Biomerieux S A Unsp/Adr

Good day and welcome to the H1 2024 results conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Emre Kfece. Please go ahead.

Thank you, Jennifer.

Good afternoon, everyone, and thank you for joining us to review the BioMérieux for this H1 2024 Finance Performance Review. I'm online with Pierre Boulud, CEO, together with Guillaume Bourg, CFO. Before handing the call over to Pierre for preliminary remarks, please note that this conference call will include forward-looking statements that may change or be modified due to uncertainties and risks related to the company's environment. Accordingly, we cannot give any assurances as to whether we will achieve these objectives. I also remind you that today's call is being recorded and that the replay will be available on our website, www.biomérieux-finance.com. I'll now end the call over to Pierre, and then we will open the call to discussion and questions. Pierre?

Thank you, Aymeric. Good morning, good afternoon, everybody. So a word on the agenda for today. I'll start by sharing with you a quick reminder on our Go28 plan. Then we'll go through the business highlights for the first half of the year. I'll hand over to Guillaume, who will share with you the details of the financial performance. And I'll close the first part of the call on the business outlook, the perspective for the full year 2024, so that we can open for Q&A. Aymeric has already shared the disclaimer on forward-looking statements, so if we move directly to the Go28 strategic plan that we shared with you on April 9th, a quick reminder on the four pillars that we shared with you. First pillar relates to going for growth, so the sales growth ambition that we have for the next five years. The second dimension relates to our cost of goods and operational efficiency improvement. The third pillar relates to our teams and the engagement of our teams and the enhancements of our operating model. And finally, the CSR agenda that is part of our Group 28 strategy plan, going responsible. In numbers, what This plan is all about delivering a profitable and sustainable growth. So we've indicated an ambition, a target of growing 7% year on year organically in the years to come, to also generate an improvement of at least 10% of organic EBIT growth at constant exchange rates, allowing us to reach 20% in 2028. And while we maintain investments for the future in research and development at 12%, we will keep strengthening our cash flow generation. So where do we stand? Obviously, we'll spend some time on the numbers today for H1. But super high level, the sales growth ambition, H1 is showing very good traction with 10% sales growth versus 7% annual guidance. And this 10% sales growth comes together with also product launches in Q2, Spotfire for source roads, both 5-plex and 15-plex, and Vitec Reveal being approved by the FDA in the US. So additional growth drivers moving forward. Going simple, we have made significant progress with regards to COGS improvement. We have three examples here that we wanted to mention. Biofire automation moving forward with the phase two of the automation for respiratory panels now in place. Internalization of virus cartridges manufacturing, also delivering cost improvements. And biomolecule insourcing for biofire is also getting started. With regards to going stronger, we have conducted an internal engagement survey That demonstrated a super high level of employee engagement. Very glad to report that back. So our teams are fully engaged with the Go28 ambition. And the board that we had yesterday approved the alignment of a long-term incentive plan together with the Go28 target. And finally, on the CSR part, we are on track to reach the 2024 CSR target. And very quickly on this one, as you know, there is a set of indicators. We've just highlighted three here. Greenhouse gas emissions, we have reduced as of June 2024 by 14% greenhouse gas emissions versus 2019, very much in line with the objective for 2024. We have a diversity ambition in terms of gender diversity. We are also improving and very comfortable with the ambition for 2024. And finally, at the very core of BioMérieux business model, obviously making sure that we provide more results supporting antimicrobial stewardship ambition, significant increase, very much in line with the 2024 ambition. So overall, very much in line with the Goal 28 target, but I think it's a good moment now to deep dive into H1 performance. So I'll share with you the business highlights. Sales growth, as you've seen, H1, we are posting 9.9% sales growth, very much driven by a good 28 growth engines, biofire non-respiratory panels, spot fire, microbiology, and industrial applications. Altogether, they are growing 11.4%, so faster than the rest of the franchises. SEPED, Guillaume will come back to that, is significantly increasing, 20%. like for lunch, to be compared with a 10% first growth to twice as fast. A robust performance, however, negatively impacted by foreign exchange headwinds, 44 million. And finally, I said a word