Biomerieux S A Unsp/Adr

Good day and welcome to the BioMario fourth quarter sales and full year 2024 results conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Emeric Fichet. Please go ahead.

Thanks. Good afternoon, everyone, and thank you for joining us to review the BioMario 2024 financial performance. I'm online with Pierre Boulu, CEO, together with Guillaume Bouhour, CFO. Before ending the call over to Pierre and Guillaume, 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 assurance as to whether we will achieve this objective. I also remind you that today's call is being recorded and that a replay will be available on our website. I will now hand the call over to Pierre, and then we will open the call to discussion and questions. Pierre, it's to you.

Thank you, Aymeric. Good day, everyone. Good morning. So let me start with a review of our 2024 business. So first of all, as you know, this is the first year of delivery of the Go28 plan that we disclosed to the market almost a year ago. Also, first full year for me as a CEO for the company. And I'm very glad to report back that on all four dimensions of our Go28 plan, we are either at target or above the target. So in terms of sales growth, we have a 7% sales growth compounded growth rate over the next five years. We've achieved 10.3%. In terms of profitability improvements, we've increased our profits by 20% at concentration rates. In terms of engagement for our teams, we have actually reached our target, which is to be in the top quarter in terms of engagement of our employees. And finally, the responsibility dimension of the Go28 plan. We've managed to reduce greenhouse gas emissions by 13% in absolute terms versus 2019. So if we go into the numbers, again, a very strong sales performance, a little bit above the revised guidance, 10.3%. Driven, I'll come back to that, by the four growth engines of Go28. Profitability improvement is above the revised target, that was between 12 and 17%. 20% improvement in 2024, very much supported by the GoSimple improvement that we've initiated in 2024. And finally, I'd like to highlight strong performance in terms of free cash flow, 330 million euros, almost tripling the free cash flow generation that we had in 2023. So all three components point towards a very strong financial performance in 2024. Now if I move into more specifically our sales growth drivers, So the first growth driver, as you know, is biofire non-respiratory panels. I won't read through all the elements that show in the slide, but I will highlight three of them. First of all, Our cross-selling strategy that we've implemented in the last few years has been working very well in 2024, actually at the same pace than in 2023, improving by four percentage points, for instance, the percentage of customers using at least three panels. So we're seeing a very strong, continuous execution of that cross-selling strategy. The second element I would like to highlight is in terms of new units, I mean, as you all know, we are by far the market leader in syndromic testing, be it in sales, be it in install base. I think the good news of 2024 is that in terms of new clients or new capacity for existing clients, nobody has installed more units than us in 2024. So still by far the market leader in terms of customer expansion. And finally, continuous innovation. Very glad to report that we have two new panels that were approved end of 24, very beginning of 25, tropical fever panel and a new GI midplex panel that allows to address an additional segment of GI patients. The second growth driver is Spotfire. So for Spotfire, we have actually exceeded our sales guidance. It was 80 million euros for 2024, reaching 95 million euros. Very glad we've already shared in January the instrument installations in Q4. So after 250 in Q2, 600 in Q3, reaching 900 in Q4, we're seeing a very strong adoption and very exciting action with regards to Spotfire. And that number allows us to confirm a 450 million euro target for 2028. The third growth driver, microbiology, we are at the top end of the guidance range that we gave, 6% to 8% in the context of Go28, slightly above 8.3%. This year, very much driven by reagent growth, because as we've had the opportunity to share in 2024, the new instruments, sales institutions have been a little bit slower across all our product ranges for BioMérieux, BioFire, microbiology, VIDAS, and industrial applications. So, 13% sales growth demonstrating the value of the use of BioMario reagents on our instruments. We are very happy with that, together with a good price increase. The second element I would like to highlight is we keep innovating into this market, sustaining market growth. And probably the highlight of 2024 for us has been the FDA approval of ViTechReveal that allows to launch end of 24, beginning of 25, ViTechReveal solution in the US. Finally, the fourth growth driver relates to industrial applications. Again, on the high side of the range, 7 to 9, we're at 9% growth. Again, very much driven by reagent sales, 12%, and price increase, very positive, allowing and demonstrating the value of the solution. The other element I would like to highlight for this growth driver is that innovation is also supporting the growth in this segment. GINOP is a molecular solution that allows for the food market to grow. improve our diagnostic capabilities. And in pharma, 40% of our sales are coming from recent product launches. So very reassuring factor for me, showing that our capacity to generate sales growth for the future. And then there are obviously two important segments, even though they are not growth drivers, where what we want to do is maximize the value of the install base that we have. So on biofire, obviously respiratory panels are a big chunk of our sales. We are planning to have flat sales. That's one of the very good surprises we had in 2024. Very strong sales performance. In the context of competition, that you all know is... is growing and showing very limited price erosion, so really demonstrating the value and capacity to be competitive in this syndromic market. The other area where we want to maximize the value of the installer base is VIDAS. It's probably one of the weaker points for 2024, together with new instruments. We want it to be flat. We are low single-digit declining, minus 5%. We're actually flat excluding PCT, but we keep declining on PCT by 20-ish percent. So it translates into an overall decline of 5% in 2024. During this period in 2024, we've launched two new panels. One is traumatic brain injury, the other one is B12. Moving on to profitability improvements. So Guillaume will come back to the detailed numbers and the P&L, but I wanted to give you a little bit more qualitative perspective on Go Simple initiative. even though not every action that we've identified, of course, has been completed in 2024. It's a five-year plan. But I'm very glad to report back that 80% of the 50-plus initiatives to improve profitability have already been initiated. We are working on them, and they are already starting to deliver tangible outcomes. So I'll give you three elements. The first one is, as you know, we've been working in the last few years on biofire automation. We have fully validated respiratory panel automation, and we are now in the process of expanding our manufacturing capacity, installing the new lines so that the panels are fully manufactured in a fully automated model. And it's already, at the end of 2024, 10 percent of biofire pouches that are fully automated. And of course, it will increase in the next few years, supporting a profitability improvement target. The second element, we're also working on managing in a better way our G&A cost, and very glad to report that we have generated significant savings with regards to highest near-shoring. It's very general, and of course there are ups and downs, but talking about the headcount of BioMérieux, the number of employees that we have, and of course it depends by department, but if we look at the overall headcount of BioMérieux, R&D, manufacturing, commercial teams, G&A, we have flat headcount at the end of 2024 when we compare with 2023, which means that we've been able to generate 10% sales growth without increasing the number of employees, which obviously has a financial impact in 2024, but has also an impact moving forward in terms of career impact for 2025. So very positive report on this Go Simple dimension. It's been also a busy year, as you know, in terms of product launches. As you know, we invest 12% of ourselves in research and development. It's a critical component for us. And for me, as the CEO for the company, it's critical that we maximize the return of that 12% investment. So BioFire, I've just mentioned two new panels announced in the last 12 months. Spotfire, I remind you that last summer, actually, we were capable to launch Not only respiratory, but source route panel that allows to complement our offering for respiratory disease. Microbiology, I've already mentioned the launch of Vitec Reveal, FDA approval over summer. Immunoassays, two new panel, traumatic brain injury and vitamin B12. For industrial applications, I wanted to give you two examples for the food market. One is Genoptyper that allows to better identify the root cause for listeria contamination for food manufacturers, and Trusted Third Party that is also an additional opportunity to work with food manufacturing companies. Finally, before handing over to Guillaume, a word on the fourth dimension, corporate social responsibility, we've made significant progress over 2024 it's it's a critical component of our go 28 ambition i've mentioned on the positive side the minus 13 percent of greenhouse gas absolute emission very much in line with a target to reach minus 50 percent in 2030 we are making some good progress on different dimensions maybe on the less positive side it's fair to say that the last day incident rate, so the safety indicator that we are looking at, is not where we want it to be. So it's definitely an opportunity for us to improve and to work on in the next few months. And with this, I'll hand over with Guillaume, who will give you more granularity on the financial numbers.

