DiaSorin S.p.A.

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining the Diasorin First Quarter 2022 Results Conference Call. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Carlo Rosa, CEO of Diasorin. Please go ahead, sir.

Thank you, operator, and ladies and gentlemen, good morning, good afternoon. And I will make some few comments. As usual, a constant exchange rate, and then the CFO, Mr. Pedron, is going to take you through the numbers. Okay, so first, as you know, we have been slightly changing our reporting system after the acquisition of Luminex. So now we have the business, which is divided in three buckets. We have the immuno side, and the immuno side, we have all the technologies that start from CLIA, the ELISA technologies. And we have the molecular bucket, and then we have the license technology bucket. So let me start to talk about the immuno. Immuno, we look at the ex-COVID part of the business, so clear ex-COVID, and then we look at the COVID part. So let me clear first the COVID. COVID, if you remember on immuno, it was the antibody test after vaccination to monitor the antibody titers. And then we had a high throughput antigen test to be used in hospital settings when they wanted to have cheaper technology, cheaper than molecular to test personnel. Well, this side of the business is declining sharply. And this is fundamentally because there has been no adoption of the serology test or less than what it should be done. And this is certainly linked to two things. One, the perception that COVID is pretty much going away. The second is the fact that governments have been fighting the adoption of serology as a way to control immune response against the vaccine because the problem there was to convince the population to get vaccinated rather than the sophistication of the follow-up. So we still have a business that is a good business for us, but it's 50% below what it was one year ago, mainly driven by the serology component. Now, if we look at now CLIA X-COVID, and when we look at CLIA now, the all-day assortment business, we have the CLIA X vitamin D component, which is growing strongly, 13% in the quarter, and we have vitamin D, which is declining a little bit, minus 5%, but is much more stable than before. On the ClearXD performance, if we look at the geographies, we have the U.S. growing 30%, we have Europe growing 9%, and we have China, which is flat-ish, just growing 3%, and I'm going to comment on China later in the presentation. Now, if we now switch to molecular, we have the COVID bucket and we have the ex-COVID bucket. I understand that when it comes to molecular, numbers are clearly affected by the change in the perimeter that happened after the Luminex acquisition. So I will try to digest the numbers for you. When it comes now to the COVID component, Okay, which is molecular COVID. We see 15% decline on average compared to the peak of last year. And this is certainly to do with the fact that with the Omicron, with Omicron, we had a very high January and then a sharp decline. So the peak of testing, as you have seen reported by different operators in this field. This peak now is much sharper than what was in 2021. When it comes to the ex-COVID, We have overall a single-digit growth, and we can XCOVID is a combination of the old, of the MDX technology coming from the , and clearly you have all the multiplexing different technologies coming from Luminex. Overall, this bucket is a single-digit growth with certainly there is a negative growth in the respiratory as a consequence, clearly, of COVID. And then we have growth in non-respiratory. So primarily, we're talking the gastro panel for the VIRGIN1, the blood culture panel for the VIRGIN1, and then the MDX assays, which, if you remember, were primarily On the non-respiratory side was for transplantation, and we had a very nice ASR business that has been used by labs to develop their own LDT. So overall, this bucket of ex-COVID is a single-digit growth component. Now, if we move to what we call licensed technologies, okay, licensed technologies has to do with the business that Luminex developed when the company was started. Overall, it's around annually is a $200 million franchise, and this business, if you remember, it's... An interesting business where we have partnerships with some of the main players in the life science business that are actually using our instrumentation and our technology to build their own products, primarily in the space of life science research, clinical research, but also specifically there is one player, very important player, which dominates the transplantation market, and that player is using our technology. Overall, this bucket, which in terms of profitability is accretive vis-à-vis our overall business, that bucket is growing 14%. Okay, and that is a consequence of the fact that a good quantity of money has been poured into life science research as a combination of pharma investment, but especially as a combination of grants coming from the governments both in U.S. and in Europe that after pandemic decided to foster the sector, really increasing the number of public spending in this sector. So we are benefiting from that trend. Last but not least, the flow cytometry, which is a relatively small business for us. It's less than $50 million annually. It's flat. And it's a combination of that business actually is split in two. We have some very high complex flow cytometer plus imaging system, and that piece of the business is actually growing. And then we have a more mature set of technologies, a small piece of equipment that have sold to smaller labs. is in the very specific case in quarter one, we had problems with delivering some of the system because of the supply chain and unavailability of certain electronic components, which is interesting because so far is the only area in the company where we have experienced supply issues with this component. One remark when it comes to the LTG growth, if you remember that last year we launched the IntelliFlex, which