about it. We have launched new products to support the growth for the future. A third growth panel is obviously a significant progress in terms of complementing offering in point of care. Vitec Reveal being now available in the U.S., and traumatic brain injury on Vilas, all three are now available in the U.S. So if we go into the different growth engines, the first one, as you all know, is non-respiratory panel. We are very glad to report H1 cell growth 19%, which is significantly above guidance for Go28, which is at 10%. As we shared during the Capital Markets Day, what is supporting this sales growth is, on the one hand, a cross-selling effort, which are further increasing since December 2023. We have now 50% of our customers, two additional percentage points, using at least three panels worldwide. We have also increased our install base with customer expansion. We have managed to have 700 new instrument installations in H1, which is striking is that it's similar to H1 2023, so a very strong competitiveness for either new customers or customers that increase their capacity. And finally, we keep internationalizing the sales outside of the U.S. As you know, historically, it was a 20%, 80% kind of split. We have now 40% of install base installed outside of the U.S. The second growth engine is Spotify. As you all know, we are still on track to reach our 18 million sales target in 2024. I won't comment the whole slide, but the big news for us is, as planned, the approval of the respiratory source-throat panel, which allows to now detect PrEP-A, which was missing in our panel. It's also bringing to the market with Spotfire not only a nasal swab, but also a throat swab, which is a little bit easier to use. Both available in 5-flex So, mini panel and 15-plex. So, we are very happy also in terms of timing because it's coming perfectly on time to prepare for the respiratory season that is coming for 24-25. We keep growing the install base. We have now close to 1,500 instruments installed in one year, 250 in Q2. And the reagent cells are very well balanced between 15 plex and 5 plex, a question that we've had in the past, in past Q&As. It's actually 50-50, the split between 15 plex and 5 plex. Final piece of good news on Spotfire is the commercial agreement with McKesson is now running full speed. They are dealing with what we call pure point of care while we are doing direct sales for the hospitals. We are also seeing very good traction in Japan, which has a market for point of care. It's now 15% of the install base. And Spotfire is available in 16 countries in most geographies. Microbiology, very strong performance in H1, again, 9%, ahead of our expectations, to be fair. We were expecting 6% to 8%. The growth is not only driven by volume expansion, but we keep increasing pricing, so our pricing power is delivering again in the first half of 2024, and we have a similar price increase in the first half of 2024 with 4% that we had in 2023. Vitek Reveal, I already commented, was approved, and we are now in a commercial launch. And finally, Vitek MS Prime that was launched 18, 24 months ago now is still ramping up with more than 500 instruments in the market. Finally, industrial applications. Facially, a little bit on the low range of the target with 7% growth in H1, whereas we have a good 28 target that is a little bit higher. However, our reagents are growing very nicely, 11% or a little bit soft on instruments in the first half. Very good traction in the food segment, which was slower in the first half of the year, and very good price increase, strong testimony to the quality of the solutions and the efforts made by the team, with 6% price increase in the first half of the year. If we go to the next slide, there are two additional segments that are not gross drivers, but we want to obviously comment to share with you the perspective for H1. Respiratory panel. that was expecting to be relatively flat, slightly decreasing, has been growing 14% in the first half of the year. Super impressive performance. Definitely leveraging the install base. We are by far the market leader. Also demonstrating, I mean, as you all know, it's by far respiratory panel, the panel where we have the most intense competition. So in the context of a relatively strong epidemiology season, I think we demonstrate in the first half of the year the very strong competitiveness of a biofire system. And we have posted very limited price erosion, which again is a testimony to the competitiveness of the solution. Immunoassays is probably the one that is softer. It's been the case in Q1. Q2 is slightly better, but as you can see, it doesn't allow to recover from a low Q1. Still working on the launch of the new instrument, the next generation of the instrument, Vidas Cube. Still working on complementing the portfolio with traumatic brain injury, but we don't see the traction yet, and we're seeing a bit of softness on Vidas. And with this, I'm happy to hand over to Guillaume. we go a little bit more granular on sales and on financial performance.

