DiaSorin S.p.A.

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Diasorin First Half 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 Diasorin. Please go ahead, sir.

Yes, thank you, Officer. Ladies and gentlemen, good morning, good afternoon. Welcome to the Diasorin call. We're going to be discussing the H1 results, and as usual, I will make comments on the at constant exchange rate so that we can take care of the exchange factor. First of all, this is the first conference call where we have expanded the Diasorium family. It is the Diasorium Luminex family today. I was in Austin last week. I believe we acquired a great company full of opportunities and technologies. with a lot of talented people. And during this call, I'm going to make some specific comments about the Luminex business. So let's start from DioSorin. When it comes to the H1 result, as you've seen, we reported in line with guidance. What is very interesting to notice is that compared to our expectation, we have the base business, which is doing slightly better than what we expected, and I'll explain why. And we have the COVID business that is doing slightly worse than we expected, mainly related to the antigen testing volume. that is lower than what we expected. But again, I'm going to give a little bit of details later on. Now, let's focus first on the base business. And, you know, for us now, the base business is fundamentally the CLIA business, now that the Siemens-Eliza contract was actually terminated, and so our revenues with ELIZA are becoming very small. If we now look at the CLIA business, And we look at CLIA without COVID and without vitamin D. And if we compare to 2020, clearly there is a phenomenal growth, 40% growth versus last year. But if you want to measure really how things are going, we should use 2019 as a reference. because we did not have clearly the COVID effect. And the great news is that our CLIA business, and again, ex-COVID, ex-vitamin D, is now growing 16%. And this is the result of the fact that I said many of the programs that we had, like the Quaniferon, like the GI, so the specialty program is really performing well in all geographies. And I'll just give you one example of a successful geography, which is the U.S., that, as you know, today is becoming the number one geography for the group. If I look at CLIA X COVID and X vitamin D, and I compare it to 2019, our business is growing 22%. And this is phenomenal. If I include vitamin D, The 22% goes to 12% because, as you know, we have lost the vitamin D business at Quest that we had in 2019, and we don't have it today. It was a very significant business. So notwithstanding that, our overall CLIA franchise in the U.S. is growing double digits, and we have a lot of installations that happened over the last few months. mainly driven again by the quantiferum and the gastroenteric strategy. Let me also remind you that in the U.S. we made an investment in 2019, roughly $5 million of OPEX in hiring reps, hiring marketing people, and hiring service people to support our hospital strategy. Our target was to close in the following three years no more than 150 hospitals, and I think we are now, notwithstanding COVID, at 100 hospitals already closed. So we're going to clearly by the end of next year, we're going to blow that number. So it's going very well, the hospital setting. This is very interesting because we're going to come in later, Luminex, The Luminex diagnostic business was primarily directed toward the hospital market, so we find ourselves now in a very interesting position where we have a hospital program with CLIA that will benefit also from the hospital customer list that Luminex brought to us. If you look at the Excel placements in H1 300 systems, which is not worthy considering that typically a good contributor to Excel placement was China. China is a difficult geography these days to access. And also there is a slowdown of placements in China because of the COVID situation. So we actually made better placements. than previous year in exchange placement worldwide, notwithstanding the slowdown in China, which means, again, as I said, our business in U.S. and Europe is really doing very well. Now let's talk about COVID. And as you know, COVID for us, I put in this big family of products, molecular, which makes the majority of revenues, and serology products, that are split between antigen testing and antibody testing. Now, in H1, COVID was roughly 180 million years. In Q1, we had a little over 100 million. In Q2, there has been a slowdown due to, on the site that we'll talk about, volumes. And in Q2, we have close to 80 million euros. So if we look at the molecular component, Q1 to Q2, we saw an overall decline of the COVID franchise of roughly 30%. Now if we look at the reason for this, for molecular, is as everybody else is reporting, in the U.S. there has been significant decrease in volume, which is roughly overall 60%. We are doing better than that because of the positioning of the system. It was never intended to be a high throughput system. And as you know, our volumes are moving away and getting more decentralized from the core lab. And so, yes, we lose volume, but not to the extent that other competitors have reported. It is not worthy also to say that so far we didn't see any significant price pressure, also because the reimbursement system in the U.S. has not been affected so far. In H2, so the guidance that you have seen, includes an overall COVID business, molecular plus serology, in the range of 140 to 150 million, which would put us in the middle range of the guidance. So still, compared to each one, we expect a 20% decrease. As you can imagine, still very complicated to make a real assessment of of what the COVID effect is going to be, especially in light of the recent news with the Delta variant. But as good as it gets, this is what we've included in the guidance, and we're going to give an update clearly in quarter three, where I think we're going to have better visibility on how the season is going to look like. Now, I will briefly comment about Luminex. I'm not going to go too much into detail, but I would like to touch base on some very important points. First point is our guidance, so what we expect Luminex to contribute in the second half. And we expect Luminex to contribute around $210 million to our top line