DiaSorin S.p.A.

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the Diasaurian First Quarter 2021 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Carlo Rosa, CEO of DioSorin. Please go ahead, sir.

Yes, thank you, operator. Good afternoon. Welcome to the quarter one DioSorin conference call. As usual, I'm going to make some general comments about the business, and then I will turn the microphone to Mr. Pedron, the CEO of the company that is going to take you through the numbers. Let me first start to say that, as usual, I'm going to comment numbers at the cost of the exchange rate because, as you know, dollar variation has been significant, and the product effect is fairly significant in Q1. And I will talk about the COVID business and ex-COVID business to give you a view about how we see the market developing. Let me start for once from the ex-COVID business. I believe that the company performed extremely well in quarter one. As you've seen, plus 6% versus quarter one last year. We introduced a couple of adjustments to allow them to understand the real trend. The first one, we took out the effect of some one-offs regarding the vitamin D contract with Quest. that, as you know, was there last year is not any longer in our revenue this year. And then the Siemens effect, meaning that last year, Manusaccio, the Siemens ELISA was stopped as the contract, and therefore, whatever was converted to CLIA was converted, and the remaining ELISA revenues have been dissipating throughout the last few quarters and now are almost nil because of the fact that the product is not there. So if you take out these two effects and you look at how the business performs, The growth is 6%, which is an indication that in several geographies, notwithstanding pandemic, the lab business and the hospital business is returning to a relatively normal course. As far as specialties are concerned, as you know, our revenues are skewed towards specialties. We suffered last year because non-elective surgeries were actually not performing. Now with the clinical patients going back to get tested and to be monitored, then we see, again, the use of specialties going up to where they were. So extremely comfortable with the way that this business is doing, specifically from a geographical point of view, as we have discussed a few times. U.S. is actually the lion's share of the growth, and this is because of the fact that the hospital strategy is paying out. The TB product line, T-cell, together with Cajun is working very well, as you also have seen from the Cajun comment on the work-losses business. And again, that goes together with a series of specialties, primarily gastrointestinal that we have launched in the U.S., and they follow suit together with TB on the same customer base. Europe, same thing, notwithstanding pandemic is clearly stronger here at the time, notwithstanding that in all the main countries, the base businesses are returning to normality, and again, We are gaining from the fact that some of the ATP business that was developed together with Kayagen now with all the install base and all customer gain is providing traction to our traditional ex-COVID business. Now, let's talk about the elephant in the room. Let's talk about COVID. And as you know, as far as COVID is concerned, We look at COVID in three different technologies. And I'm going to comment the three technologies, so molecular, serology, and COVID antigen high-tropical testing. Now, let's talk about molecular. And when we look at molecular, we need to actually comment U.S. and Europe separately. As far as the U.S. is concerned, public data shows that the molecular testing has been significantly decreased, volume-wise, from peak time, which was actually Q4, let me say, around December, January this year. Public data show that daily testing peaked at 1.6 million around December, and now we are closer to a million. and the projection is that by the summer it's going to plateau at 750,000 PCR tests per day. We see in the U.S. the trend of our business to follow pretty much the path, all driven by the fact that there is less request for the time being of testing volume. We don't see any effects of farm pricing also because, as you know, the reimbursement scheme under the emergency situation is still in place allowing customers good reimbursement for all the testing which is performed. Now, if you look at Molecular Europe, we see a completely different trend. We see a little bit of softening but really not so remarkable. And this has to do with two effects. First one certainly has to do with the fact that pandemic is still in place. Strong demand in the major geographies where we play. I remind you that during COVID time when there was shortage of systems and reagents, we elected to give priority in Europe to certain countries, namely Italy, Spain, and partially in France. And therefore, we built and installed these primarily in hospitals in these three countries because of the fact that, again, testing volume in these countries continues to be strong and because of the positioning of our platforms, which have been typically used in emergency room or hospital admission of patients. We don't see today any decline. To the contrary, we see an expansion of the soul base because there is more need of smaller systems and, conversely, less need of high throughput systems in these hospitals because decentralization of testing now is becoming the relevant part of the COVID testing adoption. So in combination of Europe holding and the U.S. declining according to market volume, we have now developed a certain view vis-a-vis the ERM guidance that I'm going to describe later. But you understand from the time being, molecular-wise, this is what we see. Let's comment on serology. Serology for us is what we always said, the part of the business that we believe is going to take longer as a necessity to monitor vaccine response, not necessarily in the general population, but in certain very specific populations. Lots of publications have been Now, I'm now demonstrating that in immunocompromised patients, in dialysis patients, in certain populations, the response to vaccine is different from the normal population. And therefore, we see adoption of testing, of serology testing and monitoring that is, for us, significant. We have, as you know, an