or whether it's
your customers focusing on the cheaper Roxolid 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? Finally, given that you seem to be quite happy with its 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, SLActive 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 impact on the overall ASP due to this move. We have seen the majority of our customers moving from titanium SLA to Roxolid SLA or from titanium SLActive to Roxolid SLActive. In other words, no downward rating in terms of pricing. Interestingly enough, we've also seen actually an increase of our SLActive overall share. There have been quite some customers now upgrading from an SLA surface to an SLActive surface because they feel the overall offer now with Roxolid, 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're all aware of the numbers of Zimmer, 3i and Nobel. If you look at the numbers of three out of our four key competitors, and when 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 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 Roxolid SLA or to Roxolid SLActive.
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. 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 SLA.
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 of January, what we see is that we are able to maintain our gross margins.
All right. Thanks.
Next question comes from Michael Youngling from Morgan Stanley. Please go ahead, sir.
Good morning. Thank you for the time. three questions, please. Firstly, on the margin developments, 6% growth probably is perhaps also better than you thought. 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 Neodent Spain, U.S., and so forth? That's question number one. Question number two would be on MegaGen. Can you comment on the profitability of this business? In the press release that you had made, what do you mean by a double-digit EBITDA valuation? Are we talking here in the low teens, or are we talking here in the high teens?
Also on MegaGen, 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? The third question that I have is in relation to 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 Medentis. 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. To your first question, I want to again refer to our midterm commitment to deliver more than 20% EBIT margin, and that's actually including our investments into Neodent. Building up the Neodent businesses outside of Brazil. Your second question on MegaGen: The profitability levels of MegaGen 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 MegaGen is there. We also believe that once we have the opportunity to convert our bond into shares in MegaGen, the profitability levels will be at expected levels. The restrictions when it comes to spending the CHF 30 million, they are clearly defined.
A large part of the CHF 30 million will actually be used to reduce debt. We also have, for our bonds, adequate securities. We have assets against these CHF 30 million convertible bonds. The remaining part of the paying back part of the debt, it's clearly defined for which projects MegaGen is allowed to spend the CHF 20 million. Clearly, it's not the priority for us in MegaGen to take these CHF 30 million 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 compare ourselves to Medentis. I'm sorry, that's not really the right benchmark.
If you would talk Camlog in Germany, yes, that's a challenge for us, clearly. Camlog is when it comes to volumes, potentially already the leading player in the German market, not value, but volumes. Obviously, we have to take this competitor very seriously. With the new pricing policy in place, with our new titanium SLA pricing, with the more value campaign when it comes to Roxolid, 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 Camlog and to actually penetrate the upper part of the value segment in Germany.
Okay, great. Then on Medentis the question on the valuation on the press release, you mentioned double digit.
Oh, okay.
Is it high teens or is it low teens?
Low teens.
Low teens. Okay. Then briefly on Neodent, 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, at the end, that's actually the driving parameter.
You must have some sort of model or so where you predict what the EBITDA will be this year.
Yes. We have models, sure.
We're not going to disclose that at this stage, Michael.
Okay, I understand.
Please understand that.
All right, thank you.
Of course, we know the number.
All right, thank you.
Next question comes from Christoph Gretler from Credit Suisse. Please go ahead, sir.
Yes, thank you. Good morning, Marco. Good morning, Mr. Dresendörfer and Fabian. I have also three question. To start off, Q1, is this in line with your budget or above?
It's above.
Above, okay.
Then maybe, if we move on to the new product. Could you give some more precise feedback on what your customer thought about Straumann One 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 first 3 months overall. The reception of that product 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. We don't have a 3.3 yet Monotype, and we don't have a two-piece ceramic implant yet. Obviously, these are projects we are working on. Overall, the ceramic implant has been overwhelmingly positively received. On the second question on Straumann One, to be honest, the development in Germany has been a lot of disappointing so far. We launched the 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. I think it's not related to the idea or the product itself. It's all about how do we actually steer our sales force because Straumann One is clearly a product to make new customers. It's not a product which you sell into your existing customer base. The German colleagues have been very busy the first couple of months in converting their existing customer base from titanium SLA to Roxolid SLA. Potentially, or probably, the focus has not yet been enough on actually making new customers. We are aware of this, and we are taking the necessary measures to turn this trend also in Germany around.
Was probably a bit too much at the same time. The last question is, or the second last 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 rep productivity is improving or increasing month by month, but that's also not a surprise because we started at zero, 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, even more encouraging is that quite some of these already repurchased. That shows us that the price quality ratio of the Neodent product range is quite appealing.
Okay. Then maybe the last question on the China distribution set up. Is there any progress there?
Yes, slower. This is a complicated project. To change the distribution set up in China, you don't do that overnight, and you have to be very careful when you touch this. We are actually 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.
Oh, good morning. I have a couple of hopefully fairly simple questions. Firstly on your European performance, very nice performance. You mentioned that you grew in nearly all countries. I wondered which countries you didn't grow in, what your expectations and plans are for those markets. Then there's 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. Therefore, there's always a bit of an incentive to stock up a little bit. Based on 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 European performance in Q1 as a result of your changed pricing structure?
