Q3 2025 Coloplast AS Earnings Call
Good morning, ladies and gentlemen, and welcome to Coloplast's interim financial statements for the first 9 months of 2025.
My name is Yousef, the cars call operator. I would like to remind you that all participants will be in listen-only mode, and that this conference will be recorded. The presentation will be followed by a question and answer session. To ask a question, you can press star and 1 on your telephone at any time. For operator assistance, please press star and then zero. The conference will not be recorded for publication or for broadcast at this time. It's my pleasure to hand over to Lars Rasmussen, Interim CEO. Please go ahead.
Good morning, and welcome to our Q3 2025 Coloplast A/S Earnings Call.
And I'm joined by CFO.
And our investor relations team.
We will start with a short presentation by myself and then open up for questions.
These 2 slides.
It has now been 3 months since I took over as CEO of Century and 5 Focus. During this period, I have been focused on continuing the work of preparing the new car insurance.
With our new strategy, we are reinvigorating our focus on delivering the best customer experience by putting the customer at the center of everything we do.
This also means delivering a step change in innovation to certify our position as the innovation leader in our industry.
I firmly believe our new strategy will create value for all of us here: stakeholders.
Customers, shareholders, and partners, I look forward to sharing.
More at our camps and markets, day on the 2nd of September.
To support the successful execution of the new corporate strategy and to assist with our insights, we have decided to organize ourselves differently with a number of changes to the executive leadership team, effective immediately.
Going forward, our professional organization will be divided into two business units: Chronic Care and Acute Care.
This structure allows us to respect the differences in market dynamics.
Katherine needs and patient partners.
As part of chronic care, we are establishing a new chronic care commercial organization and the new chronic care R&D function.
The Chronic care commercial organization. Combines our a constant
And voice and responsibility care teams and commercial organizations under one leader, as these businesses share the same market and customer dynamics.
Currently Executive VP of Voice and Respiratory Care, with a step into the role of Executive Vice President of Chronic Care Conversion.
We are establishing the standalone, chronic care, and deaf functions with the goal of creating a step change. Within innovation, bringing new products faster to the market and building further ID commentators are competencies that will strengthen the core of flexibility.
To drive value from our products, the leader of the new Chronic Care ID organization would be our last produced, who will return Code of Life in November.
And we will be part of the EOT in regards to the CEO.
The Acute Care area includes interventional neurology, advanced food, dressings, and choices.
These treatment areas are characterized by premium products like the Coloplast penile implants, the corrective skin portfolio, and our home dressings.
Most of the products and technologies in these businesses are used in the hospital setting or specialized private clinics, where innovation and clinical outcomes are critical.
Effectively, we are emerging advanced wound dressings and C to a new owner, tissue repair organization that is acute care.
The goal is to become an innovation leader in this area to create a strong global footprint by merging these two complementary businesses and ultimately transform the business into a stronger value equation. Contribute to the group.
More than a teacher repair would be left by Executive Vice President. Some of the reports of the company could be part of the years.
There are no changes to the intervention; you already have a business, which will continue under the leadership of the Executive Vice President, Tommy Jobs.
I'd like to congratulate Caroline and, last but not least, on the new roles. I'd also like to thank Nick, who led the quarterly class, for his dedication and contribution to the company over many years.
And finally, I'd also like to mention that the search for Courtice NewCo is progressing with them and remains on track.
Please translate.
We delivered 7% organic growth and a reported EBIT before special items of 28% in our third quarter, as expected.
Adjusted return on this camp, and after tax and before special items, was 15 last year.
Before we look at the details of the forwards, let me speak to two significant proposals that were made over the summer by the U.S. Centers for Medicare and Medicaid Services. Please turn to slide number 5.
The first proposed rule announced on the 30th of June is related to our chronic care business in the U.S., where CMS proposed medical equipment such as a metry, a try to ask me, and neurotic supplies.
Should be included in the list of items that CMS may subject to complexity.
This means that the catboys can be considered to be eligible for.
To getting, but it does not necessarily mean that they will be subject to compensation.
Besides our tools and U.S. calling care businesses around services of group sales, we are primarily present in the market as a manufacturer.
Given the complexity of the matter and the U.S. market, we are unable to provide an estimation of potential financial impact at this point in time.
If the competitive bidding is implemented, we expect potential financial impact in 2027 and.
The second proposed rule, announced on the 14th of July, is related to skin substitutes.
The CMS has proposed a fixed payment of $125 per square centimeter to be applied to all skin substitutes in 2026. In the outpatient setting, around 20% of total car sales are derived from this outpatient setting and are covered by Medicare.
The cases currently have 2 product brands in the outpatient setting: Margin and Shield, with an average price of $110 per person.
We perceive this change as positive for both calculations and for the patients, and we welcome the A500 resources to increase the quality of care for We Care patients and Mid Care recipients, along with institutions.
Both policies are currently in the commenting period, and we expect an update on both.
To be published in late 2025,
And now, let's take a closer look at today's results. Please turn to slide number 6.