program. of which around $30 million are COVID-related products. I remind you that because of a certain number of things, the COVID business that Luminex was able to develop in last year was relatively limited due to the fact that because of their technology, it was complicated for them to scale up manufacturing. This is why The COVID effect now is much less than what you could see on the dinosauring site. As far as business performance, we have the LTG business, which is clearly booming, is a very profitable business for the company. And if we look at the growth compared to 2019, so take 2019 as a reference, normal year is double-digit. Clearly, if you compare it to 2020, it's very high, over 20%. But again, difficult to compare things to 2020 because it was a very awkward year for, I think, all of us. When it comes to the molecular business, as said, we need to split the business in two. We have the Aries business, which is the single-plex business. That business is where they had an impact of COVID relatively limited in 2020. So the loss that can happen in, and it is, sorry, a relatively stable situation. as far as quarter one and quarter two is roughly around $10 million. And we expect, you know, that business to decline slightly in the second half, even if, again, we have no idea at all what is going to happen because of the COVID effect. That business is primarily a U.S. business. So it does not have the relief, let me say, of the European component. So it's primarily dependent on U.S. volumes. Then you have the multiplexing business. Overall, the multiplexing business has been doing okay. This has to do with the fact that there is a respiratory component to it, which clearly fired up. at the beginning and now as well, is dependent a lot on COVID plus the flu season, which nobody knows what is going to happen to flu in the second half. But more than anything, I think we should talk about the future, and the future is the Virgin 2 system. Let me remind everybody, what is Virgin 2? Virgin 2 is a fully... integrated sample-to-answer system that has been designed by Luminex to compete with the rest of the companies in this growing space. It does have a very interesting feature, which is differentiating vis-à-vis the other companies, and that's a flex system that would allow customers to tailor-make and design their own panels, The launch of the Virgin 2 has been impaired by two events. The first one is that the company, prior to Diasorin, elected to go through the agency, the FDA, with a panel for gastroenterology, and clearly that panel was, the review process was completely frozen by the agency because, as you know, in 2020 and still now, priorities respiratory. The company then submitted an EUA for respiratory right at the time when the FDA changed their policy, and now they want a fight and cake. So we are running the clinical study for the respiratory panel. And we expect that the clinical study will be completed at the end of the season because the respiratory clinical study clearly is depending on the season. You cannot clearly do it during the summer. And we plan to file with the FDA the respiratory and hopefully they're going to start reviewing also gastroenterology panel by Q1 next year. with full launch of the platform by second quarter next year with an initial panel of respiratory and gastroenterology. Following that, very close to it, so still within next year, there are going to be the submission of the blood culture, positive and negative. So the full panel is going to be coming soon. We're very excited about this platform. We really believe that it does make a difference vis-à-vis the ability of customers to make affordable multiplexing compared to what they have on the market today. We are working at the scale-up of manufacturing, and we are going to be ready next year for the full worldwide launch of this platform. Now let me talk about the integration plan. I'm going to give just some flavor, and then full disclosure is going to be done at the investor day that, as you know, has been scheduled for the month of December. As far as integration is concerned, we have certainly some primary objectives here. First one is to refocus the company on what we consider bets that cannot be missed. And as an example, we are talking about the Virgin 2. The IntelliFlex, which is the platform that has been just made available to the partners the company works with recently. for the LPG and has been the first platform that this company has been launching in the last 10 years. So there is a lot of excitement about the system that would go and possibly replace thousands of systems that have been installed by the company and the partners in the field over the last 10 years. Last but not least is the image stream and the flow cytometry new generation systems which are coming to the market. So this company had a mission before. It was a Luminex mission, and now we are making it a Diasore and Luminex mission, refocusing all the resources in these very strategic projects. By the same token, we are looking at the footprint of the company and the possibility of synergies and improvements of operations since we also have operations in the U.S. There is a full team of people that is reviewing footprint and preparing a plan that, again, we are going to be able to discuss when we talk about the expectations for the next three years. By the same token, you know, to complete strategically our product portfolio, we have two very important projects that now are hitting the end phase of product development for Diasorin, the liaison nest, which is the small platform for the decentralized market PCR sample to result in 15 minutes. And then we have the Liaison MDX Plus, which is replacing the Liaison MDX and will substitute actually the Liaison MDX starting from 2022. So my point is, now that we really bought technology in a good business, as far as molecular diagnostics is concerned, we have many arrows in our quiver. We have four platforms that will hit the market in the next year or so. And as far as LTG, we just launched the next generation platform. So I would say that we have many, many good things that are coming forward for the combination of diasoring and luminex. At this point, I'm going to leave the microphone to the CFO of the company, Mr. Pedron, who is going to drive you through the numbers.

