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Good morning. Thank you for joining us on the call today. I'm going to share with you some insight into the strategic and operational progress we've made. Thereafter, I'm going to hand over to Frank, our CFO, who will take you through Q3 trading as well as the revised guidance we are announcing this morning.In summary, what I'd like to do is to really highlight to you 4 key points. First, we have set a clear direction of travel with our FISBE corporate strategy, and this clarity has been well received by our organization. Second, we are successfully embedding our new operating model, which is delivering better line of sight to our customers and improving accountability. Thirdly, we're improving execution by our transformation execution office with initiatives in R&D and quality and operations as well as in our customer supporting and customer facing functions. Finally, we are tightening our guidance for the top line and revising our EBIT margin guidance, given a better-than-expected Q3 performance and following a review of the phasing of our costs and investments.At this point, what I'd like to do is to really share some thoughts with you about 3 different topics. First of all, how are we responding at ConvaTec in regards to COVID? Second, what kind of performance are we experiencing on the operational front? And thirdly and lastly, what kind of progress are we making on the strategic front? So let's start off with COVID. In terms of COVID, what I'd say is our business has really risen to the challenge. We've continued to strengthen the resilience of our supply chain, including increasing capacity and production, to meet strong levels of demand, most notably in Infusion Care.On the demand side, there are 2 businesses which have been significantly impacted. Advanced Wound Care is down because of restricted access to the acute and community settings. But to counterbalance this, we benefited from a significant boost in demand for our Critical Care products. At this point, I would like to take the opportunity -- I'd like to take the opportunity to share a personal thanks with all my colleagues for their tremendous dedication and hard work in these challenging times.Moving away from COVID, let's now focus on our operational performance. In Q3, we delivered a good performance in constant currency. Infusion Care delivered significant growth. Continence & Critical Care grew strongly. The Wound Care performance improved, while Ostomy Care was flat. Revenue was better than anticipated for a number of reasons, including: first, a step-up in demand for our innovative infusion sets serving the "smart glycemic control" segment; second, the more rapid rebound of elective surgeries in the U.S.; thirdly, some positive phasing of orders and continued strong demand for our Critical Care products.These revenue trends in essence have enabled us to tighten our revenue guidance toward the higher end of our 2% to 3.5% range. Furthermore, when you really dig in and try to understand the underlying performance of our group, we note that it's really good. But we also note that there is variance amongst the various businesses. So let's try to understand this good performance, but this varied performance by business. Wound Care is showing some signs of improvement. In the U.S., we saw elective surgeries rebound faster than expected. However, the chronic segment remains challenging.Ostomy Care was flat as we work on improving commercial execution in key markets and rationalizing the portfolio. In Q3, we saw some continued destocking following significant demand in Q1. Our Continence Care & Critical Care businesses had a strong quarter. They benefited from continued strong demand for Critical Care products, albeit lower than earlier in the year. Our continence business continued to deliver good growth with the Home Service Group performing well.Finally, Infusion Care showed significant growth. We have established a leadership position as a provider of innovative infusion sets serving the fast-growing "smart glycemic control" segment of the diabetes market. This is a fundamental strength of ours. Moreover, we have phased our investment spend in light of COVID. Various operating expenses this year are particularly low, such as travel or promotional spend for congresses and medical symposium. These lower expenses and the further proactive deferral of transformation investment are the primary drivers for our enhanced EBIT margin expectations for the full year.So now let's shift gears. We've talked a little bit about COVID. We've talked about our operational performance and how it's been good, but I'd like to focus on the progress we're making from a strategic vantage point and as we think about our FISBE strategy that really drives us towards pivoting sustainable profitable growth. Now let me just remind you that FISBE fundamentally stands for focus, innovate, simplify, build capabilities and execute. And I'd like to provide you with some highlights during the period.First, we completed the skin care disposal, thereby focusing the business on our 4 key categories: Advanced Wound Care, Ostomy Care, Continence Care and Infusion care. On the innovation front, we are successfully launching our new ConvaMax, super absorbent product in the U.S. and European advanced Wound Care market. Thirdly, we are effectively embedding the new operating model, which is giving us greater line of sight to customers and improved accountability. In the area of building capabilities, we continue to strengthen key areas such as marketing and corporate development.In fact, next week, we will be welcoming Evelyn Douglas as Chief of Corporate Strategy and Development. Evelyn joins us from Becton Dickinson, where she successfully led this function for nearly a decade. As I've shared with you previously, we expect to carry out bolt-on acquisitions to contribute to the growth of our business, and Evelyn brings a wealth of expertise to lead us in this area. Lastly, we continue to execute over a 100 initiatives in R&D, quality and operations, customer supporting and customer facing functions.So let me try to summarize. We're making good progress in executing our business strategy as we pivot to sustainable and profitable growth. Although there remains plenty to do, I feel confident about ConvaTec's long-term growth prospects.At this point, I'll go ahead and hand over to Frank to take you through Q3 trading and guidance before we take your questions. Frank, it's all yours.
