CLPBY Q1 2026 Earnings Call

Operator: Ladies and gentlemen, welcome to the Coloplast Interim Financial Statement for Q1 2025-'26 Conference Call. I am [indiscernible] chorus Call operator. [Operator Instructions] the conference has been recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Rasmussen, Interim CEO. Please go ahead.

Lars Rasmussen: Thank you, and good morning, and welcome to our Q1 '25/'26 conference call. I'm Lars Rasmussen, Interim CEO of Coloplast. And I'm joined by CFO, Anders Lonning-Skovgaard and our Investor Relations team. We will start with a short presentation by Anders and myself and then open up for questions. And please turn to Slide #3. We delivered 6% organic revenue growth and 3% EBIT growth in constant currencies before special items. Return on invested capital after tax and before special items landed at 15% on par with last year's adjusted figure. We had a soft start to the year as expected. However, with a significant more turbulent quarter in Kerecis than we would have anticipated. I'll get back to that in a moment. For the year, we maintained our guidance of around 7% organic growth. We lowered our growth expectations for our Kerecis to around 10% amid significant market uncertainty in the outpatient setting, but raise our outlook for interventional urology to high single digits following a strong start and improved outlook for the year. Before we dive further into the quarterly performance and outlook for the year, let me begin with a brief comment on our leadership team. In December, we announced two important changes to the executive leadership team. EVP of People and Culture, Dorthe Ronnau, has decided to leave Coloplast to pursue the next chapter in her career and Tommy Johns, Executive Vice President of Interventional Urology, has decided to retire after more than a decade in Coloplast and more than three decades in the global life science industry. An external search is currently ongoing to identify a new leader for the Global People and Culture Function while Kevin Hardage will step into the role of EVP of Interventional Urology on February 9. Kevin brings extensive experience from the global medtech industry, including senior leadership experience from Teleflex in the urology space, and I look forward to welcoming Kevin to Coloplast. Dorthe and Tommy have both played key roles in ensuring a smooth leadership transition. I want to thank them for the continuity and stability they have provided throughout this period and wish them all the best in the future endeavors. Additionally, I would like to mention that the search for Coloplast's new CEO is progressing well and remains on track. I would also like to put a few words to key developments in Q1. Interventional, we already delivered a strong start to the year with 8% organic growth driven by the Men's Health business. The product recall in Kidney and Bladder Health is now behind us, and we are looking at a very healthy business expected to deliver high single-digit growth in '25, '26. During the quarter, we reached the important milestone of submitting INTIBIA, our investigational tibial nerve stimulation device to the FDA. This marks an important advancement towards the future launch of the device and our goal of bringing innovative and clinically differentiated solutions closer to the patients. INTIBIA plays an important role in delivering on our Impact4 strategy for Interventional Urology and I'm encouraged by the fact that we continue to see clear external confirmation of the relevance of the implantable tibial nerve stimulation space. Industry activity and investments in implantable tibial nerve stimulation continues to increase indicating broader confidence in the therapy area and the role it may play in the future management of overactive bladder. These developments reinforce our long-term view of the opportunity within this segment. I would also like to highlight that we are further strengthening our product portfolio in Interventional Urology through an agreement to purchase the outstanding shares of Uromedica, a commercial stage company with a minimally invasive solution for treating stress urinary incontinence, complementary to our existing men's health business. The transaction is expected to close here in February, and we have an immaterial impact on the group financial performance in '25, '26, while being accretive to Interventional Urology's financial metrics in the second half of the impact for our strategic period. Finally, I would like to spend a moment addressing the development we have seen in Kerecis in Q1. Kerecis delivered 10% organic growth in the quarter with an EBIT margin of only 1%. While we continued to see a healthy momentum in the inpatient setting in Q1, Kerecis overall performance was subdued due to significant sales disruption from Medicare reimbursement changes in the outpatient setting, which resulted in negative growth in the outpatient setting. Effective January 1, 2026, Medicare has introduced a single fixed payment of USD 127 per square centimeter for all products in the outpatient setting covered by Medicare. At the same time, Medicare has withdrawn, the already announced LCD also set to go into effect January 1. Combined, this has triggered significant uncertainty in the skin substitute market as the channel adjusts, and we expect the heightened market uncertainty to persist throughout the year. As part of the shift towards a fixed payment rate, the Shield product brand will be phased out of the Medicare market and replaced by a renewed portfolio of the product brand MariGen which is well positioned to take market shares under the new fixed rate. This shift will create a negative mix effect as MariGen volumes are scaling. There is no doubt that the