Thank you, Pierre. Hello, everyone. So maybe kind of a recap overall on what Pierre commented on the trend by range. So overall, you see here how the speed of the 1.9 billion sales of H1 and 10% organic growth So overall, when we take BioFire overall, be it RP, non-RP, SpotFire, this overall range is now close to 40% of group sales, very close to 40%. I will not, let's say, recommend on RP at 14%. Non-RP continuing to be super strong at 19%, and SpotFire on track. with 33 million cells in each one. Microbiology is obviously our second range, contributing to 33% of good cells. As Pierre mentioned, the 9% growth is actually 13% on reagents and some, let's say, softness on the equipment. And overall, important to re-say that on the price increases, we were able to pass about 4% still in H1 on the microbiology ranges overall. Immunoassay are now only representing 9% of group cells overall. Industrial applications, same effect of stronger growth, organic growth of 11% on reagents, and softness on equipment is a bit more the same as what was mentioned for microbiology. And as Pierre mentioned, but it's good to highlight again, a super good performance on price pass-through at slightly above 6% actually. With that, maybe if we look at by region, so these are the major regions. So overall, America's total is a 13% growth. You see slightly above 50% BioMario cells overall. North America was 10% organic over H1, definitely driven by biofire respiratory and non-respiratory performance, as well as industrial applications. Latin America was reported at 35% growth. This overall organic growth is boosted by the fact that we have price increases in Argentina to offset or to compensate for the significant currency devaluation. Without this effect, Alatam is actually at plus 11% over H1. And I mention that because we'll come back on FX, and including especially Argentina. EMEA overall at 9% organic growth, as you can see. Definitely a great performance on BioFire non-RP, on BioFire respiratory. as well as a solid performance on microbiology industry applications. Asia Pacific is at 4% organic growth, so slightly lower than the other regions. China, which is, of course, our first country and base in Asia Pacific, is doing very well, actually, above the region average. India was on a high base last year, so it's actually slightly negative, but on a higher comp base. from last year. Japan is doing very well. And industry is a bit softer and maybe a bit difficult in this overall figure. It's actually negative in Asia Pacific, with especially the effect, maybe stronger in Asia Pacific, of equipment sales softness. With these comments, I propose we move to the P&L. I will comment mainly on the last column, which is the organic change on the P&L, so like for like at constant exchange rate and constant perimeter, even though perimeter-wise we don't have a major effect. So with the 10% organic growth on the sales, you see that we are able to deliver 12% organic growth on gross profit. So it reflects the fact that gross profit margin on the constant rate basis improved by 100 basis points, thanks to the price increases. that we mentioned earlier, especially on microbiology and industry applications, and as well, a favorable mix effect, which includes the, let's say, quite obvious effect, less equipment, which have less, lower margins on sales of equipment, and more reagents in the overall revenues. So, favorable mix effect. Now, moving to SG&A, you can see that the whole line of sales, marketing, general administrative costs, are up 9% on an organic basis, and this mainly reflects the investments in our sales forces as well as in our marketing and marketing capabilities overall to support Go28, obviously. R&D plus 6% on an organic basis, and you see that we remain at, let's say, solid 12.7% of ourselves invested in research and development and in the innovation powerhouse, as we say in Go28. So with that, overall, our contributive EBIT stands at €306 million for H1, 16% margin, but actually a 20% increase on an organic basis versus H1 2023, so significantly above our guidance, let's say, in the growth of the SEBIT as well as the organic improvement of SEBIT margin, which is 150 basis points. There comes the negative exchange rate, and I'll come back and zoom on this negative 4x impact of minus 44. And despite this minus 44, SEBIT, on the reported basis, is up 5% overall in each one. Below SEBIT, SEBIT to net income, we have the main effect to commence is actually in this line of amortization of intangible assets. Pretty simple. This line was heavily impacted by the write-off of the valuation of Hydeum Acquisition, the Chinese immunoassay company. And now this line is coming back to, let's say, the normalized level of recurring depreciation of intangibles at minus 18. Net financial expense is slightly more negative than last year. We had some, let's say, favorable one-off on the hedging of internal cash positions that we had last year and we don't have this year. And income tax is, let's say, excluding the effect last year of high-dome write-off, is very similar, around a 24% effective tax rate. So with all of that, net income at 215 million euros and up, including everything, up 33% versus last year.