Thanks, Karim, and good morning, everyone. As Karim mentioned, we delivered a good performance in the third quarter with group reported revenue up 6.5% to $493 million or up 5.6% in constant currency. Growth for the 9 months of the year was up 4.8% at constant currency. This was driven by significant growth in Infusion Care, strong growth in Continence & Critical Care, and improved performance in Wound, and a flat performance in Ostomy Care. The performance in the quarter was overall negatively impacted by COVID, but this was more than offset by the good underlying growth in the business, coupled with stocking activity, mostly in Infusion Care and beneficial phasing of orders during the period.Overall, the underlying growth of the group was encouraging. But let me walk you through each of the businesses in more detail. Advanced Wound Care revenue of $149 million increased 0.8% on a reported basis and declined 0.6% in constant currency. This was a better-than-expected sequential improvement from the second quarter, which was down 13% -- over 13%, in fact. The quarter benefited from some advanced purchasing and a stronger-than-expected rebound in elective surgeries. However, the chronic care segment remains challenging as COVID continues to limit activity in the community setting.Some markets performed well with continued strength in Latin America, progress in certain Asia Pacific markets and improved performance in certain European markets. Overall, the estimated underlying growth remained in the low single digits. This is lower than the overall wound markets and partially relates to our underexposure to the home segments, which is proving relatively more resilient in this pandemic. Home is an area of focus for us and we're investing to strengthen our commercial execution, while the R&D teams are working to enhance our product portfolio.Looking forward into Q4, we currently expect a weaker growth rate for the following reasons. First, the disposal of the skincare business will impact year-on-year growth as it contributed approximately $8 million of revenue in the fourth quarter of 2019. Second, some of the Q3 growth was advanced purchases. And finally, although the COVID related impact is difficult to accurately predict, we are more cautious looking forward, given the rise in infection rates and additional restrictions being seen in recent weeks.Ostomy Care revenue of $132 million increased 0.4% on a reported basis and 0.1% in constant currency. We had good growth in global emerging markets in both Latin America and key Asia Pacific markets such as China. This was offset by some COVID destocking, continuing challenges in certain European markets and in the U.S., coupled with the plant's rationalization. The estimated underlying growth remained in the low single digits. While we continue to expect similar levels of underlying growth in the fourth quarter, such 2019 comparatives and the impact of plant rationalizations will result in a lower constant currency growth rate.Continence & Critical Care revenue of $124 million increased 7.7% on a reported basis and 7.2% in constant currency. As expected, we saw some moderation in growth from the second quarter, although demand for Critical Care products remained strong due to COVID. Our Continence Care business continues to perform well with our Home Services Group in the U.S. continuing to achieve good growth. Looking forward, we expect to trend back to market growth given how well stocked hospitals are.Infusion Care revenue of $88 million increased 28.2% on a reported basis and 26.7% in constant currency. This was driven by a strong demand for innovative infusion sets, which are a core element of the rapidly growing "smart glycemic control" segment of the diabetes market. During the quarter, we added capacity to respond to this strong demand, addressing some backlog, which had developed earlier in the year. And some of the demand was due to our customers' building resilience in their own supply chains, although the primary driver is our leadership position with our innovative infusion sets.Looking forward, Q4 growth is expected to slow compared to Q3, but should still be double digit. Longer term, we're excited about the potential of the "smart glycemic control" segment and think high single digit underlying growth should be achievable, although this year's performance will, of course, produce a tough comp.Looking ahead for the quarter -- for the group as a whole, as set out in this morning's announcement, we now expect group revenue growth to be towards the higher end of our guidance range of 2% to 3.5% in constant currency. Clearly, forecasting is more challenging during this pandemic. So based on what we're seeing, we don't currently anticipate growth in the fourth quarter on a year-on-year basis. And let me take a minute to help you understand why. The first reason is that the skincare disposal was completed at the end of September. So we'll be out in Q4, as I have mentioned already. Another reason is that there are tough comparatives in Q4, particularly in Ostomy Care.And as I mentioned, part of the growth in the third quarter was driven by our [ large ] purchases in Wound Care, which last year featured in Q4. And then finally, we are more cautious due to the recent rise in COVID infection rates. Regarding our adjusted EBIT margin guidance, we now expect to be between 18.5% and 19%. And this is primarily driven by 2 variables. First, our decision during the year to proactively rephase some of our transformation investments in light of COVID. We have now deferred a further $10 million of recurring transformation investment to 2021, such as our sales force expansions in China and selected European countries. And on top of that, investments towards the scale up of GentleCath Air. This is in addition to the EUR 10 million announced at the half year.And as a consequence, we now expect recurring transformation spend this year to be between $40 million and $45 million, and we currently continue to expect $75 million of recurring transformation investments in 2021. And the second, in this COVID environment, certain operating expenses are just lower than expected. For example, in travel, as well as in advertising and sales promotion. Together, the investment phasing and subdued operating expense are expected to benefit the annual EBIT margin rate by a couple of 100 basis points in 2020.So notwithstanding the deferral, as Karim said, we remain fully committed to driving forward our transformation as we focus on pivoting to sustainable and profitable growth, and we feel positive about the long-term prospects for the group.With that, I will hand back to the operator, and we will take your questions.
[Operator Instructions] Our first question is from Patrick Wood of Bank of America.