many unprecedented changes by CMS and the recent pivot with regards to the LCD in fiscal Q1 has made the operating environment increasingly difficult to navigate as a manufacturer. Similarly, we have seen an increased level of customer hesitancy to place large orders amid the significant market uncertainty. However, we're looking ahead, we remain optimistic about the outlook for the category and Kerecis long term. We support CMS' efforts to clean up the market. And we see both the now canceled LCD and the fixed payment rate as evidence that Kerecis remains well positioned to compete and win in the skin substitute market. Only 18 out of more than 300 products were in the final LCD and of these, 2 were Kerecis products. That is a clear testament to the clinical efficacy and differentiation of Kerecis products offerings. Kerecis is the only product in the market based on intact fish skin. It has a high resemblance to human skin and is proven to be more effective than the standard of care in healing severe wounds. In addition to being incredibly potent, the technology is also highly scalable based on its unique waste-to-value proposition, allowing for a highly efficient production setup. No other products in the markets share the unique characteristics of the fish skin, and we have moved quickly in response to the changes. We have enhanced our go-to-market model to align with the new requirements and will roll out a series of product launches during the year -- or during this year to support this updated approach. I'm deeply impressed by the agility, ingenuity and the grit of the Kerecis team and the way that they've handled the situation. Long term, we therefore continue to believe Kerecis will see continued strengthening of its competitive position relative to peers due to its unique technology and strong clinical documentation. With this, let's now take a closer look at the details by business area. In Ostomy Care, organic growth was 4% and growth in Danish kroner was flat in the first quarter. Ostomy Care delivered a soft start to the year as expected due to negative growth in China, a high baseline in the U.S. and order phasing in emerging markets. Rest of the year, we expect the gross momentum to pick up. In the U.S. business, the underlying performance continues to be strong. And in Q1, Premier has renewed Coloplast Group's purchasing agreement. The contract remains multi-source and effective for 3 years starting April 1, 2026. In China, sales declined in the quarter, impacted by a continued weak consumer sentiment and competitive pressures from domestic players in the community channel, further amplified by a high baseline last year. From a product perspective, the SenSura Mio portfolio was the main contributor to growth, followed by the Brava range of supporting products. The latest product launches within SenSura Mio, the black bags and the new 2-piece offering both continue to perform well. Additional variance of the black bags were launched in Q1 and further variance are expected throughout '25-'26. In Continence Care, organic growth was 7% and growth in Danish Kroner was 2% for Q1. The Luja portfolio was the main growth contributor in the quarter, driven by both the male and female catheters in Europe, most notably in the U.K., France and Germany and also in the U.S. Growth in the SpeediCath portfolio was driven by flexible catheters in the U.S. and LatAm. Within our two smaller segments in Continence Care, Bowel Care made a strong contribution to growth, while collecting devices saw a slight decline in the quarter. From a geographical perspective, growth was driven by Europe and the U.S., while growth in emerging markets was impacted by order phasing. Voice & Respiratory Care posted 8% organic growth for Q1 with growth in Danish Kroner of 5%. Laryngectomy delivered high single-digit growth in the first quarter, driven by an increase in the number of patients served in existing and new markets and an increase in patient value, driven by the Provox Life portfolio. Tracheostomy delivered mid-single-digit growth driven by solid underlying demand, partly offset by phasing in distributor markets. Growth in tracheostomy is expected to be back-end loaded and will pick up momentum in the second half of the year. In Wound and Tissue repair, organic growth were 5% for Q1. In Danish Kroner, sales declined 8 percentage points or 8% due to 8 percentage points negative impact from the skin care divestment in December 2024. As mentioned earlier, Kerecis delivered a soft quarter with 10% organic growth due to the significant sales disruption from the Medicare reimbursement changes in the outpatient setting. The Advanced Wound Dressings business declined 3% in Q1 and China detracted significantly from growth, impacted by the product return initiated last year with a negative revenue impact of around DKK 25 million in the first quarter. From a product perspective, Biatain Superabsorber was the main growth contributor. The Contract Manufacturing business posted solid double-digit growth in the first quarter, reflecting a front-end loaded year. In Interventional Urology, organic growth was 8% and growth in Danish Kroner was 3% for Q1. As mentioned earlier, the Men's Health business in the U.S. delivered a strong first quarter and was the main contributor to growth. Our flagship products within Men's Health, the Titan Penile implant, continue to perform well with the patient funnel positively impacted by our patient support program targeted at prospective patients. The Women's Health business and the Kidney and Bladder Health business also contributed to growth. With this, I'll now hand over to Anders, who will take you through the financials and outlook in more detail. Please turn to Slide #5.

