Smith & Nephew plc (SN) Earnings Call Transcript & Summary

Thank you very much. Good afternoon, again. Good morning to those of you calling in from the United States. Welcome to Smith+Nephew investor event, focus on innovation. Here today with me on the call and speaking from a range of locations around the world are Skip Kiil, our President of Orthopedics; Brad Cannon, our President of Sports Medicine & ENT; and Vasant Padmanabhan, President of R&D. I'm very excited to be with you all today, albeit virtually, but I do hope that you're all well and safe. As you may recall, we have planned a technology event at AOS earlier this year. Unfortunately, AOS had to be canceled. But we have certainly used time to further advance our technology and R&D efforts, and I'm very excited to present our progress to you today. Shifting to the agenda slide, I'm going to start with focus on innovation introduction. And as you know, innovation is a broad topic. We have exciting projects across the whole of our portfolio. We're focusing today on the particular area of enabling technology and digital surgery. We're in the early stages of some really important and strategically connected launches. You'll hear from Skip about the Real Intelligence ecosystem. Then Vasant will take you through the detail of our next-generation robotics platform called CORI and Real Intelligence hip navigation software. Brad and Vasant will talk about our advances in Sports Medicine, enabling technology, and in particular, about the INTELLIO Connected Tower. And then, of course, we look forward to your questions. First, I'll talk about the strategic context. I'm sure this slide is familiar to you by now. This is the strategy we've embarked on in 2019, with the primary goal of sustainably accelerating Smith+Nephew's underlying growth. The early results have been very encouraging. We delivered on a broad-based acceleration across the businesses as we went through 2019. All regions, actually, and all franchises contributed, and that included clear progress in some of the subsegments that had headwinds in the recent past. So the task, as we came into 2020, was to build on that. And in February, we announced specific priorities for the year. One of those priorities, and moving to the next slide, was a renewed commitment to innovation. I think you've heard me on this, along with the entire management team. We want to accelerate the cadence of launches across our franchises in the medium term. And that, of course, needs continued investments in R&D. You saw in our first half results that we chose to protect R&D spendings, even as the COVID outbreak impacted industry revenue. Also, our work on accessing external innovations through M&A has continued. The Tusker Medical acquisition in January is a further example of bringing a commercial stage asset into the portfolio and rolling it in into our existing commercial teams, in this case, into our ENT business. The route to value creation from this style of tuck-in deals is well established, and the CE Marks granted for REGENETEN and NovoStitch Pro this year are important milestones from 2 other recent examples. We've also been acquiring in digital technology, adding MY.JOURNEY to the Atracsys and Brainlab transactions in 2019. Here, the concept is actually quite different to a more traditional style of a deal. The technology was acquired, has provided components to other key regulatory clearances this year, with the Atracsys camera built into CORI and the Real Intelligence hip navigation software in early deliverable from the Brainlab partnership. Importantly though, these products are also part of a developing ecosystem of fully integrated digital assets, positioning Smith+Nephew to address peak trends in our target markets. So we're effectively moving from a product company to a delivery of integrated health care solutions company. And you will see we are very well positioned to do so with our combined strength in Orthopaedics and in Sports Medicine. This is, of course, supported by market trends, and we'll talk more about those market trends of decentralization of care and specialization of interventions and delivery. On the next slide, you see some of these trends in a bit more detail. One, of course, is of a greater share of procedures that take place in outpatient settings around the world, including ASCs, of course. In the U.S., we're seeing further expansion of reimbursement with Medicare now proposing to cover total hip replacement in ASCs from 2021. And parts of the U.S. and other health care systems' responses to COVID has been to actually further accelerate the shift of procedures. New products will actually need to be suited to a wider range of clinical settings than in the past. A second trend is around outcomes. Health care payers are increasingly using outcomes data to inform decision-making. Digital technology offers new ways to collect data, both during and after procedures, with potential to improve processes and help reimbursement. A further trend is on increased focus on cost. Health care systems already face the challenge of demand growing faster than society's ability to pay. The specific financial pressures of the COVID pandemic will only add to that challenge. Solutions that can demonstrate improved efficiency, cost effectiveness and even reduced costs for providers will become more and more compelling. And fourth, advancing technology and connectivity and data analytics make it possible to engage more closely with patients, all the way from preoperative preparation to outcomes measurement. We see a growing provider interest in the whole episode of care for a patient, and being at the forefront of this development means going beyond just providing devices. Now the new generation of enabling technologies that we're presenting today is built to address those trends. And importantly, it is in a way that is fully scalable. The aim is to provide tools that are essential for every surgeon in every operating room. Robotics, we believe, is still at an early stage of adoption in our markets. We think only around 2% to 3% of joint replacement procedures globally are currently performed with a robot. In other areas, though, and other suppliers have shown that robotic technology is valuable, and it will be used. And we have a great opportunity today to get our systems in place as adoption in Orthopaedics also accelerates. The Arthroscopy Tower actually is an example of what a scalable solution can look like. And today, you'll find a Tower anywhere that Sports Medicine procedures are being performed. Smith+Nephew is uniquely positioned for the next generation. And it is actually the only company that can combine the Tower with navigation and with robotics. Our experts, specialists will take you through the details of our new launches in a moment. And you'll see across the products, the simplicity the ease of use and the small footprint that we believe are positioning us to win. We'll begin with Real Intelligence, which is our digital surgery platform that brings all of this together. And for that, I'll hand over to Skip Kiil. Skip, please.