Our Q3 performance was driven by broad-based growth that enhances our chronic care businesses. This, I'm very satisfied with.
On the other hand, our advanced board care business spend, short of expectation, was impacted by preventive and voluntary product returns in the Chinese food dressing business, as well as a core with lower than expected growth for Asus with our call more.
Let's look at the performance by business areas. In Austin, we achieved organic growth of 6%. For the first time, months are growing in DayZ corner at 5%.
In Q3, organic growth is at 6%, while growth in Dennis' corner is at 2%.
On our social view of food, it continues to be the main growth driver, followed by the Brava supporting products.
And, as well as the portfolio, we will continue to see solid growth in emerging markets.
From a geographical perspective, growth in the quarter was.
The UK, Germany and Italy.
Where where the main contributors?
The U.S. continued its solid momentum into Street.
Contribution from American markets, excluding China, improved in the quarter, driven by an increase in the level of activity.
And China posted low single-digit growth in line with expertise.
It is constant care. Organic growth was 8% for the first time in months while growing over 6%.
The organic growth for Q3 was 8%, driven by growth in the data corners. The growth in dates corner was 3%.
Growth in the corner was driven by the male due to which performs strongly across the key European markets.
The launch of L for women concluded. The difference and the product also performed well and contributed to growth.
Speedy care, our previous generation of candidates, also contributed to growth driven primarily by the Emerging Markets region.
Our power care business also made a solid contribution to Google growth driven by Purity. Plus, in Europe, while collecting devices, it made a modest contribution to growth.
From a geographical perspective, recent contributions to growth markets where reimbursement has been recently established or improved, such as polling, continue to perform well and grow in double digits.
In response to our care, posted 9% mechanical growth. For the first time, months will grow in dangerous corners of also 9% in Q3. Organic growth was 9%, while growth in Danish corners was 8%.
Growth in land dictionary. The increase was propagated and driven by an increase in the number of patients served in existing and new markets, as well as an increase in patient value created by the Provox Life portfolio.
A growth in triglycerides in Q3 was high, with single-digit increases, driven by continuous solid demand. From a geographical perspective, recent contributions to growth were noted.
Driven by Europe and in the West.
Care organic growth was 9% for the first 9 months and grows in the data score of those negative 1% impacted by the investment in the Skin Care business in December.
823 of any goals or focusing, and goes the Danish phone number is negative, minus 8%.
Was the main growth contributor in advance, okay? With growth of 26% in the first-time launch.
Is the 70% growth impacted by a slowdown in the outpatient setting at the end of the core?
Let's slow down. This was a consequence of the FCD delay allowed in mid-April, which caused a market shift to high price.
The inpatient setting continued to deliver solid growth and was the main contributor in Q3.
We expect the growth momentum in cases to improve into Q4, following the shift in the market to 823, and we had a good start to the quarter in line.
Operating profit margin, excluding PPM or cations, was 12% in the first 9 months and 13% in Q3.
The advancement of the pricing business grew 1% organically in the first 9 months of 2023. The business posted negative 2% growth, impacted by a preventative and voluntary product recall in China.
We have to check the significantly composed.
During the quarter, we decided to initiate a product return of all biotin adhesive foam brushings in China.
Following a sampling inspection by the authorities on the 3L class, which found that the products do not need a local technical requirement.
The safety of the product is not compromised, and the product.
Uh, we will continue to comply with the technical standards as well. The negative impact from this product return was around 20 minutes corner in the third quarter.
and we expect an additional impact of around 60 million days corner into
Our European dressing business was up against a high baseline due to the timing of, for us, in Germany last year and provided limited offers to the impact of the product return.
In Q3, the organic growth rate was 1% for the first nine months. The growth in Data Corner was also 1%, while organic growth was 4%. Reported growth in Things Corner was 1%.
Growth in Q3 was driven by good momentum in the U.S. Men's Health business.
Also contributes to growth driven by improved momentum and lower baseline loss.
The Better Health and Surgery segments continue to detract from growth with a large, 10 million days' worth of corn and a negative impact in the corner.
The segment is showing early signs of recall recovery across key accounts. However, the timeline for food recovery remains uncertain.
The U.S. was the main gross contributor in Q3, while Europe was distracted by those two product recalls.
Before I hand over to take us through the financials, I would like to provide a brief update on the status of the clinical starting point for interior.
The 12 months, the patient follow up, which is required by FDA for our pre-market approval. Submission is completed, and we now continue preparing for the to see for the FDA submission.
The launch of Inia is expected to be in the first half of the next G period, with exact timing dependent on receiving clearance from the DSP. Over to you as well. Please turn to slide number 7.
Thank you, L, and good morning, everyone. Report: Revenue for the first 9 months increased by 836 million DKK, or 4%. Compared to last year, organic growth contributed 1.3 billion DKK, or around 7%, to reported revenue.
Revenue from diverse operations, mostly related to the diverse skin care business in December 2024.