Thank you, Pierre. Hello, everyone. So here you have a recap. Of course, I will not repeat what Pierre presented already, but the recap of the It's a split of the growth for the group. Just very few comments. You see that now the whole molecular ranges, BioFire plus SpotFire, represent 40%, 37% plus 3% for SpotFire. So overall 40% of our revenues. And the second big, let's say, family of ranges, microbiology, 33%. Another comment is that clinical operations, you don't see the sum here, but are 85% of sales and grew 11% organic in 2024, a very impressive performance, especially when you compare to market peers that are, let's say, way below that. And industrial applications, we mentioned already, 9%. In terms of prices, also, if we take everything together, and I'm sure you have a We have questions on that. We have a very limited decrease, very limited actually, 1% on respiratory US, and a very positive, as Pierre mentioned, 4% price increase on microbiology, 6% price increase on industrial applications that all contribute to our 10% organic. So with these few comments, we can look at the more, let's say, geographical view of our sales performance. North America grew 11% organic with, of course, the boost of the biggest part of the spot fire growth, as well as a double-digit respiratory and double-digit non-respiratory in the U.S. Latin America is a very dynamic region for us. You see 33%, of course, that includes hyperinflation from Argentina, which we tend to carve out to see, let's say, fundamental performance, which is actually 12% excluding Argentina. So also super strong and dynamic and driven by all the countries, especially on microbiology and biofire. EMEA, our second, let's say, core region after the U.S. and North America, pretty dynamic at 7% organic growth, solidly pushed by Central Europe. Spain, France, and Middle East in 2024. And as you can read, especially strong on BioFire, which when you combine RP and non-RP, were together up 20% in EMEA. Asia Pacific was slightly lower at the plus 5% organic, with, let's say, more contrasted trends in the region. Double-digit growth, very satisfactory in ASEAN, very strong success of spot fire growth in Japan. And we are glad to report that we are flat actually in China, thanks to the resilience of our microbiology business, which makes the bulk of our China sales, while of course, and we can come back to that, immunoassays are down in China. Now turning to the P&L. So below the net sales, the gross profit improved at a constant exchange rate by 70 bps in terms of margin with several factors there. First, the price increases that we already mentioned, especially on microbiology and industrial application. Second, a favorable mix effect, product mix effect, especially with less equipment this year and a higher growth of reagents, but also inside the reagents portfolio, a positive mix. And also, we can mention a good management of the cost of manufacturing and supply chain. By the way, to make the link with what Pierre mentioned on the increasing full automation of biofire manufacturing, this, of course, helps the cost and is part of this improvement of growth margin. All this offsetting, let's not forget that we have higher placement. We see that in the capex, higher placement of spot fire, which, of course, means higher depreciation. as part of gross margin. Below gross margin, SG&A were up 9.5% on a like-for-like basis, mainly with investment in sales and marketing, and also we can mention the digitalization of Bayer Mario, so it means IS, information systems, investments, which also help on efficiency. R&D is up 7%, and you can see that we are now at 12% 3% of sales invested in our internal innovation in R&D. It's a solid investment, but slightly lower in terms of percentage of sales in line with our Go28 ambition. Overall, a SEBIT that is up at constant exchange rate 20% year-on-year, 150 basis points improvement of the margin at constant exchange rate, and on a reported basis, 10% up and 30 basis point improvement due to, as we reported and exactly in line with our guidance, an unfavorable foreign exchange of minus 59 million. By the way, we have added a slide to give you also additional maybe visibility or updated visibility, I should say, on the FX effect. So the 59 million of 24, about 40% of it is linked to the hyperinflation countries, Argentina and Turkey. And then the rest is linked to a lot of currencies that have moved versus Euro. I can mention China, Impact, Japan, a bit US, but not so much, India, et cetera. That's part of the 59 million. We've updated on the right for the analyst the exposure. I remind you that we have, as you can see, for example, a very high exposure on USD on the sales because the US are 45% of our sales. but much lower SEBIT exposure on the USD because we have a high base of cost with manufacturing R&D and functions in the US. That is a natural hedge. So we have much higher, much stronger, let's say, sensitivity to, as you can see, China, India, UK, Japan. When we take the rates at the end of Feb, so actually one week ago, The simulation for 2025 gives us simulated minus 30 million or around minus 30 million guidance as an impact on SEBIT in 2025. Now turning to the rest of the P&L below SEBIT. The first element to mention is that we had to book a new impairment, an additional impairment of our China immunoassay NTC Hybiome. I remind everyone it's a very small immunoassay company that we took control of. We have 87% of the company. It's about 20, 25 million euro revenue, so really small. But let's say the... The company is slightly growing actually in 2024, so not so bad, but the market of ImmunoSA, as you've probably read, is under very strong price pressure from the authorities and from the competition. So the prospects for this company are not easy, and we've booked this additional 49 million impairment, which you should read. It's not easy. Minus 26 in other non-recurring for the tangible part of the impairment, and minus 23 is part of the amortization of intangibles. Just to mention that after this, what is left in terms of net book value of Hybium in our books is only 32 million for, let's say, tangible assets such as real estate and equipment. Net financial expense was slightly more negative than last year, especially due to hyperinflation, let's say, bookings, as well as some losses on FX, which is part of hedging. Income tax rate is very similar to 2023 at 26.6. Just to mention when we retreat from one-offs such as the impairment, the recurring tax rate is about 24%. And overall net income group share is therefore up 21% on the published reported basis. and even adjusted from FX plus 36%. You have seen and read that in line with our dividend policy that we announced at the Capital Markets Day, the dividend policy is to be around 25% payout ratio. The board is proposing to the General Assembly dividend increase of 6% to 0.9 per share. With that, and as Pierre stated, it's an important highlight for the year. We believe the cash flow and the very good performance with a free cash flow of 330 million, as Pierre mentioned, almost tripled year on year. EBITDA explains a big part of that with 90 million or so addition. You see that working capital still on a negative consumption way, but much more limited than in 2023. To explain the key constituents of working capital, we increased our inventory by 85 million, partly due to the build-up of equipment inventory for the new launches, such as, of course, Spotfire and several other products that Pierre mentioned, but also to, let's say, follow the activity and the growth of our activities, especially BioFire. where we added inventory for the biofire reagents, which we were very glad to have for the January, February respiratory sales. Receivables are up with the consumption due to the growth of, let's say, November, December 24 versus 23. No issue on the days of receivables. And the big effect on the other side, positive in the other working capital, is due to the increase. When we say social debt, it's actually a lot about variable compensation, you could say bonus, that are much higher with a very good performance in 2024 and will be paid in March, therefore in provision at the end of 2024. So all these elements make the minus 47. Investments are at, as expected, around 9% of sales. As you can see, almost a similar level as in 2023. We invest mainly first on the industrial side to increase the automation in Salt Lake City for biofire, as well as increasing capacity in many of our sites for future growth that we look forward in the Go28 plan. And also to mention that as part of this CAPEX, We have the placement capex of the install base, the spot fire equipment, especially, with our customers that are growing. The overall €330 million of free cash flow that was spent for business development, some minority stakes in a spin ship, minority in 24 and full acquisition in 25, in the acquisition of Lumed and purchase of treasury shares just only to cover, let's say, our plans with employees and free share plans. Overall, BioMario has a very strong balance sheet at the end of 2024, 41 million debt, which is almost, let's say, a neutral cash debt position, and a lot of headroom for potential Bolton acquisitions, which, by the way, makes us talk about our latest Bolton acquisition, technology acquisition, Spinship.