Thank you very much, Roland. Appreciate the opportunity here. And soon, we're going to take you through kind of the subsegments of Real Intelligence. And so we're on the side with our vision. And really here at Smith & Nephew, we think in drive innovation in how we're reimagining surgery. And that's really what Real Intelligence is. It's the symphony of solutions for the future that is robotics, and Roland mentioned the opportunity with sports and just so much more in regards to what we're doing. So the next slide here is we think about kind of Real Intelligence and our vision, a strategy in the digital surgical ecosystem, it's really the creation of the digital surgical ecosystem of a seamless solution throughout the continuum of care. And if you see the chart on the right-hand side there, this graphic shows how we will connect the patient's journey in both pre OP, inter OP and throughout postoperative care. And learning from each stage of this process really helps improve the overall patient care pathway and the information that is transformed throughout that cycle. And ultimately, we're going to be taking advantage of all the technologies that Smith+Nephew offers, such as VISIONAIRE, surgical navigation, our robotics platform that Vasant will take you through and ARIA. And ARIA is really an opportunity for us to help our customers utilize that digital connectivity with patients and the referral network to break down traditional barriers, improve patient compliance and mitigate readmission risks using very objective data. And so what are we building? Really, this is a connected ecosystem of clinical solutions. And Real Intelligence supports post-acute cost reduction, clinical efficiency improvements and value-based data set generation. The platform aims to help clinicians shorten the patients' post-acute recovery time, develop efficiencies that reduce costs and generate key patient reported outcome measurements, or PROMs. And this satisfaction data is to better define value for both the patients and site of care. The platform contains customizable patient engagement pathways and enables connected automated communication between the care navigator and the patient. We also have displays and dashboards through ARIA that provide visibility for the patient and provider to help reduce variability in those clinical outcomes. And so I've shared this chart previously at AAOS events. And this is how we see the convergence of technology and data, transmitting through the digital surgical ecosystem with CORI, which is really the core of Real Intelligence as well as the integration of smart tools, the future generation of robotic arms, augmented reality, enhancing the intraoperative data flow for clinicians. In summary, we're very excited about the possibilities and the evolution of Real Intelligence and where this is going. And with that, I'll hand it over to Vasant to walk through the specifics of CORI. Thank you.