is the new platform that was developed by Luminex for this sector, and the adoption of this platform by partners is far greater than expected. so we had a solid q1 and we have a strong funnel for quarter two and quarter two so which makes us optimistic about the performance of this business moving forward now if i make some if i may make some comments when it comes to different geographies and i want to start with the us as you know Today, the U.S. is the primary market for the company. It does represent 50% of our overall revenues. And if I look at the strategy in the U.S., we started as Diasorium in 2019, really investing in a capillary cell force or a bigger cell force to try to increase our presence in the hospital market. And we now are, we went through COVID and certainly COVID did somehow help in the hospital penetration at the time when serology, there was a hype of serology in Q2 next year, last year, but by the same token also it slowed down the installation of some of the systems simply because hospitals were very busy and so in certain cases they could not literally see our technicians in the lab. But overall, as a combination of POS and NEC, we made our plan. And the idea was to create additional 150 hospitals in the new hospital in the U.S., which we are perfectly in line to achieve by year end. It's very clear when it comes to our product portfolio today as a combination of what is available with the liaison access, the quantifieron, and now the very exciting MIMED opportunity, which is clearly a hospital test. It is very clear that what we are reflecting is on further investment in our ability to reach this segment of the market, which for us is extremely promising as a combination of certainly better pricing and better and much, much interest in tests like, again, the MIMET and the upcoming on the liaison test, quantifier on test for Lyme with high clinical value, right? So my, today, What is really paying off is the fact that the company continues certainly to develop its commercial presence, but we are expanding very rapidly into the hospital segment, and the growth you see in the U.S. is driven by a combination of success in commercial lab, but also, again, a set expansion in this segment. This is very important because the next generation platforms that are coming on the molecular side, which is the liaison NESS and the liaison PLEX, have been designed for that segment. So it all fits perfectly. So you have a funnel of product for that segment, and you have expansion of the customer base and expansion of infrastructure to serve that segment. When it comes to Europe, which today is 33% of revenues, we have solid high single-digit growth. We have discussed a few times that for us, Europe clearly is a mature market. We continue to fuel that market with products that we continue to bring to that market. QuantiFerron was the last one. And NEMED now has been launched in Europe. clearly is not contributing yet to revenues because we are in a phase where we have clinical evaluations which are happening in the major hospitals. The initial response from the hospital and the clinicians is very positive and we are actually running some regional clinical studies because as you know every country in Europe fortunately or unfortunately needs their own opinion leader to bless the algorithm and the product. So there is a continuous effort in 2022 in Europe that is going to be mainly focused in generating this clinical data and promote, again, the adoption of this product in the hospital segment. Now last but not least is China. China is complicated. China today represents around 5% of revenues. And so I would say that very gladly we have diluted the Chinese risk. China short term, we see it as a burden and not as an opportunity, as a consequence of declining prices, as an effect of these very large tenders, provincial tenders that now are in place. and our driving price down, on average, 30%. The second effect, clearly, is the fact that there is a priority, official or unofficial priority, call it as you like, to the local manufacturer versus imported products. So we believe that, as said already in the previous quarter, we continue with the strategy we have. We continue with the setup of the manufacturing site. where clearly we have been hampered by the COVID, with the shutdown of COVID in the last months or so. We are in Shanghai, and in Shanghai, as you know, everything has been locked down, so we cannot move forward with what we were foreseeing needed for the manufacturing site. But, you know, we believe that this situation is temporary, and we will set up, we'll continue the setup of the manufacturing site, The overall investment in China is over 30 million euros that we have forecasted to get there. And because we believe that a 1.4 billion people market has to be served. And so the short-term view is negative. I believe that mid-long-term view has to be positive, especially for a company like DioSorin, which is thriving off some of the specialty products. Last but not least, I would like to make a comment on the announcement about the fact that we finally found a president for the Luminex business, so Angelo Arago, that is an American executive from Chicago. 30 plus year experience in med tech space where he has been working in imaging and first and then ophthalmology and later and has a very specific experience on the issue of the decentralization and the point of care in the point of care setting and that to us was key because Angelo You know, moving forward, we'll continue to serve the hospital market, but that's traditional in our sense, because we've been there with our products for a long time. But by the same token, we need to tackle the decentralization mode and get our products to the POL and to the pharmacies. And so, Angelo, Angelo's experience is very much welcome to help us out to set up the strategy for the launch of the news on this. Okay. So, PG, please go ahead with numbers, and then we're going to move to the Q&A session.