extensive install base of Liaison XL. And we see this volume growing rapidly. on a monthly basis, a high single digit. We also have serology used in secondary countries like in Brazil and India where there is still a growing number of cases and lack of solutions, molecular solutions. Therefore, we see in these countries also the adoption of serology still growing. And we continue to be positive about the fact that serology adoption will continue, and especially in those countries like the U.S. where we believe eventually monitoring is going to be added as part of the physical checks, annual physical checks provided by insurance companies. So very positive about that product and very positive about the opportunity of that product. Last but not least, high throughput antigen testing. High throughput antigen testing has been developed by the in light of the fact that we believe that high volume of an extensive molecular testing was going to become an economic issue in several situations. And we thought that a sensitive high throughput antigen test could provide a solution For the time being, we have not seen that shift. We have seen antigen testing clearly being decentralized, as shown by many of our competitors who play in that field. By the same token is public knowledge that we are participating as a primary supplier of LabCorp to the national tender in the U.S. for returning to schools. You know the tender has been postponed already a couple of times, the opening of the tender. We are enrolled in the tender as a supply of laughter, so depending on what laughter is going to be awarded, we are not going to get certain volumes. But clearly, we are all waiting. I think everybody is waiting to understand what the Biden administration is going to do vis-à-vis implemented testing for school reopening. You know, in the US now we are toward the end of the school season, so we're talking about adopting this kind of testing starting from August when school reopens in the US. So now if we look at our guidance for the second half, it's very clear that what we built in is uncertainty vis-a-vis COVID. We are confident about our base business, but when it comes to COVID, we designed two fundamental scenarios. One scenario which corresponds to the high level of the guidance is that we're going to be repeating H2, so the COVID revenues in second half are similar to what we will experience in H1. And that entails two things. That entails that we're going to have some participates, so some revenues coming from the school contracts we'll offer, and a combination of robust respiratory systems, okay, which means that COVID and flu and differential diagnosis will be needed in 2021 wintertime When clearly, you know, symptomatic patients are going to show up, still there are going to be debates about efficacy of vaccine, long-term efficacy of vaccine, and so adoption of molecular testing will be there. That's the best case scenario. Then we have a base case scenario, and the difference between two is roughly 80, 90 million euros, where we're not going to get pretty much contribution, significant contribution from the school reopening program. And together with that, the season, the rest of the season is going to be lighter than what expected because the vaccine will prove to be extremely efficient. And the full need of COVID testing adoption is not going to be as strong as somebody can proceed. I believe you will appreciate the fact that this uncertainty is clearly shown by all diagnostic companies, and so I think we're going to get better visibility when we enter into the second half. One more comment, or two more comments before I turn the microphone to the objective. First one has to do with an announcement we made over the fact that we have initiated a collaboration with Lumos. Lumos is, I remind everybody, an American company that provides what I would call second-generation laminar flow technology. We are in the process of launching two COVID products, COVID serology and COVID antigen testing, in some target European countries mainly focused on the Italian market. And we are testing the pharmacy setting because we believe that, as you know, we have a strategy of decentralized testing with a liaison net for molecular and now the liaison IQ for antibody or antigen testing. And therefore, we are deploying this system through a set of large distributors in Italy. Italy has 19,000 pharmacies, and we want to understand how this system is perceived, what's the story behind COVID testing. You're clearly using the COVID time opportunity to deploy and install this. So for the time being, we have not built financial expectations because we want to see what the contribution will be. But this is a program that to me is very important for the company because it's the first step into a segment that we stated before we want to play strategically at all in the near future. Last comment I want to make is, and I would like everybody to remember, is the fact that we have a series of initiatives with new products coming to a different level of diagnostic vis-a-vis the viral versus bacterial infection, which is largely today dominating space of clinical needs. And last but not least is the China plan. And the China plan to me, which is on time, and I would like to remind everybody that strategically companies today have to develop a China for China strategy because the message sent by the Chinese government over the COVID pandemic is that they clearly want to be independent from European or American technology when it comes to diagnostics and And there's a strong indication that if you want to be a player, you need to be a player perceived as a Chinese true contributor and not necessarily an exporter to China. So keep a note on that. Clearly, this is not going to affect short-term numbers, but mid-term numbers, I believe any company that wants to bet on the fact that growth will continue to come from China has to find a smart strategy to now move their setting into China. And I remind you that the way I define smart for a company like ISO in the fact that we are operating in China through a joint venture with the Chinese government that guarantees us visibility of what's strategic for China these days and moving forward. So with that, I'm going to leave the mic to PG, and then I'm going to take it back for Q&A.