Anders Lonning-Skovgaard: Thank you, Lars, and good morning, everyone. Reported revenue for Q1 increased by DKK 17 million or 0% compared to last year. Organic growth contributed around DKK 393 million or around 6% to reported revenue. Divested businesses related to skin care in December '24, reduced reported revenue by DKK 77 million or around 1%. Foreign exchange rates reduced reported revenue by DKK 299 million or around 4%, mostly related to the depreciation of the U.S. dollar, the British pound and the basket of emerging market recurrences against the Danish Kroner. Please turn to Slide #6. Gross profit for Q1 amounted to DKK 4.7 billion, corresponding to a gross margin of 67% compared to 68% last year. The gross margin was negatively impacted by currencies of around 30 basis points and ramp-up costs in Costa Rica and Portugal. This was partly offset by a favorable impact from lower inflation on raw materials, freight and utilities. Country and product mix also had a positive impact. Operating expenses for Q1 amounted to around DKK 2.9 billion or 2% increase compared to last year. The distribution to sales ratio for Q1 was 33% on par with last year. In absolute terms, the distribution costs were also in line with last year. The flat development in distribution costs reflects DKK 20 million in one-off logistics costs in Q1 related to the new distribution center and lower sales costs in China following the organizational restructuring in Q1 last year. This was partly offset by one-off costs to enhance Kerecis' go-to-market model under the new Medicare reimbursement model. The development in distribution costs were also positively impacted by the depreciation of the U.S. dollar against the Danish kroner. The admin to sales ratio for Q1 was 5%, compared to 4% last year and includes around DKK 15 million in one-off advisory costs incurred by Kerecis in connection with the recent CMS regulatory changes in the U.S. outpatient setting. The R&D to sales ratio for Q1 was 4% compared to 3% last year, reflecting phasing our costs within the chronic care R&D and high activity levels in Kerecis. Overall, this resulted in operating profit before special items of DKK 1.9 billion in Q1. In constant currencies, EBIT grew 3% compared to last year, while reported EBIT declined 3%. The EBIT margin before special items for Q1 was 26% compared to 27% last year, negatively impacted by the significantly reduced EBIT margin in Kerecis due to lower organic growth and large one-off costs. Currencies also had a negative impact on the reported EBIT margin of around 30 basis points, mostly related to the depreciation of the U.S. dollar, the British pound and the basket of emerging market's currencies against the Danish kroner as well as appreciation of the Hungarian Forint against the Danish Kroner. Financial items in Q1 were a net expense of DKK 24 million compared to a net expense of DKK 69 million in Q1 last year, reflecting low interest expenses and gains on exchange rate adjustments, mostly related to the U.S. dollar. The blended interest rate was around 2.6% in Q1, down from around 3.1% in Q1 last year. The tax expense in Q1 was DKK 394 million compared to an ordinary tax expense of DKK 389 million last year and a total tax expense of DKK 725 million last year. Due to a nonrecurring expense of DKK 336 million related to the transfer of Kerecis' intellectual property from Iceland to Denmark. The tax rate was 22% on par with ordinary tax rate last year. As a result, the net profit before special items and adjusted for the nonrecurring tax expense last year decreased by DKK 14 million in Q1 and adjusted diluted earnings per share before special items decreased by 1%. Please turn to Slide 7. Operating cash flow for Q1 was an inflow of DKK 2.2 billion compared to an inflow of DKK 2 billion in Q1 last year. The positive development in cash flows was mostly driven by lower financial items, partly offset by higher income tax paid. Cash flow from investing activities was an outflow of DKK 412 million compared to an outflow of DKK 133 million last year. The increase partly reflects a low baseline due to the DKK 192 million impact from the divestment of skin care business last year. CapEx in Q1 amounted to DKK 414 million with a CapEx to sales ratio of 6% compared to 4% last year. CapEx in Q1 includes around DKK 97 million related to the new manufacturing site in Portugal, which is expected to be in operations in Q4 this year. As a result, the free cash flow for Q1 was an inflow of DKK 1.8 billion compared to an inflow of DKK 1.9 billion last year. Excluding benefit from the divestment last year, the free cash flow increase in the first quarter was 8%. The free cash flow to sales ratio was 26% compared to 24% last year, and the trailing 12-month cash conversion was 82%. Net working capital amounted to around 25% of sales on par with last year. Finally, the return on invested capital after tax and before special items was 15% on par with last year, adjusted for the impact from the Kerecis IP transfer last year. In January, we refinanced our EUR 800 million credit facility, retaining the facility's existing terms and conditions. The structure remains a standard credit facility, and the facility now matures in January '29. Now let's look at the guidance for the '25-'26 financial year. Please turn to Slide #8. For the '25-'26 financial year, we continue to expect organic revenue growth of around 7% and around 7% EBIT growth in constant currencies before special items. We also continue to expect a return on invested capital of around 16%, up around 1% percentage points from 15% adjusted last year. The organic revenue growth guidance of around 7% assumes continued good momentum in Chronic Care. In Interventional Urology, we now expect high single-digit growth versus mid-single-digit growth previously following a strong quarter. In Wound Tissue Repair, we now expect Kerecis to deliver growth of around 10% versus around 20% previously, reflecting the significant sales disruption from Medicare reimbursement changes in the outpatient setting and the high uncertainty around the timing of the recovery. Within Advanced Wound Dressings, we continue to expect negative impact from the product return in China in the first 9 months of the year. Reported revenue growth in Danish kroner is now expected at around 4% from around 4% to 5% previously and assumes around 3 percentage points negative impact from currencies, up from around 2 to 3 percentage points previously. The worsened currency outlook is mostly driven by the further depreciation of the U.S. dollar. For the year, we continue to expect the negative currency impact to be driven primarily by the U.S. dollar, and to a smaller extent, the British pound, the Chinese yuan and now also the Japanese yen. The EBIT growth in constant currencies of around 7% assumes stable inflation levels and continued ramp-up costs related to our manufacturing sites in Costa Rica and Portugal. The EBIT growth guidance also includes the initiation of Impact4 investments, including Global Technology investments and AI, investments towards the new Bowel Care opportunity in the U.S. and investments related to INTIBIA. For Kerecis, we expect a significant EBIT margin uplift rest of the year with Kerecis full year EBIT margin around double digit compared to 1% in Q1. We expect currencies to have a negative impact on the reported EBIT margin of around 50 basis points, driven by the depreciation of the U.S. dollar and the British pound against the Danish kroner and the appreciation of the Hungarian forint against the Danish kroner. In terms of phasing, we expect the organic revenue growth and EBIT growth in constant currencies to be second half weighted following a soft start here in Q1 as expected. For '25-'26, we continue to expect around DKK 50 million in special items. And we also continue to expect net financial expenses of around minus DKK 500 million based on spot rates as of February 4, down from around DKK 1 billion in '24-'25. The effective tax rate for '25-'26 is still expected to be around 22%. Net profit is expected to significantly increase year-over-year as '24-'25 was impacted by extraordinary high special items, high financial items due to negative exchange rate adjustments. And finally, the extraordinary tax expense related to the transfer of Kerecis' intellectual property. The CapEx to sales ratio is still expected at around 5% and net working capital is still expected at around 25%. Our guidance is based on the knowledge we have today and assumes immaterial impact from tariffs as we expect our products to remain exempted. Thank you very much, operator. We are now ready to take questions.

