Bonesupport Holding AB (publ) (BONEX) Earnings Call Transcript & Summary

Welcome to the BONESUPPORT audiocast with teleconference fourth quarter 2021. [Operator Instructions] Today, I am pleased to present CEO, Emil Billback; CFO, Hakan Johansson; and CMO, Michael Diefenbeck. Gentlemen, you may now begin.

Thank you very much, operator. Just to clarify. This is the quarter 4, 2021 call. And I'm Emil Billback, I'm the CEO. And I'm here with Hakan Johansson, and Michael Diefenbeck is not participating today. So what we will do is we will, over the next 20 minutes, provide a presentation on the performance in quarter 4 of last year and share also the full year results, and then we will open up the line for question and answers. We can go to Slide 2, please. Before starting, actually the details of the presentation, I would like to draw your attention to disclaimers covering any forward-looking statement that we might make today. Let's go to Slide 3, please. So I would like to begin this presentation now with some condensed highlights from the report that we released this morning. Overall, quarter 4 sales were SEK 61 million, which corresponds to a reported growth of 15% year-over-year. The currency movement in the year has been quite significant and growth at constant exchange rate was 21%. This is a strong growth with further progress in market share gains, given the impact on market conditions from the resurgence of the pandemic. The EBIT was a negative SEK 22 million, which is a significant improvement over last year. For the full year, sales were SEK 213 million, which corresponds to a reported growth of 18% year-over-year and 23% positive at a constant exchange rate. Now 2020 was a year with very high variability driven by the first pandemic waves. So if we compare our full year 2021 with a pre-pandemic year 2019, BONESUPPORT has displayed strength through the volatile times and grew sales with 44%. And as you can see EBIT for the full year landed at a negative SEK 88 million. From a business operations perspective, we saw the return of regional restrictions and deferrals of non-acute surgeries as Omicron drove high incidence rates and new peaks in the number of hospitalized COVID patients. While the onset of the quarter showed strong sales development, the impact of the resurging pandemic was significant at the end of the quarter. During the quarter, we launched a cannula and guiding tube for use and application of CERAMENT in proximity to joints, with minimal invasive procedures. This opened a new segment for us in the U.S. of some 20,000 procedures yearly, mainly in sports medicine. Injuries in this area are common among athletes and their quick recovery is of high priority. CERAMENT's properties make it ideal for the treatment of this condition. All in all, we have seen diverse and varying market conditions in the quarter, but with continued strong growth for CERAMENT. Let me go to the next slide and again speak about how the pandemic have impacted the market dynamics. So Slide 4, please. So the recovery in surgical volumes that we saw during autumn was disrupted as Omicron surged in late November and December, again making health care systems postponing non-critical surgical procedures. CERAMENT sales is, as you know, strongly correlated to the number of surgeries being performed, which in turn has been determined by the pandemic for the last 2 years. On top of that direct impact, a shortage of staff has added challenges to the surgery volumes. As an example, some 450,000 people or 3% of the workforce in the U.S. health care system left their jobs during the pandemic up until November 2021. Throughout the pandemic, the patient flow has been on a steeper trajectory than the capacity utilization, which has created increased backlogs and queues. As an example of how queues are building up, we can look at the NHS where there is graph or a matrix on the bottom left part of the slide. The people in line to receive elective care were 4.5 million in November 2020. And by November 2021, that queue had grown to 6 million people. That's a sort of 33% in only 1 year. To handle this, the NHS has received an additional GBP 5.4 billion, whereof GBP 1.5 billion is earmarked specifically for elective procedure recovery. The U.K. government has provided extra funding to the NHS by establishing a Build Back Better program, so to increase elective care activity in the NHS by 30% by 2024 to 2025, compared to pre-pandemic level. So while we continue to see short term pandemic disruption, the midterm perspective is pointing at strong positive trends in surgical procedures. Sweden, at the bottom right of the slide, with easily accessible and high transparency in data, gives a very similar review for 2021. Surgery productivity in 2020 and 2021 dropped some 20% versus pre-pandemic normal levels of some 1,000 surgeries a day. Although the trend during the beginning of the autumn was positive, capacity is far from back at full speed and queues are still building up. The backlog in Sweden only is 156,000 procedures, which is 30,000 procedures more than we shared these same metrics in