DiaSorin S.p.A.

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining the Diasar in third quarter 2022 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, operator. Ladies and gentlemen, good afternoon, and welcome to the 483 conference call result. As usual, I'm going to shed some colors on... the quarter results in terms of the top line and the main fundamentals of the business, and then our chief financial officer is going to take you through the numbers. So let's start from the top line. I remind everybody I'm going to comment on a constant exchange rate. As you know, otherwise, you know, all the numbers are heavily affected by the Evaluation of the dollars. So at constant exchange rate, the business in the quarter performed at minus 14% versus last year. That is according to expectations. And the reason for the decline is attributable to the COVID, as you have seen from the numbers. Compared to last year, in the quarter, we are $15 million down, and we are roughly $90 million year-to-date. If we look at the business ex-COVID, the business grew 2% in quarter three. And it's a combination of several events. Although there are a couple of things that I would like to highlight. We had two clear headwinds when it comes to the quarter results. The first one has to do with the fact that in two geographies, and mainly China and the Middle East, we had a performance which was heavily affected by the current situation. So China continues to be a drag. And as far as we are concerned, the main effect today is with lockdowns. So we see that... In the provinces where we sell, we continue to see a strong effect on volumes. And then in the Middle East, because of the current situation in Iran, we had to postpone some of the shipments. By the same token, we continue to see the effect of Russia. We were exporting until last year, and the export has been reduced to some very small amount. If we take away these effects, then immunodiagnostic in the quarter would grow 6%, year-to-date 7%, so this would be in line with companies' expectations. Now, if we look at the business in immunodiagnostic and we look at North America, North America, as you know today, does represent the majority of our business. Immunodiagnostic is growing very strong, 10% in quarter three, 12% year-to-date. And if for one second we take away the vitamin D franchise that, as you know, has been declining historically for the soaring, the rest of the clear XD business in the U.S. grew 18% in quarter three and 25% year to date. What's the reason behind that success of immunodagnostic in North America, as we discussed many times, is the hospital strategy, where there is a segment where diasorin was traditionally under-penetrated, and because of the effort that we put in at the beginning of the pandemic to in putting together a distribution footprint in terms of more rats and more territories, and this clearly continues to pale. Today, we have, until understanding the effort, today, if we look at the available resources, market in terms of number of hospitals that we serve compared to the total market, we are below 20%. So we still have a very long runway in front of us in terms of opportunity to grow in North America. When it comes to Europe, Europe grew in neurodiagnostic 4% in quarter three and 5% year to date. So as you know, notwithstanding the current situation, economic situation in Europe. So the business is a stable business. We continue to grow. If you look at just the growth of the market in Europe, we estimate today the market grows at 1%, 1.5%. So we continue to grow the market. The strategy is always the same. It's specialties and the margin contribution certainly is extremely positive. Now, if we look at the rest of the world, is quarter three is 7% below last year. And this is exactly where we have the two headwinds that we were talking before, so export, Middle East, and China. With the exception of these two geographies, if I take everything else, including countries where the company made an investment in infrastructure and infrastructure I'm referring to India, for example, or Mexico or Brazil where we have our local team. Just as a reference, India in the quarter grew roughly 20% and in the other geographies we are growing high single digit or low double digit. So I think specifically the problem we have seen in this quarter has to do with the two geographies and the events we've been talking about. Now let's go to molecular diagnostics, 7% growth in quarter three. That is a good performance for the reassuring molecular assays. Again, we are talking about growth X COVID and growth has been driven by COVID flu. Plus it has been driven by the fact that when it comes to the very gene and the multiplexing business, we have that business. notwithstanding it's based on technologies which had been launched over 10 years ago is holding up, waiting again for the launch of the liaison Plex, which is going to be the new driver for growth in the segment. When it comes to what we call licensed technology, here is where in the quarter for the first time the business actually declined significantly 4% in the quarter, but there is a reason about it, which is there is a reason for this decline, which has to do with the supply chain. On the instruments that we manufacture, as you know, the business that we call licensed technology is a combination of consumable revenues, royalties that we get from partner distribution and instrument sales. As far as this business, traditionally the growth is high single digit, low