Thank you, Carlos. Good morning and good afternoon, everybody. In the next few minutes, I'm going to walk you through the financial performance of PSO during the first quarter of 2021. As usual, I would like to start with what I believe are the main highlights of the period. We closed the quarter with an increase in revenues, a constant exchange rate of around 60%. Q1 confirms the steady recovery in the ex-COVID business, as just discussed, in spite of the previously viewed loss of the vitamin D business in quest and the termination of the distribution of the Simon Seaman Cellizer products. COVID-19 sales accounted for 102 million euros in the quarter, slightly better than the last quarter of 2020 at the current exchange rate, vis-à-vis 4 million euros in Q1 2020. Q1 gross margin at 69.4% of revenues is a touch better than Q1 2020, which closed at 69.1%. and marks an improvement compared to the last quarter of 2020, which closed at 67.6%. Q1 adjusted EBITDA at €130 million, records an increase of €65 million, or 101% compared to Q1 2020, with a margin of 48.6% on revenues compared to 36.9% of 2020. The growth at constant exchange rate is 110% with a margin of 49%. Q1-21 reported EBITDA is €118 million and the difference with the adjusted EBITDA is due to €12 million one-off costs related to the Luminex acquisition. Lastly, we keep confirming our ability to generate a very healthy free cash flow, 80 million euro and a quarter, with an increase compared to 2.20 of 40 million euro or 100%. The net financial position is positive for 394 million euro with no debt and 430 million euro cash. The difference between the two being driven by the right of use introduced by ISRS-16. Let me now go, please, to the main items, to the main lines of the P&L. Q1 2021 revenues at €267 million grew by 53% or €92 million compared to last year. The growth at constant exchange rate, as we said, is 60%. The weakening of the U.S. dollar against the euro is the main reason behind these FX headwinds. The increase in revenues is the result, as we saw, of the steady recovery of the ex-COVID business and of the COVID contribution. Q1 2021 gross profit at €185 million grew by 54% compared to last year, closing the third quarter with a ratio of revenues of 69.4% compared to 69.1% of the same period of 2020. The margin increase compared to Q120 is a result of a higher operating leverage driven by higher volumes partially offset by different product needs, namely more COVID molecular sales, which enjoys slightly lower margins. I believe it is also worthwhile to underline the gross margin increase compared to Q420. which recorded a similar level of revenues, €271 million versus €267 million of Q1 2021, and a lower marginality, 67.6% versus 69.4% of Q1 2021. This variance is mainly driven by a favorable clear product mix and lower instrument sales, and more importantly, by some efficiencies coming from cost reduction initiatives implemented in the molecular manufacturing processes toward the end of last year, which are now very important. Total operating expenses at 68 million euros or 25.4% of revenues have increased by 3.3% compared to last year. During the quarter, All of our subsidiaries have experienced a general slowdown in some activities, mainly travel, driven by the lockdown measures implemented by the government of most of the geographies in which we do business. To 121 other operating expenses, 14 million euros increased by 9 million euros for 150% compared to last year. This variance is entirely driven by the one-off expenses correlated to Luminex acquisitions, which accounted for about 12 million euros in the quarter. As a result of what just described, Q1 2021 EBIT at 103 million euros of 38.7% of revenues has increased compared to 2020 by 109% of 54 million euros. The tax rate at 23.8% is slightly higher than what we recorded in 2020, 23%. This increase is mainly driven by the fact that some one-off costs driven by room next acquisitions are not tax deductible. Q1 2021 as a result, at 78 million euros, or 29.3% of revenues, is higher than previous year by 40 million euros, or 107%. Lastly, Quarter 1-21 adjusted EBITDA at €130 million, 48.6% of revenues, is higher than 2020 by 101%. The variance at constant exchange rate is positive by 110%, with a ratio of revenues of almost 50%. This result is mainly coming, as we saw, from the good gross margin and the operating leverage delivered by the increasing revenues amplified by a muted increase in operating expenses, which in the quarter accounted for about 25% of total sales vis-à-vis 38% of Q1 2020. As we have discussed, the only difference between adjusted EBITDA and reported EBITDA is the mentioned one-off cost related to the luminous acquisition. Lastly, let me just cover 2021 full-year guidance, already been explained by Carlo. So, as usual, it's three views here, cost and exchange rate. Total revenues to increase between 15% and 25%, out of which the business ex-covid represents an increase of around 15%. and the adjusted EBITDA margin between 44 and 47 cents. In this definition of adjusted EBITDA, we mean without considering the luminex acquisition related one of expenses that we will book from here till the end of the year, on top of the one we booked in Q1. Please, like always, consider that the Australian financials are highly exposed to the U.S. dollar. And even more so now that the United States represents about 40% of the total growth rate. And therefore, as the usual rule of thumb, consider that for every one cent movement of the dollar against the euro, the Australian revenues move by about 3.54 million euros on a year's basis. Now let me please turn the line to the operator to open the Q&A session. Thank you.