the quarter 3 report. Now let's turn to next slide, and I'll guide you through some of the details of our quarterly performance. So Slide 5, please. So despite the strong Omicron impact at the end of quarter 4, we reached an all-time high sales. We have gone through the details of this slide at many previous occasions. So let's focus now instead on the trending we see. On the European side, which is the red and orange bars, we see that the very strong sales trend up until 2019 has been a bit upheld during the last 2 years by influence of the pandemic. With the latest 2 to 3 quarters though, we see again a growth trajectory despite the effect from the pandemic. In the U.S., growth momentum has been stronger as we continue to expand our market presence through important GPO contract, increased market penetration and broadening of market segments. All in all, despite pandemic influence, market -- and the market conditions that the pandemic has brought with it, we continue to gain market shares and quarter 4 was our best quarter ever. I also have to say that I hope that when we come to quarter 3 of this year, we will be able to add one color to the U.S. bar, hopefully, potentially representing deferred sales of CERAMENT G. So let's turn now to the next slide and transition into the geographic segment details. We'll start with North America on Slide 6. So we have delivered sales of SEK 35 million, which represents a reported growth of 22% year-over-year and growth above 30% at constant exchange rates. In areas where Omicron has raged through the population, the number of surgeries have been significantly reduced. In other areas that have been less affected, surgeries have almost been back to pre-pandemic levels. After the end of the period, we signed a strategically important distribution agreement, extending our market access to the important pediatric market. The company OrthoPediatrics is a leader in the orthopedic pediatric markets, have an annual sales of about USD 100 million. And since this contract is in effect, they can start to distribute CERAMENT BVF to their network of 250 pediatric hospitals across the U.S. One of our key priorities is, of course, to pursue the CERAMENT G registration in the U.S. In late September, we sent the supplementary DeNovo bone infection data to the FDA and have since then been engaged in an interactive review with FDA. What this means that during October and November, the BONESUPPORT and FDA team met almost weekly. By the additional data submitted, the control group now contains data from more than 200 patients. A potential market access grant decision could arrive in -- sorry, should arrive in this current quarter. Turning to some other highlights of the quarter in the U.S. In anticipation of pursuing further market opportunities, we're actually expanding our commercial infrastructure with recruitment of 2 additional regional managers, one in Northern California, because we have splitted California into North and South, given the vast opportunity. And we've also added one regional manager to the Midwest. In total, we have now 12 regional managers in the U.S. In Canada, we are replicating the successful setup in Southern Europe with a hybrid sales model. And as you might remember, CERAMENT G is already approved in Canada. Let's turn to the next slide and look at Europe & Rest of the World. So in the quarter, we delivered sales of SEK 27 million, which represents a reported growth of 8% and 9% in constant exchange rates. Sales vary regionally as there were also regionally high levels of hospitalized COVID patients. More and more governments are discussing special fundings to address the backlog in elective procedures. And as I alluded to earlier, the additional funding in the U.K. was indeed visible with positive effect on sales in the quarter. Several major clinics have also extended their surgical procedures into weekends to reduce the buildup of backlog. Let's now turn to the next slide and spend a minute on the latest trauma publication on CERAMENT G, showing strong radiologic validation of bone remodeling. Slide 8, please. So this study comprises retrospective data of 51 patients collected from 2015 to 2021. 80% (sic) [ 81% ] of the patients had open fractures of Gustilo-Anderson IIIB and 20% (sic) [ 19% ] had closed fractures. X-rays were performed on these patients regularly over 12 months. Now the study concludes a high union rate and "good signs of radiological remodeling into trabecular bone." Now these findings have already been shown, of course, in clinical studies, clinical practices, preclinical studies and for other indications. That CERAMENT turns into bone is proven and also widely accepted. This study does, however, provide validating 12-month x-rays, specifically for the trauma indication, which is an important piece of data for a future potential regulatory process. The study actually has clear similarities to the data mining that was part of our supplementary submission on DeNovo, but this was, as you know, for bone infections. And with that, I will hand over to Hakan to run us through the financial details.

