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Ladies and gentlemen, welcome to the Straumann Group 2018 Third Quarter Results Conference Call and Live Webcast. I'm Sherry, the Chorus Call operator. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. The conference must not be recorded for publication or broadcast.At this time, it's my pleasure to hand over to Mr. Marco Gadola, CEO. Please go ahead, sir.
Good morning, ladies and gentlemen and thank you for joining us for this conference call on the Straumann Group's 2018 9 months results. We are using the presentation slides that we published on our website this morning, and we kindly ask you to take careful note of the disclaimer regarding forward-looking statements on Slide 2. As usual, I will begin with the highlights, and then Peter Hackel, our CFO, will share the performance and financial details with you. After that, I will say a few words about some recent product and expansion initiatives that will help to fuel our growth in the future. As usual, we will conclude the presentation with our outlook, after which we will be happy to take your questions. But first, let me begin with the highlights on Slide #4. In the first 9 months of 2018, Group revenue grew 23% to almost CHF 1 billion. The currency effect was neutral, and excluding the effect of acquisitions, our organic revenue increased 18% positive in the first 9 months and in the third quarter. North America was a main contributor and together with Asia Pacific, contributed almost 60% of our growth. The latter continues to be our fastest growing region, with 9 months organic growth of 33%. We brought several innovations to market in Q3, including our 2-piece PURE ceramic implant and the new mini implant system for edentulous patients. However, the most exciting moment was when we unveiled Straumann's fully tapered BLX implantation system a few weeks ago at the EAO in Vienna. This implant will carry on driving the strong premium implant growth that we have generated this BLT over the past 4 years. In addition to bolstering our premium business, we are also strengthening our foothold in the 3rd-tier implant segment by taking control of T-plus in Asia. Based on the strong performance so far, we are raising our full year outlook for the second time this year and now expect organic revenue growth to reach the high-teen percentage range. As you can see in Slide 5, we added a little more to our strong first half momentum in Q3, thanks to accelerations in North America and Asia Pacific. The pace in EMEA is slightly, while last time we had to contend with the difficult economic environment in the 2 largest markets, Brazil and Argentina. Nevertheless, with all our regions achieving double-digit growth, we again outperformed the market significantly and thus gained further share. Once again, I would like to congratulate and thank all of our employees for the excellent job they have done in achieving these great results. And now for the details on our business and regional performance, I will hand over to Peter.
Thank you, Marco, and good morning, everyone. As you can see in Slide 7, our reported 9-month revenue in 2017 amounted to CHF 801 million. The FX tailwind melted down from CHF 10 million in H1 to just CHF 3 million over the 9-month period. The acquisition effects of ClearCorrect, Dental Wings and the Turkish distributor added further CHF 34 million, bringing the adjusted revenue base in 2017 to CHF 838 million. In the center of the slide, you can see the regional organic growth rates, while the regional contributions to overall growth are shown on the right. North America and Asia Pacific each contributed 29% to overall growth. Our largest region, EMEA, provided the biggest contribution despite its slower pace, which is still significantly ahead of the market. Asia Pacific was the star performer over 9 months, with revenue increasing 30%. North America, edged up to 19%. Latin America also developed positively and achieved growth of 18%. Slides 8 and 9 provide more insight into the individual regional performances. I'd like to begin with EMEA, which posted organic growth of 12%. This was expectedly less than in Q2, which benefited from the timing of the Easter break. The performance was fueled by excellent growth, especially the Nordic and Eastern Europe as well as the Middle East, where we rolled out Neodent and Anthogyr brands in selected markets. In North America, our performance was consistent throughout the first 9 months, and we gained further share in the U.S., which is the world's largest market. We further strengthened our competitive position in the premium tapered segment as well as in the nonpremium market. Both segments grew at double-digit rate. ClearCorrect also progressed well and added to the regional growth. During Q3, we resumed sales of our tissue repair product Emdogain, which together with the clearance of back orders also contributed to regional growth. Apart from this, we took advantage of the annual conference of the American Academy of Implant Dentistry in September to support the U.S. launch of Neodent's Grand Morse fully tapered implant system. Moving on to Asia Pacific. We achieved another dynamic performance