Thank you, Carlo, and good morning, good afternoon, everybody. In the next few minutes, as usual, I'm going to walk you through the financial performance of DSR during the first half of 2021. And I will also make some remarks on the contribution of the second quarter. As usual, I'd like to start with the main highlights of the period. So we closed first up 2021 with an increase in revenues at constant exchange rate of 40%. COVID sales are up by almost 100% compared to last year, whereas ex-COVID business is up by 21%. Please note that the revenues growth is in line, as Carla just said, with the H121 guidance we provided to the market when we discussed fiscal year 2020 results back in March. I believe it is also worthwhile mentioning that the ex-COVID sales in the first half are back at the same level as where they were pre-COVID in 2021 and even higher, as Carol said again, if we take out, if we sterilize the loss of vitamin D business in quest. Q2 2021 gross margin confirms the very good results achieved in the previous quarter, therefore closing half one at almost 69%, just a touch below 2020, which closed at 69.1%. H1 adjusted EBITDA at €144 million records an increase of €91 million, or almost 60% compared to 2020, with a margin of 47.4% on revenues compared to 40% of 2020. The growth at constant exchange rate is 64% with a margin of 47%. Again, therefore, slightly better than H1 guidance. provided when we discussed FY 2020, which was 45% EBITDA margin, a constant exchange rate. Lastly, we keep confirming our ability to generate a very healthy free cash flow, €126 million in the first half, with an increase compared to last year of €52 million, or 70%. The net financial position is positive for €436 million, with almost 9%. million euro cash. Please let me remind you that in Q2 in April, we issued an equity link bond for 500 million euro due in 2028 to finance the Luminex acquisition, to partially finance the Luminex acquisition. Let me now go through the main items of the P&L. So H1 revenues at 550 million euro grew at current exchange rate by 35% compared to last year. The first two quarters of 2021, we have experienced some 18 million euro FX headwind, mainly caused by the strengthening of the euro against the US dollar. I believe that if we consider where the US dollar is trending now compared to 2020, it is fair to say that in the second part of this year, this negative effect should be less material. even including luminex sales that, as we know, are mostly generated in the U.S. During the first half of the year, we booked 177 million euro of COVID sales, about 75% of which driven by our molecular test, against 95 million euro of 2020, which were, back then, almost evenly split between immuno and molecular tests. I believe it's worthwhile mentioning, as we did last quarter, that the business ex-COVID was up by 21% constant versus 2020, but also if we look at H119, it was up by 6% once we sterilized the effect of the vitamin D business inquest and de-seminarizer, as I believe we discussed in the previous quarter. H1 gross margin at €355 million grew by 35% compared to last year, closing the first six months of 2021 with a ratio of revenues of 68.9%. The margin on revenues has not increased compared to last year, in spite of the higher revenues, and mainly for the following reasons. We have a negative effect from product mix coming from higher molecular sales and lower clear sales, We've had an higher incidence of royalties driven by the increase in our latent tuberculosis sales. And all of this has been partially offset, or I would say almost completely offset, by the lower incidence of fixed costs driven by the higher sales volume and some efficiencies coming from the manufacturing processes of our molecular products. H1, 21 total operating expenses at €136 million of 26.4% of revenues have increased by less than 4% of €5 million compared to last year. The increase in revenues, mainly driven by the COVID effect, is behind the operating leverage of the period. That has seen a decrease of the OPEX ratio of revenues from 34% of 2020 to 26% of 2021. First half other operating expenses at €17 million increased by €8 million compared to last year. This variance is entirely driven by the one-off expenses related to the Luminex acquisition, which accounted for about €13 million. As a result of what just described, H121 EBIT at €202 million of 39% of revenues has increased compared to last year by 63%. The tax rate at 23.5% is slightly higher than what we recorded in 2020, which closed at 22.5%. This increase is mainly driven by the fact that some one-off costs driven by the Luminex acquisition are not tax deductible in the U.S. The net result at €150 million, or almost 30% of revenues, is higher than previous year by €55 million. Lastly, H1 2021 adjusted EBITDA at €144 million, 47% of revenues, is higher than 2020 by 59% or €91 million. The variance at constant exchange rate is positive by 64%, with a ratio of revenues of 47%. Let me remind you that the difference between the reported EBITDA and the adjusted EBITDA is only due to the mentioned one-off costs related to the Luminex transaction that we discussed about. Let me now please move to the free cash flow. In the first half of the year, the group generated €126 million free cash flow vis-à-vis €74 million in 2020, therefore booking an increase of almost 70% of €52 million. I believe it is worth mentioning that in this semester, we've had a much higher tax cash out compared to 2020. 66 million euros in 2021 vis-à-vis 5 million euros in 2020. This difference has been driven mainly by two elements. A different phasing accounting for about 30 million euros, and €35 million driven by the higher profit that the group generated compared to previous years. Lastly, let me now move to the 2020 full-year guidance, as usual, at previous year content exchange rate, which, let me remind you, was for the $1.14 compared to the euro. In order to make the number comparable with 2020, we will also provide a breakdown of the revenue guidance between DSR and Luminex business. So the total combined revenues will increase between 35% and 40%. Therefore, we expect total 2021 revenues at around 1.2 billion euros. We expect a total combined adjusted EBITDA margin at 42%. Therefore, again, 510 million euro at constant exchange rate. Besides, please note that the Australian revenue is a constant exchange rate and constant perimeter of consolidation should increase between 15% and 20%, out of which the overall Australian business, excluding COVID-19, will represent an increase of around 15%. Please, let me remind you once again that the group is very much exposed to the U.S. dollar fluctuation, even more so now that we have acquired the Luminex business. So, as a rule of thumb, remember that for every one cent movement of the dollar against the euro or the Australian revenues, should move by about 6 million euro on a yearly basis. Now let me please turn the line to the operator to open the Q&A session. Thank you.