Reduced reported revenue by $237 million, or around 1%.
For exchange rates, we had a negative impact of 252 million Danish kroner on reported revenue, or around 1%. This was mainly related to the depreciation of the US dollar and a basket of emerging market currencies against the Danish krone.
Please turn to slide 8.
Gross profit for the first 9 months amounted to 14.2 billion Danish kroner, corresponding to a gross margin of 68%. Last year, the gross margin was positively impacted by favorable developments in cost prices, increases in country and product links, and by Rambo costs. At our manufacturing sites in Costa Rica and elsewhere, this progress is evident.
The gross margin also includes a small negative impact on currencies of around 10 basis points.
Over the expenses for the first 9 months amounted to $8.5 billion, D corner at a 4% increase from last year.
The distribution to sales rate for the first 9 months was a 33% of the power of last year.
The increasing distribution cost was driven by continued commercial investments in cases and higher sales activities across markets.
The distribution costs. Also include around 30 million Danish Corner HR and area cost related to the new Distribution Center in the US in the first half of the year.
The admin to sales ratio for the first nine months is 4% compared to 5% last year and includes a positive impact from a high baseline in the first half of the year, as well as the benefit from cities from the asset's medical integration.
The R&D to sales ratio for the first nine months was 3% of sales, compared to last year.
Overall, this resulted in an operating profit before special items of $5.7 billion in the first 9 months, reflecting a 4% increase compared to last year.
David Martin before specializes in the period was 27% on par with last year.
David Mark, in the first 9 months, continues to include a negative impact of around 100 basis points. This includes the effects of carousels, PPA, and multi costs in line with expectations, as well as around 30 basis points in benefits from the divestment of the skin care business.
Currently, we had a small negative impact on the reported EBIT margin of around 10 basis points in the first 9 months.
Financial items in the first 9 months were at a net expense of 875 million Danish kroner, compared to a net expense of 621 million Danish kroner last year.
The increase in net financial expenses was most driven by the non-cash impact from losses and balance sheet items in Q3.
Primarily related to the depreciation of the U.S. dollar against the Danish krone.
The ordinary tax expense in the first nine months was 1 billion Danish kroner, with an ordinary tax rate of 22% on half of last year.
The tax expense in the first nine months was $1.8 billion in each quarter, impacted by the transfer of the carouse's intellectual property from Iceland to Denmark.
As a result of the actual electronic tax expense, the effective tax rate in the first nine months amounted to 40%.
Talk to you.
Impacted by the higher level of net financial expenses.
Adjusted diluted earnings per share before special items decreased by 1% to $16.76.
Please turn to slide number 9.
Operating a cash flow for the first 9 months with an inflow of DKK 4.4 billion compared to an inflow of DKK 718 million last year.
Impacted by the tax payment related to the address of the medical installation property transfer.
The underlying development in operating cash flow was positive, driven mostly by lower income tax paid and an increase in operating costs.
Cash flow from investing activities was an outflow of DKK 861 million compared to an outflow of DKK 94 million last year.
Capex in the first nine months is 5% of sales, compared to 4% last year.
As a result, the free cash flow for the first 9 months was an inflow of DKK 3.5 billion compared to an outflow of DKK 186 million last year.
Excluding the positive impact from the Skin Care divers and the link to the impact on the tax payment related to the access medical IP transfer last year, the adjusted free cash flow for the first 9 months was $3.3 billion in each quarter, representing a 44% increase compared to the adjusted free cash flow from last year.
The trading 12-month cash conversion was 83%, while the free cash flow to sales ratio was 16%.
Networking capital amounted to around 26% of sales, impacted primarily by decreasing trade payables.
Now, let's look at the financial guidance for the year. Please turn to slide number 10.
We continue to expect organic revenue growth for the year to be around 7%, with the following updated assumptions.
In advance to A, it seems to have now included the negative impact from the product return in China.
This will have a total impact of around 80 million Danish kroner in the year, with 60 million Danish kroner in Q4.
We expect this negative impact to be upset by good performance in the other businesses business areas. In Q4 we expect a pick up in momentum in our chronic care businesses into Q4 supported by Emerging Markets to send that facing.
As already mentioned, the global momentum is for courses in for is also expected to pick up.
Finally, in adventure reality, we continue to expect a flattish growth rate for the year will continue with certainty in the recovery of the bladder health and surgery business.
Makes the reporter revenue growth in Danish kroner is now expected to be between 3% and 4%, from previously around 4%. Reported revenue growth continues to assume around 2 percentage points negative impact from currencies.
And around 1%, 1 and a half percent, this points to a negative impact on the skin care benefits.
Debit and marketing before special items is still expected to be 27% to 28%, and the assumptions laid out in May. And lastly, nothing has changed.
We expect a strong end to the year, in terms of if it matches.
Enabled by prudent management of Opex and scale effects.
Currencies are expected to have around a neutral impact on the event market.