in Q3, with organic growth reaching 33% on top of a more challenging baseline in the prior year. China continued to be the main powerhouse. Also, an estimated 1.4 million implants were sold there in 2017. The penetration rate is still relatively low and the full market potential remains to be exploited. We also achieved strong performances in India and Japan. Now let me give some color on our performance by business segment. Implants contributed more than half of the Group's 9 months growth, fueled by the continuing success of our BLT implant range. Year-on-year, our premium tapered volumes grew more than 40%, and our SLActive share progressed positively. Further impetus came from the nonpremium brands, most notably Neodent, Medentika and Anthogyr. The growth in Implants was matched by Restorative business. Our abutment to implant ratio developed well as we saw strong demand for our Variobase abutments. Digital, which includes CADCAM hardware, software, consumables and clear aligners, achieved the strongest growth over the first 9 months, thanks to healthy growth in intraoral scanners and 3D printers. In Biomaterials, demand for Straumann’s bone graft and membrane products was strong in all quarters, while Emdogain sales rebounded in Q3, as mentioned before. Our clear aligner business continued to grow dynamically, as you can see in Slide 11. The number of cases grew 60% in Q3, and our average selling prices remains unchanged. We expanded our customer base over the 9-month period by 10%. We successfully completed our pilot programs in Europe, and our now building a sale team to prepare for launch in 2019. In Brazil, preparations are also well underway for a launch early next year. To meet current and future demand, we have expanded capacity at ClearCorrect production facility in Round Rock. Apart from this, ClearCorrect began promoting its aligners in North America together with the remote monitoring systems supplied by our partners Dental Monitoring, which is an important USP that provides a remote interface to the patient and can reduce treatment duration. And with that, I will hand back to Marco.
Thank you, Peter. Our sustained strong performance and market share gains underline that our strategy is effective. Following our entry into orthodontics, we recently modified our third strategic priority from tooth replacement to esthetic dentistry, which reflects the fact that our solutions also restore esthetics in addition to function. Slide 14 provides an example of our continuing strategy to target unexploited growth segments. 4 years ago, we launched our apically tapered Straumann BLT implants, which enabled us to make inroads into the immediacy segment. BLT still offers significant potential, but it does not address the entire range of indications in this segment, which is the fastest-growing and now accounts for 1 in every 4 implants placed. Also, we have been gaining market share in the nonpremium fully tapered segment with Neodent's new GM line. We have not had the product for the premium tier, which comprises close to 2 million implants and offers a huge opportunity for the Straumann brands. To fill this gap, we have been working with the world's leading experts for 3 years to develop a differentiated implant system. The result is Straumann BLX, which is designed for optimum primary stability in all bone classes, for simpler restorative workflows and for predictable outcomes even in complex cases. Its novel design combined with Roxolid and SLActive creates a unique new-generation implant system that is well-positioned to win significant share in the coming years. Slide 15 lists some unique selling points and key benefits of BLX, which we presented for the first time at the EAO in Vienna. We all just shared the initial experiences from our preclinical and clinical programs. So far, we have supplied nearly 5,000 BLX implants to clinicians. As you can see in Slide 16, our online case tracker, which involves more than a 100 clinicians, shows that users like it very much. Based on the excellent response so far, we have started a limited market release to selected customers and are planning a full release in March next year. In Q3, we also started the full release of our PURE ceramic 2-piece implant, which you can see on Slide 17. It complements our existing monotype design and is made of the same high-performance ceramic that mimics the appearance of natural teeth. The 2-piece solution adds prosthetic flexibility, facilitates handling and is suitable for guided implant placements. Although ceramic implants currently represent a niche market, their popularity is growing. In the leading market, Germany, they already account for 5% of the total market, and we are convinced that greater prosthetic flexibility together with increasing clinical data will strengthen this trend. Our new mini implant system, in Slide 18, offers a cost-effective, immediate and minimally invasive solution for edentulous patients with reduced bone. It is a premium-quality implant made from Roxolid, with a diameter of just 2.4 millimeters. It also features the Optiloc connection for exceptional long-term performance and low maintenance. In 2017, more than 1 million mini implants