I'll keep it to 2. So the first question. Within Infusion Care, just quickly wondering, CMS put a proposal out there for potentially changing and including some incremental benefits for infusion devices and care within the durable medical equipment bidding process. I'm just curious if you guys think there is any potential impacts, either positive or negative from that proposal on that side? So that would be the first question. And then second question. Just picking up on your comments, kind of interested on the Wound Care side. Your commentary around Foam holding up better in a COVID environment. Just curious why you think that is? And just a little bit more detail on that would be great.
Sure. Patrick, thanks for your questions. And what I'll go ahead and do is just answer the first question in regards to CMS, and I'll ask Frank to handle the Foam question. I think in regards to like when you think about "smart glycemic control" sort of intersection of continuous glucose monitoring, infusion sets and the insulin pump, and then you think about how these 3 now are sort of intertwined via software and becoming smart, clearly from a clinical vantage point and from a patient vantage point, there's a lot of benefits. But historically, one of the challenges had really been access and affordability. And so I think that depending upon what happens in general, in terms of access affordability, that could have an impact on the growth rate of this segment. Frank, do you want to take the second question on the Foam?
Yes. The main reason for Foam to be holding up a little better than some of the other segments is that Foam in a lot of cases is used in a preventive way. And therefore, we believe that, therefore, it's a little bit more resilient and less negatively impacted by coal. So it's prevention really that is Foam is used for.
Super. And maybe if I can just slot one more very quickly in. I'm just kind of curious if you guys had any -- But I'm just curious if you could give us some sort of color around the net benefit from the stocking effects you guys saw in the 3Q. And so we can help understand that translation into the fourth quarter, that'd be great.
Frank, do you want to take that question?
Yes. So stocking was largely in the Infusion Care business. And as you could see that we grew 27%, which is extraordinarily high. And there were 2 really impacts in Infusion Care, and it's -- it was a backlog that had been building in the first part of the year with extra capacity. We could take care of that. And the second deed was stocking. In total, our estimation of underlying growth of the Infusion Care, to give you at least an idea, we're still going to be sort of in the low teens, so 12%, 13%, 14% range. And the rest I think was related to indeed stocking activity as well as taking care of that backlog that had developed before. So I hope that gives you an idea around the underlying performance of the business in the third quarter.
Our next question is from Amy Walker of Peel Hunt.
Karim, I understand what you were saying about trends in glycemic control, but -- and also Frank's comments about there being a backlog, but it still feels like this has been a pretty big shift all of a sudden in Infusion Care, given your allusion to the market now potentially growing in high single digits rather than mid-single digits. Is there some specific event that's happened in the last 6 months that, I don't know, related to change of behavior in COVID or Medtronics released some major new product line? It just -- maybe I misinterpreted it, but it feels like it was a very big step-up all of a sudden.
Yes. And Amy, I think it's a really good question. I think, look, we've known for a while in the diabetes market frankly for over 3 decades from the DCCT study. But if you could keep your blood sugar levels in very tight control, you'd avoid complications like retinopathy and nephropathy and neuropathy, right in your kidneys, in your eyes and your legs and all the various macrovascular complications. But it's been really, really challenging for diabetes patients, right, to be able to keep their blood sugars tightly controlled. And so you can imagine, particularly for type 1 diabetes, who get the diabetes at young age and produce no insulin.So historically, what have these patients done? They've really been using multiple daily injections. So they're administrating subcutaneous injections continually. And yes, it's true that we've had insulin pumps for some time, right? So folks like Medtronic really brought about this sort of innovation. It used to be called as the MiniMed and then it was acquired by Medtronic. But the reality is there was never a linkage, and you didn't really have sort of an artificial pancreas. And so I think what's happening right now is we're shifting from what I'll describe as the flip phone age to the smartphone age, and that's why we're calling it "smart glycemic control".And so really, Tandem Diabetes in particular, along with Dexcom are taking a lead, whereby now they're being able to integrate the pump with the continuous glucose monitoring using software, whereby a patient actually knows continually what their blood sugar levels are. And then at the same time, in a very smart way, depending upon what that patient is using or eating, I should say, different amounts of insulin are administered, right? And so now the patient in very tight control, the patient can actually go ahead and be a problem here. She talks with diabetologists or endocrinologists because the doctor is like, wow, you're in tight control. Usually the patient feel a lot better because maybe in the evening you're getting sleep and not having to urinate and go to the bathroom.And frankly, the payer, right, we were talking a little bit about CMS before is also pleased and encouraged because you can avoid these complications. And so I think the advent of "smart glycemic control", which is really coming about this year, particularly with Tandem driving that is sort of changing the dynamics whereby there is more demand now of what I'll call the "smart glycemic control" offering relative to multiple daily injections. And our infusion sets, which are highly innovative, they're highly reliable. They're very simple to use are an integral part. So you need the pump, you need the continuous glucose monitoring, and you need the infusion set. So we're part of that [ triangle ]. Does that answer your question, Amy?
It does. Just one follow-up though. I'm curious about how much visibility you have on the degree to which the continuous monitoring and the artificial pancreas is just replacing less sophisticated humps in the segment versus actually making inroads into stick and vial. Do you have visibility on the difference between those 2?