Operator: [Operator Instructions] The first question comes from the line of Hassan Al-Wakeel from Barclays.

Hassan Al-Wakeel: Three, please. Firstly, just on the reiterated guidance, can you talk us through the offsets you see, given the Kerecis lower growth and margin expectations for the full year and how they should be a headwind to group profitability? Secondly, can you help us unpack the further weakness you're seeing in skin substitutes. And why you expect this to persist over the course of the year? And you've obviously noted more favorable pricing versus peers. What is the level of growth you're seeing in the inpatient setting? And how do you see this over the course of the year? And if you can put all of this into context with your longer-term ambition for Kerecis, that would be helpful. And then thirdly, if you can walk us through the confidence that you have in terms of the raised Interventional Urology guide, where you see Women's Health and Men's Health growing in the first quarter and expectations for the full year. Are we past the risks from bulking agents to the Women's Health business?

Anders Lonning-Skovgaard: Yes. Hassan, thanks for your questions. I will start with the first one. As I understood your question, that was the moving parts on our organic growth and EBIT growth guidance. So as I just mentioned, we are keeping our organic growth and EBITDA growth guidance in fixed currencies of around 7%. We are expecting our urology business to improve after a good first quarter, but also due to the fact that we have now the recall of the product we made last year behind us. The underlying Men's Health business continued to be strong. So that is an important assumption. Secondly, we see good growth in the rest of the year for our chronic business, and that is then offset by the adjustment in terms of the Kerecis outlook for the year. As I just mentioned, we have reduced our outlook for Kerecis to now around 10%. In terms of the EBIT growth guidance, I also just mentioned that we are expecting the rest of the year that EBIT growth will improve as a result of higher growth, but also as a result of a significant improvement in the underlying Kerecis margin we had in Q1, quite significant one-offs related to Kerecis, and we expect that to be fully behind us. So that's the other key element. So we are expecting the Kerecis underlying margin to improve to double-digit levels. So that's some of the key moving parts. Lars?