Thanks, Skip. It's great to be here today to discuss innovation with everybody. Before I get into the specifics of our next-generation surgical robotic system, CORI, I'd like to share with you highlights of just some of the clinical and economic evidence that we've collected with our robotic systems thus far. Let's start off with patient reported outcomes. Several studies with our robotics platform have shown an improvement in PROMs. And in one competitive study, the Kennedy study, that study showed that the post-op Knee Society Score was 97.2%, approximately 6 points higher than the conventional arm. And you all know that even getting a single point -- a whole point of score increase is pretty significant to patient reported outcomes. When you look at length of stay, the benefits are quite impressive. The Sherman study describes a significant reduction in length of stay from 74 to 45 hours using robotics. Even more compelling is a study demonstrating that patients could be safely discharged within 24 hours with proper patient selection and education, which further supports the use of our robotics platform in ASC settings, like Roland and Skip talked about. Returning to an active lifestyle, including sports, is very important to our patients. And the paper by Dr. Kennedy and others, comparing robotic surgeries to commercial surgeries, showed that the mean time to return to sport was reduced from 10 months to approximately 4 months, again, a significant improvement for our patients. Cost effectiveness of robotics has also been described in a recent publication through an analysis of revisions avoided by using robotics. In this 5-year economic model, it's estimated that high-volume centers can avoid costs of approximately $14,000 per patient over a 5-year period. And finally, survivorship is a critical factor for success of robotic procedures as well. And the Battenberg data show that the revision rate for our robotic procedures using NAVIO is 99.2% at 2 years, which is yet another compelling story for outcomes. In summary, I believe that our clinical and economic evidence continues to grow. And it shows improved outcomes for patients, surgeons and payers. And now on to CORI. Building on the success we have had globally with NAVIO, today we are delighted to speak to a recent launch of CORI. As Kip pointed out, this platform will serve as the core of our Real Intelligence digital system ecosystem. CORI is smarter. CORI is more efficient. CORI provides handheld robotics for precision milling, and it offers all of these benefits that I'm going to get into more detail, in a significantly smaller footprint, lending itself to both operating rooms and outpatient surgery centers. As Roland mentioned earlier, we received FDA 510(k) clearance earlier this year, and have launched CORI in U.S. and a few other countries globally. The next video will highlight the key features of CORI that we are very excited to bring into the hands of our customers. Can we play the video, please? [Presentation]