So let us go now then to Slide 10, please. Net sales improved from SEK 53.2 million to SEK 61.4 million, equaling a growth of 15% or 21% in constant exchange rate. The organic growth in the segment North America measured in fixed currencies was SEK 8.6 million or 30%, confirming a continued strong growth trend. And the organic growth in Europe & Rest of World was SEK 2.4 million or 9%. The changes in currencies had a negative impact in comparison with the fourth quarter last year of in total SEK 2.7 million, of which SEK 2.5 million relates to the weaker U.S. dollar measured in full year average in 2021 versus 2020. Next slide, please. The contribution from the segment North America improved with SEK 3.6 million and was reported to a profit of SEK 3.7 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 26.5 million compared with SEK 21.5 million previous year, of which sales commissions to distributors increased with SEK 3 million to SEK 11.4 million. The increase in sales and marketing expenses is mainly due to a higher level of activity. The contribution was also charged by R&D costs related to studies decreased from SEK 4.8 million last year to SEK 3.8 million this reported quarter. From the lower graph showing net sales as bars and gross margin as to orange marker, it can be noted that the gross margin remained stable and in line with previous quarters this year. In Europe & Rest of the World, a contribution of SEK 5 million was reported to be compared with SEK 5.6 million previous year. The slightly lower contribution explained by a higher level of activity in the period compared with the same period last year, including the setup of a hybrid structure in Southern Europe, but also relating to a low expense level last year because of the COVID-19 pandemic. Sales and marketing costs increased by SEK 2.1 million compared to the corresponding quarter previous year and amounted to SEK 17.1 million. In Europe & Rest of World, a minor decline in gross margin was reported following the market mix during the reported quarter. Next slide, please. In summary, we reported a 21% growth in constant currencies despite continued impact from the pandemic, reaching an all-time high sale of above SEK 61 million. Gross margin remained stable and in line with previous quarters. And it's -- it be noted that the continued growth in the U.S. will have a favorable effect on gross margin. The operating profit was reported to a negative SEK 21.8 million, an improvement with SEK 4.9 million compared with a loss of SEK 26.7 million for the same period previous year. The lower loss included expenses regarding long term incentive programs, a cost of SEK 4.8 million this year compared with a cost of SEK 1.8 million previous year, a difference of SEK 3 million. The increased cost was mainly an effect from the first time inclusion of the programs approved at the Annual General Meeting in May 2021. Profit improvement before the cost for the long term incentive programs was close to SEK 8 million. Cash at period end was reported at SEK 206.5 million and remaining with a substantial headroom in funding until we can reach the point of cash flow breakeven. Next slide, please. Selling expenses increased with SEK 4.6 million. The higher cost level partially relates to the investments in hybrid markets such as Italy and Spain. The period also contains significant demo kit replenishment, but also increased costs for freight and fees following the sales growth. R&D expenses reported below previous year as FORTIFY related cost has been phased out during the quarter. Administration remaining on a stable level, excluding effects from the long term incentive programs, equaling SEK 10 million this year compared with SEK 10.8 million previous year. And with this, I hand back to Emil.

Thank you, Hakan. Let me then sum up a bit. As usual, so we should be on slide -- which slide are we on? 14?

15.

15, good. That's a good slide. We put a time line so that you can follow the key activities and also upcoming milestones. The closest is the potential DeNovo approval for CERAMENT G in the U.S., which is expected in the current quarter. Let's go to the next slide, that's the final slide of the presentation. Let me summarize. So what we have seen now is a quarter which has been very focused on DeNovo, of course, also on strategic execution and situational commercial adaptation. At a full year sales growth of 23% in constant currency, we are taking significant market shares. Strengthened by this and in anticipation of surgical volumes, midterm reaching above pre-pandemic levels, we have further invested in our commercial platform. The most recent steps with the strategic partnership with OrthoPediatrics, 2 additional regional managers in the U.S. and a hybrid setup in Canada means that we charged into 2022 with a stronger commercial setup than ever before. As you well know, our most important upcoming task is to enable U.S. market access for CERAMENT G. Through the bone infection DeNovo pathway, we hope to achieve market approval in this quarter for the indication bone infection. Data and documentation are being generated to sequentially pursue a broader label in the future with further indications added. 2 years of pandemic influence has brought the largest surgical procedure backlog ever in our key markets. The obvious clinical benefits and health economic evidenced with CERAMENT is making it an even more attractive solution in addressing the heightened need for outcome effective orthopedic therapies. Governments are increasing funding to increase the pace of elective procedures. And as we are moving to a less pandemic influenced reality, we are reiterating our annual sales growth target of 40%. And with that, we close our presentation and would like to open up for questions.