Excuse me, this is the Choral School Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Maya Pataki with Kepler. Please go ahead.

Hi, good afternoon and thank you very much for taking my question. I have two right now and then I'll go back into the queue. Could you please provide us a rough split of the COVID-19 revenues? How much was roughly molecular and serology just as you did in Q4? That's my first question. With regards to the Lumos partnership and the rollout of the liaison IQ in Italy, I understand it's early days and therefore nothing is included in your guidance, but could you provide us maybe just a rough indication on how pricing is positioned and how we could think about the financial impact? Thank you.

I will – hi, Maya. I'm going to take the second question, and then I'll let E.G. take the first one. Look, here the business model in the pharmacy business is completely different because you go through distribution, right? And then – so you don't have pretty much a lot of cost under, let me say, the transfer price of the distributor. Okay, so between the transfer price to your distributor and your pre-tax, there isn't much. So what I'm learning is that you are going to be, I mean, good product should really leave you a margin that sits between 25% and 35%. Okay, the difference is that all that then goes pretty much down to your bottom. And so we are, again, learning the space, but my sensation is that if you have a product that is generating that kind of margin, is leaving the rest fundamentally to the wholesaler and to the pharmacist that actually is taking the lion's share of the margins when it comes to these diagnostic products, but by the same token, they're also taking the lion's share of the cost because they must now hire especially in Italy. They have to have a biologist or a physician come and perform the test. So my expectation is that we are going to have that kind of margin, but the contribution then to your bottom is going to be not bad.

Yeah, I believe you asked about the breakdown of COVID cases in Q4. No, after Q1, just like you did in Q4.

Okay. Yeah.

Okay, cool. Not a big difference there. I mean, we never gave a precise breakdown, but I believe we discussed a few times that the contribution of the immunodiagnostic COVID products, so the GM and the antigen, was between 5 to 7 million euros per month. So I believe you can use that as a ballpark number to get the Q1 phase of the immunobucket, let me say, and all the rest is molecular.

Okay, great. Maybe just quickly a follow-up. Carlo, thank you very much for the scenario analysis or the base case and best case scenario that you've given us with the guidance. And I do understand the difference. But just to double-check, so you're not in your – best case scenario, high level scenario, you are not assuming to see an acceleration in serology testing. So you basically think it's whatever is coming from serology or antigen test is basically what we're seeing in Q1 throughout the year and not that there is a higher adaptation of the antibody test with regards to the vaccine immunity?

I'm sorry. Okay, separate for one second. So serology, you mean antibody testing?

Sorry, yes, antibodies, sorry, yes.