For 2025, I still expect around 4 and 50 million Danish kroner. Special items in Q4 will include a significant level of special items, partly related to organizational restructuring in China and cost optimization across the internet throughout the business.
Both of which have a positive impact on the possibility and value creation beyond this financial.
Expenses for 2025 are now expected to be around minus $950 million, impacting the media in US dollars for Q3.
To be part of seniors and recent improvements.
In Q3 2025, there are no changes to the assumptions of the ordinary effective tax rate on cabins.
On networking capital.
I now expect an important capital ratio to be around 25%, impacted by the lower level of absolute sales. Our long-term expectations of around 24% are unchanged.
Finally, a brief update on tariffs. Our products in the chronic care categories continue to be accepted from tariffs, and as such, the financial impact on Coloplast is still expected to be immaterial.
Thank you very much, operator. We are now ready to take questions.
Phone. You will hear a sound to confirm that. You have entered the queue. If you wish to remove yourself from the question queue, you may press star and then 2. Questioners on the phone are requested to disable loudspeaker mode while asking a question. In the interest of time, please limit yourself to 2 questions. Anyone who has a question may press star 1 at this time. Our first question comes from Hassan Alwa, Barclays. Please go ahead.
Good morning, and thank you for taking my questions. I have 3 please. Uh, firstly, last, uh, we've seen a couple of impactful, uh, product recalls lately, as well as execution issues, which you've talked about and are addressing. Can you talk about some of the proactive steps? Uh, you are taking on product quality to prevent some of these recalls from recurring? Should we expect to hear more, uh, about recalls as part of any Deep dive exercise? Uh, secondly related to this. What are your expectations on recovering loss sales? Given the recent experience with the recall in bladder health. Where European hospitals sourced Chinese Alternatives. Do you see a similar risk here in China for biotin adhesive and then thirdly on IU, uh, you noted that bladder health and surgery. Showing some early signs of recovery across key accounts. Do you expect this better than expected performance? Uh, in IU for fy2, given the better year to date performance versus guidance.
Um, and if you could also talk about the improvement in women's health and whether you view this as a stabilization or recovery in the slings business. I'm really trying to get a sense of your thoughts for 2026 for interventional neurology. Thank you.
so, I will take your first question, Hassan and, and I asked will take will take the the 2 other
So, um, I think that the situation we have with the recall of the Euro, your logical products, where we had reached the stabilization barrier.
Was, you know?
Something that everybody who has been in this business for some years has faced in some shape or form. Now this was a pretty big one, of course, for you already, and therefore it was also so noticeable.
uh, but
But what what we experience in China is something that we've never tried before, and, and there's actually no comparison between the 2 because we have no, um, we have no customer complaints on the the the the, the the buying from products.
um,
The, the products works perfectly fine. Uh, we uh we we observe no changes to what we normally see, uh, but this is a special technical
Uh, specification for China that only exists in China. Uh, and to top it off, uh, then if, uh, the authorities find, they take a batch and, and then they take a sample from the best. If they find something up against this specification that doesn't, uh, match, then, uh, we, we, we will get a fine on top of that, uh, which, uh, you know, factors bigger than the value of the, of what they take out. Uh, so, so we don't remove it from the market because there are any quality issues. But there is a specification, which
It is super special that we cannot live up to, uh, and, uh, and, and we, I mean, of course, we have opened the discussions with, uh, with, with, with the market about this because there are absolutely no safety concerns, uh, but, um, but this is just a very slow-moving train. We have also issued, um, you know, access uh, uh,
Sort of said, you know, we we try to get access for our new products or for for substitute products to the market which is also just moving very slowly. So so I think that this is something that does have an effect both this year and next year on on wound care uh because of the character of how this works. Uh I think this is what you can.
Uh, expect in the current market environment, unfortunately. But it has absolutely nothing to do with the quality.
Yeah um so then in relation to your uh Urology uh question yes we had a good cue Q3 and with pops and growth really driven by a good growth within Men's Health, Women's Health and to some extent also early recovery within the bladder health.
We continue to expect the men and women's self, uh, with good growth rates into Q4. However, we still have some uncertainty in terms of the recovery after the recall we did in May back in December.
Uh, of course, we continue to expect, uh, men's and women's health at the current, uh, rates. And then we will be up against the EC baseline, especially from Q2 due to the recall. And so, we are expecting that our IU business will pick up in terms of growth into 2025-2026.
Perfect, thank you.
Our next question comes from Martin Parkway and CB. Please go ahead.
Yes. Uh, Martin PA yesterday and I will limit myself to 2 questions. So I also have time. Um, just an antibiotic can you maybe elaborate a little bit of that? Now you're filing. We will not get any results. Um, uh, right now. So, so how comfortable are you with the, with the regulatory acceptance? Uh, of the, of the product and then, secondly, uh, lhasa, of course, appreciate that the, that 2 weeks from now. So you will come with a new long-term targets, but, um, but if you just can, you know, broad base looked at the 2 devices here that I made at The Chronic care business and the, uh, acute care. Chronic care, very stable growth. Uh, highly predictable, acute care should be that.