So just a couple of words, thank you Guillaume, just a couple of words on Spinship Acquisition that we have signed in January and closed actually in the same month of January. We, as you know, it's a pre-revenue biotech from Norway, which is developing a very elegant point-of-care immunoassay solution. Very easy to use because it uses capillary blood, so you take a drop of blood from your finger. It's also very adapted to the point-of-care market because it gives results in 10 minutes for high-sensitive troponin for myocardial infection. And very good quality tests because basically the quality of the performance that we're seeing, that by the way was published, is similar to what you find in biology laboratories. So with this, we've moved forward with acquiring the company and welcoming Norwegian colleagues at BioMérieux. There are two main areas of synergies for us. The first one relates to a point-of-care strategy. We've talked a lot about Spotfire. The idea is that with Spinship, we'll complement from a commercial perspective our investment with Spotfire for Spinship. On the other hand, as I said, it's an immunoassay point of care, so we can also leverage the immunoassay expertise that we have at BioMérieux, be it manufacturing, be it R&D, to really accelerate and support the development of Spinship in the global market. From a financial perspective, we are going to embed the development costs from now on into the 12% of sales that we keep investing every year and that we've communicated to you. From a sales perspective, the very first launch with the first test high-sensitive troponin should happen in the course of 2026. So it's more a revenue growth driver for post-2028. So no significant change to our perspective for 2028. And with this, I think I have one slide, my final slide on the outlook for 2025, which I'm sure I will talk about. So, from a sales perspective, we guide towards at least 7% sales growth. So, of course, very consistent with what we said in the context of Go28, but you have to understand on a higher basis for 2024, since we grew 10% in 2024, we still believe we can grow at least, that's the floor, 7% in 2025. I won't go through the detail. Non-ARP around above 10%. Microbiology around 7%. Industrial applications around 8%. Immunoassays mostly flat. We expect spot fire to double sales at 190 million euros. And we expect the respiratory panel to be flat. Again, building on the fact that we are 12% above what we're seeing at the end of 2023. From a profitability perspective, again, very similar comments to the sales target, very consistent with Go28, even though we start from a higher basis with a 20% improvement of SEBIT that we displayed in 2024. It's going to be a combination of sales growth, product mix, and OPEX management. Guillaume mentioned the fact that there will be an exchange rate impact that we expect to be significantly lower than in 2024, but still in the range of 30 million euros. While we do this, we keep investing into the business, in the growth for the years to come, by 2028 and beyond 2028. So we expect to invest between 9 and 10% of our sales into the future of the company. And with this, Aymeric, I think we've covered the slides and we can open for Q&A.