Lars Rasmussen: Yes. So on the Kerecis side, this is a really strange situation to be in because we have known for such a long time now that there would be an LCD that was finally announced on the 16th of December. So I can't even imagine what kind of situation we would be in if we had not been on the short list of 18 products having this discussion. So we are very satisfied to see that we -- out of 340 products we're one of the -- two of the products that were mentioned on the list of 18 products that were covered by the LCD. And we had two products in the market. So therefore, it's everything that we had in the market that was covered by that. There was also a time or a price point on this on $127 per square centimeter. And one of the products could pass that one, and that is the MariGen product. So we have immediately also taken steps to enlarge that portfolio of products to be more competitive, even more competitive in this space in the future. We also see that there are a pretty large number of competitors that would not be able to meet the price criteria. So therefore, we actually see this movement in the, you could say, the 20% of the total sales of Kerecis that are the outpatient Medicare covered part of the portfolio. We actually see that as a positive future omen, so to speak. The other positive part about this is that more or less the rest of the portfolio we have is an inpatient. And that is an environment where clinical data, historically, have been much more important. And now we basically have Medicare's own verdict that the clinical efficacy of our products are stellar. So in that sense, we see this really as a short-term disruption. And the disruption is that the payers or the offices, the private offices that are using our products, they don't have clarity at this point in time of what is covered by Medicare and what is not. And that is -- therefore, we basically see some hesitancy from the professionals to buy the products right now. But the fact of the matter is that there are fewer products available in the market to cover the same number of wounds that we had before. So we see this as positive. And then we have question number 3? Yes.

Anders Lonning-Skovgaard: Yes. Question number 3, Hassan, that was related to urology, as I remember. And I think actually, I talked a bit to it earlier. But overall, the urology business, as I said, is off to a good start in Q1. We had -- or continued to have a good Men's Health development in Q1, actually, as we had last year in the second half as well. So we expect that to continue. And then the other important factor is that now the recall of the product we had last year is now fully behind us. So we're actually seeing a good underlying development within our urology business, and that's also why we see that business to deliver high single-digit growth for this financial year.

Operator: The next question comes from the line of Jesper Ingildsen from DNB Carnegie.

Jesper Ingildsen: Also just I'm curious, you mentioned in the outpatient setting a decline in Q1. I was curious to hear what you have seen here at the beginning of the year after the implementation of the fixed price cap. And then maybe also if you could specify how much one-off effect you had in Kerecis' EBIT margin here in Q1, just to understand where the underlying margin would be? And then also, if you could just give us an indication of what it would take to end up in a situation where you would have to write off this asset?

Anders Lonning-Skovgaard: So in terms of your questions, Jesper, thank you for that. Lars now just talked about Kerecis. We expect that the Kerecis growth for this financial year to be around the double-digit, and we are still expecting some turmoil in Q2 before it's starting to improve in the second half. But overall, for the year, we are looking at growth with the current knowledge of around double-digit. In terms of EBIT margin, as I mentioned, we have included some one-offs in the first quarter related to advisory in relation to the reimbursement changes. And we have also included one-offs related to our go-to-market model. And in total, it is around DKK 30 million. So that is fully behind us, and that's also why we now expect from this quarter and onwards, that the underlying Kerecis margin will improve, but it will not improve to the levels we had anticipated when we started the year. So right now, I'm expecting the underlying Kerecis margin to be around double digit. And the last question, can you just repeat that?

Jesper Ingildsen: Just the -- I mean, clearly, the growth has deaccelerated and margins to some extent compared to what you expected from when you recently bought the assets. I'm just wondering if this doesn't improve, will be end up in a situation where you have to do a write-off of the book value of the asset? What scenario will be -- what will require to get to that?

Anders Lonning-Skovgaard: Yes. So it's clearly that this year, so the third year where after we acquired Kerecis due to the turmoil that Lars described earlier, is not developing as we had anticipated. But we see this as a temporary dip. We are still focusing a lot on delivering on the case, and we also see that the case is intact long term. But short term, we have some challenges this year related to the growth and the margin. In terms of your other question, the impairment test, it's something we are evaluating on an annual basis. But again, we are looking at a business that we believe will deliver the long-term expectations that we also communicated at the Impact4 strategy back in September last year, where we said that the overall Wound Tissue Repair business would grow around double digit.

Operator: The next question comes from the line of Jack Reynolds-Clark from RBC Capital Markets.

Jack Reynolds-Clark: I have three also, please. The first is on Kerecis' profitability. So thinking longer term, given the new environment, have your assumptions changed around where peak profitability for Kerecis could be in terms of EBIT margin? The next question on Wound, on Dressings, so excluding the recall and obviously, the Contract Manufacturing business, growth here still looks challenged. What drove this? And was this in line with your expectations? What are your expectations for the remainder of the year? And then my last question was on INTIBIA. So now that it is submitted for PMA approval, can you share any data on clinical performance? When do you expect approval? And can you talk about your expectations for launch?

Anders Lonning-Skovgaard: Yes. So thanks a lot, Jack. Your question around the Kerecis EBIT margin. Yes, as I mentioned earlier, we had anticipated that the EBIT margin would improve further this year. Originally, as I explained earlier to a level of around 20%. Now it is sitting, that's at least our expectation, around 10%, including the one-offs in the first quarter. But I'm still expecting that over the Impact4 for strategy, we will improve also the underlying EBIT margin of Kerecis to a level of around the group margin as we have said, when we acquired the Kerecis business 2.5 years ago. Lars, number two?