This is the Coruscant conference operator, and we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. That's star and one.

We will pause for a moment while questioners join the queue. The first question is from Peter Welford with Jefferies.

Please go ahead.

Hi, thanks so much for taking my questions. I'm curious if you could just talk a little bit about the COVID-19, first of all, impact a little more. I'm wondering in particular, you talked about antigen testing volumes being lower than anticipated. I'm just wondering if you can give us an update on your thoughts around the potential LabCorp contracts and whether or not thinking on that at all has changed with regards to your change in outlook for the COVID business. And also, just thinking about the recent launch of the test, so Lumos platform, if you like, in Italy at the pharmacies, wondering if you can give us an update at all on how that's going, any initial feedback from your partners that are distributing that, and what your thoughts are on potentially expanding that pilot program, and I guess what the triggers are to potentially make that decision as to whether or not you are going to expand the program And then just a question on Luminex, if I can do, just on VeriGene2. Is there a risk, I guess, with the respiratory panels, this clinical trial that you're running, is that flu-dependent at all or RSV-dependent or anything like that? I guess the reason I'm asking is it's a highly unpredictable season. if we assume that just COVID, I guess, is going to be around, is it still viable to run that clinical trial? I can just talk a little bit about some of the risks, perhaps, to VeriGene 2's launch and whether or not you're happy with the manufacturing from that point of view for a potential, I guess, FDA inspection of the manufacturing pre the VeriGene 2 approval. Thank you.