As you saw in the video, with CORI, a surgeon can easily and efficiently use our handheld technology, along with a small tablet to navigate through the entire procedure. And this is possible because we have made our software smarter, we have enhanced the processing capabilities of the system. And doing that allows us to offer a solution for knees and hips that doesn't require CT or X-rays. It allows us to offer real-time bone and soft tissue balancing before any cuts are made. And it allows us to real-time optimize a patient's specific plan. Speaking to efficiency in partnership with Atracsys that Roland and Skip talked about, we've upgraded our camera for CORI. And our camera is 5x faster than other cameras available in the market. And this capability, faster camera, when combined with our more powerful processing capabilities, allows us to have a fast, easy-to-use intuitive workflow, which in turn leads to efficient procedures. While the improved workflow plays an important role in speed of surgery, the ability to prepare bone is equally important. And to support faster bone preparations, we have completely redesigned the handheld system from the ground up to work with the faster camera, allowing the surgeon to prepare bone almost 30% faster compared to NAVIO. In addition, as you can see, we have also significantly improved the ergonomics with the handle and rotatable trackers, as you've also seen in the video. Taken together, the faster software, the faster camera, the completely redesigned handheld, these improvements allow for faster and more efficient procedures, which we believe, will help the adoption of the technology. And finally, to talk about precision milling. In addition to improving the camera and in addition to improving the hand piece and the interfaces, we've redesigned what I call the business end of the handheld, the precision milling burrs. Our newer and faster burrs can precisely mill twice the volume of bone in the same time. In addition, we have 3 new burr geometry options: a 6-millimeter cylindrical burr; a 6-millimeter bullet burr; and a 5-millimeter cylindrical bur that cater uniquely to enhanced preparation for our portfolio of implants. And with precision milling, we get a much smoother surface finish as well. Now I'd like to talk about the applications that are supported by CORI. As shown on this page, we already have FDA clearance for the full range of primary knee replacement applications. This includes our LEGION, GEN II, ANTHEM and JOURNEY II knees for both UNI and Total Knee orthoscopic procedures. In addition, we're the only robotic system that supports a Bi-Cruciate Retaining Total Knee with JOURNEY II XR. As you know, JOURNEY II XR preserves all the critical ligaments for all our patients. When you take a look at the market and the other systems that are out there, you can see we have taken a very different approach in bringing robotics and enabling technology into the hands of our customers. As Roland pointed out, with respect to the trends, we recognize the value of being efficient and small in footprint as operating theaters all across the world look to optimize their surgical workflow. We believe we have the most modular platform that can support modern day ORs, while enhancing the features that make clinical sense in this world of robotics and digital surgery. In summary, we are very excited to introduce the next generation of robotics for our customers. With this modular and small footprint system, we have started our Real Intelligence journey that Skip talked about of creating a digital surgery platform in this new age of surgery. Going beyond CORI, as you know, we acquired Brainlab's Orthopaedic Joint Reconstruction business in early 2019 with the goal to develop new technologies for digital surgery. And we are very happy to share that RI.HIP, our Brainlab hip navigation software, is now available on the Kick platform in addition to the Brainlab RI.KNEE application that we launched recently. And as you know, the Kick platform is already in use in more than 500 hospitals globally. This is a good example of our early success with our Brainlab partnership. And looking to the future, there's more to come. We will bring the Brainlab knee and hip applications on CORI over the next 12 to 18 months. We will continue to expand our indications on CORI to include revision knee arthroplasty, in addition to UNI Knee and Total Knee and, thereby, completing the Knee portfolio. And beyond software indications, we are also developing surgical enablers and tools, such as knee tensioners that can help our surgeons precisely balance patient joints throughout the range of motion. And we're also developing robotic arm platforms for applications across our broad portfolio. That completes our remarks today on the robotics technology, and I'll hand over to Brad to discuss enabling technologies in Sports Medicine, and I'll be back to cover our exciting innovation in Sports Medicine. Brad?

Thank you, Vasant. It's really exciting to see our approach to enabling technologies in Orthopaedics and how well it complements on our overall approach in Sports Medicine. In fact, in 2019, our refocusing, both commercially and also through innovation, on our enabling technology business is what drove our acceleration throughout the year, including our double-digit growth in the fourth quarter of 2019. The reality is that AET is the base of our entire Sports Medicine business. At its foundation, Sports Medicine is about minimally invasive arthroscopic surgery to repair soft tissue injuries. We use this pyramid to represent the framework we use to communicate our strategy Sports Medicine -- for Sports Medicine globally across all functions and also to guide our portfolio decisions. It all begins with having a strong foundation of orthoscopic-enabling technologies. Over the last few years, we have made significant commitment to enabling technologies and enhance every single platform on our Arthroscopy Tower. The future for AET holds even greater promise as we introduce advanced connectivity, simplicity and capabilities. Building on the strong foundation of AET, our focus in joint repair remains on developing comprehensive solutions, procedural solutions, for knee, shoulder, hip and also small joint procedures. We continue to pursue unmet needs and opportunities to redefine the standard of care with differentiated technologies and surgical techniques. You can see at the top of the pyramid is biologics. And globally, we are now extending the tip of our strategic pyramid with game-changing products like REGENETEN that can enhance the body's own ability to heal, restore function and allow patients to truly live Life Unlimited. But as the pyramid reflects, our portfolio strategy is based on having a strong foundation in AET, which is why we've placed an emphasis on enhancing our Arthroscopy Tower. Now that we've returned to market-level performance, it's no time to take our foot off the gas. We're investing to extend the capabilities in our enabling technologies to meet evolving customer needs. Our customers, both in the OR and in carpeted areas, are looking to improve both outcomes and productivity. Enabling technologies gives us the opportunity to address both traditional needs, like enhanced intraoperative performance, and emerging ones, like cloud-based data management. In 2019, we launched LENS 4K and extended the reach of the WEREWOLF COBLATION platform. And in 2020, we launched the INTELLIO Connected Tower. We have an aggressive cadence of additional Tower enhancements, which Vasant and his team are planning, and which he'll cover in greater detail. This cadence of improvements is important to our overall current customer base and installed base, and also to expanding that as our market continues to expand. Overall, if you look globally, there's over 5,000 customers utilizing Smith+Nephew AET platforms in the top 10 critical markets. As we continue to innovate -- innovation and compatible enabling technologies, designed to complement our current Tower design, gives us a great opportunity to be the preferred supplier for leading customers, delivering a powerful clinical and economic story, both within and across our franchises. So let me hand it off to Vasant, who's going to cover all of the exciting technologies that his team is working on now.