Thank you, Carlo. Good morning and good afternoon, everybody. In the next few minutes, I'm going to walk you through the financial performance of DSR during the first quarter of 2022. Consistently with what was done last quarter, and in order to better understand the performance of the business, I will refer to adjusted P&L items. Therefore, sterilizing the impact of the following Luminex deal-related elements. So, the one-off acquisition and integration costs, the effect of the purchase price allocation that we have covered last quarter, the cost of financing, and lastly, the fiscal impact of all of these components. In the press release available on our website, we are providing a line-by-line bridge between adjusted and IFRS items. So that is usual, I'd like to start with what I believe are the main highlights of the quarter. So Q1 2022 total revenues at constant exchange rate grew by 28%. The immunodiagnostic franchise, ex-COVID, grew by 7%, driven by a 13% increase in the CLIA-X vitamin D franchise, which, as Carlos just said, has been partially offset by the expected slightly negative performance of vitamin D, ELISA, and instruments business, according to the new reporting structure. So the molecular business ex-COVID growth is mainly driven by the inclusion of the luminex in the perimeter of consolidation on top of all of those elements that carlo covered whereas the licensed technology franchise variance year over year is obviously all due to the different perimeter of consolidation but carlo covered the performance of the business so i believe we should be fine there kobe 19 sales did better in the quarter than originally expected when we set the 2022 guidance mainly because of the impact of the Omicron variant, and those sales decreased at constant exchange rate compared to 2021 by 10% of €10 million. Q1 adjusted EBITDA records an increase at constant exchange rate of 10% compared to last year, with a margin of 42% of revenues. The margin has been positively affected by the COVID sales of the quarter and by a positive one-off of about 2 million euros that we booked in the other operating expenses. Lastly, we keep confirming our ability to generate a very healthy free cash flow, 116 million euros in the quarter, with an increase compared to Q1 2021 of 36 million euros, or 46%. The net financial position is negative for €860 million, with a ratio over 2021 adjusted EBITDA of 1.5. Let me now please go through the main items of the P&L. Total revenues at €358 million grew by 34% at current exchange rate, or 91 million euro compared to last year. Luminex products revenues in the quarter amount to 97 million euro. COVID revenues amount to 97 million euro as well, vis-a-vis 102 million euro of Q1 2021. The quarter has seen some 16 million euro FX tailwind, mainly driven by the USD appreciation. Considering 2021 USD-EUR exchange rate and the current trend, I think it is fair to expect that this positive tailwind will continue for the remainder of 2022. Q1 2022 adjusted gross profit at €237 million grew by 28% compared to last year. closing the first quarter with a ratio of revenues of 66% vis-a-vis 69% of the same period of last year and in line with the Q4-21. The difference with Q1-21 is mainly driven by the inclusion of luminescence in the scope of consolidation. This variance is in line with our expectations and modeling and is reflected in 2022 outlook. Adjusted operating expenses at €109 million grew by 61% compared to the same period of 2021, with a ratio of revenues of 31% vis-à-vis 25% of last year. This increase is in line with our expectations, is once again mainly driven by the different perimeter of consolidation. We are expecting synergies to reach the level discussed during the investor day back in December as the integration process will move forward. Adjusted other operating expenses are better than last year by 1 million euro. As said, this difference is due to a favorable one-off of about a couple of million euro that we booked during the quarter. As a result of what I just described, the adjusted EBIT at €126 million, or 35% of revenues, has increased compared to 2021 by 10% or €11 million. The adjusted interest income and expenses at €2 million is substantially in line with last year. Adjusted tax rate at 23% is in line with 2021 as well. And the net result at 96 million euro, or 27% of revenues, is higher than previous year by 9 million euro, or 11%. Lastly, adjusted EBITDA at 150 million euro, or 42% of revenues, is higher than 2021 by 16% of 20 million euro. The variance at constant exchange rate is positive by 10%, with a ratio of revenues of 42%. The difference with Q1-21, which closed at 49%, is slightly better than our expectation and almost entirely driven by the change in perimeter of consolidation. Lastly, let me move to 2022 full-year guidance. As usual, as previous year, constant exchange rate. Because of the peak of COVID sales during the quarter, mainly driven by the Omicron variant of the virus, the outlook of the year has been increased. Specifically, the updated guidance is calling for total revenues substantially in line with 2021, between minus 2% and plus 1%, to be precise, and revenues ex-COVID to grow by about 24%. And COVID sales between €150 million and €180 million. Adjusted EBITDA margin between 35% and 37%. So before concluding, please remember that our financials are highly exposed to U.S. dollar, as we said, and even more so now that North America represents about 50% of the total group sales. Therefore, as a rule of thumb, consider that for every one cent movement of the dollar against the euro, our revenues move by about six, seven million euro on an 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. We will now begin the question and answer session. The first question is from Maya Pataki of Kepler. Please go ahead.