Thank you. If you would like to ask a question, you may signal by pressing star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star 1 for questions. We'll go first to Aisha Noor with Morgan Stanley.

Hi, good afternoon. Thanks for taking my questions. My first one is on the spot fire sales trend for the fourth quarter. And by the way, thank you for the biofire and spot fire revenue disclosure. That's very helpful. So, yeah, the spot fire sales, if I do the math, it would imply around €14,000 per spot fire system placed. Is this the right way to extrapolate the pull-through potential per system for 2025? Or is this too simplistic? If you could share with us your thought process to getting to the guidance of 190 for 2025, that would be helpful. The second question is on the placement trends. So obviously we saw some volatility in your biofire placements in Q3 versus Q4 on the back of some cancellations or deactivations. Does your 2025 guidance include some conservatism in the event that this slowdown in equipment growth continues? Or, you know, how does your experience from this volatility shape your forecast for biofire in 2025 plans? My last question is, again, on BioFire, but more on pricing dynamics. So are you seeing incremental pricing pressure with the entry of new competition in the U.S. respiratory market in Q4? And what pricing assumption are you building into the guidance for RP and non-RP BioFire in 2025? Thank you.

Okay. So maybe I can answer. So Spotfire Q4 and actually going forward, that's the most interesting, I guess. As you rightly point, I mean, the model is a bit complex. And the reason for that is that we, as you saw and as you know, we have a different type of customers and different channels to market linked to that. The hospital market, which we channel directly, we sell directly to, and the outpatient market, point of care, traditional point of care market through MacTesson in the U.S. The consumptions on these different types of customers are different from what we see and pretty different. Even the type of panel, the speed between RP15 and RP5 is quite different. It's also different. It's not that simple, not just the two segments, but sometimes even the regions or the states inside the U.S., depending on, as you know, the patchwork of reimbursement is different. So the model is not simple. So to your right question about maybe too simplistic, the model is changing, is moving. You can definitely see that the consumption direct per, let's say, the global base of placement is changing quarter on quarter. We try to take all this into account in the best way we could, and we are very confident with our guidance to be doubling in 2025. But we want to avoid, it's very difficult to detail the full model of simulation, I would say. Maybe on biofire pricing, so as I mentioned, the price erosion, actually I mentioned RPUS is very limited, around minus 1% overall in our portfolio, and it's actually better than that on non-RP. We factored the same level, similar level in 2025 in our budget and therefore in our gains. Placement trend. So your question was more on the spot fire placement trend or more the bio-merrier equipment?

Bio-fire, which we saw shifted quite a bit from Q3 to Q4. So how does this kind of shape your view on the bio-fire trajectory for placements and, I guess, sales in 2025?

So BioFire overall, as Pierre said, yes, you're right, there is volatility from one quarter to the next. That's why we always say, especially as we are a medium, long-term view company, that we don't look really at one specific month or quarter. We look at... bit longer trends. And that's why when we look at the full year, Pierre mentioned that we are very glad with our additions, which I remind you are net additions. So it includes the increase of capacity for some customers, and there are quite a number. It includes a decrease of capacity for some customers. New, let's say, one, customers, and of course, lost customers. But it's all this that makes up the plus 1,300 net. And we are very confident to be able to grow the sales with this kind of numbers in 25 as peer-guided and for the next four years of Go28.

Thank you very much.

Thank you. We'll take our next question from Otisis Manasotis with BNP Paribas.