Peter,

It was very difficult to hear the last question, but let me start from the last question and then move forward. The last question about the verigine had to do with the FDA 483. There is no association whatsoever between the verigine 2 and the 483. And so the problem is not the ability. The site, Chicago, by the way, never received an injunction not to manufacture. The site has received an inspection with a list of 483 that have been addressed, and the company has been working with the FDA to close the 483, and we are waiting for the FDA to conduct an inspection. But you know and I know that... For the time being, the FDA, unless it's a very, very urgent matter, they don't visit companies. Okay? So, again, disconnect from your mind 483 from Verigen 2. Second thing, as far as my comment about the application and withdrawal of the original 510K4 respiratory is much simpler than what you stated. and nothing to do with quality issues. The problem was that until that day, FDA was accepting EWA for respiratory panels, and what Luminex did diligently, they prepared an EWA submission. A week before they submitted it, The FDA approved the first 510K de novo, which was a biofire respiratory panel with COVID. And doing that, it reset expectations vis-a-vis EUA. So it started to reject EUA, forcing companies now to conduct clinical studies for a 510K. Now, what's the problem? When you have a respiratory panel and you need to have a blend of fresh prospective samples, you need to run your clinical during the respiratory season, and the respiratory season will start in September. And therefore, we say that as far as respiratory, it's unfortunate that there's been the move of the agency from EWA to 510K, but, you know, you buy the bullet. And we're going to repeat during this season some of the clinicals necessary to get the data together, and then we're going to submit in quarter one next year. As far as the antigen test, which I believe is your second question, antigen test, there was part of the company strategy is that the portfolio of our products, which I remind you we developed seven products for COVID, One of the tests needed was a high-throughput antigen test to work on the liaison XL, which we did, and we got the EUA and also the CEMART. As far as the use of this product, it was intended. as a product to be used in parallel with molecular products to alleviate the need of some of the hospital and reference centers to run a gazillion amount of molecular at a very high price. And they could substitute with an antigen test that would work effectively. almost as well as far as sensitivity. Clear antigen testing is not as sensitive as molecular, but certainly, certainly at the fraction of a price. And that was the assumption. Part of that assumption was also related to the fact that LabCorp, that is our primary partner, would participate in the U.S. to the K-12 program, reopening schools, that is a program that has been broadcasted broadly, but eventually is not coming to much in terms of businesses. As you know, as other companies did, now these deals are cut at a state level more than a federal level. And when it comes to a state level, some of the states really prefer rapid antigen tests versus centralized antigen test. And this is why I'm saying the comment was we had certain expectations following the fact that LabCorp was participating to this bid, and there would be a program that nationwide was talking about 25 million tests per month. And that program has been severely reduced, and therefore we had to reduce our expectation from antigen test as well. As far as the Lumos, which I think was your last question, the platform was launched recently in Europe, in Italy, with two assays, a serology assay that is intended to use for post-vaccination monitoring and a swab antigen test. As you can imagine, the antigen market is pretty much flooded by a lot of products and our idea was to bring to the market a product that would have lab quality versus some of the low quality stuff that is out there. As you follow from competitors, the volume for antigen testing has been significantly declined for this. I'm talking about the rapid testing has been significantly declined. It's a combination of lower incidence plus the fact of larger viability of molecular diagnostic testing spread across different geographies. And more lately, What the antigen test is now used for certainly is not much for diagnostic, but more for, in Europe, the green pass, which means that if you don't have a green pass, so you didn't get vaccinated, now you need to provide the airline and or the train, so if you want to move in a certain environment, you need to provide proof of a test. And At the European level, a repository of approved tests has been created so that pharmacies could actually deliver a result of the antigen test, and according to an approved list of manufacturers, trying to eliminate the cheap, low-quality stuff that was out there. We got inserted in that list two weeks ago. So now we have our antigen test approved, approved for travel, and we can really initiate the program. So far we have 50 flagship pharmacies that have our system installed, and we are deploying. So we expect that the deployment of this will continue through Q3 and Q4. Let me remind you again that the Lesion IQ for us was an arrow that we really needed moving forward in the decentralization strategy. We always said that we're going to try to use this as an opportunity to learn the space and create a new store base. By the same token, we've also created a serology antigen test dedicated for post-vaccination that allows we expect is going to pick up after the summer once the debate about antibody levels on fragile and certain population will now be determined to be a relevant test to be performed. So far, I think I'm happy from what we have done. We are at the beginning of this process, and we We are learning the pharmacy space that certainly for us today is an unknown, but as said, with the liaison mesh and the molecular platform, it's going to become a segment that this company wants to play with.