Hi, good afternoon or good evening to everyone. I have a couple of questions and it's mostly probably clarification to understand results and what comments have been. First of all, congrats on the results, great results. I'm trying to understand the increase in EBITDA margin guidance. I mean, yes, you are increasing COVID revenues a bit, the upper end, probably the FX is helping as well. But it would be great if you could help us bridge a bit this sudden move from 35 to 37%, given that only six weeks have passed roughly since your full year results. That would be my first question. My second question is, can you help us understand organic growth? Because I mean, It would be interesting to see what is organic growth or what was organic growth in the quarter fully ex-Luminex and what was organic growth ex-COVID to understand what the business was. Then Carlo, just a quick question. I'm not sure I heard it right. Did you talk about the mess instrument that it will target the hospital base? Did I get that? I'm sorry if I misunderstood something, but it was great to have some clarification. And then just maybe a point to make. It would be really, really helpful for us if we would have some comparables, either get the quarterly sales figures broken down by the new reporting structure or to get, in addition, the old restructuring structure because it makes it a bit difficult to follow what is really happening.

Thank you very much.

Hey, Maya.

Listen, I'll take the first on the last recommendation. I understand it's complicated, but by the same token, the business has changed, right? So the portfolio today is completely different from what we had. So we're going to try to make an effort to make it simpler. And in my opinion, it's going to become more understandable for you when after July, now you're going to be comparing at constant perimeter. When it comes to NES, fundamentally for NES there are two markets, two segments of the market. One is within the hospital, and this is simply because within the hospital there is a need for decentralization anyway, because on one side there is a core lab concentration of testing and then within the hospital, especially hospital chains, now you have the necessity to take these point-of-care platforms and decentralize in emergency rooms and certain settings to actually make more efficient the flow. And that is no problem because that's the hospital market is where we operate, is where we are investing, we have the infrastructure, and that goes along very well with the Plex and goes very well with MIMED because it's all eventually one setting. And in the U.S., what is very interesting is that the buyer eventually, the IHN, They now are all owning more and more hospital chain. They actually contract with us the full package, the full portfolio, right? So you also get the benefit of one contract for molecular and immuno and everything is exciting. And clearly when it comes to this contractual relationship, which are traditionally very difficult with these buyers, unless you have something that is unique. With the fact that we bring to the market specialties like the QuantiFeron, like the MiMed, allow us to get into the door and then from there get a portfolio approved, including also the MeToo product. Okay, so very, no problem there. Where the problem started, the problem meaning that what was new for Diasorin, clearly, now is to take the NAS out of that setting, more into the POL and pharmacy. And if I can make a comment, I believe that, as we have discussed many times, there is a U.S. situation and there is a non-U.S. or European situation. Let me put it that way. I rule out China completely because, as we speak, China is unaffordable anyway for molecular because prices are very, very low. And by the same token, they are going toward their own solutions. When it comes to the U.S., the POL market these days is concentrating, but by the same token is also being consolidated within the hospital chain because the IHN see the POL as a way to really get control over patients. And so, again, you're going to find yourself contracting with the IHN and selling through the IHN to the POL. So that, in a sense, is simplifying it. The capillary certainly will need a distributor, I believe. to serve that market, but that is relatively simpler. Then you have the pharmacy market. Okay, the pharmacy market, in my very humble opinion, the jury's out on what is going to be that market after COVID, because we know what it is for COVID, which is plenty of money. You have seen recently, I was following the Walgreens report, and they clearly said they did benefit significantly from COVID testing, but Are they now going to adopt diagnostic as part of the services provided? From what I'm seeing so far, I believe that it comes to CVS and the clinic model, that decision strategically has been made. And when it comes to Walgreens, I believe that the jury is still out. Okay, but we need to see. When it comes to the European setting, For pharmacies, the problem there is because for most of the relevant European geographies, the government, so the social system, does not cover for the test, so it's out of pocket. And what we still need to understand, certainly the out of pocket, so the 20 euros that we think a citizen in Europe is available, to spend on diagnostic procedures is good enough to use lateral flow. And that is certain. And with the lateral flow cost structure, I believe you can make money there. Jury is still out whether individual patients will be available now to pay more than 20 euros. because there is no way you can make money, in my opinion, selling point-of-care in pharmacies for 20 euros when it comes to molecular. So there is where I believe we need to understand better. The good news is that as a result of COVID, in many countries where in Europe today you could not test, pharmacies could not do any testing, COVID was made as an exception. Now, They are changing the law and testing is allowed. Italy is a very good example where literally yesterday the government is approving a new decree that allows testing in the pharmacies for respiratory illnesses. So now the market is open. which is very interesting. We need to understand the pricing situation because reimbursement is not there. Now, PG, can you take care of the EBITDA inorganic?