were sold globally. Their popularity is high in North America and is growing rapidly in other markets. The final item of product news is on Slide 19 and concerns Emdogain. In August, we received FDA approval for the change at our manufacturing facility and were able to resume regular sales in the U.S. after interruption of 4 months. In September, we signed agreements to gain control of T-Plus in Taiwan by increasing our ownership from below 50% to a controlling stake. T-Plus provides us with the products and registrations to penetrate the 3rd-tier segment in China and across Asia, where more than 2 million 3rd-tier implants are sold annually. T-Plus also provides us with a modern, certified manufacturing facility. We expect to consolidate the business later this year. As you can see in Slide 21, we continue to extend our geographical footprint and now opened our 6th subsidiary in Latin America to serve customers directly in Peru. That brings me to the outlook, which as always is barring unforeseen circumstances. Based on our continued strong performance, we are upgrading our outlook for the second time this year, and we expect full year organic revenue to grow in the high teens. Apart from this, the outlook remains unchanged, as you can see in Slide 23. Looking a little further ahead, I would like to share some early insights into a pilot project we are conducting with a view to increasing our scope. Slide 24 provides an overview of our current business portfolio, which covers implants, prosthetics, CADCAM materials, biomaterials and clear aligners. All of these are covered by an end-to-end digital workflow, including the software, scanners, 3D printers, milling equipment and related services. Slide 25 shows where we see growth potential. The pie chart on the right shows our addressable market by segment. As you can see, preventive dentistry could add as much as CHF 2 million. Slide 26 explains what we mean by preventive dentistry. The life of a tooth begins on the left of this chart and ends in the center of the various stages of disease. If the tooth is lost, we provide complete solutions to replace it. However, implants can also be susceptible to disrupt this inflammatory processes that lead to bone resorption and in the worst case, the loss of the implant. In our press release this morning, we announced that we have obtained distribution rights for a number of innovative products for treating diseases that lead to decay, tooth loss or implant failure. All of these treatments address the needs of general practitioners, and we have begun to pilot approaches for selling them through the same channel as our clear aligners, [indiscernible] from CADCAM prosthetics and other GP products. The pilots are running in the U.K., Germany and Italy. I will provide you with further details in due course. And with that, I would like to open the question-and-answer session. [Operator Instructions].So operator, can we please have the first question.
[Operator Instructions] The first question is from Ian Douglas-Pennant, UBS.
Ian Douglas-Pennant at UBS. So the first question is on guidance and particularly your EBIT margin guidance. I'm surprised you haven't upgraded that. It seems unlikely that you would now deliver flat margins given the operating leverage that the additional sales you're expecting must give. Secondly, could you respond to Align's announcement or communication that they are offering some discounting? Are they -- in your opinion, are they doing in response to you? Are you going to be forced to respond to that in turn and so we're going to see prices decline? Maybe you could just talk through to that?
Peter, you want to take the first question on the EBIT margin?
Yes, I'll take the first question. You are right, we have not changed our EBIT and EBITDA guidance, which is always a full year guidance that we issue at the beginning of the year. As I have explained when we were discussing the sales, we had significant headwind on the FX side in the third quarter, and the translation impact on the top line melted down from a positive impact of CHF 10 million to only a slight positive impact of CHF 3 million after 9 months. And if the FX rates stay as they are currently, then I would expect an even slower -- lower impact for the full year on the sales side. If we look at the impact on the margins, then you -- I might refer your attention to our half year presentation, where we had a positive FX impact on the EBIT margin of 1.2 percentage points. Given the FX tailwinds that we experienced in the third quarter that significantly melted down, and for the full year, I only expect a very small positive FX impact on the EBIT margin. In addition, as we have raised our outlook for the full year, that means that we are over-achieving our sales targets, which obviously also leads to a higher payout of respective sales bonus to the salespeople, which is, in principle, a positive development. And the higher revenue also allows us to invest more into the buildup and to invest more into specific projects such as, for example, a buildup of the sales force for the ortho business and the marketing people for ortho business that we are going to roll out in 2019 in Europe.