You know, I see that as a little bit more of organic roller coaster growth with very different growth grades. So how do you see the growth trajectory for these two business users with respect to stability?
So Martin, let me uh start with the tibia update. Um so so as we just mentioned uh, we are on plan and we are still very comfortable that we are are getting the through the FTA process in in the US. And we still expect that we able to, to launch the solution in the first part of the, the next 2 Tik process.
So, overall, we are, uh, on plan with the in-tibia, uh, launched.
And last. Yeah, so, uh, so on the, um,
On, on the question that you have on, on, on chronic and and on acute care. Uh, so, uh, so, um,
There is a reason why we divided the company into 2 business owners. Now, uh, first we have, uh, we have the size and scale now, uh, for the 2 parts of the business, uh, for them to, in the sense, have the overall goal. So we will have, uh, we will have chronic care with approximately 20 billion.
Annual sales and then, um, and then the acute care with approximately $8 billion.
Uh, we recognize that we have done that for many years. There is...
There is a distinct difference in the market environment, whether you are in chronic care or you are in acute care.
and chronic care is in
In the nature, of course, significantly. More chronic and stable, um, uh, than than what we see on on the other side. Uh, so, so that's no change to what it was beforehand.
Uh, but what we, um
What we try to do with this move is that we also, um, we are also giving.
things that are not going to care inside of cult a home where they, they have some that I liked them and where we give freedom to operate in a different way than that had. If, or when they have been part of The Chronic Care Organization. So, so, so so now we finally have the size to do that. Uh, and with that, we, we also have a leader that can take a big part of of that organization and, uh, and put some Innovation is into it because, uh, this is a market where we are even more dependent on Innovation than than non chronic care side because of, of the type of the business that it is, is so, so, so the core of your question is, uh, or to the core of your question? Yes. Uh, the acute care is different and more volatile and that's expressed on
Culture was just a movement that we saw this quarter on.
On anti-racist. And where we, as we also said for July, it just saw a pick-up immediately. So, so, so. So it's two different parts of our business.
Our next question comes from Graham Doyle, UBS. Please go ahead.
Off the setting to go to higher price products. Um, and then the second point is strength competitive bidding. Um, you can just a little bit more color on what is US chronic in theory. But is is it possible to to sort of split out of that? 12% of sales, what's Medicare? And maybe even what's Medicare Advantage should just to get a little bit of color therapy. Fantastic, thank you.
Um, thanks a lot. The grand. Let me take the first, uh, question in relation to curses.
So, in Q3, we saw some...
Pretty specific Dynamics, especially towards the end of, of the, of the quarter. Uh, as you know, the LCD, uh, that was previously announced was again, uh, delayed and we saw towards the end of the quarter that some high price products, re-entered, uh, the market and that had some impact on, on our sales, especially, uh, in in June
Um, we see those as a one-off, and we already saw a bounce back in our growth in July.
So, we are expecting that our Care sales in Q4 will be better than in Q3 due to these bounce backs.
In terms of the whole re reimbursement, um as you have noticed and that we also set the earlier, um there has been a a a new skin substitute price.
Communicated over the summer, and that is now being discussed. We are putting our inputs into this.
And we expect it will be implemented from from January the 26th um combined with the new coverage policy, the LCD policy as well. So there is quite a few of the moving Parts. Um
Hacking the, the curses sales.
And on your second question. So I'm actually there's a little bit, your, your, your line is a little bit blurred. So, um, so so, so what I think that I picked up was that, that you wanted to comment on the, uh, on the proposal for competitive bidding. For, for the, for the chronic part of the business. Uh, and, um,
and as as we also said that the presentation is hard for us to give an estimation of the impact of it right now, but but um,
But, but at least we think that, um,
That, at least, we think that when we look at the ability to do competitive bidding as someone in a product area, for example, like Austin Kerr, um, you would tend to think that if you do competitive bidding, it's because the product, uh,
Range would be something which is close to generic. Uh, and, uh, what we have learned over the years is that, uh, that is the absolute contrary when we talk about, uh,
Uh, the Austri care products we have more than 2,000 different SKUs on the base level inside of us. We care because it's so specialized.
So we think that if you want to make a competitive building on this and force people over on something, which is different than what they use today, you're going to spend multiple factors of what you spend today with other health care professionals that are trying to help this out afterwards. But, of course, this is also something to the negotiations that will go on if that becomes.
But, but it doesn't seem like a lot of logical steps.
Something to do with competitive bidding. That's not the same as it doesn't happen, but we were just wondering, you know, how would that play out?
Thank you, apologies. My line might have been been included just of the the 12th in in in the the release that you said, 12% of sales. Uh, is US chronic care, which in theory could be.
Roughly broader captured by this just of that 12. Do you know how much is Medicare? I appreciate it may not be very clear.
So, okay, in our estimation, it is quite difficult to estimate because most of our revenue is part of our manufacturing business. But a high-level estimate is around 50%.