Absolutely. Hey, Maria, good to talk to you. So when we try to dissect what's happening to the EBITDA margin for Q1, I believe we need to consider two main factors. The first one is that in Q1, I said we had very good COVID revenues, 90 million euros or so, and the one-off effect of the 2 million euros was mentioned in my remarks. That is what is explaining basically the 42% EBITDA margin. If you just use the Q1 numbers and you try to, let me say, normalize the COVID sales, saying, okay, you know what, for the next nine months, the new guidance top range is calling for, you know, 30 million euro revenues per quarter. So if you do the math and reverse engineering Q1 with 30 million euro of COVID revenues, you would get to an EBITDA margin of 35%. without considering the one-off, which is exactly where our guidance was. So why now we raised the EBITDA margin guidance? I mean, we had a range now at least from 35% to 37%. Well, the answer is all in the additional COVID revenues that we think we might see in the remainder of the year compared to our original guidance that, as you know, was set before the Omicron variant. and before the capital market day. So long story short, the main driver behind the potential increase in the EBITDA margin in the guidance for the fall of 2022 is higher COVID sales. Indeed, we kept the guidance for the ex-COVID sales at 24%. And once again, if you did, you know, if you try to, reverse engineer the year to go from now until the end of the year, you would see that in order to meet the 37 EBITDA margin guidance, we are expecting for the nine months we have in front of us, a 35-ish EBITDA margin. I would move to the organic growth now. So I understand it's kind of more complex now because we bought Luminex But what we are trying to do is to report sales according to what we did in the capital market day when we set, if you want, the new way to look at the business. So three main buckets, as Carlos said, the new diagnostic, which is absolutely comparable because it's, if you wish, the legacy of the assuring business. And there we said 7% growth. which, if you look at the guidance we gave you on the Capital Market Day, because we brought it down by technologies exactly in line with that guidance, which is calling for 7% growth in 2022, driven by PIX vitamin D, you know, all the things that Carlo explained. So I believe not a lot of complexity there to understand the immunodiagnostic growth, which is, by definition, constant perimeter. Then if we look at the other two buckets of our sales, molecular diagnostic and license technology. So for license technology, it's all a delta perimeter of consolidation, but I think Carlo made a couple of comments compared to, let me call, you know, the revenues that Luminex generated prior to the acquisition. Carlo said, you know, in the license technology, you have two components, the so-called license technology group, and this is where we have all the complexity that we're trying to simplify. But, you know, you said in that bucket you have what Lumilex used to call the license technology group, and there you have a very nice growth of 14%, which is the vast majority of that bucket. Then you have the flow cytometry business, which is mainly instruments, and there, Carlos said, flattish. Then you move to the complex part, which is the molecular, because now molecular is a combination of the assortment existing business plus the Luminex business, which is made up of multiplex business and the ARIS platform. And, again, a lot of moving parts there, and I'm making all of these comments without considering COVID. But what you see there, as Carlos said, you know, is that single-digit growth whereby you have all those panels which are not respiratory, which are growing nicely, and you have a little bit of negative number for the respiratory panels. Again, I understand it's complex, a lot of different elements. But we think that the right way to look at the business now is to spread it out in those three main buckets, and we will help you out as long as we will not get too free to understand the main drivers behind those variances.

Okay, since you can't give me an organic growth number excluding COVID for the business, can you help me understand the $97 million in COVID revenues that you're booking in the quarter? Which part was Luminex? which part was diasorin, and within diasorin, how much was in immunoassay. The second part that I'm still a bit puzzled about is, look, I know you had strong COVID revenues, but that should not have really been a super surprise in March. So, I mean, it's a bit difficult to understand the strong beat that it's really only down to COVID. I mean, right? I mean, we had an Omicron wave. We had the peak in January. You talked about it. And you had numbers fairly late in the quarter. So I'm still a bit puzzled to understand, can it really only be COVID? And what was your assumption really for Q1 when you were setting the guidance?

Let me take the COVID part. I'm puzzled myself because we made a very clear comment when we gave the 150 million guidance. The concept is we really have no idea what is going to be H2. And by the way, it's not only us saying that. It's everybody saying that. So today what I'm saying is that compared to my own assumption, I believe that Q1, but more importantly, February and March, because January everybody was a hero. But then you saw a very sharp decline, especially in the U.S., for February and March. Okay. So what we are seeing is that the business is holding up better than what we expected. And this is why we feel that there is an opportunity to overachieve that number. Okay. Is it going to be what we said? Is it going to be more than that? I don't know. I keep saying I think we all need to wake up in June and look at the H2 scenario at this point, look at what is – was the adoption of COVID testing. Because, look, what is very interesting today, and I have to say my own surprise, is that antigen testing is holding up. But fundamentally, because there is a ton of self-testing that is going on, and people don't want to do molecular, fundamentally, for a very simple reason, because molecular is more sensitive. And that means that the quarantine period is going to be much more elongated, to the point that even the governments are saying, just do antigen testing, right? These, especially in countries, in the European countries, where still, when you're quarantined, then you cannot leave your house, you cannot go to work. Second thing is that, so the question is, who is going to do molecular testing? And today what we see is that hospitals continue, for example, to test, use molecular testing, which is really predictive of infectivity of the patient, for admissions, for healthcare monitoring, and so forth. Would this continue? I don't know. If this continues, I think that that is going to be the core business off-season COVID business because remember now we're talking about off-season procedure nothing to do with peaks or non peaks and now you're going to be facing the Respiratory system when it comes to the respiratory season the big big question is differential diagnosis you're going to sneeze and you're gonna you want to know whether you have flu or you or COVID, and you're going to be sent now to do, by your dog, to do a differentiating test, and there I believe that molecular is going to be the choice, or you're vaccinated, eventually you got Omicron already because there has been a ton of people that got Omicron, so you have natural vaccination, and then you really are not going to do testing with the exception of the fragile population pockets of patients. Nobody knows. So I think the industry is saying, I believe we will understand much better in H2 what that number is going to be. Now, when it comes to the fact that the extra growth may come from the better performance of the current business, I honestly don't think so. But, PJ, please.