Thanks, Brad. I'd like to start off by describing the different components of our Sports Med Arthroscopy Tower and review some of the recent launches with you. As you know, the Tower includes 4 different systems or 4 different components that collectively support the surgeon's overall goal to reliably and efficiently treat soft tissue injuries arthroscopically. First, visualization. The visualization system is the window into the joint for the surgeon. Here, image quality and user experience are paramount. And that's why you've seen a regular cadence of innovation from Smith+Nephew in this space. For a recent example is the launch of the LENS 4K surgical imaging system in 2019 that Brad alluded to. This system delivers a premium image and enhanced user experience with the tablet application that accompanies the system, and feedback from the field has been outstanding with respect to image quality and usability. Next, mechanical resection. Often during an arthroscopic procedure, there is frayed or damaged tissue that must be removed. And our mechanical resection blades represent the cutting-edge of technology in this space. Our recent launches of the PLATINUM line of blades deliver superior resection, debris evacuation and sharpness related to our competitors. COBLATION Technology. Beyond blades for tissue removal, we also offer a proprietary COBLATION Technology called WEREWOLF that Brad talked about. This is an incredible technology and has equally incredible clinical outcomes. In short, for those of you that love technology, COBLATION uses radio frequency energy to generate a plasma field that disassociates molecular bonds within the targeted tissue. And clinical studies have shown that patients recover faster with the use of COBLATION. And clinical results also have shown better long-term patient outcomes, and that this technology is safe for use with all soft tissue types. In 2019, we launched, along with the WEREWOLF system, the COBLATION FLOW 90 Wand, which represents an exciting step forward with this technology. The FLOW 90 Wand has been designed to enable faster tissue removal with more safety features for all tissue types within the shoulder. And the FLOW 90 Wand follows the FLOW 50 Wand that we had launched prior to that for all tissue types within the Knee. And finally, there's Fluid Management. Fluid Management is used to maintain the visual field of view for the surgeon and also help with debris evaluation. We'll come back to this platform and our planned innovation here when we talk about future plans. And now on to INTELLIO Connected Tower, our most recent innovation that we launched just a few months ago. Let's play the video, though, first, to see how this innovation helps surgeons to be more efficient and connected. [Presentation]