Look, I think it's difficult to say. And that's fundamentally a driver of how rapidly this segment is going to grow, right? The more you think you're just going to replace sort of previous pumps, you come up with certain assessments. And the more you fundamentally believe that actually this category or this segment is going to grow and displace multiple daily injections. I think, frankly, Amy, time will tell, but that is the sort of the key variable, right?
Yes. Okay. And then my very last question, I'll give someone else a chance is just given the group margin is much better because of all these moving parts this year, is it still your expectation that 2020 is the trough margin year after the update today?
Sure. Frank, do you want to take that question?
Yes, I'll take that. So Amy, clearly in the beginning of the year, we thought it was likely to be the case that 2020 was going to be the bottom. But of course, since then, we have taken the decision to defer recurring transformation investments, and we're also seeing this lower spend as a result of COVID driven lower activity and both benefit really the 2020 EBIT rate by a couple of 100 basis points, which is temporary in nature. So clearly in the future, we expect to see some normalization of these COVID impacted costs.And we also as we mentioned before during the discussion earlier, we are still expecting $75 million of recurring investments in 2021. So it's -- at this moment, too early to provide '21 guidance and we will be, of course, in a better position to provide an earlier -- an update in February. But you basically see 2020 getting the benefits because of this OpEx phasing of a couple of 100 basis points, and we don't see at this moment any material changes in transformation in 2021.
And your next question is from Veronika Dubajova of Goldman Sachs.
I have 2, please. My first one is kind of a follow-on on to Amy's question, just trying to understand the moving parts as we move into 2021. And in particular, kind of your degree of confidence that you will get that recurring TI spend to $75 million. And I mean, I think we all understand why you're deferring some of those investments this year. But as much as I would like to hope COVID disappears on January 1, 2021, I'm just not sure that's a realistic expectation at this point in time. So I guess, Frank, Karim, if you can talk us through a little bit of how you're thinking, your degree of confidence that we do get to that $75 million next year? Or is there a chance that we really get to $75 million in 2022? And what are some of the investments that are being pushed out further? If you can give a little bit more color? I know, Frank, you mentioned some geographies, but maybe by division. That would be helpful.And my second question is just kind of current trading to the extent that you're able to talk to what you're seeing specifically in the kind of elective segments when it comes to advanced Wound Care as you think about October? And whether are you seeing any impact from the growing COVID cases? That would be helpful.
Super. Frank, do you want to take the first question and the second one? I'll let you to do both of it.
Yes. So Veronika, we are very committed to the transformation program. We are very committed to our new strategy. And of course with COVID, there is a heightened level of uncertainty. But what we can see today and what we can see today also in our program funnel, project funnel and the phasing of all of that, we are seeing a investments in recurring of $75 million. There is going to be a perhaps a little bit more a mix shift, less related to outside sales, but, for instance, more into R&D, more into technology, more into digital. But at this moment, we clearly can see that the $75 million is what we expect to spend in 2021. Again, there is, of course, because of COVID, a level of uncertainty.Related to the electives, Q2 -- basically, what you could see if you go back in time, after Q1, we saw a very significant dive, very negative responding electives. And indeed, we saw a good bounce back in the third quarter. But also here, because of some uncertainty and unpredictability related to COVID, there will be a gradual sort of a variation, a certain volatility quarter-to-quarter. So if you think about it longer term, we expect a gradual improvements of the electives over time. And we don't expect it to go back to this very negative drop in the second quarter, but there will be quarterly fluctuation. And therefore, we've said, listen, Q3 was better-than-expected bounce back, given rising infection rates, giving restrictions to hospitals also on the rise, we expect that we might see a little bit of a decline again in the fourth quarter, and then it might improve again in the first quarter. So gradual, but quarterly fluctuations. That's how I would portray.
Maybe just to add, Veronika, just a little bit on the first point that Frank was making because you're trying to get a little bit of a feel for the likelihood of being able to invest the $75 million. I do think you're going to see us ramp up our R&D agenda next year. We have been ramping up capabilities across the board. And so for example, now we've named a head of biomaterials and design for manufacturing. We've named now ahead of the whole area of mechatronics. We know we put in place now a new head of regulatory. We're in the midst of going ahead and then putting in place ahead of sort of a software development as we think about software as a medical device and how can you actually develop clinical decision making tools. And so there's a lot of activities in R&D and investments, which historically have not been made at ConvaTec.And I think frankly, 2021, even just today, present a tremendous opportunity to do that. And also as you think about moving forward, whether it's with our employees or whether with our sales forces and marketing efforts, really the hybrid model is here to be, right? It's here to stay. I don't think that's going to go away fundamentally. So it's critical that we make the investments, frankly, in the appropriate and relevant digital platforms to be able to engage with customers in that manner. And so that will require a fair amount of investments.
Okay. And if I can just a follow-up. I think Karim, at the outset of the year when you brought in new head of R&D, you were going to give us a update on sort of what are some of the things that are in the pipeline that are exciting. It might be too early, but if you can share kind of where we are 3 quarters later from an R&D perspective, major product launches to be looking out for over the next couple of years, if you can give us a little bit of a preview of that, that would be great. And that's my final question.