Let's move to the cash flow statement.

Our EBITDA stands at $424 million, 22.3% of sales and actually up on a reported basis 8% versus last year. We had a working capital consumption of $107 million, mainly driven by a further increase of our inventories in H1. Why do we increase inventories? Because first, we need to build up, continue to build up some inventory for new instrument launches, especially for spot fire. And also, on the reagent side, we need to support the growth of biofire reagents on non-RFP, non-respiratory panels. as well as building the inventory for the coming winter season that will start from November, December, for respiratory panels. So, again, the seasonal effect on top. Receivables were pretty good, and especially on the U.S. collection of Q4 last year sales. On the CapEx, so investment line, you see we are 147 million euro, 8% of sales in CapEx. We mainly invested in our U.S. manufacturing sites to increase capacity and automation. Just to re-mention that Pierre highlighted that we have validated the phase two of the automation steps of the biofire respiratory reagent manufacturing. And we will invest, now that it's validated, in the deployment of automation capacity for this in the coming year. We also invest in the new placement of instruments, especially spot fire as the point of care segment is traditionally more with placements. So overall, a free cash flow of 50 million, significantly better than neutral last year. And the net debt position for Biomérieux at 286 million, which remains very low overall, 0.3 times APDA for the group. Specific slide, we wanted to, let's say, zoom in a bit together to try to give you a bit more, let's say, color as we can on this, let's say, complex topic of foreign exchange impact. So just to split the 44 million negative FX impact on CBIT in H1 can be split in two categories. The first category is on hyperinflation countries, and there we specifically account for Argentina. Turkey, and we also included Egypt and Nigeria. So, four countries, only these four countries. And the rest, so all the other countries of BioMario exposure accounts for 23 million, as you can see at the bottom. Now, when we zoom in on the hyperinflation currencies, the very good news is that we are able to increase prices in those countries to compensate for the local hyperinflation and going with it, of course, the huge currency devaluation. What impact does it have in our accounts? So first, these price increases mean that we have a very strong positive impact on the top line sales organic growth, as well as the organic, so same constant rate, SEBIT growth in our accounts. It also means that then when we look at the foreign exchange impact, we have a very negative impact due to the devaluation in those countries. And I come with an example. And let's say the rather good news is that when we look overall with the plus of the price increases, the negative of the cost, and the currency effect, we are able in those countries to report and tell you that we have a neutral net impact on the reported . I will not go into all the calculation below, but we wanted to give you all the figures. But if you see the illustrative example on Argentina, typically, it means that on an organic basis, we are able to increase prices representing 31 million euro, and you have the figures for this example. The SEBIT on an organic constant rate basis is up 13 million euro. But then we have a very massive negative effect in foreign exchange, minus 13. And the net is actually zero. So reported SEBIT was 4 million euros last year and 4 million euros the year after. Last comments on 23 million from the other currencies. What do we do? So first, we increase prices also when we can in those countries, especially as we highlighted before, micro-USD and industrial applications. We try to have some localization actions, and we can mention China, where we have a new plant for Bacti bottles, Japan, where we have a repair center for biofire instruments, and of course, most importantly, we work to drive organic growth overall of profits in those countries.

And with that, I hand over back to Pierre.

Thank you, Guillaume. So, 2024 outlook, as you could see in the press release, we have decided to review our guidance. So, on the right-hand side, you see the initial guidance. On the left-hand side of the slide, you see updated guidance. So, we are comfortable based on the H1 performance, based on the innovation launches that we've done. to forecast between 8% and 10% sales growth organic for the full year 2024. Profitability improvements building again on the very strong achievement of H1 and the good progress of Go28. We review it upwards between 12% and 17% increase at constant exchange rate. Unfortunately, as Guillaume was explaining, and as you could see in H1, 45 million already in H1 of exchange rate impact. We have reviewed also the negative impact of exchange rates to 70 million. With regards to capital expenditures, we are reviewing carefully the progress of the investment that we make, and we are now in a position to say that the 10-11 that we were giving is probably going to be between 9 and 10 for the full year 2024. Final slide before we open for Q&A. Qualitative slide, but just to share with you very comfortable with where we stand. As you could see, our growth engines are delivering, growing 11.4%. As you could see, organic profitability improvement is very strong at the end of H1, 100 base points. We are also very satisfied with the corporate social responsibility progress that we are making, with greenhouse gas emissions reducing by 14%. Obviously, we've launched the Go28 plan in April, so we are very much in the process of deploying the different actions and initiatives that we are going to deliver in the next few months. But I'm glad to report back that 75% of the Go Simple initiatives are already started, that we benefit from a very high employee engagement level, as I shared with you a few minutes ago. And an innovation powerhouse is not slowing down. We keep delivering. And as you know, we give you visibility on what we expect to deliver in the next few years, very much in line with our plans to keep bringing innovation into the IVD market to support our growth and profitability ambition in the next few years. And with this, hand over to Aymeric to the questions.

Directly to the questions. Jennifer, if you can open the question session.

Yes, thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

We'll go first to Hugo Sullivan with BNP Paribas.

Hi, hello. Thanks for taking my questions. I have three, please. First, on the CBIT growth guidance, when we look at it at consent exchange rates, it implies virtually no margin extension in H2. So, could you please discuss the moving parts behind that and what would basically hold back margin progression in H2 or is it just conservatism from your end? Second, on Spotfire, there is still 47 million left to deliver for you to achieve your 24 target of 80 million. So should we think about phasing in Q3 and Q4? I guess everyone would be interested to see if it's possible that you deliver another quarter below 20 million, which you had in Q1. And also within that target, can you give us a bit more detail on the expected contribution from McKesson? And lastly, on respiratory season, have you seen any impact on your sales in Q3 from the flu COVID wave? And a quick word on current trading would be helpful, what's reflected in your guidance in terms of intensity of the flu season.

Thank you. So maybe, Guillaume, you start with the first question on seed growth for H2.