That's great. Thank you very much. Thank you very much.

The next question is from Naresh Chauhan with Intran.

Please go ahead.

Hi there. Thanks for taking my question, or question number two, please. One on the potential for a new diagnostic in, you know, COVID portfolio. There's some initial data suggesting that the higher the antibody levels after vaccination, the less likely someone is to see fading vaccine efficacy. Is that a test that you're planning on building? That's something you can use it in your common sense if that's something you plan to produce. And then secondly, on COVID testing pricing across the portfolio, how is pricing holding up? How is the competition faring? Are you seeing some of the, as you mentioned, some of the lower quality of the sleeping and just some of the bigger players remaining? Just some insights on that would be helpful. Thank you.

So if I understood correctly your question about antibody level, today there is no evidence or brought evidence a certain minimum threshold of antibody is necessary for protection. And there is none of the current and approved vaccines have provided data to prove that there is, again, as in other cases, for example, for hepatitis B, there is a cutoff level which is necessary to hit with antibodies to be protected. I think it's going to require more time to come to that assessment, and I don't think that it is going to be a responsibility of the diagnostic industry to do so. What is very important is really to understand a response to vaccination in a different class of patients because what data are proving today is that, A, five months after vaccination, healthy individuals still carry antibodies. but the titer is reduced 80% to what they had 21 days after the second shot. Okay? This is the first data point. The second data point is that if you now look at different groups of patients, So unhealthy, and you look at immunosuppressed at different degrees. If you look at certain patients that are taking certain drug regimens, now you discover that, as expected, there is a variety. The behavior in terms of the immunological behavior of these patients is very different. And some group of patients, as expected, did not even develop an antibody titer. So today, I think that there is a certain usage of antibody testing. As you saw, we are selling roughly 5 million euros of antibody testing per month. We see that there is a slight pickup on that, but what we believe is that The future opportunity with this is going to be, A, on follow-up on those patient groups where response to vaccine is not sure. The second thing is that once a threshold cutoff for immunity is going to be established, then it's going to be more regular follow-up. And therefore, our effort today is, Is to get as much as possible market share on the current market now to capture surge of testing when and if that is going to happen. And I think we are with this new assay that we have designed that is using the primary protein, the full length protein. We are really becoming a gold standard in the industry about antibody testing. And we enjoy market share that are coming from EDMA data in Europe that we are in most of the countries. We're really number one or number two in terms of our market share. About COVID pricing, it was very difficult to hear you, but, again, I restate I don't see for the time being an effect of pricing. which comes from the fact that competitors in our segment, don't forget, we don't play in a high-throughput segment. We play in the mid-throughput segment, low-throughput segment, certainly not decentralized selling. We don't see an effect of pricing at all. So I think we need to understand what is going to happen in the future, but all contracts that we have in place pretty much are holding the same price that were established one year ago when the pandemic started.

Mr. Chuan, do you have any other comments?

No, that's fine. Thank you very much. Okay, thank you. Thank you.

The next question is from Maya Pataki with Kepler. Please go ahead.

Hi, good afternoon. I have just two quick follow-up questions to make sure that I got it right. Carlo, you stated that throughout the 2022, you are going to submit the data to the FDA for Verigine 2. So it would be prudent for us to assume that we should see only revenues starting to come through in 2023. Would that be correct?