Lars Rasmussen: On the Wound Care, well, yes, technically, it is a recall. I would say that it's maybe a kind of -- it's basically a consequence of the long-term plan for China to be self supplying inside of pharma and medical devices and we -- there are no product flaws on the product that we have taken out, but it's basically just been replaced with a Chinese product in the market. And that was, of course, unexpected when it came last year, but we can't say that we have not heard that this is a movement that you -- that happens in that country and many other industries and also other competitors have experienced the same. However, we have still a very large business in China that we are protecting to the best of our abilities, but it means that our growth have temporarily been set back. And it also means that we don't foresee that we will have growth in China, which is more than low single digit in the coming -- in the strategic period that we are in, and we still expect that, that will be the case.

Anders Lonning-Skovgaard: Yes. And your final question, Jack, related to INTIBIA, it is following the plan. We have submitted it to FDA and we are still expecting that we will be able to launch next financial year, '26-'27 and we still have high expectations for this technology to support our long-term growth ambition for the Urology business to be in the high single-digit level. So that is tracking as planned.

Operator: The next question comes from Oliver Metzger from ODDO BHF.

Oliver Metzger: First one is also on Kerecis. So you described well also the positive dynamics. So according to your statement, the inpatient setting should be pretty fine. But if outpatient is just 20% of Kerecis and you reduce your segmental guidance for Kerecis by 10 percentage points, it means mathematically that the outpatient sales [ expect ] a very hard stop. Could you, therefore, also comment about some inpatient dynamics, whether do you see there any underlying growth deterioration? And the second question is on Ostomy Care. So you said about a pretty harsh headwind coming from China. So can you comment how Ostomy Care growth would have been excluding this China effect, please?

Lars Rasmussen: So on Kerecis, the -- in a sense, the inpatient part of the sales should be completely unchanged. There is a little bit of effect on it because some of the vendors that has only participated in the outpatient setting, they are now testing their products, of course, in the inpatient setting. So that gives a little bit of turmoil there, but prices and everything else is completely unchanged on the inpatient side. And as also said, it is a very clinically driven environment and we have just gotten sort of a very strong underlying testament to the fact that our products, they really have strong clinical efficacy. So that's -- we actually see that as an opportunity. But it is a strong growth environment also in the inpatient clinic. So of course, over time, that is also covering for what is happening now on the outpatient side. The whole reform's aim and purpose was to take value out of the outpatient segment seen from a Medicare point of view, and that is definitely happening. But as I said before, we see this as a potential upside for us. So longer term, we definitely see this as a positive development. We understand the actions that the government are taking and we see ourselves even better positioned than we would have hoped for in this situation. On the Ostomy side, I don't think we give a number when we take China out. But of course, we are market leaders in China. We have a very, very high market share in the community market. So the fact that we have this part is not growing, that impacts the numbers. But we are going to see much better numbers in Ostomy in the rest of the year. We are basically just having a very low first quarter due to comparison numbers. So we see that going up.

Oliver Metzger: Just a very quick follow-up. So for the inpatient setting at Kerecis, so would you describe a 20% growth momentum still as valid?

Lars Rasmussen: So I don't have a comment to the exact number there, but it's definitely a very healthy double-digit growth.

Operator: Next question comes from the line of Aisyah Noor from Morgan Stanley.

Aisyah Noor: My first one is on the Uromedica acquisition or agreement to acquire. Can you talk a bit about the competitive KPIs of this product versus bulk of it or the standard of care and what you think this product could take share? And then my second question is on the MariGen phaseout. So what's the mix of the MariGen versus Shield product in your outpatient sales today? And why do you think those customers will shift over to your new MariGen products? And will this come with new costs embedded in the double-digit margin guide for Kerecis?

Lars Rasmussen: So on Uromedica side, as I said, this is complementing our portfolio in the Men's Health. So today, in Men's Health, we have the penile implant for erectile dysfunction. And we basically have one competitor in that space, and they also address urinary incontinence in men in the same space, and that's also what we do with this device. The difference is that this is minimally invasive. And therefore, we see it as a very good way to complement our product portfolio and increase our competitiveness in this specific market segment. So those are really the benefits. We know it works. It is in the market already. It is accepted by the professionals, and now we can put effort behind it and thereby also help getting it into the market and educating much more doctors to use it. Could you take the second question, Anders? I didn't write it down.

Anders Lonning-Skovgaard: So the second question was around MariGen. and Shield. So we have not really disclosed the split between these two from a revenue point of view. We have said that Shield product's price was above the cap of USD 127 per square centimeter and the MariGen is lower then the cap. And the whole work is now about to convert from the Shield to the MariGen. And that's what we have initiated, and that's the focus we are having the rest of the year, including launching new products within the MariGen portfolio. So that's really the focus we are having.