On your second questions on Align, it would be -- obviously would be great if actually Align would have to decrease prices because they feel us in the neck. That's not the case, to be honest. Just remember, we are only present in the U.S. market with ClearCorrect so far and a little bit through distributors in Australia and the U.K. We are about to launch ClearCorrect in the European markets beginning in 2019 and also in Brazil, where we are launching ClearCorrect during CIOSP in January. But the reaction of Align is not a direct kind of consequence of us gaining significant share. In their press release, they are mentioning that they increased their [indiscernible] discount. And I think the second impact is due to [indiscernible] mix. Align also gained quite -- some quite significant DSO contract over the last couple of quarters, like for example, Aspen or Heartland in the U.S. And obviously, these contracts are coming at lower ASPs compared to the rest of the business, but they are obviously also helping to boost volumes. That's our interpretation of the situation.
Next question from the phone comes from the line of Markus Gola, Mainfirst.
So my first one is on China. It seems that some European companies benefited China, as U.S. companies has disadvanced on the back of the current trade conflict. So do you also see any benefits from this situation, given that most of your important competitors are U.S. companies? And my second question is on your 2-piece ceramic implant. I believe you have already introduced this implant on the IDS in 2017. So is this a different implant? Have you changed something material here? Or why it took it so long to launch this product on a broader scale?
Good. Thanks for your questions, Markus. The first question on the Chinese market. Keep in mind that our key competitors in the Chinese market are the Korean players. So Osstem and Dentium, they are our fiercest competitors in China. And then we also have quite some competition from the German implant manufacturers like ICX or BEGO or even CAMLOG. We also don't see any kind of negative consequence due to the trade war when it comes to the businesses, for example, Nobel Biocare or 3i or Simos. But to be honest, we also don't consider them as our fiercest competitors in the Chinese market. On your second question on the 2-piece ceramic implants, just keep in mind that we only showcased the PURE 2-piece ceramic implant back in 2017. And we also at that point in time clearly pointed out that there is still quite some development effort to be done until this product will actually reach market maturity. We are now obviously convinced that the product will deliver what we expect out of it, and that's why we entered a full market release phase at EAO this year.
Next question comes from the line of Michael Jungling, Morgan Stanley.
I have 2 questions. Firstly, on the BLX implant. Can you comment on your pricing relative to Nobel Active and whether the gross margin post, the royalties that you have to pay are above or below your current dental implant margin? And secondly, when it comes to clear aligners, can you comment on the sort of the competitive offerings coming out of 3M with Clarity Aligner, X-ray with SureSmile and Henry Schein with SLX? It seems to me that lots of new products coming to market. Just curious how you view those and how your products perhaps differentiate themselves to those offerings coming up.
So on BLX, we will actually price BLX competitively and obviously, no black pit will be the benchmark. So we will position it slightly below or maximum at Nobel Active prices -- list prices. You are right, we are paying some royalty on the product, but with the targeted list and ASPs of BLX, we -- obviously, we want to generate more absolute gross margin for every single BLX sold compared to the other premium implants we have in the portfolio. So we want to use this as an opportunity to also generate more absolute gross margin per premium implant sold. So there will not be a dilutive impact on our gross margin. On your second question, yes, but it was very clear that the clear aligner market is such an attractive market, such a fast growing market that once the patent cliff in October has been passed that other companies will also enter this market. And like the Henry Scheins or the dental suppliers of this world, we believe that we have a very good positioning with ClearCorrect, because it's a product that caters very well to the needs of general practitioners. This is actually our core targeting group. It really delivers, and we have enough evidence from all the pilots we have been running throughout all major European countries, Japan, Brazil, other Asian countries, that it actually is fully in line with expectations of general practitioners. So we are confident that the rollout of ClearCorrect in other geographies outside of the U.S. will be a success.