Do you want to ask me both questions?

Okay, I can shoot. I mean, did I get it right that you mentioned that you're now selling or that you have now placed around 50 liaison IQs throughout Italy and that you're planning to place a similar amount throughout Q3 and Q4? Is that correct? That's correct.

Okay, let me start from the IQ. We placed 50, and I expect a pickup in Q2 and Q4 because we just established the, let me say, the distribution network. Now we have three partners that are working with us. We have better coverage, and now we got also the approval at the European level for antigen testing for Green Pass. So I expect really that Q3 and Q4 should be better than this. Keep in mind I'm in a learning phase. This is not my home base, and so we are learning. And the way I can predict this is not as good as I'm usually doing with the Excel or platform that I'm more familiar with. Sure. second figure about the region to know and i think that uh... we should expect uh... uh... you should expect to have uh... revenues coming from very deep who stopped him from shake-off of uh... of next year okay okay i'm and and carter just trying to find it and when i you know i don't want to take up topics that you will discuss that you're in that today but out of curiosity

Would it be fair to assume that by 2022 you will be running another five, six tests on the liaison IQ?

I don't know where you're taking this information, Maya, and if I ever said it my fault. I think that what we are now trying to understand is post-COVID, what's the positioning of the liaison IQ? And funny enough, and this is really funny for us, one of the most valuable products, ex-COVID, that pharmacies see is vitamin D. Yeah. Because clearly the logic there is to be able to assess – whether you are insufficient and then provide you right there over-the-counter supplementation. So I think the next product in line that you may see from us, and I would never bet this with you two years ago, is going to be another vitamin D test. But so far this is the only one that we clearly understood would make sense to have.

Okay, great. Thank you very much.

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

Yeah, thanks, guys. A few questions, please. So firstly, on your COVID business, I wonder if you could help quantify the serology contribution this quarter and more broadly, perhaps share some geographic dispersion of your molecular diagnostic business and help us understand whether trends in the US and Europe are any different or whether your expectation is any different. Second question, please, relates to Luminex. Assuming the warning letter disappears by the end of the year, which I think your comments were pointed towards, and you look to launch veraging when the respiratory panel is approved. Can you help talk a little bit about the strategy here? Because in North America, this market is somewhat, shall we say, penetrated, and the white space is really in Europe and then Asia, where much of a market doesn't exist today. So talk a little bit about how you expect to move into those segments today. and create a successful business there. Last question on Luminex, please. You refer to the life science part of Luminex being very profitable, very successful. When we look to Luminex margins as a standalone company, they weren't that exciting. So am I right in saying that the molecular diagnostic business was loss-making or not very profitable? and provide much of the opportunity for you as a company to optimize.

Hey, Scott.

Okay. I can see that you can do the math. If I look at... Let me start from the last question, right? Without really getting too much into the detail, but I have to say that... you need to look at different components of the molecular business of Luminex. Certainly, their single-plex platform, the Ares, was not, let me say, the best opportunity in terms of profitability. It was subscale. a very, very complex cartridge we are using, very complicated, high cost, and therefore the profitability was not there, certainly at the volume of sales that they're having. Okay? Conversely, if you look at the multiplexing, and you look at the VIRGIN and the X-TEC line, profitability is certainly there. But you need to understand that I have to admit as an immuno-SA person, in molecular diagnostic, you are never going to get the same gross margin that you get from immuno. I think that you're going to get your EBITDA contribution from a lot of discipline under the gross margin, which is what we did when it comes to our MDX line, where we were able to get with focus more than 35% EBITDA because we were very disciplined in the way that we integrated our molecular with our immuno cells, right? So long story short, I believe that with our MDX technology and making an effort to be disciplined and have automation on the Virgin 2, you can turn also the automated, fully automated Illuminix business back to where it deserves of profitability. When you go now, if I move to the strategy on Virgin 2, allow me to tell you that, first, I am learning this business. Second, I really want to provide the market with reliable data and commitments by the company once I had a chance to sit down with Luminex management. and after the integration of our commercial team, which is on the way, and then provide you with better details. So let me just pass on that. When it comes to the COVID serology, as I told you, we have around 5 to 6 million per month of COVID serology, which is relatively stable. We got 90 accounts in the U.S. that today are using our serology product. You know, in the U.S., there is no claim allowed by the FDA on the use with vaccine, post-vaccination. Whereas in Europe, in the package insert, we have all data to support antibody testing, post-vaccination, and all the different variants. When it comes to Europe, as I said before, in all the major geographies, and you can verify it through the EDMA report, we are in number one or number two. So very well positioned vis-a-vis the fact that the test has been recognized as a standard. And now the question is, is volume going to pick up or not? And as I told you before, I am positive about this because I see from all the clinical studies a real need on certain subpopulations to monitor what the heck happens. And by the same token, what we are also working on is a strategy to on T cells with our partner, Kyogen, because we believe that the right algorithm to look at post-vaccination in certain population is really to go to look at a combination of T and B. And if you think about it, this would be a unique algorithm that us and Kyogen would be the only one able to really offer it to the market. I'm really looking forward to the development and launch of this product together with our B cell. Again, geographical split on molecular, we have not provided these data ever before. Let me say, if I may, that half of the business is North America and half of the business is ex-US, primarily Europe.