No, absolutely. I mean, as I said, the guidance has not changed for the business ex-COVID, which is plus 24%. You are right when we commented the ERN results, you know, we were at the beginning of March, so we had the visibility over two months. Now we have visibility over four months, which is the double of two. It's very simple. So, you know, we feel more comfortable now to say that we might end up with 180 million euro revenues of COVID in 2022 compared to the visibility we had back at the beginning of March. Going to the breakdown of COVID sales, yes, I can help you out there. So, in Q1 2021 immunodiagnostic COVID sales were around 24, 25 million. Q1-22 is 12 million, so half of what we saw in Q1-21. The Luminex contribution to Q1-22 COVID revenues and its whole molecular, it's around 14, 15 million euros. And the remainder to get to the 92 million euros or 93, I can't remember on the top of my head, is all molecular diasorin. which is a recording decrease of 15% compared to Q1 and Q2. I believe that's covering your questions.

The next question is from Hugo Solvay of BNP Paribas Exxon. Please go ahead.

hi thank you for taking my question couple on my side first on the clear X vitamin D business strong growth across the board can you help give us a bit more granularity on what is exactly driving that gastro tuberculosis or is the world I would go ongoing that that would be very helpful thank you and second question on the on pricing How many price increase would you expect to pass this year? What's the net impact of that and how your clients are taking them? Even qualitative comments would prove very helpful. And last one on my end and on the guidance. We understand that the guidance is being driven by extra COVID-19 sales, which you won. However, over the past six weeks, since you gave the 2022 guidance, we have had a significantly worsening macro environment. What makes you, I would say, so confident that Diaserine will not feel any impact from worsening macro in the remainder of the year and that you will be able to deliver on that guide?

Thank you.

Okay, so let me take some of the questions. Pricing increase is a very simple situation. There is no price increase. Unfortunately, in our business, very hardly you can pass to your customers your inflation. And this is because a good chunk of the business is driven by tenders with fixed pricing, by contracts, multi-year contracts with fixed pricing. very few exceptions, we cannot pass on to customers additional costs. So we need to find or finance the increase of costs with more efficiencies. And this is what we have been done consistently over the years. Keep in mind that what is working in our favor is that the product lines that are actually growing. So the mix is favorable because the CLIA is certainly much more profitable than the declining ELISA and instrument revenues. So, that favors it. The mix within CLIA, selling 1B serum, selling stool, and the specialties clearly is affecting positively the overall CLIA margin. So, and that is where traditional diastole is always being able to safeguard margin notwithstanding price pressure. When it comes to the CLIA X vitamin D growth, look, to me, it's very simple. It has to do with a combination of legacy products that, or let me say, not legacy products, but new products, which I would call a relatively smaller market opportunity of higher price, like hepatitis C, for example, that we launched last year, and clearly high price, high margin competition, very small competition, and that is clearly affecting, contributing to the growth, plus two very large buckets of products. One is, again, the stool legacy of products, where Adoption of some of these products, like calprotectin, for example, continues to occur 20-25% year-on-year growth. And we are investing a lot in clinical studies to foster this growth. And also keep in mind that in the U.S., pretty much for a product like Calprotecting, the product offering we have, we are running solo. And we don't really feel competition from smaller players. And or what big players try to do, transitioning. trying to transition some of this assay into the clinical chemistry, which failed because of quality and because of the handling of the sample. So that, I hope, and then clearly the quantiferon franchise is a product that we share with our good friends from QIAGEN. You have seen that they reported good growth in that line, and you can clearly extrapolate. If they are growing nicely, On that product line, we are growing nicely as well because a lot of the growth comes from the fact that we are working together to expand the customer base and adoption of these assays. And also, we are moving from send-outs to in-house testing in hospitals, especially in the U.S., and that really drives Pfizer. Okay. So these are the two factors.

On the macroeconomics, I believe we did consider the changes in the macroeconomic environment we're seeing. To be more specific, if you think about the inflation pressures that we're all seeing and we're talking about, We already made some assumptions when we did our budget, and we recently reviewed our numbers, and we factored in seven, eight million more on the cost side, in our assumption, which we believe will be covering safeguarding the margins with all those initiatives that Carlo discussed about. So, with the visibility we have now, because the situation is changing every minute, but with the visibility we have now, I believe we feel comfortable with the guidance we just gave to the street.