Hi. Thanks for taking my questions here for Hugo. So firstly, a bit of a follow-up to Aisha's question. On the biofire placements, given that you're calculating net additions here, how do you feel about many of your five-year rental reagent contracts? signed in 2020 uh expiring this year i mean back to the volatility point is there even a chance that we might see let's say negative uh placements for biofire in a single quarter uh around the time where you placed a lot of these for pandemic related testing uh and and secondly A quick one on inventories. Thanks for the detail there, Yiam. But these have remained quite high relative to your COGS compared to the recent past. I mean, I understand that a big part of it is because of the plenty of product launches you're going through. But does it make sense to assume that this will be going down quite materially, proportionally speaking, over 25, 26? Thank you.

OK, I take it. Thank you, Odysseus. So first question on biofire placements. And I think what I understand is that you're saying the placement that you sign in 2020 that will expire in 2025, what's going to happen? So a couple of comments there. Maybe three. The first one is, actually, we don't do that many placements on biofire. They are mostly sales. so there is a thank god a level of renewal of reagent selling that is actually very strong because we have a high proportion of biofire instruments that are sold so less volatility if you wish that what you see probably in the point of care segments the second element is we are not pessimistic based on what we're seeing in 2024 in terms of competitiveness versus the competition, we are not pessimistic about 2025 and we feel we can still hold a very significant share. The third element that makes us relatively confident is that Guillaume mentioned the fact that we have limited price erosion and probably the most competitive intensive panel, which is ERP. So we believe that we can hold share while maintaining our prices. So, yeah, that's what I would say to answer your question on placements of BioFire done in 2020. On your inventory question, you're right to say we've still increased. Even though we have significantly improved cash flow generation, we have still increased increased a little bit our stocks not at the same pace and in 2023 but still we don't give a guidance on stock or cash flow as you know and we are working on improving the level of stock that we have the teams are working on it there are a number of actions that are being initiated so even though we don't guide for that i want to reassure you that this is something we are working on and looking at very closely.

Understood. Thanks, Pierre. Thank you.

We'll take our next question from Marin Ballou with Bank of America.

Thank you very much. Good afternoon, both of you. Just two questions for me. The first one is, could you talk about the respiratory season that you're seeing so far in Q1? Is it fair that we can assume a sequential growth versus the Q4 numbers, given the season was a little bit late into this year? And also wondering if you have seen some stockings from your customers on the respiratory side in Q4. And then my second question, you had a good contribution from other income, which is R&D tax credit to your EBIT line in 2024. And I think you mentioned the R&D tax credit as well in the working capital movements. So just wondering if you could explain a little bit what it refers to and whether we should consider it to be a recurring item going forward. Thank you.

Thank you, Marianne. So I'll take the first one. Guillaume will try to answer your question for the second one. So respiratory season, the big usual question, I would say, because as you point out, it has an impact. So for us, you have to understand respiratory season has an impact in Q1 and Q4. So those are the two quarters where we see the impact. As you could see, Q4 was stronger. from a respiratory season perspective, and it shows in our cells. And it's likely, I mean, we're not at the end of Q1, but what we're seeing is Q1 is relatively strong. What we have accounted for is Q2, Q3 being back to normal, and Q4 to be moderate in 2025. So moderate comparing with high respiratory season in Q4, 2024, Overall, that would be a favorable comparison in Q1, a less favorable comparison in Q4. And to your question on stocking, no, the answer is a straight no. We haven't seen any specific stocking impact in December that would have an impact on January sales. And the R&D tax credit question, it's a complicated gift, but I'll leave it to Guillaume.

Thank you, no problem. So definitely, for everyone, you are referring to other income and expenses, which is a positive line in our P&L, thanks to R&D tax credit and specific grants. This line was, as you can see, much higher in 2024. We had a special, let's say, one-off grant and additional recognition of R&D tax credit, especially positive in 2024. It should come back in 2025, probably lower, I would say slightly closer to the earlier years.

Okay, thank you. Thank you very much. And just to make sure I understand clearly on the respiratory season, so Q1 should be sequentially better than Q4 in terms of the strength of the season. Q1-25, Q4-20-24. OK. No, sorry.

So you didn't get me. Q1 and Q4 are both strong respiratory seasons. They are very, very high for, relatively high for those two quarters.

Not stronger Q1 than Q4. Okay, thank you very much. Thank you.

We'll take our next question from Maya Pataki with Kepler.

Hi, good afternoon, and thanks for taking my questions. I actually have a couple, if I may. I would just like to start with Spotfire. You've indicated that 85% of the instruments placed in the U.S. are outside of the hospitals. Now, I was wondering if you'd be able to provide us with more color on how much of your reagent revenues of Spotfire were on the 5-plex versus the 15-plex, and also how much of your revenues were in hospitals and more in the outside hospital point of care setting. That's number one. Number two is a question related to the recommendation of the CDC that was put out beginning of this year that is supporting or basically indicating that hospitalized patients, particularly in the ICU, should get a subtyping of influenza to allow for further subtyping of potential avian flu cases. Do you believe or have you seen any support for respiratory syndromic hyplex testing in the US coming from this CDC recommendation third question you still continue to have good placements in the US and I was wondering is it the entire portfolio that is driving the interest from your customers or what is it that keeps you as an interesting partner within the US setting and then lastly a very big picture question that may or may not answer at this point in time, but looking at what is happening currently in the U.S. with the cuts to U.S. aid with weird statements coming from R.F. Kennedy Jr., how do you anticipate this to impact the infectious disease market nearer term and longer term? Thank you.