Yes. I understand the question. It's about comparing the margin of H2 versus H1. So yes, we saw this and actually re-looked at it and recalculated. It's a bit technical, but it's back to FX, unfortunately. It's linked to the effect. You might see if you do only a constant rate calculation on H2 that seems lower in margin than H1. Actually, I think it's a technical effect due to average rate of the period, H1 or H2, versus average rate for the year. When we look at it, either looking at it at current rates or even at our internal budget rates, H2 margins are the same.

in our forecast, I should say, than H1.

Just a quick follow-up, sorry, on that. That means, virtually, you're expecting 17 percent margin at constant exchange rate, on my math, in H2, which is no margin extension H2-24 over H2-23. So, just wondering what you thought about the margin here, excluding ethics.

Sorry, you're on H224 versus H223? Correct. I will recalc, but for me, we are expanding the margin on an organic basis, of course. Yes, yes.

There will still be some expansion of margin in H2-24 versus H2-23 in our forecast.

Thanks for clarifying. Question on spot fire.

So as I said, we have complemented the menu on Spotfire. We have now four panels, respiratory 5-plex, respiratory 15-plex, source road 5-plex, source road 15-plex. A commercial setup is in place with McKesson in the US so that the teams of McKesson are working together with the teams of Biomérieux. Q2 is a very low quarter in many regards for obvious reasons, because there is very limited respiratory season. So it's the end of the respiratory season. It's usually the weakest quarter in terms of installations, in terms of sales. So what we're actually seeing is a strong summer and we are very comfortable with confirming our target for 80 million. Because in Q4, I mean, Q3 and mostly in Q4, talking about phasing, you will start to see the respiratory season ramping up. And obviously, an installed base in Q4-24 is going to be significantly bigger than what we had in Q4-2023. Yeah, we expect Q3 to be better, Q4 to be even better, because it's mostly respiratory, so to reach 80 million targets for the end of the year. And last question on epidemiology. Actually, we are seeing a respiratory season that has been relatively strong this year versus 2023. 2023 was actually very high in December, January, but then fell in February, March. And we are seeing good dynamics that fully translate in respiratory cells. Again, 14%. And actually what we're also seeing, which is not reassuring, but which is confirming what we've been seeing in the last few months is The traction on respiratory panel doesn't come at the expense of spot fire tests. They are very complementary segments, and they are both doing very well.

I hope that answers your question. Thank you. We'll go next to Maya Pataki with Coppler.

Hi, good afternoon. Thanks for taking my question. I have two, please. One, on BioFire, you have remarkable results in Q2. I was wondering if you could share some feedback from yourselves in the field, whether you can see this step up in competition in the U.S. with your competitors now offering also additional panels and diastole in the market with respiratory. That's my first question. And the second question may be, Maybe it's a bit of a weird question, but I'm nevertheless surprised that in Q2 you did not manage to place more spot fire instruments, given the fact that you're in a ramp-up phase. I understand the seasonality impact and everything, but it's not like you have a very mature position in the market already. I guess there are a lot of people you can be talking to. Is it that people or the hospitals are just not doing the investments right now, or is How do I think about that? Thank you.

Thank you, Maya. Good afternoon. Let me start with your first question, BioFire Q2. I mean, like you, we're hearing a lot of the competitive noise, right? Like you, what we're seeing is a very strong performance of BioFire. So it's probably early days to assess the impact of diasporic lounge or GI panel in the US. What I can say on our side is we are still getting very positive feedback of the competitiveness of our solution. And what I can say is when there is epidemiology, they are massively using our solutions. And what I can say is As I shared earlier, we managed to install as many instruments in H1 as we installed in H1 2023. So until now, we don't see a massive disruption from a competitive perspective. That's the way I would phrase it. And of course, we're watching it, and we are looking at it, but we don't see it. The second question on Spotfire, no, it's not a weird question. It's a good question, actually. Yes, the number of installations in Q2 is lower. It's actually very consistent with what we expect. Q2, by construction, the market is slow. So even though we believe we have a very attractive offering, there are very few... clinics that equip themselves with respiratory instruments in Q2. They are just exiting the respiratory season, so the installation come back, especially, I mean, as you can hear with my French accent, we are not, I'm not a US citizen, but with the go back to school, it's really starting in August, September, and Q4. We had maybe a lower level of installations. We keep building a very strong pipeline for 24 and 25. So it's not for us a red flag or even a yellow flag. It's just a normal process. And as I said earlier, very aligned with our plan and very comfortable with a target of 18 million sales by the end of 2024.

Okay, thank you very much.

And the summer installations, even though we are commencing Q2, the summer installations are increasing.