Thank you very much.
Our next question comes from Jack Reynolds, at RBC Capital Markets. Please go ahead.
The recruitment process has been underway, and we now have a new, more permanent CEO in place. Thank you.
Uh, so on the R&D changes, um first, um
Innovation matters in in a market like ours and and you, you just see it whenever you, you bring relevance Innovation to the market. You also see more or less immediately on on the growth numbers. So so that that's never going out of fashion.
Um, we, uh, we want to, uh, to have an even stronger pipeline. That's also why we elevate this to the, um.
To the executive leadership team, but there's another reason for it. And, and that also is that, uh, that as we move into the next 20 period, uh, we, um, we are also super focused on our bottom line and slowed out that the closer collaboration we have between R&D and uh, and, and
Our manufacturing part. We we, or we need a we need a as close as possible, uh, collaboration between those 2 parties, to also make sure that on top of being a super Innovative product to the customers that we also, uh, develop
The products in a way where we are able to derive maximum value from them when it comes to both cross margin. But also, what is the cost of establishing manufacturing for them, and so on? And that's the step change that we want to pursue. Uh, and that is why it becomes part of the executive leadership team, so that we make sure it doesn't become a silo office.
All on a CEO search first. Uh, we expect, uh, we we, we are searching for a CO externally. That's why we have a search uh, secondly, uh, we have a search company, conducting the search. Um,
Uh, Coloplast is the largest, uh, medical device company. So, so, so there's definitely uh, post attention and interest for the position.
Uh, it is a global search that we are conducting, so it takes time to speak to the different, uh, people who are on the short list. Uh, and that is when we say it's progressing and explain that is, we have the interest that we expected and and more more. So, uh, we have a, a very good candidates that, that are in process, uh, but it takes the time it takes to, um, uh, to get to a handshake. And, uh, and what the time is, it's super hard to, uh, to put a fixed deadline on, uh, because you, you know, how it is. You know, you have somebody who is, is ready to take a position, or you have somebody who is in
Competitive alignment where they need to go on a garden. Leave that, of course, all would put different timelines on this, and we are not at a point in time where I can democracy than this.
That's great. Thank you.
Our next question comes from Aish and Morgan Stanley. Please go ahead.
Good morning. Thanks for taking my questions. I have 2 as well. Um, the first one is on carousels. If I assume your outpatient segments didn't decline, so let's say flattish for the quarter, it would imply your inpatient segment grew 20% or so, which is below your midterm target of 30%.
Is this consistent with your expectations, or was there a slowdown in demand in the inpatient setting as well?
Uh, second question on the competitive bidding program. I appreciate the complexity in estimating that impact for you, but do you at least share your competitor's view that this would largely be negative for a distributor, not manufacturers, and that the pricing reductions could be in the range of 30%?
Thank you.
So, uh, thanks a lot for your questions. In terms of chaos, is...
Uh, in the outpatient setting, as, as I mentioned earlier, um, we had, um, and negative growth in, in the, in the, in the Q3. But the underlying uh on the inpatient was positive.
In terms of the competitive bidding.
Can you just repeat that?
Yeah, so just appreciate the complexity and estimating, you know, because you didn't provide guidance as to how this would impact your sales or earnings for 2026 or 2027 when you expected to be implemented.
But do you at least share your competitor's view? That this would be largely negative for distributors and that the pricing reductions could be in the range of 30%?
Around. Uh, the 12% are impacting around 12% of group Revenue. I said earlier, that the Medicare, um, percentage of our total sales in the US is around 50%. It is super difficult for us to estimate. What, what is going to be the price?
And now we're moving into the hearing process, and that is going on for some time. We expect a conclusion during autumn.
Uh, we are expecting that if there will be an impact, it will be from the 27th and onwards.
Our next question comes from Anil Verma, JP Morgan. Please go ahead.
Hi, good morning, 2 questions from me, as well, please. Um, the first 1 is just some characters again. Do you expect the LCD to still go ahead? Um, or is it likely that the payment proposals take over? So essentially, is it an either or scenario or do we expect both the LCD and the new pricing to go through if it is an either or scenario, how would your assumptions change next year for carouses given competitive products? May still remain on the market obviously at a lower price. Um and then the second question is um around your full year Top Line guide which has been reiterated despite the headwinds and wound care. And as I appreciate you briefly touched upon the potential offsets and other parts of the business, but could I please push you on some more granular?
On where you expect the business will perform better than expected in Q4 versus your assumptions at Q2, and the guidance was set.
The first 1, then.
Case is.
We cannot assume anything else than the OCD moves on, and that would be from 1st of January. That is what we know at this point in time.
It's a pretty visible.
You know, what is going on in the market? So, you can find some of the data in there. And what we could see was that, uh, you know, here in...