On your first question, the Netherlands were still slightly negative. However, if you look at the trends compared with the last quarters, it's extremely positive development. It's still slightly negative. Yes, on Q2, I don't want to spoil the party, that's also why we are a little bit cautious when it comes to Q2. 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, also due to potentially some customers placing a relatively large initial order on Roxolid SLA or SLActive, that we may see in the second quarter in Germany and also in Switzerland, a slight slowdown of the growth rates.
Sure.
Could be.
Okay, perfect. Was Netherlands the only country or the only significant market in Europe that was going backwards in Q1?
The Netherlands?
Yes. Was 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. Then just one general follow-up question. Your Europe-based friends seemed pretty relaxed about the potential merger of two of your competitors in environment. I just wondered what you thought, not specifically about the deal and whether it's good for Zimmer Biomet or vice versa, but just what impact 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 Zimmer will hold on to the dental assets. They haven't actually made any comments into one or the other direction. Let's assume that they hold on to the three and to the Zimmer Dental asset, and they actually embark on the same exercise that Dentsply did with Astra Tech, combining the structures, trying to exploit synergies, et cetera. On the softer scenario, we believe that short, midterm, this may even be slightly favorable to the other global players. As we have seen out of the Dentsply Astra Tech case, a lot of internal focus, a lot of insecurity among the sales force for quite some time. Midterm, once they have actually completed this exercise, obviously they will be much stronger together than if they would act as individual companies.
That's neither for us nor for, I think, the other global players an advantage. I think short, midterm, probably potentially even a chance, an opportunity. Mid, longer-term, it appears a competitor in the marketplace.
Sure. Okay. That's helpful.
Next question comes from Mrs. Yi-Dan 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 Straumann's results will be negatively impacted? 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? I presume you haven't stopped or you haven't completed. There will be more of these assets coming in the pipeline. The second question is on the subject of cost management. Obviously, this year you 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? How much investment do you need, and where would those investments need to be? The third question is on the subject of new products. The ceramic and Straumann One product seems to be coming along. 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 two. 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 areas.
Okay. On your first question, the premium segment, the Straumann brand, that's 99% of our focus and our attention. We are not deviating our focus and our attention from the Straumann brands to actually the value segment. The innovation pipeline and the innovations we've presented in Q4, brought to the market in Q4, and we were talking about during this presentation, and also the growth rates I think we've delivered over the last four 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 two structures completely. We have the Straumann EMV focusing on the Straumann brand 110%. We have a small structure, completely separated from the Straumann structure, focusing on developing the value segment.
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, again, we have committed to over 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 the growth opportunities, and we will be ready to invest the corresponding resources to exploit the growth potential.
For you, I think, then important, our commitment to deliver more than 20% EBIT margin in the midterm remains untouched. Your third question in terms of the white bubbles. If you look on slide 19, fixed immediate eventual solutions, one of the bubbles we've just launched, the abutments, the angulated abutments. We will come up with also a CAD/CAM assortment, which will allow to do All-on-Four type solutions. Obviously, what's still missing here is corresponding implants. We're also working on that to actually make the whole offering when it comes to this bubble fixed immediate eventual solutions complete. Simple eventual solutions, there we are working on similar concept like Straumann One. 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 Neodent or excluding?
No, that's excluded.
Thank you.
For any further questions, please press star and one on your telephone. Star followed by one. The next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead, madam.
Good morning, gentlemen, and thank you for taking my questions. I have three if I can. The first one's 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 in thinking about now you're 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 headwinds likely to be in Q2 if people have stocked up ahead. The third question is just a quick financial question.
I was hoping you could comment on what the financial impact's going to be from the MegaGen convertible and the Dentsply Sirona stake. Thank you so much or the Dentsply Sirona collaboration. Thank you.
Veronika, you may appreciate we launched Neodent in the U.S. mid of March. 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. We are confident that the price quality offering which we have in the U.S. is appealing to a broad potential customer base. On the VAT in Japan, this is actually in our case, it's very difficult to assess this because we also have the effect of SLActive. We launched SLActive end of February, March was a very strong month in Japan. On one hand, due to the SLActive uptake and on the other hand, due to the VAT change as per April the 1st that you pointed out.
Most of the over-proportionate growth rate in the month of March is due to the VAT change and which one is due to SLActive is hard to tell.
The important thing is that we have, with SLActive, a clear differentiator to all the other players, which will let they hopefully continue to boost our sales in Japan.
The third question, Thomas?
Yeah. The impact of Megagen, obviously it's a convertible bond, so you will see that in the balance sheet. We're going to convert that. Suppose the conversion will work out in 2016, we'll then be able to consolidate these numbers. Impact-wise, at the moment, you're not going to see anything from Megagen. On botiss, 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 roll-out plans for these products. 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.
The Megagen bond is-
2016
is interest bearing 3%.
3% interest bearing. It's-
It's in U.S. dollars, it's not in KRW.
Exactly. That's U.S. dollars, not KRW. It's above the average interest what we pay here in Switzerland, we have a positive impact out of the interest earnings.
Understood. Thank you, gentlemen, very much.
You're welcome. Good. That brings us to the end of our session here. Thank you for your questions. 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. Thank you again for joining us. Have a good day and goodbye. Thank you.
Ladies and gentlemen