Yes. I mean, I think it's a little premature, but what I'll basically highlight to you is 2 things. One, we're investing in building the capabilities, which I just started describing to you, right? And so a lot of it is actually putting in place the leadership, the systems, the process in governments to go ahead and do that. And so for example, just with a valve, right, 1.5, we've been endeavoring to improve the performance of our disposable negative pressure wound therapy. We've made adjustments from a design from a manufacturing perspective. And our initial reactions from the marketplace are actually encouraging or positive.But if you look out, what I would say basically is to highlight to you really 2 different areas. I think the first one I'd highlight to you is little bit as whole reference to the Foam area. The home segment is clearly an area where it's a very large segment. It's actually the largest segment of the advanced Wound Care marketplace. And we are basically at this point in time underexposed. So we're busy, frankly trying to work as to how can we go ahead and improve the quality of our offering. And so we're endeavoring to go ahead and do that would be the first area that I'd go ahead and highlight.And then I think, frankly, in the area of Infusion Care, look, I mean, that's a very interesting and growing arena, and we do have a leadership position there with a differentiated offering. But again, we're looking to frankly keep on driving the level of differentiation. And one of the interesting things in the marketplace and is clearly needed, can you use your infusion sets, maybe not for 3 days, that may be closer to a week. And being able to use them for a week has a whole series of benefits to the patient in terms of could you then link it maybe to the whole area of continuous glucose monitoring? Could you integrate those -- themselves? I think that that whole extended wear of an infusion set is also an interesting area. So hopefully, you're getting a sense that fundamentally we're building capabilities and hopefully getting the sense of it's pretty clear to us where is it that we're trying to go ahead and make sure we've got a competitive product offering and where is it that we want to go ahead and sustain or drive further differentiation.
Our next question is from Hassan Al-Wakeel of Barclays.
I have a couple, please. So in wound, could you please talk about the underlying growth here before any benefit of stocking and what you're seeing in October? And whether this is a driver for your conservatism on Q4? Or is it more a function of uncertainty? And any color around the different parts of this business, acute versus chronic would be helpful? And then secondly, in the U.S., could you please talk about your progress as it relates to the commercial organization within wound and any early signs of improvement here? And then also within Ostomy, any changes in MPS by region?
Okay. Why don't I ask Frank to take the first question? Underlying growth in the wound --
Yes.
-- and then I'll tackle the U.S. question.
Okay. Yes. So the underlying growth in wounds are estimation there is it's low single digits. So 1.5% to 2% or so. And the reason for that is as follows. If you look at the quarter 3, we indeed saw a sequential improvements in electives, and it was clearly better than the second quarter. So a very clear bounce back. At the same time, we still see the chronic is challenging. So if you look at the different patterns, chronic is improving, but more gradually, while electives bounced back very fast. So the overall impact, if you take the COVID impact out and there was a little bit of a phasing, an order that was placed last year in Q4 was now into Q3, we again get to that low single digit underlying growth rate.Now for the fourth quarter, as I already mentioned, there is the impact of skincare, which is 500, 550 basis points. But there is, indeed, a level of uncertainty arising from the increased infection rates. And we already know that several countries in Europe are driving more restricted or show some restricted access. Think about Spain, U.K., France. There is nothing yet in the U.S. Of course, you hear about that might also come starting in the northeast. But we are therefore, a little cautious there and expect that some of the growth rates will, in fact, go the other way in the fourth quarter. Besides, of course, the skin care impact, which is a separate phenomenon. And that's how we look at it. So it's caution at this stage, given that we see just more restrictions already starting in several big countries in Europe and possibly also in different states in the U.S.
Super. Thanks, Frank. Hassan, look, good to hear from you. I would say on the U.S. front, let's start with advanced Wound Care. I think it's fair to say that the organization is settling in, right? As you recall, we sort of just put up our commercial organization to 3 units. We got a dedicated unit just for long-term care. We got a dedicated unit or a group of commercial folks focused on the whole chronic segment and one focus on the surgical segment. So that organization frankly has really settled in. And I think that focus is actually helping us in terms of our ability to interface with those respective segments. The leader now of that unit, [ Joe Telang ], just has been enrolled now coming up to award a year being December.And so there's just an element of the group settling in. They're learning how to work the hybrid model, which is basically a combination of face-to-face selling, inside sales, using a whole series of digital tools to frankly interface with customers. So I would say that when we look at the productivity metrics, the number of contacts, the number of contacts that are digital versus in person, what is the impact that we're having with these contacts, I would say that that's encouraging. Now those are operational metrics, and it's quite difficult frankly within the context of COVID to really appreciate and see some of the benefits, right? So we'll see that hopefully during the course of '21 and beyond that some of these operational improvements bear full fruit.On the Ostomy Care side, I'd say the story is a little different. In terms of new patient starts, we're clearly challenged in that area. We have regions whereby our net patient starts or our new patient starts, I should say, have been declining. We have regions where it's flat and we have regions where it's growing, right? So it's very much of a mixed situation. And we've just put in place new commercial leadership here in the last 1.5 months. And so we really need to let Matt sort of settle in with his team and really review the go-to-market strategy, strengthen the commercial capabilities. And so I would say that there is a fair amount of work to be done in the Ostomy Care area in geographies like the U.S., frankly, in the U.K., where we need to really improve our commercial execution in addition to rationalizing portfolio, in addition to refreshing portfolio.