Okay, good to hear. Thank you. Which is exactly what we expected. We'll go next to Ei-Shanor with Morgan Stanley.

Hi, good afternoon. Thanks for taking my question. It's Ei-Shanor from Morgan Stanley. I have three questions. My first one is on microbiology. Are you able to confirm if you want additional share of VTEC placements in the quarter due to the competitor supply shortages and has this impact, if any, continued into September? The second question is on the industrial business. So some of your peers have seen a slowdown in order trends from large pharma companies in the quarter. And I noticed your equipment growth was down 17% in the first half of the year. Just wanted to know if you've seen any signs of slowdown or R&D budget tightening in the pharma segment of your industrial business and whether you've had to take lower pricing or discounting in this segment in the period. The third one is a bigger picture question on 2025. Appreciate its early days, but if you think about the positive market dynamics you're seeing right now, 14% respiratory sales is quite extraordinary. Pricing growth of 4% is quite strong, and your new sales guide implies you will exit the year at around 9% organic growth, which puts you well ahead of this Go28 target of 7%. Which of these elements do you think are sustainable into 2025, and could we be looking at a similarly elevated growth for next year versus the midterm target? Thank you.

Sure, thank you for your questions. So I'll start with microbiology. So yes, as you point out, we have a competitor that has been dealing with supply chain challenges. Obviously, we have been confronted with that. We share actually supplier for our raw bottles in blood culture. The benefit that we have is that we are multiple sourcing, so we have additional vendors to help us to cope with the demand. As we share, we have a very strong dynamic, so we are, and we've confirmed that with our clients, we are in a position where we can definitely supply the increased demand that we are seeing, and we are watching the situation to make sure that we don't put our customers at any point in time at risk. Uh, very on our side, we are very comfortable with the capacity to supply the customers. Um, industrial applications. Uh, yes, we still, we, I mean, to your point, we've seen a little bit of a slowdown in pharma. We had a very. Very strong performance in 2023. There is a little bit of a big impact, but we are seeing a little bit of slowdown. It shows in instruments. As Guillaume was mentioning earlier, we see a little bit of softness in instruments overall, not only pharma. And we are seeing good traction on reagents, including in pharma. So to your question, we don't anticipate a massive, significant slowdown that would be noticeable to you guys for pharma applications. And third question, that's an easy one, 2025. Obviously, it's very early days, as you point out. We've just communicated a Go28 ambition in April. Very glad to report back a very strong H1. And it would be definitely anticipated to make any change to the Go28 ambition. But let's say we start with a strong foot and the right foot to be able to deliver the Go28 ambition that we have.

Thank you very much. We'll go next to Carvia de Spande with UBS.

Hello. This is Carvia from UBS. Thank you for taking my questions. I've got two, please. The first one was just on the share of spot fire installations this quarter by setting. I think in Q1 that you'd said it was 75% of installations were in outpatient sites. Would you be able to provide a similar update for this quarter by any chance? And then my second question was on the VITAC reveal. I was just wondering if you could give us a sense of how you're going to be approaching distribution, please, whether you'll be leveraging your existing sales reps and any kind of update on the early demand that you're seeing. Thank you.

So can you repeat your question on Spotfire? What was your question exactly?

Yes, it was just the percentage of installations that were in outpatient settings this quarter. I think you'd said in Q1 it was 75%.

So I'm not sure we share that level of detail, but overall, we still have a blend of outpatients and we still, I don't know if it's a majority, but it's actually very well split between pure outpatients and lab settings. So no significant change in Q2. And again, Q2 is a bit of a low basis for, because we have fewer installations, but it's The more general answer to your question is we're still seeing an opportunity for spot fire in both segments, point of care and decentralized sitting within the hospital. On your second question for Vitec Reveal, it's actually a beautiful complementary solution into a microbiology offering. So we definitely want to leverage a commercial go-to-market. It comes together with Vitek Reveal, with Vitek MS Prime, with Virtuo, with Vitek. So it's very much the same teams, very much the same marketing. And the overall plan, as we are launching, is to leverage the resources that we have already in place to market the product in the U.S.

So thank you very much. There is a written question. Jennifer, there is a written question.

So from . So one question, please, on the audit you are running on the US activities. What is the problem and what should we expect? management changes, more procedures. Pierre?

Yes, I'm happy to take it and give a little bit of color and context. So during the summer, while we were closing our accounts in the US, we have identified internally shortcomings on internal control and compliance matters. So we triggered immediately internal verifications. I hope you see... for obvious reasons, but also in the context of the closing of the accounts. We have identified only non-material impacts on media accounts. They have been fully integrated into financial statements, and they were obviously reviewed by external auditors. So moving forward, while we The internal investigations are ongoing. We feel confident enough to revise the group guidance as we just commented and stated in the press release. And overall, I should say, in the spirit of transparency and trustworthy financial communication with our shareholders, which is very much in the DNA of BioMérieux, we felt it was appropriate to mention it.