In June, when the the LCD was was announced, it should be postponed. We saw that 40 computers as they came back in. Uh, so so that also means that that that we would expect that as we as the SD is enforced from
From the first of January that the high number of of competitors. They are then leaving the area again because if, you know, there are there, there are dressings that are so much higher price than than what, what is the current suggestion? And we also know that some of the competitors, they will have the cost prices that are higher than the current or the new reimbursement price would be. So, in that sense we have we have a pretty good idea that the that that there will be uh more wounds per player. Uh but but of course everything everything is, the proof is in the booting. Are we also then able to to pick our fair? Share of that up. Uh that's uh that's that's of course to be seen
And in relation to your second question, the full year, slash Q4 assumptions. Yes, we are expecting a strong Q4 across our chronic business, driven especially by emerging markets and the tenders we have talked about all year that are coming through. We also expect the continued impact from innovation, especially here in Europe.
And we expect, as I said earlier, stronger growth in Q4, better than Q3. That is then offset by the China product return, as we talked about. So we are expecting the full year growth to be around the guidance of 7%.
Perfect. Thank you very much. That's clear.
Our next question comes from Maya. Stephanie Pocky, please go ahead.
Yes. Good morning. Thank you very much for taking my questions. Um, I would like to start with the reorganization of the business and large, specifically getting back to the R&D— the establishment of an R&D organization within chronic care.
based on what you said earlier to the question, um, I'm wondering is it, you know, is it that you want products faster in the market, or do you want to have product in the market that are
um, that are profitable because
If we look back to the previous, uh,
Um, any color on that would be very helpful. Uh, and then under, also with regards to the guidance.
Um, you have reiterated the guidance on organic growth and on FX and the impact on skin care.
And maybe that's very tedious to ask. But your Danish Corona growth has moved from 4% to 3% to 4%. Is it the uncertainty on the organic side of the business, or is it more a question of FX impact? Thank you.
So, uh, my the, the the, the reason for, or the expectations, the targets that we, that we are putting on on R&D is actually be asked more. So, yes, we want to, uh, to get new products faster to the market.
Uh, and uh, as you know, there's been a whole reset of the quality management system over the last many years. So, so, so the nets have gone up. So, so, so we.
We would take a step back and look at the way that we are organizing our product developments so that we can get products to the market.
That's the one thing. The second thing is that we, um, that we also think that there is an opportunity to get more value out of the products that we are having in the market. And that goes both for gross margin but also for the capex that you need to put into establishing manufacturing for new products for the market. So those.
Articles. That's, that's the whole reason for for this change. Uh, it is a step up of you could say the technological ambition in the company, uh, in this strategic period. As we are also stepping up our ambition on on what, what should the customers experience when they when they uh, uh, having business with coloplast? But but it's uh it's very evident of course that
Innovation is a major growth driver in, uh, in all medical devices companies. So it's, uh, it's the next level that we are that we are after here.
And Maya, in relation to your second question, it's, uh, it's FX.
So, it's specifically the U.S. dollar that has impacted us to guide. Now, 3% to 4% reported growth.
Thank you.
Our next question comes from Martin Bruno. Not there. Please go ahead.
Thank you for taking my questions. I have uh 2 questions please. The first 1 is on the reorganization of the uh, of The Chronic care and the dedicated R&D to Chronic care which I guess makes sense given the limited, uh, successful launches in, in recent years, could you maybe
Uh, help us understand. Uh, first of all, will you provide an updated pipeline, uh, on on, on the CMD, um, to, to help us with the building blocks on, on, where you see, uh, improvements, uh, on the R&D side in chronic care. And can you maybe also, now you are making the announcement of a new head of R&D in in, chronic care. What will be the first area to look at, uh, whether it's AIS, medical ottimo or or continent care, where do you see the most potential? Um, that's the first question. And then, I'll, I'll take the 1 after that second, 1, after that.
And cancel Market day. Um,
so,
We are in the process of launching Luta. That is what is driving the very nice course that we have on the Coasters here. We also have the Black Back, and since you're new with the 2-piece coupling in the market now.
uh, which means that
we have so much to work with right now, uh, in in the first period of this of this strategic period. Uh, and uh, so so there I'm
I am very optimistic about the growth for the two big businesses in Coloplast.
What we talk about with the R&D reorg.
is that we we, um,
We think that there are more opportunities is when we look into the the speed to markets, which is super important year or year going forward. Uh and we uh as also said to Maya and I think 1 time earlier that we think that we can we can definitely drive more value out of what we have. Uh, and if you look at the at our
And I just want to be releasing here. So that's the whole work, but it's not like we have something which is broken.
It is something that works really well, and we want to take it one notch off.
That's very clear again. Then then just a second question, which would also be on on caresses. Um, it's it's mainly on also on the, on the rear, uh, because I think that the philosophy earlier was to, to keep caresses separate from, uh, the the what you could maybe call the Legacy business. Uh, and and that would be no synergies between the 2 at least in in the short term. So what has driven the change behind this? Uh, and what does it mean in in, in terms of consolidating, uh, the the, the the organization to see a redundancy uh in in in the organization? Uh, and are we going to see fewer employees to, to drive each sale, uh, from from here on? And can you maybe just, you know, there's been so many news out on on caresses. Also, the price cap was probably not a part of the the the business, uh, case in the beginning, do you still think that the case of caresses is intact is, is it still the same in your view or or has that actually been any changes to the structure?