Great. And a follow up on BLX. Can we assume that perhaps you will offer major volume discounts to win large business from Nobel Biocare through Nobel Active? Meaning, are you willing to gain incremental absolute EBITDA, if it actually means that your --- if your margins actually are lower?
Absolutely, but we have done the same with BLT too, okay. So also BLT, a large part of the volumes we achieved with BLT was with competitive accounts. And obviously, if we have large customers buying hundreds of implants, clearly, they get the better commercial terms than customers just buying 10 or 15 implants.
Okay. And are you able to show that your BLX implant is superior to Nobel Active? Have you got some early data which shows that the various surfaces that you have on there is a better product than Nobel Active?
We don't have a head-to-head study yet, but I can tell you one -- for example, just 1 characteristic of the BLX implant, you can do all indications with the 3.75 millimeter diameter, okay. So Nobel, the smallest-diameter Nobel Active product for all indications is 4.3. It is obviously a clear differentiator. And also if you look at -- and we will actually put more spin on the advantages of BLX compared to Nobel Active when we will go into the full market release. Just understand that at this point in time, we don't want to actually kind of really disclose all the unique selling propositions of BLX. We will do that once we go into the full market release.
Next question comes from the line of Kit Lee from Jefferies.
I have 2 please. Just firstly on the discount implants that you acquired from T-plus. How do you plan to roll out the product? I understand that you probably will go into Taiwan and China first, but do you plan to bring this product to other markets as well? And then my second question is just on your new preventive portfolio. Can you just talk about the rationale of having a separate sales force to sell this rather than just adding the portfolio to your existing sales teams that you have?
On your first question on T-Plus, this so-called 3rd-tier segment, we know now that this is actually a very important part of the total dental implant market. We estimate that roughly 10 million out of the 25 million implants which are sold annually are 3rd-tier implants. And we have now 3 3rd-tier brands available. We have Sinadent, which is our brand for emerging markets. We have Equinox in India, and we have with T-Plus a 3rd-tier brand which -- and the first market we're going to target after Taiwan, where it is already an established brand, is China. Already in China, it's to actually launch that through a network of sub-distributors. So we will actually not sell that directly to dentists in the Chinese market. And we are also looking at other markets in -- especially in Southeast Asia. Many of them, if look at markets like the Indonesias of this world, they are 3rd-tier markets, and we believe that with T-Plus, we have now a solution to go after that potential. On your second question on preventive dentistry, the pilots we do right now, the primary objective of these pilots is to test if the products are successful and have really a market and are actually coping this demand with an unfilled demand by dentists, by general practitioners. That's the purpose of the GP pilots. In Italy, for example, where we are running a pilot, clearly, once we have certainty that the portfolio is delivering what we expect, then we would actually have this portfolio being marketed by our full sales force in Italy. So we would -- in Italy, for example, we will not build up a lone separate sales force just to sell the preventive dentistry range. So today, pilots' purpose is to test are the products delivering, are they actually up to the expectations of the dentist. Once we have that certainty, then we will obviously tailor-make, tailor-structure the go-to-market of that portfolio in the specific geographical regions.
Next question comes from the line of Julien Dormois Exane BNP Paribas.
I have 2. The first one relates to the competitive landscape and whether you have seen any change on that side, I'm referring to the implant side specifically. For example, we know that Danaher has announced that they would be willing to float Nobel Biocare next year. So have you noticed any change in their attitude toward pricing or maybe aggressiveness, I don't know? And the second question just relates to the tough comps you are going to face in Europe in Q4. I think last year in Q4, you had strong sales on the digital side. Does that mean that you still expect double-digit growth in the region in Q4?
Okay. And I take the first question, number one, Peter, you can take the second question. What we see when it comes to the competitive landscape, clearly, it's that the consolidation is continuing to take place. If you look at Henry Schein, they were very active over the last quarters in acquiring value in 3rd-tier companies. They acquired a majority stake in ICX, which is one of the larger players in the German markets, but they also have, for example, an interesting position in the Chinese market. They also acquired Intra-Lock, which is a U.S.-based implant company. They acquired a distributor in the Netherlands. So what we see is that the consolidation in -- especially when it comes to the implants, is actually continuing. On your second question, I would like to hand that over to Peter, on the comps in Europe.