Aisyah Noor: And if I could follow up with Lars on the Uromedica comment. I know you mentioned the impact on financials is immaterial but do you anticipate having to ramp up the sales force for this business? Or can your existing urology sales force sell this product?

Lars Rasmussen: So it fits directly into the existing sales force that we have because it's the same call points that we're having. But of course, if we -- when we see it take off, we also are going to step up accordingly. But from the beginning, it's going to be in the hands of us and we have significantly higher sales pressure in the market than the former owner.

Operator: The next question comes from the line of Veronika Dubajova from Citi.

Veronika Dubajova: I apologize, but I'm going to come back to Kerecis. And I wanted to ask a couple of questions here. The first one is that, Lars, you've described the disruption at the moment is temporary. I guess I'm curious to hear what give you the confidence? In conversations we've had with physicians, many of them are simply discontinuing the use of skin substitutes and switching instead to traditional wound care dressings. So I'd love to kind of get your perspective as to why you see this issue is temporary? And why you think the market will recover? And I guess that sort of also fits into my sort of second question, which is, would your expectation be that Kerecis can be back at sort of around 20% growth rate as we move into fiscal '27? And if it's not, what implications does that have on midterm guidance? So that's my first question. And then I have a follow-up, but maybe I'll let you answer this one first.

Lars Rasmussen: Yes. So I think that's a super good question, Veronika, because we are talking about the outpatient clinic here and as I said, that's -- of our total sales in Kerecis, the 20% comes from the Medicare reimbursed outpatient setting. And there's no doubt that, that has been an exceptionally fast-growing market. So if you see the market data on it, you just see that it's literally exploding within the last three years. So it makes a lot of sense that is being addressed, of course, by the payers. So for some doctors, of course, they would discontinue using it because the financial incentive to use it is simply too low compared to what they have been used to. And I don't know the price of the products that they are shifting to. So -- but you also know that these are real businesses that we are selling into. These kind of wounds, they don't go away. So there will still be lots of need for these kind of products, but it's, of course, a different price level. It is, however, a price level that we have been used to living with. That's what we have been making most of our sales on. And therefore, we see -- we don't see that the need goes away. But of course, since it's both a doctor and a business person, they will find a way to try to substitute in the most sort of -- with a good fit between what is helpful for the patient and what is a good financial outcome also for the doctor. With the prices that we are having and the efficacy of MariGen, we think that we are super well positioned. So that's the reason why we think that we're in that position. This whole change is then not affecting the biggest part of our business, which is the inpatient part that goes on as it was before. We just think that we have a better position or we have a potentially have a better position than we had before because we have Medicare's own assessment of all the clinical data they have received, and we simply have super strong clinical data that we can take to these payers and users, and that puts us in a better position. And that is such a big part of the business, and it's growing so fast that it is also covering parts of the downside that we see in the outpatient clinic on the short term on outpatient segment. But we see the outpatient segment will have a healthy growth going forward after we have sort of having this shake up. And we think that we are super well positioned for that.

Veronika Dubajova: Okay. And then my second question is for Anders. It's a bit financial in nature, but just obviously looking at the year, I know you always said to us, we'd start below the full year guide, but a few especially on EBIT growth, we still have quite a ways to go to get to the full year. So I don't know Anders, if you can give us a little bit of color on how you'd expect the growth phasing, both from an organic sales perspective and from adjusted EBIT perspective to look like through the remainder of the year?

Anders Lonning-Skovgaard: Yes. Thanks a lot, Veronika, for your second question. So for the rest of the year, first and foremost, we are expecting growth will improve from this quarter and onwards, driven by the factors we have been discussing. So we are expecting Ostomy/Chronic business to improve, we are expecting the Urology business to continue at the levels we have seen in Q1. And then we have been talking about Kerecis quite a few times during the call that we are expecting that business to sit around the double digit. So overall, we are expecting growth to improve versus Q1, so that's an important factor. Secondly, gross margin ballpark in -- at the levels we had anticipated for Q1. However, the FX impact is, yes, real also due to the Hungarian Forint. But I'm expecting the gross margin to develop as we have said previously. And then on the cost side, I have -- we have talked quite a bit now to the one-off costs related to Kerecis, that is behind us. We are expecting the underlying Kerecis margin to improve. We will continue to also run a prudent cost across the business. But we have also agreed to initiate the impact for investments, especially related to some of the opportunities we see in the U.S. We have this Bowel Care opportunity. We are initiating investments in technology AI. And then when we are ready, we will also initiate the investment to support the INTIBIA launch. So overall, we are expecting both the top line growth, but also the EBIT growth to improve from this quarter versus Q1 to deliver the full year of around 7% organic growth and 7% EBIT growth in constant currencies.

Operator: The next question comes from the line of Julien Dormois from Jefferies.