And Karim, if I can please follow-up, just in terms of NPS and Ostomy in the U.S. I think you've said in the past that you see some regions that are actually growing NPS relative to others that are shrinking. When you delve deeper into the reasons behind that, do you think that you could get to a place where you could actually stabilize the trends without product introductions?
I think the short answer is yes. And I think, frankly, we have evidence of being able to improve new patient starts, both within the U.S., but also frankly, outside the United States, right, with the current portfolio. That doesn't say at the same time though that we don't need to refresh the portfolio. We don't need to streamline the portfolio. But I would say that's the short answer to your question is yes.
Our next question is from Michael Jungling of Morgan Stanley.
I have 3 questions, please. Firstly on organic sales growth. Does the slower hiring of salespeople in 2020 provide you now with a materially more challenging growth dynamic for fiscal year 2021? And question #2 is on the R&D progress. Could you comment on how COVID is impacting your ability to roll out your R&D program and running clinical trials? Are you being put back? And is that perhaps causing a delay in products and organic sales growth in the future? And then the final question is also on organic sales growth. I would love you to comment on the progress you're making in the timing of inventory rationalization and how the reduction SKUs is going to be impacting your organic growth in the fourth quarter and how you're thinking about this in 2021? That's all.
Yes. I'll try to take the first 2, Michael, and I'll ask Frank to comment on the inventory rationalization. I think on the first one on organic sales growth and the impact of sort of not expanding the sales teams as rapidly. I think it's difficult to say, just being candid with you there, Michael, right? I think that from one vantage point in certain geographies like China, where we've not been at scale, there really is a need to expand the sales force. And frankly, we've now gotten on the case, and we are actually adding salespeople, right? So there basically was a delay of about 6 months in doing that. And that was the right thing to do. But as you know, the situation in China, at least today seems to be more -- yes, more positive or more optimistic than say maybe Western Europe or Europe and the United States.So we see those situations where you need that sales force, so you can sort of see that there's a lag of about 6 months and putting in place in those investments. Having said that, in other geographies, I would say the whole hybrid model makes a lot of sense, right, where you're balancing out the digital interface with the in-person approach. And so I think it's difficult frankly to say at this point in time because the model frankly as to how to interface with the customers is changing. So I would honestly say question mark. And I could argue one way, I could argue the other, but I would prefer to basically say, look, difficult to assess at this point in time.On the R&D progress, I would say actually, making good progress there. I don't think fundamentally COVID has slowed down. Our focus in our investments, frankly, and striving to refresh our portfolio to make it more competitive and frankly to start driving a differentiation agenda. We continue to run our lives. We continue to sort of build capabilities. And so even when it comes to clinical trials, we've not seen limitations at this point. So there I would say, I'm actually cautiously optimistic that we are on track. This is obviously a long-term game that we're playing on the R&D investment front, but encouraged by it. Frank, do you want to take the question on inventory rationalization?
Yes. So the rationalization, this is really very much related, of course, to our Ostomy Care business. And earlier in the year, we have talked about this. We have rationalized some of sort of not -- contract that didn't make any profit. And that had an impact on the growth rate for Ostomy here. One of the reasons you basically go for a flat in Q3, we think it's low single digits underlying piece of that was destocking and the [ R ] piece is really the rationalization impact. So it is limited. It's less than 100 basis points, but it's probably 80, 90 basis points.Now in Q4, we are going to see a little bit of a increase in that impact because we are starting to see the SKU rationalization starting to gain momentum. So our expectation is that probably in Q4, it will be just over 100 basis points of negative impact could be even a little more than that. And then we are sort of ramping that activity into 2021. So at this month, it's too early to comment on what exactly the impact is going to be in terms of basis points, but that's how you have to think about it. SKU rationalization across the market rationalization is starting to ramp up in '21, and it will have an impact on the Ostomy -- the growth rate of Ostomy Care.
Okay. Great. And could just briefly follow-up on the sales force expansion. With this hybrid model that you're talking about, are you now suggesting that perhaps the way forward is to invest less in salespeople just because the world is changing, and therefore, maybe the investments need to be split more evenly between, I don't know, call it a virtual world versus sort of the human world?
Yes. I think the short answer is yes. I think that the marketing mix, if you go back to fundamentals and you start looking at promotional mix in fact, right? What's going to be in person, feet on the street versus the virtual side, I think it's definitely going to be changing. I think we see that in our own personal work practices, right? And it's a matter of calibrating what is that mix going to be. And I think it's going to be variance by geography. I think it's going to be variance, frankly, also by category in which we're competing in.And so I think that one needs to be very thoughtful. How does one build digital platforms that can be used across the board to allow you to interface with a patient, with a nurse, with the physician, with the other appropriate guardrails, right? All the privacy guardrails or the security guardrails you need. But at the same time, allow you to be nimble and agile and to really you drive sort of this whole idea of omnichannel. How do I link the sales force with inside sales vis-Ã -vis virtual channels? And how do I help, frankly, folks as they decide to choose who to use as they decide to buy. So I think e-commerce and as they decide to need help to be serviced, right? So I think we are going to see a significant change in the commercial models that will be used to interface with customers.