So, obviously, no comment on what we should expect because we need to run those investigations. Other written question? No written question.

Maybe one on VITAC reveal. You gave a bit of an update already, Pierre, but the question is, would you confirm the PNL you are expecting for VITAC reveal following FDA decision? i.e. 20 million euro losses and equilibrium in 2026. What I can mention, if we don't follow a P&L for reveal, what I can mention is we continue to invest in this solution. And yes, 20 million is approximately the amount of R&D that we spend to continue to support and develop the FAST. AST solution. We are very glad to have BFD approval this year, which definitely opens the full U.S. market, of course, being the main one for this solution, but it's just been opened now for commercial launch. So we'll see how we develop. We have given a target around $60 million in 2027 back at the Capital Markets Day for the sales, let's say, ambition.

Any other questions from the call?

Yes, we'll go next to Anna Bain with Barclays.

Hello, thanks. Anna Bain with Barclays on behalf of GORAD Jane. Thanks for the call and thanks for taking our question. Firstly, I guess if we could just dig down a little bit in terms of business lines. Previously, you were guiding to respiratory panels being slightly down this year and non-respiratory biofire panels being up 15%. I just wanted to confirm whether the bulk of the upgrade of your guidance was being driven by BioFire. And additionally, within industrial applications, your previous guidance was 9% growth this year. Is it fair to expect that you're now looking at a slightly lower growth level this year? That would be my first question. The second question really is around price increases in micro and industrial. You've obviously continued to have pretty strong pricing here and just wondering how sustainable you view this is. into the end of the year and into next year. Thanks very much.

So on guidance by business line, so basically our upgrade, and I think we mentioned it in the slide, without being resetting each of the different guidance, but we said where is the upgrade to 8% to 10% coming from. Obviously, as we said, we are surprised by the very good performance of RP beyond our expectation for this year. So definitely respiratory biofire we see today higher than we thought a few months ago. Second, non-respiratory as well is performing very well and slightly above expectations. You remember expectations for the year where Around 15%, we are significantly above. Microbiology, as Pierre mentioned already, we are also slightly above expectations. These are all the positives. We should mention also a negative Vidas. We had said that we would be flat. Now we see probably slightly negative for the year. So Vidas are the immunosays for everyone. And it's a blend of all these slightly better on those and just a small effect, but immunosays that make this upgrade to 8 to 10% range for the organic growth.

Second question was on prices.

So the second question, can you say again what was exactly your question on industrial application pricing?

Yeah, it seems like micro and industrial both continue to see quite strong pricing dynamics. I'm just wondering how sustainable you view this for the second half of the year and into next year. And maybe if I could just tag on one more with spiritually pricing. I think that's also held up pretty well and been pretty strong for you guys. So any thoughts around how you expect respiratory pricing in molecular to evolve going forward, especially given increased competition would be great.

Okay.

On the micro and industrial application prices, I would say at least for H2, we see similar trends to be pursued. And on the respiratory pricing, I can mention that we said the Slightly below 1%, so let's say close to 1% negative overall. Even the U.S. alone for RP is between 1% and 2% negative, which is basically what we were seeing for already several times.

So it's similar, not less, not more. We have time to take more questions.

And we'll go next to Jan Kopp with Deutsche Bank.

Good afternoon. Thanks for taking my questions. I also have three, if I may. The first one is coming back to your new guidance, which implies a deceleration of sales and adjusted EBIT growth in H2. Isn't that your typical conservatism, or is there anything we should consider here? And then secondly, on the increased FX headwinds to earnings, it seems like the situation doesn't really improve. Are you willing to exit some of your smaller countries where you faced hyperinflation, such as Egypt? And I understand that your margin proper in Argentina is quite attractive. How attractive is it in other countries where you're facing hyperinflation? And then lastly, on M&A, There are some concerns in the market that you could go for a bigger acquisition in an area where you currently do not yet operate in. Could you remind us of your M&A criteria and what exactly are you looking here for?

Okay, thank you.