Yes, you are right, Julien, we have a higher comparative base in the last quarter over all and especially also in the EMEA region. Last year, sales were driven, as you rightfully said, by digital equipment. If we see at the year-end such a higher level of digital equipment this year again, that needs to be seen. And we are not issuing a guidance at reaching a level, but as we have increased our outlook, we definitely expect a strong quarter. And the Europe region on average has also always been around 10% or above 10%. So I would not expect a significant change in the pattern in the European region compared to the previous quarters.
Next question comes from the line of Christoph Gretler, Crédit Suisse.
I just wanted to quickly come back to these preventive care initiatives. And actually could you discuss? I mean, you're talking about this CHF 2 billion market, which the products now you have now under contract. How much of that addressable market actually you can reach? And adjacent to it, I mean, how much -- how significant is this initiative now costwise? So if you could give an indication there, that would also be interesting.
The main target of our portfolio -- of the preventive portfolio is obviously caries treatment and periodontitis treatment. And these are the bread and butter kind of treatments in a general practitioner practice. And they are actually making up the majority of the CHF 2 billion potential which we were actually outlining in our presentation. So we believe that we have a rather interesting portfolio when it comes to actually supporting general practitioners with these treatments, caries, again and periodontitis. And the pilots we are running, obviously, these are incremental operating expenses, and they are fully actually considered in the guidance for 2018. Again, what we are trying to find out with these pilots is do these products really deliver, are they really as innovative as we believe, do they have potentially a chance to actually remove traditional treatment methods which are applied by general practitioners? And only once we are sure that the portfolio is actually up to expectations, then as already outlined before, then we would actually go into LMR, limited market release. And then from an LMR into what we normally do, a full market release with actually then the full sales force or it might be that in some specific countries like the U.S., a special sales force selling these products. A side aspect of this whole pilot is also to actually put together a meaningful portfolio to justify in certain countries the costs for setting up a dedicated general practitioner sales force. And so far, we have obviously clear aligners, which is a GP product, we have intraoral scanners, we have tooth replacement solutions. Now with the preventive portfolio, we're adding caries, periodontitis, but we're also, for example, adding other esthetic treatment options like tooth whitening. So all this together might give us the critical mass when it comes to product portfolio to justify in some countries even a dedicated GP-focused sales force. But it's still premature at this point in time to make other statements or more statements related to this initiative.
Okay. Maybe could you also discuss the competitiveness of this particular market segment? To be honest, I'm not too familiar with it. And looking at the company is now -- you got this distribution rights from -- they are not very common household names, so to say. Maybe you could discuss whether that's more a technology-driven market, and maybe that will be helpful as well.
Yes. So when it comes, for example, to caries treatment, today, still the majority of the dentists, they apply the drill-and-fill approach. So even if with white spots or with soft caries, very often they -- actually, they take out the drill and they actually put a hole, and then they fill the hole with filling material. Now we have now product in the portfolio -- in the pilot portfolio, which on one hand allow dentists to actually treat not-yet severe caries without having to drill a hole. It is, for example, this Curodont Repair from Credentis, and that's a clinically proven product. Or we have products in our portfolio that allow the dentist to actually touch how severe is the caries already. So is it really necessary to drill a hole? And then we even have some products, some innovative products in the portfolio, for example, for children, for teenagers who are very afraid of actually going to the dentist and getting a hole drilled. And that product allows to actually soften the enamel of the teeth and to actually like with a spoon to take out the caries. So the whole portfolio is not just a me-too kind of copy of what's already existing. The whole portfolio, and that's also why internally we call it next-generation dentistry, is targeted at actually bringing more modern treatment options to general practitioners. And to your question, who is the competition on that. Interestingly enough, there is no company yet out there marketing to general practitioners a holistic portfolio and holistic approach when it comes to preventive dentistry. And we see this as a potential interesting opportunity for us to jump in to actually take share of this CHF 2 billion market and to position ourselves as really the total solution provider for esthetic dentistry.