Okay, so let's, hello Maya, let me start with the first question, which is Spotfire, give you a little bit more granularity. So a split of 5-plex, 15-plex, in value is 60% of the sales are on the 15-plex, 6-0, and 40% are on the 5-plex. So that's just click-in value. Obviously, since they have different price, the volume is slightly different. And Guillaume mentioned that when we were talking about the model for Spotfire. Obviously, this mix is changing, and we're seeing, to your point, significantly more five-plex use outside of the hospital and significantly more 15-plex use inside the hospital. So the setting mix has an impact on this product mix. Even though, I have to say, we are also seeing a very decent use in outpatient settings for 15 plex. The reimbursement is sometimes possible. It depends on the location, if you're far away from the hospital, if you are an immunocompromised patient. So there are actually opportunities for the patients to have access, even outside of the hospital, to 15 plex. And, I mean, we kind of keep saying you have to keep in mind we've been 18 months in this market. Our install base is relatively fresh. So we are still learning the markets. And that's why we don't give too many details because there are so many drivers into the model that it's easy to make mistakes in extrapolations. When we see our install base more stabilized, the mix of products more stable, of course, we'll be in a better position to share more granular numbers. But at this stage, this is what we can share with you. CDC and the kind of what they issued in terms of guidelines Maybe I should say that we don't see a significant impact on syndromic testing. What we can do is the subtyping allows to have with a 15 plex and a regulatory RP, regular RP panel, we can actually already subtype between flu A and flu B. And in case of avian flu, we can also identify it, even though we cannot subtype it. It shows that flu A. So we think we are relatively well equipped in case there is more implications. But at this stage, we don't see a significant business impact for us based on CDC guidelines. Your third question was relating to placement in the US, but I'm not sure if you are speaking in general of BioMérieux business, BioFire or SpotFire.

It's on BioFire. Given the fact that your competition has stepped up last year with panel launches, but also Diasorum being new in the market, I was wondering what is it that hospitals are saying, like, okay, that's why we go with BioFire, despite the fact that we have a cheaper alternative or different kind of alternatives in the market?

Okay, so it's actually a competition question on BioFire. As you think, the numbers don't lie, right? There were lots of talks in the last 12 months on renewed competition, and we've kept saying that we have a very competitive syndromic offering in the market. be it time to result, be it menu, be it quality of service, reliability of the instruments. So what we see in the market, and I think it's confirmed by the numbers, is that we have a very strong position in the market. Maybe I'd like to highlight three elements that for me are elements of reassurance with regards to the competitiveness of BioFire. The first one is Our cross-selling strategy is actually working as well in 2024 as it was in 2023. So we keep increasing the proportion of clients that use at least three panels, which shows that the new launches have not changed that dynamic. The second element I would like to highlight is our growth in terms of new instruments is still, even though the market was slower, very dynamic, and at least based on the information that is disclosed in the market, by far, we are the market leader in new installations. So I'm not even talking about reagents, new installations. And the third element is we have very limited price erosion. Guillaume mentioned 1% on recipe, very limited on the other panels, which means that we manage to do all of that without discounting and compromising on our price points. So as we've said repeatedly in the last few quarters, we are very confident in our capacity to hold a very strong market share. And of course, you know, we have a formidable competitor. So we are looking very closely at the situation and monitoring it on a regular basis. And if and when we see there is a need for a change, we'll activate them. But so far, I think so good. Finally, the kind of big picture question on new Trump administration and potential impact. Maybe first general comments, which is... There are new news every day, I would say. So a lot of different talks, a lot of... You know, and sometimes... information that are not always confirmed so we keep monitoring the situation but in general I would say too early to say if there is any impact for us because we haven't seen yet very concrete measures. Probably the one topic that is most talked about these days is potential tariffs and as you know there are now very active discussions with regards to tariffs with Canada and Mexico and already in place for China. So as far as BioMérieux is concerned, 85% of our cells are manufactured in the U.S. So as you know, BioFire is 100% manufactured in the U.S. SpotFire, 100% manufactured in the U.S. Microbiology, Vitec, BactiAlert, 100% manufactured in the U.S. Because of very strong manufacturing and R&D footprint in the U.S., exposure to U.S. tariffs is relatively moderate. But, of course, I mean, very evolving situation, so we monitor it very closely, and, you know, we'll make sure with the supply chain and manufacturing teams that whatever happens, we'll try to make sure that patients keep having access to our diagnostic solutions.

Thank you. Okay.

Sorry, operator, we'll go for one question on the app. So actually two questions from Arnaud Calard. The first one is, are you increasing prices in non-U.S. countries to offset the re-evaluation of U.S. dollars? The second one is, would you comment on the patient dispute with QIAGEN on the tuberculosis? And remind us of the size of this business. Not patient, but patent. Patent. You take the price question? Yeah, of course. So the price question is about the countries with devaluation. So as we already mentioned in previous calls, especially on hyperinflation countries, and I think we detailed in H1 results, we are able to increase prices in Argentina and Turkey notably to be able to offset the devaluation of the currency and therefore the increasing costs from Euro base or US dollar base. And we do confirm that for the full year for those countries, for the hyperinflation countries. Then for some countries that have, let's say, more moderate fluctuation and devaluation, such as India, China or Japan, it's more difficult and we are not always able to increase prices in those competitive markets to offset the devaluation. There is another one just as we are on FX and then we move to Kayagen patents dispute. There was a question online on the expected FX impact on the top line and the stability for 2025. So just especially the question is on US dollar. So just on the top line, again, we have a huge exposure on the US dollar, 45% of our revenues. I didn't mention, it's very difficult for us to guide because it's moving very fast. Actually, you see the US dollar move from 1.04% to 1.08 in a week, which is really an amazing swing. So seen from today, but again, moves faster for the top line. I would say the sales impact would be kind of around neutral on our top line, FX impact on our top line neutral. It's not a guidance because that changes a lot. We are not hedged on the top line. It can move very fast. Our guidance is really on the CBIIT net impact because For the U.S. dollar, we have a natural hedging of localized costs that are very significant in the U.S. We hedge a number of the exposure, at least for one year, where we can hedge on most of the rest of the world. And we have, of course, remaining exposure. But overall, we have this minus 30 million, around minus 30 million FX guidance for SEBIT impact in 2025. And now moving to the QIAGEN patent topic.