Okay, thank you. And just to clarify, the 7 to 8 million euros more, is that a change from the initial 2022 guidance to the upgraded guidance?

It's included in the 35% to 37% EBITDA margin that we just shared. Okay. So it's in there. It's included. Okay. Thank you very much. Thank you. Thank you.

The next question is from Peter Welford of Jefferies. Please go ahead.

Oh, hi, thank you. Just really a few quick points of clarity, if you don't mind. Just firstly on COVID, could you possibly just, you've given us a lot of colour, but could you possibly give us also some visibility by geography, if possible? Just trying to understand from the point of view of when we think about the trends going obviously forward, but also as well coming back in the winter season, is it possible to see quantified in terms of how much of those COVID cells are US, presumably the bulk of Luminexes, and also how much of it is potentially then from Europe? And also then just on serology for COVID, I'm interested to hear that you said that that's down about 50% year on year. I guess back at the sort of capital markets event, you were a lot more confident it felt that that was probably a more durable business at about sort of 10 to 15 or something, or even 15 million euros a quarter. I guess, could you talk briefly about what's changed to make governments, I assume, and other academics less interested in that? I mean, is that their business basically just faded to zero at this point? And then just the other one, the quick one, just on MeMed, I think that was filed in the US. I guess any commentary at all? I know FDA is very busy and obviously trying to sort out a backlog. Is there any update at all on the potential timing of a possible approval by FDA of MeMed in the US, please?

Thank you.

Hey, Peter, listen, on the FDA approval, I don't feel comfortable making any assumption, to be honest with you, because as you said, today it's impossible to understand their schedule. The very good news, though, on that side, quite often these days when the FDA is busy, they don't assign a reviewer. So you're kind of put in a queue. Today, we already had a reviewer assigned three months ago, almost right away after the submission, and there is a continuous dialogue with them, with the reviewer. So it's a very active process, which in my opinion in these days is very good news. Now, when it comes to serology, I can give you my two cents, to be honest with you. Of what is what is happening. The first thing I believe that the governments have spent an awful amount of time telling people don't test, just vaccinate. Because testing would add confusion, especially in the U.S. CDC and the FDA. The FDA never, ever allowed anybody, by the way, including ourselves, to report in their package insert all the data about follow-up studies, I mean studies about follow-up after vaccination, which we have in the European product. but not allowed in the U.S. product. And what they say is, we're going to be allowing you to report this data, you meaning everybody else, only the day that you're going to show me what is the protective cutoff, which is a very smart way to say, forget about it. When it comes now, I believe, to Omicron. And Omicron, I am triple vaccinated, and I got Omicron in a heartbeat. And so I believe that notwithstanding data that are really proving that if you are vaccinated versus not vaccinated, especially in the fragile population, you get less severity of the infection. But I believe that now people, if you talk to the regular people, they see that, okay, you get vaccine, but you're going to get Omicron, but it's not a big deal. Okay, so it's like it's washed out like, okay, it's another flu and a couple of days and back in business. So people don't want to hear about follow-up testing and all that jazz. And it remains today measuring antibody diagrams is done academically by on a certain population because people really want to understand what is the, I mean, how long antibody these antibodies will last and last but not least if you remember which is very interesting until a few months ago everybody was talking about a fourth shot with a new vaccine with the omicron variant i don't know about you but i've not heard any anything anything new on that side as if you know Even on the vaccine industry, there is not an effort any longer to go after this new variant. So long story short, this is what we are seeing. We see a core business that continues. It's mostly with academic clinical studies, large hospitals that are following a certain patient set. But this business is clearly not growing. Now, when it comes COVID trend by geography, which I believe, Peter, was your last question, I believe that we see today what we already saw before in the last wave, U.S. declining much faster than Europe. This also has to do, in our case, with positioning of systems, because in Europe, as we have discussed in a few conference calls, All our NDX systems are placed within hospitals for hospital admissions and confirmatory of positives from the high throughput systems. And so that volume is much more, that testing volume is more resilient. And there in Europe we see a 30, 35% decline so far, whereas in the U.S. is, I mean, we are following the market, 70% down, okay? And this is it.

That's great, thank you.

The next question is from Giorgio Tavolini of Intermonte. Please go ahead.

Hi, good evening or good morning everyone and thanks for taking my questions. I was wondering if you could provide us more color on your multiplexing business that you acquired from Luminex. And on the cost synergies with Luminex, if you started with some cost synergies in the quarter and the progression for this year. Thank you.