Next question is from Carla Bänziger, Vontobel.
My question is around restorative solutions that you now offer for the ceramic implant. Can you maybe quantify a bit how many or what percentage of cases you can now address with the ceramic implants. And the same for BLX, will you launch it the full restorative portfolio? And how does that compare to the launch of BLT at the time?
The ceramic PURE 2-piece implant, if you look at it, it's a parallel-walled tissue level implant. And To be honest, the range of indications you can do with a parallel-walled tissue level implant, it's relatively, I would say, limited. And also if you look at the diameters which are available, so for example, for aesthetic treatments in the aesthetic zone, we don't have a full-fledged ceramic portfolio yet which we could actually really market as something alternative to, for example, our BLT or even our BL portfolio. It's still a relatively limited portfolio, and that's also why we are not, I would say, overwhelmingly kind of bullish that we will take a large part of the dental implant market with this solution. But it's actually, obviously, a step -- a further step in actually building a meaningful ceramic portfolio -- ceramic implant portfolio. With BLX, we are in the limited market release right now, and we have now a limited amount of prosthetic or restorative options with BLX. But in March, when we're going to launch it fully, so when we're going to enter the full market release, BLX will come with a complete and comprehensive portfolio of prosthetic options and classical treatment options, but also fully integrated digital workflows with everything that's needed, including guided surgery. So it will be a much more ample prosthetic portfolio at launch compared to when we launched BLT.
Next question is from Maja Pataki, Kepler Cheuvreux.
I would like to start with the initiative that you've implemented earlier this year in the Nordics and Germany of rolling out the Neodent portfolio and by that just addressing also the value segment through Neodent in the European markets. Can you give us an indication of what you're seeing and how this has changed the sales behavior of dentists, also maybe giving an indication on the online offering that you have? And then my second question would be also surrounding this new initiative that you're taking in the GP market. Of course, it is early days, but could you give us an indication of how your thinking is around margins should that business be successful? Would it be margin dilutive for the group in the long run? Or would it be at par of the current business?
So your first question on the Neodent rollout in Europe, and you specifically mentioned the Nordics and Germany. Germany, very well received, and in Germany, we have the so-called key account manager approach. So we have a dedicated key account managers, and they are carrying all the different implant brands. So not only Straumann, but they also carry Neodent and they carry the Medentika brand. And the results in Germany are extremely encouraging. In the Nordics, we started a little bit later. In the Nordics, we have mainly Neodent, so the Neodent range. And we waited until we have GM available, we didn't want to start with CM range. We waited until we have GM fully available. And also in the Nordics, the first results we are seeing out of countries like, for example, Denmark and Sweden, especially Denmark. Denmark is a market which already a relatively high percentage of nonpremium implants. So over there, the results are rather encouraging. On your second question, as you have seen most of these products are actually trading products, and we will actually add to the range the [indiscernible] Emdogain product in Q1 of next year. This is obviously our own product. It's actually a nonsurgical alternative or a nonsurgical version of the Emdogain, which has been in the market for many, many years. The other products are trading products, but with margins above 50%. And so we are not actually anticipating that the addition of this portfolio will have a negative impact on the margin levels. So we will potentially have to add additional salespeople in certain countries, especially when it comes to the specialist markets. So if you look at the U.K., for example, or the U.S. But in markets like, for example, Italy or other more GP markets, the whole sales force will carry the portfolio. So there, the additional operating expenses will be relatively limited. When it comes to the U.S. and the U.K., just to give you 2 specialty markets, the exciting perspective of this preventive portfolio is that together with now being able to offer clear aligners, being able to offer full digital workflows to general practitioners, we're also working on a 3D printing solution, for example, for dentists. So to be able to offer full digital workflows to general practitioners. We believe that we can actually justify a direct-to-GP sales force in these markets, and that would be really exciting. Because honestly, if you look at the U.S. or other specialist markets, I will say, in the GP segment, and I'm not talking implants necessarily, implant is just kind of a side product. I'm talking here really the bread and butter business of general practitioners, which is caries treatment, which is periodontitis treatment, which is more and more also treatment which is tooth whitening. So that we have a full range available, which allows us to actually penetrate more the attractive and for us, underpenetrated general practitioner segment.