Our next question is from Lisa Clive of Bernstein.
I have 3 questions. First, on the infusion devices market. My understanding is while demand for infusion sets was clearly increasing, there's also a dynamic in the market around a shift in technology to pass pumps. Can you provide us with some high-level commentary on the differences in the technology, how easy or hard it would be for ConvaTec to get involved in the past time supply chain? And have you made any moves to do so? And then can you also remind us of what proportion of your infusion devices sales today are to Medtronic and an effect have shifted over time? And then lastly, can you provide us an update on your product development in continence? When we could see a new product portfolio and your plans on moving into the EU market there?
Okay. I'll take the first one. I'll pass the second one to Frank, and I'll take the third one. So maybe I'll take 1 and 3, and Frank pass to you the question about our proportion of sales to Medtronic.
Sure.
But on the patch pump, yes. So look, so you've got -- historically, this whole area lease, which you're well aware, right, is sort of the durable pumps versus the patch pumps and they got pros and cons. But fundamentally, the market is -- has been more of a durable pump with patch pumps frankly growing more rapidly or more quickly. So I think the dynamic that we see there is that there's going to be space for both, and there is a need for both, right? So we don't see a sort of one versus the other. I think the first question is, to what degree does one believe that patch pumps -- to what degree are they going to be playing in the "smart glycemic control" segment too? Our assessment is that we will see patch pumps, it would also be part of that "smart glycemic control" mix.And then to your specific question of, okay, is there an infusion? Is there an opportunity for the Infusion Care business to ConvaTec to partake in, not only the -- let's call it the durable pump portion of "smart glycemic control", but also in the patch pump area. I would say the short answer is possibly yes, but honestly for competitive reasons, I'm not liberty to comment more beyond that, okay? All I'll just say is it's a sort of top of mind, but we clearly see and understand that the "smart glycemic control" segment is one that structurally, we see a important growth long term. And we think that from a technology vantage point, we can make an important contribution to our partners.On Continence Care, what I'd say, look, they're -- a little bit frank alluded to this. It's unfortunate, we've been talking for quite some time about the GC Air or GentleCath Air trying to develop basically a compact offering. And the reality is that we did go ahead and carry out a pilot launch, which is ongoing frankly in France. And from a customer receptivity perspective, the idea behind the offering and the benefits are actually attractive and appealing. However, unfortunately, we did not focus efficiently on design for manufacturing, really focusing on quality and really focusing on efficiency and cost of goods sold, right? And so what that has basically meant is that we're having to go back to a drawing Board fundamentally. And so I would anticipate that's going to take us approximately an additional 24 to 30 months to be able to go ahead and introduce a significantly more competitive product offering in that arena.So again, back to some of the previous questions that to R&D spend, where do you see some of your R&D spend, that would be an example again of where we need to go ahead now and invest the appropriate time, effort and energy to think, yes, about design from a human factor perspective, i.e., what's going to be appealing to the patient. But equally importantly from a design, from a manufacturing perspective, think efficiency and think quality and then to also carry out the appropriate clinical trials to have sufficient data to be able to effectively launch. Frank, do you want to take the question about Medtronic?
Yes, the Infusion Care. So if you look at our Infusion Care business, about 85% of that business is related to infusion sets. And Medtronic is -- we're not providing specific percentages here. [ If you can say ], Medtronic is over 50% of that. And looking at the growth rate of the different players in the markets, that percentage is slowly coming down because we are providing infusion sets, basically all the major players in the market. So that's how you have to think about it. 85% of the total business is related to infusion sets and more than 50% is Medtronic, but it's going down.
The one thing I would just add to Frank's comment is clearly we're diversifying the number of partners that we're working with. Today, there's folks like Roche. There's folks like Tandem Diabetes. There's folks like Medtronic. I think what's also clear to us is that there's going to be new players in the marketplace, particularly Asian players. So I think we're well poised to work with them. And also what's clear to us also is that there are applications and opportunities for us to grow that business outside of diabetes care. So in areas such as Parkinson's disease, in areas such as on immune diseases. There is an opportunity for us to go ahead and drive our R&D agenda there. And clearly, those are areas which we're actively working in and actively exploring.
And just a follow-up question on that. In order to access those new markets, I assume you need to be running clinical trials and sort of proving that the technology really is beneficial to these patient. How long of a time line are we talking about here?
Yes. So look, it really depends on the application, but we have -- you probably are aware we said that and we've disclosed this publicly that we're actively working, for example, with AbbVie in terms of their L-dopa and Carbidopa dual suspension, right? That's currently in Phase III clinical trials. And so I think we'll have an outcome there during the course of the next 24 months, right? But that would be a very good example. The application of an infusion set for the treatment of severe Parkinson's disease and potentially all of a sudden now the infusion set plus the pump is not only impacting the patient from a convenience perspective, but truly from a clinical efficacy perspective. And so if you can frankly leverage the Infusion Care technology to help improve the clinical profiles of things like biologics and frankly, molecules like the L-dopa Carbidopa dual suspension, then that could be quite interesting.
Our next question is from Nyeok Lee of Jefferies.