[Operator Instructions] We have a question from Erik Cassel from ABG Sundal Collier.

So I have a couple of questions for you today. And I just want to start off with the cost levels. So you talked about going with the hybrid model now in Canada and increasing the amount of regional managers in the U.S., so sort of ramping up sales efforts in North America. But is this in any way, conditional on the FDA approval for bone infection or are you doing this either way?

Thank you, Eric, for your question. The ramp-up of resources that you just mentioned, Canada and the 2 extra regional managers, that decision has already made, and it's being implemented. So out of the 2 people -- the 2 regional managers, one was already recruited in December and the recruitment of a person for the hybrid setup in Canada was also done already at the end of last year. So those have happened independently.

And what sort of incremental costs does this imply?

Well, we don't break down the cost for individual activities like that. You could see that the cost in quarter 4 was slightly raised due to partly some of these activities. But overall, it's rather small incremental costs that we're talking about. It's a total of 3 people that is added.

And then Hakan, you said that cost for replenishing demo kits was substantial this quarter. And I guess that's sort of a non-recurring expense. So could you help us in any way with how large that cost was?

So the cost for that is somewhere around SEK 1 million, and it will cover the need of demo kits for 5 to 6 months.

Very helpful. And then just quickly on the R&D spend run rate now in Q4. Is this the level you expect to be at going forward now that FORTIFY is out of the picture?

Well, underlying we have communicated previously that the level will remain fairly stable after phasing out FORTIFY. What you will see in some quarters is that we will be reaching milestone payments in a few of our clinical studies that will cause some movements. But again, I think that if you take this quarter and also look backwards and adjust for the phasing out of FORTIFY, you would find a fairly stable level, yes.

And then, Emil, you said that you're taking significant market share from other treatment options, primarily in the U.S., would you say that doctors who has been using synthetic grafts are switching to CERAMENT? Or is it now more moved from autograft users sort of making the switch?

Yes. Thanks, Erik. Obviously, a good question. In the U.S., we see, as is clear from the numbers, a slightly higher growth than what we see in Europe. And to a large extent, it is switching from allograft and synthetic grafts. And I guess that for an orthopedic surgeon to switch from one synthetic or from allograft into CERAMENT is fairly easy, because the procedure doesn't change so much. In Europe, the conversion from autograft to CERAMENT is slightly slower, because it also involves changing the technique. So U.S. synthetic to synthetic mostly. And in Europe, slightly slower autograft to CERAMENT.

Just a last question for me to sort of get a feel for current trading. I mean it seems to me like the COVID situations in hospitals have improved quite a bit over the last 2 weeks just compared to mid-January. And the data I show have -- I have shows that sort of U.S. room capacity or utilizations is back to sort of early November levels already. So just wondering if you can confirm a fairly quick rebound right now in the numbers you're seeing as well?

Yes. There is -- it depends on if you look at infection rate or hospitalization rate. But if you look at hospitalization rate, because usually if you get infected, it takes a few days before you end up in a hospital if you have severe symptoms. If you look at hospitalization rate, our sales, to a large extent, is a reverse mirror of it. So we also see that hospitalization has dropped pretty sharply since the beginning of January. And as you said, that it's basically on the levels of November, and our sales follows a corresponding pattern, but opposite.

We have a next question from Carl Mellerby from SEB.

The first one relates to the financial targets. You reiterated the target of 40% sales growth per annum post-COVID, or sort of kind of normalized situation. I was just thinking, is that based on the assumption that you get the positive decision on the DeNovo application for bone infections? And then a follow-on question for this, if you assume a worst case scenario, we don't get approval, what would you see as a reasonable sales growth target per annum, so say, excluding the CERAMENT G in the U.S., considering that we still have significant elective backlog here? That's my first one.