Understood. Just a follow up question. Do you have exclusive rights for those products?
Yes, as long as we -- most of them we have as long obviously as we actually cope with the minimum sales quantities. If we don't sell what we have contractually agreed, then we're going to lose the exclusivity. But that's not what we anticipate, obviously.
The next question is from Veronika Dubajova, Goldman Sachs.
I have 2. The first one is on the impact of BLX that you, Marco, anticipate for next year. Obviously, BLT was a tremendous accelerator in your growth rate. As you think about 2019 and 2020, can you maybe help us think through how we should be thinking about the impact from BLX on either organic growth or absolute revenues? That would be very helpful. My second question is a follow-up question to the preventive dentistry strategy. If I look at some of the other players that compete in the market, the traditional players, they've seen a bit of disruption from sort of online platforms like Amazon. Clearly, your portfolio here is specialized and you do already have an online store for the implant business. But I just wonder if this becomes a bigger part of your strategy, how would you think about online distribution in the GP channel. And is that something that you might entertain?
Now to your first question. We estimate that the market for fully tapered premium implants, and that segment is roughly 2 million units. And so if you look at BLT, BLT is obviously bigger than the target market for apically tapered premium implants. Where actually BLT obviously plays in is roughly 3.6 -- is roughly 4 million. So it's half of the potential which we have able actually to tap into with BLT. However, we believe that now with BLX, we really have something very differentiated. BLT -- honestly, BLT is okay, it's rock solid obviously, and it is, we said, [indiscernible] that differentiates it from the other apically tapered premium implants, but the design itself is nothing really, I would say, earth-shattering. Now with BLX, we believe we have really something also unique from a design point of view and from how the implant works. So if you take the 2 million implants and, let's say, we're going to get 15% share maybe in the first year and then we go to 30% share in that segment in the second year, that would mean 300,000 incremental implants in year 1 and would actually mean another 300,000 in year 2. On your second question on preventive. Yes, obviously, we're also going to sell these products through our e-shop, clearly. The products are innovative, and that means, you need to explain them to the dentist. So it's not just an order of filling material or another drill, these products are really differentiating. There are innovative, and that's why we believe they have to be explained. And also, we don't only want to sell 1 specific product, we want to actually sell a holistic treatment concept, for example, when it comes to treating caries or when it comes to treating periodontitis.
Today's last question is from Daniel Buchta, Vontobel.
Just 1 question remaining from my side. I mean, a bit broader picture, given the uncertainties we see, for example, in Latin America and the moderate impact we have seen on the numbers in Q3 now, is there anything that worries you that 2019 for the organic growth potential might be significantly softer than 2018? Just to check. I don't think so, because you have so many growth initiatives.
Peter, do you want to answer that question?
Well, I think you are right. There are some trends currently that there's a certain insecurity. I mean, in Brazil, we just had the election of last weekend, and I would expect a positive impact on the economy and especially also on the currency exchange rates that we have already seen from the preelection, where the Brazilian real got stronger again. If I look at the fundamental growth story that we have and that the -- all the growth initiatives, be it on the innovative and products with launches that we have presented at the EAO, and be it on the further rollout of the nonpremium business across the different geographical regions and on the buildup of the ortho business and the internationalization of the ortho business across the different regions and the new initiative on the preventive side. There's nothing that worries me that I would not expect a continuation of the growth story also in 2019. But as mentioned earlier, on '19, we will give you more color with the release of our full year results of this year and the issuance of the guidance beginning of next year.
Okay, so in closing, I would like to draw your attention to the Investor Relations calendar and our latest analyst recording, which you can find on Slide 29. To help us improve our service to you, we will be conducting a perception survey in the coming weeks and would very much appreciate your feedback. But for now, I wish you a good day, and we look forward to meeting you at one of our upcoming Investor Relations event. Thank you, and have a good day.
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