If I may, I think we gave a lot of color on multiplexing business. So I believe in a nutshell, as said, we have today, so we bought a multiplexing company, and there is a business today that is based on older technologies that is resilient, but certainly cannot be grown until the new technology liaisonplex will market, okay? And I have to, and again, there is an appreciation from these technologies, but certainly they are today, they're not allowing much new customers adoption. Today, fundamentally, for multiplexing, the respiratory part of the business is becoming relatively small. It's spiked. because of COVID, but then it's going back to really small numbers, whereas what's resilient is more the gastro and the blood culture testing, which I think has been a bread and butter of the Virgin One businesses since the beginning. Now, that was the question. What was the second question? Was it synergies? Cost synergies.

Please. Sure, Karl, I can take it. So, Giorgio, I believe we said during the capital market day that the overall cost synergies we were committing to were $60 million by 2025. I would say we are very pleased with how the program is moving along. We have initiatives, we have projects, we have owners, we have due dates, we have timelines. We have an IMO program, which is, I would say, very well managed. So, you know, what, again, I can say is that everything is moving along according to the plan, and you start seeing, you know, again, as planned, as modeled, the impact on our financials.

Okay, thank you.

As a reminder... If you wish to register for a question, please press star and one on your telephone. The next question is from Maya Pataki of Kepler. Please go ahead.

Ms. Pataki, your line is open.

Yes, sorry, I was muted. Just two questions from my side. First of all, can you maybe talk a bit about the instrument placement that you've seen in the quarter? I must have missed that in the press release. Maybe just talk about the legacy business, how that has been progressing and then the molecular franchise business. And then just quickly to come back to the numbers that you have given me. If I do the math, I see that on my calculations, ex-COVID organic growth was around 2-3% and I cannot consolidate that with your very strong and positive notes about all the business lines. So is it Eliza that has been declining more or is it China specifically that has been more of a drag on the organic side? It would be really helpful if you can help me understand what's been going on. Thank you.

So I'll take the organic growth. Again, I don't know exactly how the model you're looking at is built. But what I can tell you to add more color is that, you know, on the previous capital market day, before Luminex acquisition, I believe we said the growth mid to high single digit. This was before COVID, different work. If I look at how we close the numbers, constant exchange rate, the assortment only, And without Luminex, I would say that we are there. So we are in the range of 5% to 6% growth. Immuno, and it's the overall DSR in business without COVID. More than that, I believe it's difficult to say. We've already sliced and diced the numbers in a few different ways.

So I believe that's all I can share with you.

Okay, Maya, I think your question is on the stall base, I believe.

Yes, the trend in the Q1.

Okay, the trend in the Q1 is that, you know, typically in the Q1, we have a lower number of installations than happens in the other quarters. Last year, the comparison to last year is unfair for the liaison Excel because in Q1 last year, we installed almost 30 systems in a very large U.S. lab for the quantifier business. Okay, so that was one of peak results. that was, you know, was made a Q1ID as an outlier. When it comes to the liaison access, we are actually starting the placement in the U.S. and I think the overall budget for this year is around 100 systems. that we have. And when you look at the liaison, MDX is around 50 systems, which is in line with what we are projecting. And clearly, we had complete different numbers when during the COVID time, but the COVID time in this very specific case is over. And so now, as far as COVID is concerned, as far as the MDX is concerned, The game here is to defend the base first because you have a lot of crowded labs with a ton of capacity, and now they're going to make decisions about which platforms they're going to keep and the ones they're not going to use any longer. And on your installed base, clearly now they have the time because they didn't have the time before to get more juice. So differentiate the product offering away from just the coffee. So all in all, I mean, trends for quarter one are in line with our budget expectations.

Thank you very much for that.

The next question is from Hugo Solvay of VNP Paribas Exxon. Please go ahead.

Hi, thanks for the follow-up. Just wanted to come back on the supply chain issues and problem in sourcing electronic components, which you mentioned earlier in the call. Just wondering, within your new 2022 guidance, how long do you think those supply chain issues will last? Thank you.

First, Hugo, I was talking about a very specific case for one system that we offer in flow cytometry, and that is to be with actually a cable that we're getting from Vietnam and the supply there is, let me say, not certainly solid. Overall, I have to say, notwithstanding all the issues you hear from different businesses, Our business specifically as any touch would not really suffer that much from availability of components. And also Stratec, our supplier, did not report so far any issue with the supply chain. There is a cost issue, which is different and has to do with inflation. which PJ, I think, has already discussed about. The other issue with supply chain that we discussed is the complication of shipping products to China. And that is clearly an issue, especially people like us that have their warehouse system in Shanghai and everything is locked down. But again, I think we are, to me, it's black and white. Either in the next two to three weeks, they're going to open up, or I think we're going to have bigger problems than, and not only us, bigger problems than what we're seeing today, because Shanghai is, and also now the Beijing airport, they're all closed. And so, especially for people in pharma industry, that everybody that has to ship within the cold chain, now is, okay, but You know, I'm an optimistic guy, and I believe that this cannot continue for too long.

Thank you for the clarification.

Mr. Raza, there are no more questions registered at this time.

Thank you, operator. Take care.