Yes. Thank you, Carl. Yes, I will answer the first question and possibly not the second, but let me explain. The 40% sales growth target was set -- we set that when we made our 5-year plan about 3 years ago. And it includes an approval for DeNovo. If DeNovo approval wouldn't come or would be partially restricted or something else, we would have the opportunity to come back and revisit that target. But as we haven't had any signs that, that will be the case, we stick with our previously communicated target until data points arise that will give us reason to revisit it. The way to look at the 40% is not to say that we will grow with 40% for all alternative or the market cap will eventually be bigger than Tesla's. But the way to look at it as -- is that at least for the next 2 years, this is a very valid target given, hopefully, potentially positive message from the FDA. Worst case scenario, I cannot answer actually, because we haven't done that exercise. It all depends on what the message will be from FDA. There are so many different options, of course, everything from a full approval to a full rejection. And then all kinds of scenarios in between. So we have actually decided not to dwell further into those different scenarios until we have a better understanding of what the outcome can be. I can assure you, though, that as soon as we have the notification from FDA, we will be able to communicate much clearer what that means to the company.

Fair enough. I just have one additional one. You mentioned a relevant safety stock level, but would you say the situation around possible component shortages have worsened reasonably for you guys or is that still a non-material risk?

Yes. It's not a risk currently. We have good stock levels. And -- but we do also see that the disruptions in components everywhere in the world and the disruption in supply chains is probably going on a little bit longer than we first anticipated. So we cannot hold for granted that also we would be completely isolated from this in future production. Some products or some components have longer lead times and that could, of course, be influenced. If that influence would be material, we would communicate it to the market. There's always, on products like this, short-term disruptions here and there. But to our knowledge, nothing has led to any canceled surgeries or disruption in procedures. So right now, we're in good shape. And we keep a very close eye also at our suppliers to guarantee that this continues to be the case.

We have a next question from Kristofer Liljeberg from Carnegie.

It's Kristofer from Carnegie. I have 4 questions. First, on this 40% sales growth target, you said it's very valid for the next 2 years. Does this mean you expect to grow at least 40% 2022 in isolation? Then a question about your comments about the overall market environment, market share gains, et cetera. So I wonder a little bit how you see sales being correlated to overall market volumes versus your ability to gain market share by deeper penetration at existing hospitals and the ability to sign new contracts. So i.e., how important is those fluctuations in market groups for BONESUPPORT sales? And the third question is, if we -- if you get this approval now for CERAMENT G, are you planning to expand marketing capabilities significantly more than what you have done so far? And the final question relates to the R&D cost line. Did you include -- or did you have a FORTIFY or cost for the FORTIFY study in the quarter? And if so, how much?

Okay. So the first question relates to the growth targets. We have said that we will grow 40% once we get to a more normal pre -- sorry, post-pandemic state. So if the trend continues in the -- with the pandemic of reduced restrictions, not only in Sweden, but in all key markets, and we see that the health care systems is starting to come back at least to close to normal levels, yes, we can confirm 40%. The 40% will be more dependent on the pandemic than anything else right now. So in post-pandemic times or where we find some kind of new equilibrium or normal state of being, we can confirm that also for 2022 in isolation.

Could I -- may be related to that, since the target was set a few years ago, and now we have had a negative impact from the pandemic, assuming there will be a catch-up effect, doesn't this mean you should grow a bit above 40% then in the next few years?

I agree. As I said, it's all down to the pandemic. And I must admit, sitting here a year ago thinking that the autumn of 2021 would indeed have a bit of a rebound then catch-up, and I have to admit, I was wrong. But if the scenario, as you depicted it, would happen, I think it's also likely that our growth will be even higher than targets. To the market environment, what has happened mainly during the pandemic and where we see the market share gains is with existing customers or customers that have been won just before the pandemic or during the pandemic. But the increase of volume has been bigger with those won customers than the recruitment of new customers. This is mainly related to restrictions to get into the hospitals and for our salespeople to meet potential new customers during the pandemic. So what we're looking forward to now is with restrictions, hopefully, starting to be renewed, is that our salespeople again can be fully productive and effective and again, start to visit some of those hospitals around our key markets that yet have not started to try CERAMENT, because there's still a lot of them. With an approval of CERAMENT G in this current quarter, and many of you have also seen, let's say, from FDA's webpages that how long time usually they take to answer to such requests. So yes, indeed, the notification should come at the end of February, plus/minus 1 or 2 weeks given COVID influence. We don't have any plans communicated right now to ramp up our efforts further. We have a very well-established commercial structure in the U.S. where the ramp-up is rather getting more attention from the distributor sales reps. They're being paid by commission. And I can tell that the distributor reps in the U.S. are very, very eager to see CERAMENT G come into the portfolio. So with 12 regional managers, I have absolutely everything I need to go full blast in the U.S. and potentially then spice up the incentives for the distributor reps so that we get maximum attention in front of the customer. So it's a variable model where, yes, the investment comes more as a commission payment rather than us adding more headcount. So the headcount is fine for us now. And finally, on R&D, yes, there were costs in R&D for FORTIFY in quarter 4. They were significantly less than 1 year earlier, and it has been a decreasing number since the beginning of 2021. The cost that we saw in quarter 4 related mainly to closing out some of the study centers and finalizing the report writing, which has to be done. So not material cost, though.