Great, thanks.

Well, have a courtesy from our colleagues. I'll jump back in the queue. Thank you. Gentlemen, there are no more questions registered at this time.

Oh, sorry, there's a follow-up from Scott Bardot. Please go ahead, sir. Oh, you're back.

That was good. Maybe just one last one because I know it's pushing on. Carlo, you just referred to a B-cell and, of course, one of the major initiatives for the post-pandemic world for DSRN is to expand upon this opportunity. You've got approval now for Lyme disease in Europe. Help us understand a little bit the activities the company is pursuing to develop this opportunity with reimbursement agencies, practitioners both in Europe and maybe even in the US already.

Okay.

As you know, when it comes to this very innovative product, you have to go through two steps. One is provide clinical evidence, and the second one, as a consequence to this, to get a reimbursement. Because the SA today, the T cell component of it, is pretty much off-pocket everywhere, especially in Germany. where this represents a good chunk of the total market. I would say if you look at the Lyme disease market, you're going to have over 60% of that market in Germany, and then the remaining is actually on the adjacent geographies, and so the Netherlands, then you have Austria, Slovenia, and so forth. So it's a northern European thing for the time being. Where we are today is that we have agreed upon with the German reimbursement system about what we need to achieve to get that reimbursement. We have conducted the HTA study, so the health technology assessment, to prove that the algorithm actually provides not only clinical value but also reduced cost. Vis-a-vis the current treatment, we have a series of clinical studies that are conducted as we speak because, again, it's a seasonal disease. So now this is the season when you're collecting data from the patient. And so we clearly launched the product, but we launched the product. You cannot put this product right now in the hands of a regular doctor, We put it together with QIAGEN in the reference hospitals where they're using it, verifying it, and then hopefully we're going to be generating publications to support it. By the same token, in the U.S., because, as you know, the difference with Lyme disease is that in the U.S. you have a specific strain. We are now conducting the clinical study in the East Coast, in the Appalachian region, where we are collecting the data to prove that the algorithm works also with the U.S. strain. This is not the clinical study for FDA approval. This is the clinical study on the U.S. strain to gather the data, go then to the FDA and show them the effectiveness and efficacy of this test, then to agree upon the clinical studies that we're going to be conducting in the 2022 season. So to make a long story short, this is a market that you need to create, as I said, so the need is there, clearly, but you need to work on all these elements that eventually made the TB quantifier on what it is today as a product. So you need to be patient with us. We are going to give you more updates, but I think we need to all focus on a certain cornerstone right now, which is not revenue, but more supporting clinical studies, the HTA, and reimbursement, because then that is going to be triggering the vast opportunity that both Arthur and Kajan have been discussing about.

Okay, very good. Thanks so much, Dave. Gentlemen, there are no more questions now. I give the floor back to you for any closing remarks.

Okay. Thank you, operator. Thanks, everybody. And we'll see you at the Q3 results and then clearly by year end when we will have our full disclosure of the planning investor day. Thank you. Thanks.