QIAGEN patent, I won't be able to say much, but I can share a few comments. First of all, maybe a general comment, which is BioMérieux is, of course, I mean, we spend 12% of our sales in research and development, we generate a lot of intellectual property, and we are very committed to protecting the intellectual property rights of any third party. I should say that first because it's an important topic for us and a very important topic, I think, for the industry. The second element is we don't actually know much more than you guys because to our knowledge, as of today, the proceedings have not started. So what I can tell you is BioMario has not been officially been served with anything. So we don't have the material supporting the disputes from Thiagen. The one element we believe we understand is that it would relate to TBI-GRA test, tuberculosis, tuberculosis, latent tuberculosis test. If that were the case, It stands for less than 0.1% of ourselves, so definitely not material. But again, we need to know more about what QIAGEN is concerned with. And by the way, we're a little bit surprised of how the information was circulated in a context where we don't even know what the dispute is all about.

That's what we can say on the topic.

Okay, we can maybe come back to live questions.

Thank you. We'll take our next question from Natalia Webster with RBC.

Hi, thanks for taking my questions. I have a couple, please. The first one is to follow up on Spotfire. You saw better than expected revenues in 2024 and are guiding to more than double revenues in 2025. Are you able to give us an idea of what you expect in terms of phasing across 2026 to 2028 to reach that 450 million target by 2028? Does that look a bit conservative now or are you expecting some impact from more players entering the market later this year and into 2026? My second question is around the lower instrument sales in microbiology and industrial applications in particular. Do you expect this to pick up into 2025? And if so, are you expecting some mixed reversal impact on your margin if instruments start to perform better? And then finally, in terms of CBIT growth and margins, are you able to give us an idea on the factors that contribute to phasing to hit that 20% margin target by 2028? You say more than 80% of your initiatives have already started and some are already delivering, but do you expect more implementation costs through this year in 2026? Thank you.

Thank you, Natalia. I'll start with the first two questions.

Guillaume will take the third one. I mean, to your point, it's a long way to 2028. So what we see for us is the 190 million is very much on the right trajectory to reach 450 million in 2028. We don't give a specific guidance for the following year, 26 and 27. I mean, there are multiple factors that can play in favor or against upsides and downsides with regards to what can happen between now and 2028. So for now, we think it's more reasonable and prudent to keep the 2028 guidance at 450 million, based on what we're seeing in the market. That's the answer to your first question. The second question, low increment sales in 2024. It's fair to say that, let me say it this way, what we've seen post-COVID in 2023 is a bit of a rebound in terms of instruments. Because, I mean, for obvious reasons, our clients were very much focused on dealing with COVID during the years 2020, 2022. In 2023, we've seen a bit of significant amount of investment and we benefited from it for microbiology industrial applications and also molecular. In 2024, it went lower, probably a bit in contrast with the higher 2023. Probably what we kind of assume for 2025 is to come back to something neutral in between 2023 and 2024. So a little bit better than 2024, maybe not as high as 2023, but getting a little bit better than 2024. With regards to profitability and how we get to the 20% in 2028, maybe Guillaume, you can give some color.

Yeah, with pleasure. So I remind you and everyone, so the 20% is that constant exchange rate. So it was a commitment to improve by 340 basis points, which when we look at the 150 already done in 2024, is a significant part of the way. But still four years to go and a lot to improve. As we stated during Capital Markets Day, the earlier years, of course, we have some implementation costs. It can be systems, information systems. It can be a startup cost of a new organization, new departments, etc. So implementation costs that then will generate savings and efficiency. We have stated some in 24, probably more in 25. It can mean several millions of that type that we included in our budget and therefore in our guidance for 2025. We remain very committed, as we said, to the minimum 10% SEBIT improvement year on year, which we confirmed for 2025 despite the very strong achievement in 24, so actually on a much higher base, we confirm still a minimum 10% SEBIT improvement. And we'll pursue that for the plan to reach the 20% margin improvement.

Thank you.

Thank you. Thank you. We'll take our next question from Ed Hall with Stifel.

Perfect. Thank you. Good afternoon, everyone. I guess my first question would just be coming back to the spiritual panel in the fourth quarter. I guess it's a similar question to what you answered before in regards to pre-buying. And I think I appreciate you've cleared that up. But on our math, I think influenza-like symptoms were down. So I was just curious, what is the driver for such a sort of strong end to the year? And then just a couple of questions, financial questions. First one would just be on progress in working capital. Obviously, congrats on the free cash flow number. That's very strong. How much more is there to go in this regard? And then finally, just on sort of the FX headwind, just looking at our math, it should be less than maybe the 30 million. Is there perhaps any sort of tariff-related reflection or conservatism baked into this? That's all. Thanks.