We have a next question from Sten Westerberg from Analysguiden.

First of all, I wonder if you could discuss in any more detail this interactive review process, what it has consisted of. Is it solely a process for data mining, for coming up with the control group? Or have you been asked to complement some data regarding the active component as well? And also a follow-up on the last question. So we should not assume that given the market opportunity for CERAMENT G in the case of an approval that you will not incur any launching costs in the coming quarter, just a clarification on that. And then, finally, on currencies. I guess there should be quite a swing in the positive direction for you coming into 2022 with the strengthening of the U.S. dollar. Given current currency rates, how -- what kind of impact do you expect currencies to have on 2022?

Thank you, Sten. Yes. So as we said, when we supplemented the supplementary DeNovo data, we went into an interactive review with FDA. And this was very pleasing to us. I must say, I think I have one of the absolutely sharpest and brightest teams in both regulatory and clinical medical. So for us, it was a great relief to be able to get extra airtime in front of FDA. It has been also an education or developing, I should say, process for them. They have never approved a combination product in DeNovo, and I'm sure there were a bit of learning on both sides on how to position the results of the extra supplementary data and how to explain them, how to look at the data. We're talking about some quite sophisticated details. And BONESUPPORT has submitted to FDA close to 17,000 data points, so it's a very comprehensive submission that we have done. The discussions mainly in the interactive review was regarding the comparability of the control group and the treatment group on many different levels on everything from side effect to biomarkers to efficacy and also X-rays and detailed patient info. So of course, this requires both professional interpretations and discussions. And that's what the interactive dialogue has been very much about. You're correct, Sten, when you say that the -- an approval of CERAMENT G and a launch, a launch we would expect then to come -- well, if the approval would come now in quarter one, we expect a launch that could take place in quarter 3. But it wouldn't incur any significant cost in quarter 3, quarter 2 or for the full year rather than maybe marketing cost, promotion material. But the whole sales infrastructure is already in place. And then there's a variable cost on how much is being sold in the U.S. But yes, it's a commission as we have discussed before of about 30% to sales. And then there was a topic also raised on currency and what we could expect for quarter one. I think I leave that over to Hakan to comment on what are the currency effects we've seen in the quarter 4 and potentially quarter one.

Thank you, Emil. So again, Sten, so I won't take a risk to speculate in some -- how the currencies will move during 2022. But if we look at the current FX ratios compared to the full year average is applied when reporting the Q4, it will definitely take a jump up with a much stronger U.S. dollar. That's absolutely correct.

We have a next question from Oscar Bergman from Redeye.

I only have 3 pretty short questions. And the first one relates to the product that you launched in October. And I wonder if you can give some sort of indication for the coming quarters or at least broadly speaking, some sort of indication of what your expectations are at least to group sales in the longer term?

Yes, absolutely. So the product that launched in quarter 4 was the guiding tube and the drillable cannula. It gives the opportunity to apply CERAMENT in a, let's say, a closed compartment, or if you have to go through the cortical bone, which we couldn't do before. It relates very much to athletes, basketball, for example. And as I mentioned also in the call, there's about 20,000 procedures per year. So yes, it increases our addressable market, let's say, in the U.S. with about 7%. So that's, let's say, if you look at what is the potential of this. I believe that we will penetrate this segment quite well actually, because what you want to have, specifically in this area, given the nature of the injury, is an injectable synthetic bone graft that remodels the bone. The -- this is not only top athletes in the U.S. They need to get back quickly. Every day away from a game or practice costs a lot of money. But this is also for the average maybe runner that have hurt themselves. They want to get back to a decent life. So the properties of the product makes me believe that we will have a strong penetration in this area. And what we've seen so far in the 2.5 months that we've sold it would confirm that.