As you saw in the video, the INTELLIO Connected Tower Solution enables improved operating room efficiency by ensuring that the different systems in the Arthroscopy Tower are wirelessly connected and also remotely controlled from outside the sterile field. Further, the solution has added an on-screen display functionality for the connected devices to support the surgeon workflow. The MY.INTELLIO cloud is Sports Medicine's first cloud-based solution for our visualization platform. The cloud expands the functionality of the LENS 4K app that I talked about earlier with secure HIPAA compliant storage of patient images and video captured during the cases. MY.INTELLIO cloud will help with post-surgical workflows for surgeons by allowing easy post-op data access as well as the digital platform for the surgeon to share content with their patients. Sports Medicine is embarking on the digital surgery journey as well and embracing the digital surgery ecosystem that Skip alluded to earlier and Brad alluded to earlier. Within this ecosystem, we'll be building additional capabilities to serve the surgeon in new ways with digitally enabled data-driven insights. Looking beyond 2020, we are very excited about our Tower for the future. We see a world where the Connected Tower can enable both arthroscopic and orthopedic procedures. We see a world where new innovations and tower capabilities in navigation, robotics, machine vision, artificial intelligence as well as data-driven insights will yield to more efficiency and procedure innovation. And finally, our cloud technology will help us own the episode of care for the patient through integration with the digital surgery ecosystem and our newly acquired assets that Skip talked about. With that, I'd like to hand over to Roland for a summary.

Thank you very much, Vasant. I'm very excited by what we've been able to show you today. As you can see, innovation and enabling technologies are key pillars of our growth strategy. And these new launches bring truly differentiated functionalities. They also bring solutions aligned with key health care trends. And of course, these platforms will and can be further developed. This is only actually one part of the picture. We're also working on other high-potential projects across the portfolio. And you'll hear more from us as we continue to evolve and develop. So with that, I come to the end of the presentation. Thank you for your attention, and we look forward to your questions.

[Operator Instructions] And our first question comes from the line of Veronika Dubajova from Goldman Sachs.

I will keep it to 2 questions, if I can. One is, I just want to kind of get the sense for any initial feedback that you're getting on the CORI launch. I guess, you've taken a very different direction from all your other peers in terms of robotics. And I think folks either love or hate the handheld piece. Obviously, with NAVIO, it's not had a great amount of traction. So Roland, maybe if you can share a little bit of feedback from customers so far and how they're thinking about CORI and whether it's likely to be a bit more successful than NAVIO and kind of maybe some of your internal goals and expectations are for placements or market share would be helpful. And then my second question is also about CORI and just a timeline for when you expect of the non-ortho applications or non-large joint applications to be available.

Thank you, Veronika. Thanks for the questions. I will also hand over to Skip in a moment. Just from a high-level perspective, I think, obviously, you pointed out a major difference, which is handheld. This is a different approach that we've deliberately chosen. We've chosen that because we believe it can deliver better performance. I would actually say that we were quite successful with NAVIO. But remember, we came after others onto the market. There is a market to be developed on one end. I think it takes education and practice to use a handheld. But the feedback we've had so far has been just outstanding, just because it gives this very haptic feeling to the physicians, to the surgeons. So I think it's been very successful. But again, we're at the very early stages. We would have loved to put that in the hands of more physicians initially, but we've had to deal with -- like everybody else, with the COVID situation. But then again, I'm excited. I think this is a really differentiating technology. Skip, do you want to talk a little bit in more detail around search surgeon feedback and then maybe also some of the timelines as much as we disclose them?

Sure. Thank you, Roland. Veronika, I appreciate the question. And I would give you kind of 2 points of reference. If you think about handheld robotics, yes, it's a very differentiated approach, but it's one that is creating an adoption curve and opportunity to really transition the traditional way of thinking around removing bone, right? When you think about the use of a blade or a saw versus precision milling, again, we feel confident that the level of competency there is moving in the right direction and it is a change in workflow. And keep in mind that we don't have the requirement for a CT or an MRI. This is very translatable when you start thinking about the reduction in inventory and implants. And as the site of care changes in the -- towards moving from the inpatient to the outpatient setting where there's limited space and when you think about kind of the comparators relative to the size, scope and scale of those products, just in orders of magnitude, you think about the size of the CORI versus the competitive footprint products, again, you're talking about 400 or 500 kilos versus 9 kilos. And so it's almost a half a ton of robotics equipment that are sitting in OR versus ours that weighs about 25 pounds that can be moved from OR to OR. So when you start thinking about the adoption curve, I think that's pretty dramatic in regards to our ability to convert both current surgeons and competitive surgeons. The other piece of this that's really important is really the setup time. As you think about the set up time with our product, which is about 5 minutes versus the competitive products are anywhere from 20 to 45 minutes, debating on what procedures they're doing, when you add all those things together, we feel like there's a pretty nice opportunity to create some disruption in the marketplace, and we're looking forward to competing across all segments.