So I'll start with your first question on the new guidance. I won't qualify a level of conservatism, but what you need to understand is that H2 is very much impacted by the respiratory season. We have a significant share of ourselves that is impacted by the magnitude of the respiratory season. And as I was sharing earlier, actually, November to January was very strong last year. So it creates a bit of a baseline that is... that is a bit of a comparison factor and we assumed a normal respiratory season for h2 so if you see and that's why we give a range if the respiratory season is stronger it would be in the higher range of the range if the respiratory season is longer than a normal season which honestly at this stage of the year is possible we would be in the lower range so that's the way we approach it and you have to take that into account significant sales in q4 and actually to be It's even, in a way, even more painful. It's really November, December that is moving the needle in terms of sales dynamics. Second question on a fixed headwind and consequences in terms of geographic footprint, Guillaume.

Yes, on hyperinflation. So for us, it's important that we monitor that closely. It's important that we are able to, especially on the hyperinflation countries, to actually be able to increase prices to offset the local cost inflation as well as the imports from our U.S. and European plants of products, which of course are much higher locally with the devaluation. So that's why we monitor as long as we are able to, let's say, compensate and therefore maintain overall, at least on a reported basis, a profitable business, we will maintain. But again, we keep open eyes and open mind. If there is a country where we see that it's not possible to actually have a reasonably profitable business, we could take other decisions. But at this stage, no, nothing to report in this category.

And on your first question on M&A, obviously, it's a little bit challenging to comment on the M&A agenda in a public call. But I understand your question. We have a very ambitious strategic plan, as you know. So obviously, we are looking at any M&A opportunity. in the spirit of it needs to make sense from a strategic perspective, as in the spirit of what we described on April 9th. It also needs to make sense from a financial perspective, impact on sales growth, impact on profitability, impact on debt level. So, those elements are definitely in our mind, and this is pretty much where we are. And maybe just to add to that in the spirit of what I said, because it was a little bit of a question on April 9th, as the CEO of the company, my very first priority is to execute properly GoToNGA plan. So, no, I mean, I'm very happy to look into many opportunities if and when they contribute, support what we want to do from a strategic perspective.

Understood. Thank you.

We'll go next to Marianne Bullitt with Bank of America.

Thank you very much for taking my question. I have two, please. The first one is I just wanted to double check that your midterm guidance of at least 10% EBIT growth is still valid for next year. I'm asking simply because you raised the guidance for this year, so it makes it a bit of a tougher comp for 2025. And then the second question, I just wondered if you could talk a little bit more about the Spotfire opportunity in Japan and what are the expectations you have for this market? Thank you.

Cool. Do you want to talk about the first one and the guidance, at least 10% for 2025, for the years to come?

Yes. And again, it's our commitment to go for this at least 10%. So we do confirm, of course. Yes. It's a year-on-year improvement that we will target. So you're right.

We have a higher basis, and we're still committed to deliver at least 10% year-on-year. On your second question on Japan, good question. It's actually probably the second biggest market in the world for point-of-care. There is a point-of-care market, which is reimbursed, which is organized. So, and we were, I think it's fair to say that the teams have been very successful in getting both BioFire. By the way, for BioFire, Japan is the second biggest market after the U.N. We've been very successful in getting SpotFire approved. For Respiratory, not yet SourceRoad. We are working on getting SourceRoad in Japan. We are seeing a good level of traction. As I said, significant share of our install base is there. We have a good pipeline with some deals coming up in Q3 and Q4. We haven't communicated on specific targets for Japan, but it's definitely a geography that is an opportunity for us to deploy our spot fire solution internationally.

Okay, thank you very much.

There is a recent question on Spinship. I'm being asked to answer it. Could you please give some comment on your recent investment in the capital of Spinship Diagnostics? And so we've acquired 20% of the capital of Spinship. It's a company from Norway that is... developing a point-of-care immunoassay system that we see as very promising, very competitive. We've looked at multiple companies and technologies in the field of point-of-care immunoassays. As you know, in point-of-care, you don't only have molecular, you have also a lot of immunoassay solution. So back to the strategy, MNA question that we had, we obviously look at this field with high level of interest Complementing a spot-fire solution together with an immunoassay point-of-care solution would make tremendous sense. We are very glad with the progress that is being made by Spinship. They are running a clinical trial as we speak. We have one board member, and we follow up very well. We have a very close relationship with the team. So it's a financial investment, but it's also very much a strategic investment. Nothing much more to comment at this stage, but very glad with the investment that we made and very excited, actually, by what they could bring to the market.

Maybe one last question, Jennifer, if you have one.

Yes, we'll go next to Shibangi Gupta with HSBC.

Your line is open. Maybe he left the call.

I have to confess we're running late. We'll stop there. So thank you very much.

Thank you for the good discussion and the good questions. We'll probably meet some of you in the next few days in the context of the roadshow. Looking forward to future interactions. And have a good day. Bye-bye.

Bye.

This does conclude today's conference. We thank you for your participation.