Yeah, because then we have the antigen testing. So I believe that we continue to see this business trail up. But I think that what is going to move, and it's not a bad business for the finding, as you have seen by what Vigi is saying, certainly it is dwarfed by the molecular opportunities. But I believe that you will see a change in this when two things happen. First, more data are going to be generated with the different vaccines vis-à-vis the long-lasting, I mean, how relevant it is to monitor the antibody response. Because if Long-term studies, and I'm saying about now 12 to 18 months, are going to show that the response pretty much stays up. Then, you know, the need for monitoring is going to be less. But the second thing, the second element you need to consider is that the initial clinical data I said are demonstrating that that may be true for general population, but then you have lots of subpopulations related to clinical certain clinical disease that where certainly the vaccine response has not been as strong. And not related clearly to a clinical situation, but when you talk about the old age group where you know that the immune response is not as strong as in younger people, but those are the ones that are susceptible to the infection, and we need to understand how long that response will last. The second element you need to consider, as it happened, I already, I think, did comment on this one, as it happened with vitamin D in the U.S. specifically, which is going to move the needle because it provides immediately 40, 50 million tests per year, is the fact that the SARS-CoV-2 serology is introduced into the yearly check provided by the insurance companies. I believe all this is going to be more a 2022 effect, right, because by year end, You're going to have more studies to understand immunoresponsal vaccine, and then decisions about monitoring are going to be taken next year. As far as we are concerned, as PG is saying, it is a business that is fluctuating between 5-7 million per month that we expect to continue to trail up between now and the end of the year.

Okay, thank you. And PG, just a last question on the guidance, on the EBITDA margin guidance that you're providing here. the range of 44% to 47%. Is it as straightforward as to think that if you hit 15%, we're going to be at 44% and if you hit 25%, you're going to be at 47% or are there several layers of cost savings that could put you anywhere in the range loose of the fact where revenues come in?

I mean, you know, there are many moving parts. There are projects, co-saving initiatives, which, I mean, as I said, we've already seen the results. Some others are going to be kicked off pretty soon. But there are many moving parts. Think about OPEX, for example, right? So we need to make some assumptions in terms of traffic coming back because, you know, people will start to go back and, you know, go and see customers and so on and so forth. So at Bold Parker, a short answer is that Yes, but with some flexibility.

Okay, thank you very much for that.

If I may make a comment, which I think is a general comment about this, which to me is fascinating, is the fact that think about our overall industry that was able, within 12 months' time, to express a testing capacity of 4 billion test rates. I've seen that the estimate today is that worldwide today there is a manufacturing capacity of roughly 4 billion tests. All that capacity came with investment and hiring people, right? And I think what is going to be interesting vis-a-vis margins is that you're going to have now all that cost, that if you've not been building that cost as a variable cost, then it's going to eventually hit your P&L. And as far as diastolic is concerned, I believe we have been extremely careful and disciplined about making sure that that cost is a variable cost and we are taking out that cost when we see manufacturing volume going down. But just to reflect on the fact that I see, and it is incredible, you see companies saying that they've been investing hundreds of millions into infrastructure. And I really want to understand what is going to happen to all this cost when the volume, and we all hope it's going to happen, is going to pretty much go back to almost zero. Just a reflection.

Thank you very much, Carlo.

The next question is from Peter Valford with Jefferies. Please go ahead. Mr. Ralford, your line is open.

Hi, sorry. Thanks for taking my question. Can I just ask, first of all, just sticking with the outlook, just to understand the base outlook, the base business of 15%. Is that on the same basis as the 6% number that you provided this quarter? So in other words, it's excluding the Siemens advisor, the flu business, obviously volatility and the Quest contracts. or is that 15% on an absolute reported basis for 2020 numbers? Secondly, then, if I could just ask, just with regards to antigen testing in particular, I know you commented about the economic alternative in LabCorp in the US, which I think is fascinating, but I wondered if you'd comment at all on the emerging markets. Are you seeing, in places, for example, like Brazil and India, are you seeing any adoption of antigen testing there as an alternative to the sort of more costly and infrastructure-intensive PCR testing? or is that really not materialized to a significant extent either so far this year? And then thirdly, if I could just ask just on the Lumos product again, just curious to me, is Italy a test market region? But obviously it's a market you know well. But I guess just thinking beyond Italy, can you just give us some thought into which other countries in, I guess, in Europe could be attractive, but equally which ones perhaps have other unique challenges that we need to consider just to consider longer term? Thank you.