So I assume that the current existing sales channels that you have fits quite well into this new product offering too?

Yes, it does. It fits very well. But this -- the launch of this kit has actually also given us an expanded reach. Some of these orthopedic surgeons working with athlete clubs, they sometimes even have their own physicians in the staff who were difficult to access before, because there was a limited amount of indications where CERAMENT would fit in. But now all of a sudden, we're right in the bullseye of a very common and problematic indication, which we have a solution for.

And then I was wondering if you can give some color as to how the GPOs have helped drive sales in this quarter and 2021 as a whole?

The GPOs that we won have been one of the major contributors to the strong sales growth of last year. So the GPOs has given us access, a better -- we have had better success with the GPOs that I must admit I would have imagined and envisioned. And this has given us access. And we know that when we get access and we can compare CERAMENT to either regular bone cement or to allograft or to whatever else the physician might be using before, we know we win those comparisons. So getting market access also means we get sales.

And then I just have a final question before I can get back into the queue. This hybrid sales model that are now implementing in Canada. Can you give some sort of indication on when that could be up and running and maybe also a brief background to that market?

Yes, absolutely. So the Canadian market is around 30,000 procedures a year. So it's slightly less than 1/10 of the U.S. market. But it's an attractive market with a well-developed orthopedic surgeon network, a good reimbursement. It's a little bit like a mix of British and French system, you could say. We've made a market analysis and concluded that this market could be very attractive to us. We submitted the application for CERAMENT G a couple of years ago, we got that approved, and have now appointed a distributor. And decided also that the attractiveness of the market is sufficient for us also to relocate actually one of the persons that have worked in BONESUPPORT for a few years -- very skilled, very talented lady into Canada to set up this hybrid structure. We implemented a hybrid structure in Spain and Italy. And despite the fact that the pandemic has steered very much on the outcome, we can clearly see that it helps us also to penetrate the market in a very efficient way. So we believe that this is a model where maybe our key markets, we have a direct setup. In other markets that are of high interest, we might have a hybrid. And then in further outskirts, let's say, [ ROW ] attractiveness, we might work with only distributors.

And then maybe just one more question before I leave you guys alone. It feels like you're quite confident that you will be -- you'll be able to launch CERAMENT G in the U.S. without possibly raising more cash. How is the case position standing in relation to those plans?

Well, I can quickly comment on that and also hand over to Hakan. But we have more than plenty of headroom in our cash position. So there's no need to raise further funds. But Hakan, do you want to comment on that even?

But again, as also mentioned a few times, we have established a commercial platform, commercial structure in the U.S. that, by strategy, is highly scalable. And that together with the distributors can take launch of CERAMENT G without us having to add substantial commercial investments. So again, if we take that into account with a strong gross margin profile in the U.S., a fairly stable cost structure, with the exception of the variable commission cost, this has a good chance to give a very good positive impact, not only in terms of sales, but also then profit and cash position.

All we can say, Oscar, as you are, moving back into the queue is that, would the positive approval come now within the next couple of weeks, we're not going to hold back. We're going to go all in to create success in the U.S. market. But as Hakan said, if we pay 30% commission and our gross margin currently is around 94%, it will be even higher on the CERAMENT G product. We believe that the project somehow is self-funding as we accelerate penetration. And we've taken in a short time, a very strong market share in the U.S. with the BVF product. So many physicians are well aware of the concept and understand the mechanisms of the product. Gentamicin is a well-known antibiotic. So it's the best of 2 very good concepts combined.

We have no other questions on the phone for the moment.

Very good. Well, then I would like to say thank you, everyone, for joining our fourth quarter results presentation from BONESUPPORT. And I wish everyone a great time until we meet again, which I hope will be very soon. Take care. Bye-bye.

Ladies and gentlemen, this concludes today's web conference. Thank you all for your participation. You may now disconnect.