double digit. And if I look at the royalty component, which is an indicator of what the partners are doing with our consumable and the consumable growth, the growth is very strong. Unfortunately, when it comes to the instrument component of this business, because of the current supply chain issues and unavailability of certain parts, In quarter three, we built less instruments than we have orders for, and we are estimating that the gap today is between five and eight million euros in terms of systems that we should be delivering, but as we speak, they are held in the quarter waiting for some of the parts to be completed. So this explains why, for the first time, licensed technology is not a growth component for the business. But again, it has nothing to do with the fundamental of the business. Again, it has to do with the supply chain issue. But this also explains why margins are very strong in this quarter. notwithstanding the fact that we are missing some of the revenues. And this is to do with the margin differential between consumable and royalties and instruments. As you can imagine, on instruments, the gross margin is relatively modest, whereas on consumable and certainly royalties, the margin contribution is very high. So the fact that that component of the business goes well explains why the overall margins of the company are I would say very nice in the quarter. Now let's talk about COVID. COVID continues to decline. It's roughly 90 million below last year. Of the 90 million, above 50 million, exactly 53 million is in quarter three. The decline versus last year, it is expected, as you can imagine, because we don't sell the antigen test, the rapid test, which is a market that today is declining, but not as much as molecular or certain serology. Although the decline we see is better than what we expected. So the business is still holding in certain key strategic geographies, and this is why we're actually performing better than our expectations. We still don't see in these numbers any effect on differential diagnosis, where we expect to see pickup in volume in Q4 and Q1, but the jury's out, as we've discussed many times. So we're going to be able to comment on that, I would say, when we're in the mid of the influenza season, which is around the December time frame. A couple of things that I would like to discuss have to do with margins. As you've seen, margins in the quarter are strong and actually better than what we expected. And what is very important to note is that despite the headwind due to the inflectionary effects that everybody, I believe, is experiencing, is facing these days. I think in the last quarter we quantified the effect of inflation around 15 million annualized. We revised this effect slightly to 17 million and mainly due to the effect of the cost of electricity in the European plants. It's still marginal, vis-à-vis what you see in other industries, and certainly manageable from a DSR perspective. By the same token, what's working good for us is the synergies that we are extracting from the consolidation of Luminex within the SORIN. As we have discussed already previously, the program is in line with the expectation, and I would say slightly better than we scheduled. The other element, which is very important these days for us, is that all the time and money and education spent in the last few years in terms of education improving the manufacturing cycles in our manufacturing sites, especially when it comes to the immunoassay now clearly coming to fruition. So notwithstanding our situation where there is price pressure, we continue to be able to hold our margins because of the efficiencies that we we've been driving through manufacturing. And that, let me say, makes me quite comfortable even in these difficult times. It's a combination of increasing costs and decreasing prices. A couple of notes when it comes to two key programs. The first one, MIMET, as you have seen, there has been a recommendation published vis-à-vis MIMET. The U.S. CMS reimbursement, the proposed reimbursement is around $250, which is extremely high for an immunoassay. And I believe that what is extraordinary about the proposed reimbursement is that this has nothing to do with the technology per se, but it has to do with the benefit of the algorithm. vis-à-vis the way patients are actually accepted and treated when they come to the emergency room. So that's very positive, and I believe MIMED as a company did a fantastic job in educating the regulators on the value of the assay. So that certainly will support and facilitate the marketing of the product in the U.S., The second element which makes me very proud, in a sense, is the fact that BARDA just announced that they have decided to fund substantially the development of the Elias of Mess. And the contribution of BARDA is $31 million, which... What is very interesting is that these funds are not coming from the COVID fund. As you know, the emergency COVID funds pretty much are over. This is coming from the strategic funding, which means that this reflects the recognition of BARDA, the liaison platform with its characteristics of being easy to use, fast PCR response, and can be disseminated in the territories So the capillary system is a key and strategic technology for the U.S. government, and that, as you well know, is not simple for a non-U.S. company. So that, I think, is a very interesting and encouraging side vis-à-vis the acceptance of this technology. So now I'm going to leave the podium to the speaker. Thank you, Carlos.