Okay, I'll take the question about the antigen and then the question about humus. As far as antigen is concerned, look, the only market that today has been engaging on high-throughput antigen tests is Russia, where we do have an extensive install base. and there has been adoption as in the other what we call primary markets where we serve direct of antigen testing. When it comes to India and Brazil, I believe that these markets have been flooded by cheap Chinese-made products, rapid antigen testing. And there has been a very interesting, I don't know if you didn't follow it, but one of the last flights that actually flew into Italy from India carrying 200 and some passengers, 90, and they were all with, they all had results done with an antigen test in India that said they were negative. I think 90 of them, eventually when they were retested over here, they were positive. That tells you a lot about the quality of some of the stuff that unfortunately goes around the world when it comes to these antigen testing. But in the secondary market, you are facing with the reality of markets where, you know, they don't have the FDA on one side or they don't have the European authorities. So the quality of some of these products is not there, but the price is certainly cheap. So positioning high-throughput quality products like the liaison Excel has been complicated. To the contrary, what we have seen, though, is that in Sankant, again, India is a good example, we are having a good success with serology, IgG, and IgM because those tests have been adopted on a high-throughput scale to monitor patients because now they're becoming more monitoring tools. in some of the clearly Class A larger institutions. But as I said, antigen testing is unfortunately today all cheap stuff in these geographies. The second question is which other markets? Look, we said in 19 already that we would follow decentralization. We started the liaison just on this molecular development together with TCC. Then the COVID hit. And the major issue pre-COVID about decentralization and testing and setting outside the lab was the fact that in many countries it was not legal to do such testing. So pharmacists did not have a license to perform this test. Italy was not an exception, but with COVID they made an exception. In the U.S. also was complicated, but I don't know if you followed recently, a week ago, a bill has been filed to allow CMS reimbursement for diagnostic testing in pharmacies. Okay, so we believe that where we're starting from Italy, because we don't understand the market and because of proximity, Italy is a good place where we can learn the space, learn how to market, learn the distribution, but I keep saying that strategically the U.S. is the place to be because in the U.S. is the only country in the world where they are starting to understand that the pharmacy business, which as you know is pretty much private business between Walgreens and CVS, they have they have understood that that business with Amazon competing on home delivery is doomed. And they are thinking about transforming their business model from, you know, a generic supplier of drugs and food, as any pharmacy is today in the U.S., into a health service qualified provider. And in that model, then diagnostic will play a role, especially now if a government is opening to reimbursement. So long story short, Italy, good way to understand strategic is certainly the U.S. market.

And Peter, I guess I'll take the question on the 15% guidance stuff. It's all in. So it's considering the whole ex-COVID business of 2020 and what we project we're going to reach in 2021. Please remember that Q2, Q3, Q4 of 2020 and the ex-COVID business of those quarters in 2020 was affected by a decrease in volume caused by COVID. Just on the top of my head, I believe that Q2, for example, the ex-COVID business was down, give or take, 35%, not only for us, for your industry. And I believe this is going to give you more ground to understand why we think 15% is a sensible guidance for the ex-COVID business in 2021.

That's great. Thank you very much.

The next question is from Scott Bardo with Barenberg. Please go ahead.

Yeah, thanks very much indeed for taking my questions. And thank you for providing some guidance framework for the full year, which I think is helpful. So first question on the group level guidance of 15 to 25%. I just want to understand this a little bit better. I think I understood your comments that At the upper end of the range, you're assuming that COVID remains broadly stable. So, with that in mind, I think you're suggesting that both serology and antigen compensate for the anticipated decline in molecular. I want to understand a little bit then, please, with respect to this LabCorp tender. Can you give us some sense of potential magnitude for the size of this opportunity and whether you include all of this opportunity within the upper end of your guidance framework or just partially? That would be helpful. Secondly, and underneath this, your routine business or your normal business growth that you're highlighting to be around 15%. I just wonder if you can help us better understand the first start, the beginning, the start to this year. A 6% adjusted growth seems relatively low in the context of the sort of recovery growth that we've been seeing in the context of the rest of the industry. So I wonder if you could talk to any specific special items that would mean even that adjusted growth where it is right now. And lastly then on this 15% growth guidance for the routine business. Help us understand whether this is all simply recovery from the declines last year or whether you're now starting to embed any material contribution from new product launches like Liaison, XS, and others. Thank you.