Okay. So I'll start with the first one. So your question was on... No, what we've seen is actually the flu season started late, but it was strong. So November, December were actually strong, and to be given the market share we have with respiratory panels in syndromic, I mean, we kind of benefit from it, kind of mechanically. So we've seen a strong flu season in Q4. As I was sharing with Marianne a little bit earlier, we see that continuing in the first two months of the year, January and February.

On free cash flow, definitely a strong improvement. We have not given guidance on free cash flow during Capital Markets Day, nor do we do it today. Yet we committed to improving free cash flow. So we did it in 2024. It's going to continue to be a focus to manage the... It's a better and stronger and closer cost control on working capital. So again, we don't give precise elements, but we believe we can continue to improve on that front, especially probably on the inventory management. FX had win. So again, we gave you this table that you've seen after the P&L to give as much clarity as we can on the sensitivity of our operating profits to FX on the different zones. Normally, you should be able to, I would say, play with it, test it as a rate move. I don't think we are especially conservative. We try to really factor the best possible way. The latest simulation, our simulation was much different on the rates at the budget time for us in November. It changed a lot. But here we factored the latest rates of two weeks ago with the forward rate. Because, of course, for emerging currencies, you have to look at... the six months forward, which is a better picture than the spot rate, you should find, let's say, around 30 million impact in 2025. Perfect.

That's very clear. Thank you very much.

Thank you. We'll go next to Jan Cook with Deutsche Bank.

Good afternoon. Thanks for taking my questions. I have three, if I may. The first one is on microbiology. Obviously, a very strong reagent performance in 2024, which was probably partially driven by some supply chain issues at one of your competitors. How do you view the risk that this could turn into a headwind in 2025? And then secondly, on your food testing business, have you benefited from some kind of stimulus tenders in China? We heard from some peers that some of them have seen a tailwind over the last few months. And then finally, potential NIH cuts is a pressing topic at the moment. I guess you only have a limited exposure, if any at all, with your industrial business, but could you remind us of your exposure to the U.S.

academic channel, please?

Okay, so let me try to take that. Microbiology... I suspect you refer to challenges of backorders for BD with hemoculture. To be transparent with you, the microbiology business, most clients have one sole supplier. So it's either BD or BioMérieux. They change contract somewhere. every five to ten years. So we haven't benefited from it. If we were to benefit from it, it would be in the years to come. But there is no specific... The performance of 2024 cannot be explained by the challenges of the competition. Hence, we don't see any particular headwind with regards to 2025. So that's the first answer to your question. Flu business in China...

Yeah, we don't have the food quality testing business.

Ah, food quality testing.

Got you. I mean, unfortunately, we haven't, I mean, we are always very supportive of any regulation that aims at strengthening food quality. And of course, we have good solutions to support the industry. But we haven't seen any, unfortunately, any positive impact yet into our Chinese business on food testing. The third element, NIH costs. Well, our business has very limited exposure to direct NIH spending or investments. So I guess we could argue if it's good news for science and for NIH and for the future, but from a business perspective for BioMérieux, very limited impact.

Okay, great. Thank you. We'll take our next question. Thank you. Maybe last question?

Thank you. We'll take our last question from Kavya Deshpande with UBS.

Good afternoon. Today, my questions are just two quick ones.

On guidance, it's also about the COVID-19 7% cell growth.

I'm sorry, sorry. Yeah, Kavya, sorry. Sorry, the line is super bad. Can you put your question in the chat?

Yeah, sorry. Is this any better?

Oh, yeah. Now it is.

Oh, super brilliant. Sorry. Yeah, no, my question was just to you. So first on guidance, so the starting point of your sales outlook of 7% growth is a little bit higher than in previous years. But for your profitability guidance, you've stuck to a starting point of at least 10% CBIC growth. at constant currencies. So should we view this as conservative with you aiming to beat this CBIT guide like you did in 2024? Or are there investments that we need to factor in that limit operating leverage? And then just my second one was a quick one on Spotfire. It would be great if you could give us an update on the momentum that you're seeing with the McKesson distribution contract and whether you expect this channel to continue performing at the pace we've seen in recent quarters. Thank you.

Thanks very much. So maybe to comment on the guidance, I would like to rephrase what Pierre said. The guidance is not 10% SEBIT increase. It's at least 10%. So it's really a bottom of the range at 10%. We don't give a top of the range. given also the geopolitical environment and uncertainties in the current environment that everybody knows. But clearly, it's the bottom of the range at 10%. That is our guidance. It's not the guidance at 10%. So it's a flaw. It's important in the way you look at it, and it's definitely the way we look at it. So it's important that you all get that from us.

And with regards to McKesson, I mean, when you've seen the traction, we're seeing, which is also, you know, of course, along the year, as we are getting into the respiratory season, we have a strong number of installations at the feature of that market. So the answer to your question is yes, we expect to see McKesson still performing strongly. It's... We still have a very, I mean, we are very happy with our sales performance, but to be honest, we have a very small market share. So there is a lot more to do. So we're working hard to keep that momentum and excellent collaboration, I have to say, with McKesson. It's proving to be very effective, very good dynamics between the teams in the U.S. So, yeah, we're excited with 2025.

Thank you very much. That's very clear. Thanks.

Okay. So with that, we can end the webinar. So thanks a lot.

Thank you, everyone. And we see some of you in roadshows.

Thank you very much. Talk to you soon. Bye-bye.

That will conclude today's call. We appreciate your participation.