And the timeline for the non-large joint applications?

Yes. Thank you, Veronika. Sorry, I'm having some feedbacks on the line here. So we are not going to disclose relative to the timelines. But again, we're -- we've shared a cadence of the new product software introductions that Vasant went through, and we'll kind of leave it at there. But we're very excited about where we think this disruption in innovation is going to come from, particularly when we start thinking about the intersection of Orthopedics and Sports Medicine. So we're not going to get any specifics, but stay tuned.

And if I can squeeze in a final one, I guess, Roland, just a big picture one. Maybe you can -- I think we've all talked about robotics a lot over the past 3, 4 years. So just curious kind of, one, what your ambitions are in terms of where you'd like to get to, whether that's market share growth, installed base? And two, how do you think about robotics? Is -- are we going to end up in a place where you give the robot away to locking your disposable consumable market share? Do you think you can generate revenues from robots, robot sales and placements? Kind of how you're thinking about it from a financial perspective? That would be incredibly helpful, and I'll rejoin the queue after that.

Yes. Thank you, Veronika. Certainly, I mean, we look at this as a truly enabling technology. We look at this as really innovative, and we're seeing a clear trend for robotic surgery. This has only been accelerated of late, but the trend is here to stay. We're talking about a very small number of surgical procedures that are done with robots at this stage. So there's 2 things here that I believe we will benefit from. One is the segment that will continue to grow and expand. And second, we believe that our technologies offers opportunities to capture market share. So our ambition remains the same. We want to grow above the market, and we believe that these technologies will help us do so. In particular, also that we also start to observe some trends where physicians really look at how is actually a solution being delivered rather than what are the really implant features. So procedural aspects become more and more important, and I think that will only just accelerate when we talked about ASCs and the very different setting there. And then in terms of the model, the sales model, I think we are very open. We are adopting to the market needs here. We see an opportunity to sell systems. We see an opportunity to also engage with all sorts of different models. We are ready to work with customers to see what their needs are. We do this on the basis of 2 elements, of course. One, this is a proprietary technology that is differentiated. So there is certainly a great full opportunity here. And the second one is, of course, building flexibility on the basis of low COGS for this system. As Skip mentioned, when you have a system that is roughly around 25 pounds, you can imagine that we've worked very hard on the COGS side of this, and that will give us flexibility as we move forward and as we drive adoption in the marketplace.

We will now take our second question, and it comes from the line of Michael Jungling from Morgan Stanley.

I have 2 questions. Firstly, on your slide -- Page 16, you made reference to numerous studies showing outcomes and cost savings, amongst other things. Are these studies specifically in relation to your own system or are these studies more broadly referencing robotics in Orthopaedics? Question number 2 is on the customer base. Could you comment in which segments you think CORI is likely to be the most successful for you? Will it be the hospital segment or will it be the ambulatory care segment? And if you could, perhaps an indication of how you see sales, is it 40-60, 50-50? If you have some sort of indication, that would be helpful.

Thank you. Vasant, can you take the first one? And then, Skip, maybe you can just go straight into the segments after that.

Yes, I will. Thanks, Roland. It's a short answer. All the studies that I spoke about are from our robotic platforms across the world. And Skip, do you want to get the second one?