The case of the addresses.
I I think that we can all agree that this is a very Dynamic markets, uh, and and, you know, just just within the, the the last quarter that has been, you know, several news on on how this is going to be reimbursed.
I must say that, uh, that if they play out like they are being, uh,
Told to us, now this is positive.
Uh, because uh, this gives more people access to much better treatment at a, in a much more affordable way. And actually it, it also turns out that the, that, that for us, there is an upside on the prices for this. So, so there will be fewer competitors. And, uh, and there will be for us, uh, better prices, you know, that is positive.
It is, uh, it's, um,
You know what? Why do we do this reorg? So.
so, um,
We just have to admit that the first time and the team that he has created, it's kind of...
almost like a force of nature when it comes to innovating this, they are so super Innovative. And, and uh, and we we haven't, we simply have don't have that level of innovation as in our current boot camp business. Uh, so the the uh, sort of
The expected sort of robotic factor of that is something that we would like to have.
Uh, it's also very important to say that, uh, the first time, who is now the new EVP for this.
He is a very energetic person. So he also, since day one, has asked us.
Can I do more? Uh, and, uh, of course, uh, we think that this...
This is just a happy marriage of Satan's ambition and also a need for our current business.
We are super aware, of course, that there's a big difference between.
Normal Bank addressing and, and, and biologic dressings. And and that will also be reflected in the organization on. Uh, but but of course it's a major step of also for some, in a, in a big organization. Uh, so so he gets significantly more resources toward the and he has ever tried before in his current position. Uh but um
What we think is, uh, this is a very, uh,
Uh, very, very positive story and most times when, uh, companies are being smaller, companies are being acquired by bigger companies. You will see that the, uh, the founder of the small company will leave the, uh, the, the, the new company in frustration, because it's hard to work together and they can get it their way. And so on, this is a super nice collaboration.
And we are going from this. So I see that's all upside.
And then our focus is on delivering the business case of a growth of 30% over 3 years and improving the EBIT margin for courses before. I'm noticing that the 20% is still intact. We are still focusing on delivering those numbers.
Makes sense. Thank you so much for answering my questions.
Question comes from Veronica, Dubai city.
Go ahead.
I'm an R&D reorganization spent reorganization, just curious whether we should expect this to drive the higher growth in R&D spending going forward. And just maybe a conceptual question. I mean, I think the old coal fast often used to spend between 4, sometimes even, you know, let's say around 4% of sales. This has come down a lot to around 3%. Now, just curious if you think this level of spend is appropriate as you look at the next strategic period. I appreciate the business has changed in terms of composition, but if you can maybe talk through that, that would be helpful. Um, and then my second question is just to follow up on the impact in China. Um, I just want to understand whether the $60 million is the quarterly revenue run rate, is it more or less? And I guess the largest has sort of said you expect us to be a headwind also for fiscal '26. So should we take the $60 million that you're going for in the fourth quarter and multiply that by 2, by 3 for next year? Kind of what's the sort of thing that you should be plugging into our model for that? Thank you, guys.
So, thank you very much. You were the lucky one because you got the last questions. India, so this is for this, but, um, so on R&D.
I would now reiterate what I think has been said many times, and I know that I've said it myself many times: we don't have a fixed number on what we want to spend on R&D. We don't put a part of gold on the table and then invite people to see how they can spend it. We go the other way around.
So uh so we challenged the organization to bring us more growth, more profitable growth. Uh and if we can find very good business cases in this, this is what we, uh, uh, this is what we are finding. Uh, because as I said a couple of times to also, during this presentation, um,
Innovation drives topline growth and value creation in this business environment that we are part of. Therefore, we would welcome, if we had to spend more, because that would also be because we were convinced that we have.
Uh, more, you could say props up a growth on the weight and we have today, and so I can give you a number. Uh, but we only invest in things where we think this is going to, uh, knock the ball out of the field, so to speak.
Yes, and the second question, then we're running.
At, um, in terms of the product return in, uh, in wet China, you should expect that our Q4, uh, estimate of around $60 million. That is the big, uh, because that includes also, um, inventory reduction, product return, etc. But we will see an impact into, uh, into next year as well. And that is something we are currently evaluating also. It's also depending on how fast we are converting to other products in our portfolio. But we will have an impact, um, Q1, Q2, Q3, uh, before we are up against an easier baseline Q4 next year, but the overall.
impact that something we are currently assessing.
Okay, that's really helpful. Thank you both.
Yeah, with that, we would like to thank all of you for listening in and for all of your questions. We are looking forward to seeing you in the next call.
Period, thank you very much.
Ladies and gentlemen, the conference is now over. Thank you for choosing Coloplast, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.