Okay, Scott, I will try to take the first question. I'm not sure I understood the second question, to be honest with you, but When it comes to the first question and the upper range of the forecast here, I think that, as said, what we are saying is that we now have visibility on H1, and the upper range means that we're going to have H2 in line with H1. I think it's undeniable that you're going to have... You're not going to go back to 1, okay, unless disaster happens, but you're not going to go back to 1.6 million deaths per day in H2, okay? So we are going to have, we forecast that the molecular is not going to be as strong as in H1, but we believe that you're going to have still a growing demand, so over what they are Projecting of 750,000 tests at the day, which is what the consensus says about the current volume, driven by a respirator. Certainly not going back to the 1.6 million. The delta there would be actually filled by a tender that, as you know, has been public information, is a tender asking for 25 million tests per month. U.S. is divided in four quarters, and LabCorp clearly is looking for a chunk of this business. They're going to be providing solutions, a combination of molecular and antigen. And so in the upper end of the curve of the guidance, we see that you're not going to have the same contribution of molecular, same as H1s. But what is going to bring you to the same level of overall COVID revenues is the fact that antigen will fill in. Hopefully, I cannot tell you what to expect because then I would be actually, I would be talking about lab core numbers, which I cannot do. Okay. But that is the way I interpret it or we try to figure out the upper range. Second question, you're saying 6% is... No. Well, let me tell you that I'm reading, I think, the same thing you're reading about what other competitors, other companies are reporting. And I think it's very difficult to compare nodes between companies because, in my opinion, if you look at last year in Q1, you had two effects. You have a relatively stable U.S. business because the U.S. was not in the same situation as Europe. You had Europe growing especially in certain geographies because of a stock effect. Customers, especially private labs, were buying lots of goods expecting disaster in delivery and moving forward because Remember, we were closing borders. There were no flights and so forth in Europe, which was not experienced in the U.S. And then you had China. And China was actually tanking pretty much starting already from February and March. So depending on the weight of revenues of the different companies in these three environments, you would actually notice, you would see that you have a different effect on what is called base business. This is why I'm not looking to try to compare what we do versus others do because I don't understand how they define base or the comparison vis-a-vis their base business. But let me just give you a number which is to me very interesting. If I now look at 19, okay, 2019 Q1, and you look at 2000 and you look at now 2021 Q1, now we are talking about an improvement on the base business around 60%. in spite of Quest, in spite of everything. So don't do the carve-out. So the 6% 2021 versus 2020 is different from the 6% to 8% improvement I'm talking about versus 2019 with All In. And if I look now at that number, now I'm saying that my base business is actually doing not that.

I see. That's clear. Thank you. And that makes sense. And given your 15% growth guidance for the base business, is that just purely recovery, Mr. Rosa, or are you expecting contributions from new launches already in that number?

No, I believe that, look, when you look at new launches, you're talking about the line seasons. which were the effect, you know, we are launching the product in Europe and we still, there's a lot of uncertainties about adoption guidelines and so forth, so you don't see the effect this year. And now we're, and then new launches, we are talking about MIMET ERN, but the contribution in 2021 is going to be very low. The 15% is built on the fact that, as I told you, the U.S., is doing fantastic for us and on the liaison business with the gastroenterology and the play with the QIAGEN and the fact that now LabCorp has started to use our own liaison Excel solution for the ATP for which us and QIAGEN are extremely fond of. The growth that is coming is actually coming from the current business and current programs that are actually taking place, especially in the U.S. and lots of emphasis on the hospital strategy that is paying out, as I said before.

Understood. Thank you. And very last quick one for me just to be entirely clear. Is your new guidance framework now superseding your previous guidance for 40% or so growth in H1, or are you still confident that you can achieve this sort of 40% H1 expectation within the context of your new guidance?

Scott, this is Pierre-Georges speaking, superseding. This is the new guidance. Even though, you know, back of an envelope calculation, I guess – H1 will land pretty close to what we said in the previous guidance.

Very good. Thank you, guys. I'll hop back in the queue.

Gentlemen, Mr. Rosa, there are no more questions registered at this time. I turn the conference back to you for the final comments.

Okay. Thank you, operator. Take care. Bye-bye.