Julien Dormois: I have three, and I'm going to give you a break from Kerecis. The first one relates to Voice and Respiratory Care. You have indicated that tracheostomy was a little weaker in Q1 and you ascribe that to the phasing in distributor markets. So just curious what's your visibility on the pickup in the back half of the year. And just remind us of what is the proportion of sales in tracheostomy that are made distributor markets, that would be helpful. And the second and third question relates to the Wound and Tissue Repair. So the first one is just I would love to know what was the growth in the business overall, if you exclude Kerecis and you exclude the China recall effect, just wondering whether the underlying business was growing when you exclude those two elements. And the last one, still in Wound and Tissue Repair, you have also commented that the contract manufacturing business helped a lot in Q1. You had double-digit growth, so I just can't recall what's the proportion of sales you made in the contract manufacturing business just to get a sense of how this could impact the remainder of the year.

Anders Lonning-Skovgaard: Thanks a lot, Julien. Let me start with the first one related to our Voice & Respiratory Care business. So we delivered 8% growth in the first quarter. Our laryngectomy business continued to develop really well with high single-digit growth, and we continue to see our laryngectomy business to perform well here in Europe, but also in the U.S. and across our distributor markets, also supported by the Provox Life launch that is still ongoing in a few markets as well. The tracheostomy business was a little bit more soft than we also anticipated. So it was growing mid-single digit, but it's really due to some order phasing in our emerging markets, and we expect that to improve the rest of the year. But overall, 8% growth in Q1 was okay, but we also expect the total Voice and Respiratory Care business to improve especially driven by the tracheostomy business the rest of the year.

Lars Rasmussen: On the Wound and Tissue repair. So we don't break it down to that level where we take the growth when we have taken out a couple of the more programmatic areas, but actually, when we take them out, it's actually quite positive. And then the Contract Manufacturing, we -- it's double-digit growth in Q1 but we don't have a lot of visibility on it, to be honest. So therefore, we believe it to be flat for the year, but that can vary. We don't expect it to be more negative than that, but we keep it in our own books there, we keep it just neutral.

Operator: The next question comes from the line of Tobias Nissen from Danske Bank.

Tobias Nissen: I have a few also stating -- going back to Kerecis. If you can then talk a little bit more to the assumed time line for stabilization here in the Medicare outpatient challenge and what the really key drivers are for this? And what visibility you have at this point? And what -- like the key risks are for driving growth for Kerecis below the 10% you're guiding for, for the full year? Are we looking into like an inflection in the second half of the year or is it likely to remain heavily disrupted? And then also just on potential spillover to the inpatient segment here. How confident are you that we will not see like a downward pricing pressure over to this area, which is like still like 70% of Kerecis revenue? And then just the last one on urology, like 8% organic growth this quarter, very strong. Can you talk to how much, if any, was due to some one-off factors related, after this, you can say, post [ recall ] catch-up, and how much of this growth rate is sustainable for the rest of the year?

Lars Rasmussen: Yes. I would love to have an answer to the time line on this also. We have not tried this before, to be quite honest. I don't think that the market has seen anything like this before. So what we do know is that the change -- Medicare is changing their prices. It shouldn't be hard because there is a limit to what you can get out $127 but we have asked what is the normal time line when Medicare is changing the pricing. And they have a database with all the prices in them and that's normally three months. So that's at least what we anticipate will happen and it's important that the price list is updated for people who are using Medicare or using products that are covered by Medicare. So it is within three months. That's also why we say that we expect that the effect will be the hardest in this quarter. Any sort of effect on the inpatient side, it's a very different market dynamic. It's also different products that you have inside in the inpatient setting and in the outpatient setting so we don't anticipate a lot of turmoil going in that direction from it. What the government have been addressing here is the cost -- explosive costs, so to say, in the outpatient setting, and it's not the same picture internally in the hospitals or in the inpatient setting. So we don't assume anything there. I don't know if it's a help to you, but what I can do here is I can share with you what we know. And of course, we're also guessing how long time does it take for us to be on the safe side, but we expect, in the way that we see it right now, that it is bottoming out in this current quarter.

Anders Lonning-Skovgaard: Yes. The second one, that was again the urology business. So no, there was no one-offs in Q1. And again, the Men's Health business has actually been looking very solid from a growth point of view for quite a number of quarters in a row now. So I just want to remind you that last year, both Q3 but also Q4, so last year, the second half was also at a double-digit level, and we saw that again in Q1. So the underlying momentum in Men's Health is strong, and we're expecting that to continue for the rest of the year. And on top of that, we had this recall last year that we have now fully behind us. So that's why the underlying momentum within neurology, we have increased to now high single-digit versus mid-single digit when we started the year.

Lars Rasmussen: And we are a couple of minutes after the hour. So that was, unfortunately, the last question, but we will have a chance to catch up in the near future. Thank you very much, everybody.