Sure. Michael, as you think about kind of that shift that's moving from, again, the inpatient to the outpatient, I think we mentioned it's around 3% to 5% of total joint procedures being done in this environment in that kind of outpatient or inpatient with robotics. And as you think, that kind of 3 to 5-year trend increases dramatically, our hypothesis is that we're going to be able to respond to the shift in market and the competitive dynamics more appropriately given the size, scale of our product. Again, going back to the reduction in inventory and implants, the limited space that is required, and really, as you think about kind of that mix shift more towards the outpatient or ASC setting, the profit versus price equation is going to be pretty important. And if you also consider the price points that we are at relative to our competition, again, about half of the ASC of the larger robotic systems in regards to what we're doing, we do have the opportunity to maintain flexibility in our commercial model and allow us to move as the market needs us to and really increases our overall commercial flexibility. We're very excited in regards to the idea of CORI and the robotics solution and really around the precision milling versus what you've seen with the blocks and blades in the marketplace today. And Vasant obviously mentioned some of the clinical outcomes. Those obviously have financial implications as well, and we'll let you draw your own conclusions there. But again, we're very excited about the focus of technology and the approach in allowing us to have flexibility in those business solutions.

Great. And may I please follow-up on my question, too, on the customer base for CORI. Would you expect to dominate the outpatient market? I mean look at the size and the cost of your competitive systems, would you be -- would you expect to be sort of absolutely dominant in the outpatient market given the size and cost of your systems versus the others?

Mike, I love your aspiration of dominance, but I would tell you that I think all of the large players are going to move towards the outpatient segment. We love our ability to compete, not only at the level of implants and implant systems, but really, as you start thinking about the summation of the navigated robotics products and how you're bringing those disparate systems together to deliver reproducible results and drive clinical value proposition. Again, ultimately, as you think about the medium-term integration opportunities between procedural automation, we mentioned the interplay of Sports Medicine. We really believe we're one of the only companies, if not the only company, that can bring big bone Orthopaedics to soft tissue repair in regards to Sports Medicine. Imagine the ability to use that handheld robotic unit or surgical arm to tunnel an ACL or something that's pretty straightforward there. I get pretty excited when we start thinking about the parlay of what Orthopedics and Sports Medicines bring, particularly in the trend of the site of care that's moving towards that outpatient and ASC setting. Again, we feel very good about our value proposition, and again, the whole host of reasons why we're calling Real Intelligence the kickoff to the digital surgical ecosystem.

Okay. Our next question comes from the line of Kyle Rose from Canaccord.

I had a couple of questions here. First on -- sort of, Vasant, on some of the actual usability features on CORI. Can you maybe help us understand how CORI compares to NAVIO, specifically around time of utilization? I mean you talked about faster video and imaging processing, it sounds like better, larger burrs. How does CORI compare to NAVIO just on a skin-to-skin to fully up to the learning curve as far as a procedural time perspective? And then secondarily, a lot of talk on enabling technologies, not a lot of talk on implants. Just wanted to understand are there any plans for specific implant designs that are focused around CORI in particular? And what I'm thinking there, I'm thinking the competitive products have really unlocked the cementless -- the press fit markets when they get an updated plans there.

Right. I'll take the first one, and Skip or Roland, you could maybe take the second one. With respect to workflow, I think was the first question between CORI and NAVIO, we have made improvements in 3 or 4 different areas of CORI compared to NAVIO, both in how we do the planning steps, the workflow for that as well as beyond planning when we get into looking at gaps and assessing ligament balancing, we've made workflow improvements. And then on top of that, as I went through, the camera is also faster, and that helps as well. We believe that NAVIO -- CORI is about 30% faster compared to NAVIO in preparing bone. And what we are in the process of doing is, as I think Skip pointed out earlier, the procedure itself has multiple phases, right? There's a set up phase and a planning phase and the workflow phase and then the bone cutting phase. We're collecting data now as we start doing real cases, and we'll talk about that down the road. But CORI is a complete kind of redesign over NAVIO in different elements. And when you put it all together, it's faster, significantly faster. Skip, do you want to take the second one?