I have 2 questions, please. Firstly, just a follow-up on Infusion Care. How should we think about the stocking activity that for 4Q this year and also for Q1 next year? And then my second question is just on some of the new product in the near term, including Avelle 1.5. Can you just talk about the progress there? And if those products are on track to be fully rolled out in the near term?
Yes. I'll let Frank take the stocking activity question, and then I'll answer the Avelle question.
Yes. So the -- if we look at the stocking levels of some of our key customers, and of course, some of that happens because customers are expanding geographically, but also coming out with new products and therefore really filling their channels. If we for instance, take a comparison versus fourth quarter of 2019, then stocking levels are somewhat up, but at a pretty decent rate. They are higher than the Q4 of last year, but not very significantly. Therefore, we believe that we don't expect any at this moment stocking dynamic that again is substantial material. And we expect similar levels in 2021. But of course, things can change from now on. But that's our current view of those type of levels of inventory.
Yes. Look, I think what I would say, look, on Avelle 1.5, I mean, look, it's an improvement we've made, and that's just helping us fundamentally just be competitive, right? So I wouldn't sort of getting overly excited. I mean, it's something we used to do from a design, from a manufacturing perspective. I think it was fair to say, look, on the R&D front to improve and refresh our offering, but that just takes time. And so historically, we've really underinvested in the area of R&D. And so it's going to take us several years frankly to build the capability, to refresh the portfolio and truly be competitive and drive differentiation.And so I think what's fair to say is, look, we currently have a series of businesses where there is a fair amount of variance, right? And I think we've been pretty straight in terms of highlighting businesses like Infusion Care and the Home Service Group where there is a fair amount of differentiation. In the case of Infusion Care, that's product differentiation. In the case of Home Service Group, that's really service differentiation. But there are other businesses such as Ostomy Care, the whole compact segment of Continence Care, part of the portfolio in advanced Wound Care where we need to really be working hard on improving that. And frankly, we will need to make the investments in '21 and '22 to thereafter be able to see some of the fruits of that hard work and that significant investment we're going to be making.
Our next question is from Chris Gretler of Credit Suisse.
I have 2 questions left. One, actually following up on infusion devices. Could you actually talk about the price/mix dynamics in that business? Is this kind of high single-digit growth you're projecting midterm now? Is this volume growth? Or is there a significant price/mix effect as well as you essentially kind of diversify away from Medtronic? And then second question is just on your Critical Care business. I mean, looking into the current world and with this increasing COVID hospitalization rate in development, shouldn't that business not see kind of a major kind of increase in demand over the next couple of months?
Yes. They're both great questions. Let me try answering both questions for you, Chris. In terms of Infusion Care price and volume, is there a mix effect? I think fundamentally, there is volume, right? For example, as the "smart glycemic control" segment, I think is much more of a volume element. I think that as you look at different applications though, there probably is a mix and pricing opportunity, right, because you need to sort of understand how much value are you bringing to a specific application. And so the infusion set itself may be using a very similar technology. But across different applications, the degree of value you bring to bear varies. And so therefore, how do you actually price based on value pricing, if that makes sense. So I think there is an opportunity there, and I'll leave it at that. And I think I've given you 2 examples of diabetes in partial sense, which should help you think that through.On the Critical Care one, look, I think you make a good point, which is, look, Karim and Frank, these COVID rates are going up, wouldn't you expect frankly utilization of your Critical Care products to rise? I think the reality is that because of what happened in Q1 and Q2, whereby we saw some very strong growth in demand of our Critical Care offerings, at least in our assessment right now is that, frankly, the hospital is actually very, very well stocked. And even though COVID rates may be going up right now, and I think most of us would say, hey, they're probably going to keep on going up unfortunately, right? No one is wishing that. If we assess from the knowledge that we have, what are the current stocking levels that these folks have, they seem to be very, very well stocked. And so therefore, the commentary that Frank and I have been sharing with you. I don't know, Frank, do you want to add to that at all?
So I think that is -- it's very accurate. There are very low stocks. And at this moment, our expectation is also having discussed with the business and people in the field that we in fact don't be the same level of growth that we have experienced in the first 9 months of the year. And that's our current assessments. And things can change, of course, but that's what we see.
Our final question is from Paul Cuddon of Numis Securities. It looks as though Paul is disconnected now, which means we have no further questions. So I will hand back to your host.
Okay. Thank you very much. First of all, I just want to say thank you to everybody, and I just wanted to highlight to you 2 things as we wrap up. The first one is, should you have any further questions about today's announcement, please do get in touch. I want to share with you that we recently recruited Kate Postans as our new Vice President of Investor Relations and Corporate Communications, so should be delighted to have a catch up call if that's required. The best way to reach or to contact Kate is to e-mail, and e-mail you may want to go ahead and use or should use to contact Kate is ir. So pretty straightforward ir@convatec.com.Second, what I'd like to highlight to you is that we've decided to conduct an investor perception study. So you may be contacted by someone at Revel in the next couple of weeks. We very much would like to hear your feedback and I think get your inputs and insights, and hope you can find the time to participate. On that note, I'll sign off and say thank you for joining us today. We look forward to the next opportunity to present, which will be at our full year results, and we're currently scheduled to hold that on February 26. Until then, once again, thank you. Goodbye, and please be safe.
Thank you very much.