Good morning and good afternoon, everybody. In the next few minutes, I'm going to walk you through, as usual, the financial performance of PSO during the first nine months of 2022. And I will make some remarks on the contribution of the third quarter. Let me please remind you that consistently with what we did over the last course, we In order to better understand the performance of the business, I will refer to adjusted P&L items, therefore sterilizing the impact of the Luminex deal-related elements. In the press release available on our website, we are providing a line-by-line bridge between adjusted and IFRS items. Please also remind that we completed the Luminex acquisition in July 2021, so starting from this quarter, we have the same perimeter of consolidation. So that, as usual, I'd like to start with what I believe are the main highlights of the period. 2022 year-to-date total revenues at constant exchange rate grew by 10% or €82 million vis-à-vis 2021. as we saw as a combination of a decrease in COVID sales by 32%, more than offset by an increase in the ex-COVID business by 171 million euros. The neurodiagnostic franchise ex-COVID, at comparable effects, grew by 4%, driven by an increase in the CLIA-XD business just short of 10%, in spite of the weak result in the Chinese market that Carlo just discussed about and the headwind we faced in the export business. Partially upset by the negative performance of vitamin D and the increase in 4% of the immuno business and the ELISA franchises. The molecular business ex-COVID growth is mainly driven by the different perimeter of consolidation and by a very good performance of DSRI molecular reagents. The licensed technology franchise variance year over year is mainly due to a different perimeter of consolidation in the first half of the year, partially upset by the slowdown in the third quarter that Carlo just commented. Q3 total revenues at constant exchange rate decreased by 14% of €47 million as a result of the anticipated decrease in COVID sales, partially offset by an increase of the ex-COVID business by 2% of €5 million. We should be able to recover most of the gap in the licensed technology business that Carlo has discussed and the new expert business by the end of the year. These elements... the one that we just saw, explain the soft increase in the immuno business and the decrease of the licensed technology franchise, whereas we saw the molecular franchise increase by 7%. Year-to-date adjusted EBITDA at €391 million records an increase of €8 million or 2% compared to 2021, with a margin of 39% in revenues compared to 45% of 2021. The expected decrease in marginality is the result of the combination of a diluted gross profit, mainly driven by different product mix and the lower operating leverage, driven by the inclusion of Luminex in the perimeter of consolidation and the very high COVID sales of 2021. Both these elements are in line with the assumptions we made at the time of the Luminex acquisition and are embedded in the outlook shared during the Capital Market Day and the updated guidance we've just released today. Q3 2022 adjusted EBITDA margin at 37%, or €122 million, records a decrease towards Q3 2021 of €17 million, or 12%. The variance is mainly driven by lower COVID sales, 47 million euros in the quarter, to be precise, and as a consequence, a lower operating margin. We keep confirming our ability to generate a very healthy free cash flow. 150 million euros yesterday to an increase compared to last year of 28 million euros, or 13%. As you might remember, when we released Q1-22 results back in May, we announced that the ESR and Board of Directors resolved to launch a share-by-back program for a total maximum of 1.5 million treasury shares to support the potential settlement of the outstanding convertible bond and the management equity plan. As of the end of September, within that program, the Australian bought back about 1.3 million shares for an equivalent amount of about €160 million. On a different note, and before moving to the main items of the P&L, I'd like to provide an update on the impact on the inflationary pressure on the Australian total cost base. We saw that number was 15 million euros back when we closed the half year. And at the light of the recent increases in energy costs, that number has been increased to 17 million euros. Now, moving to the P&L items. September year-to-date total revenues at 1,012 million euros grew by 18% or 153 million euros compared to last year. Luminex products revenues in the period amount to €277 million, vis-à-vis €91 million in 2021. COVID revenues amount to €201 million, vis-à-vis €276 million, therefore recording a decrease of €74 million. The first nine months of the year have seen some 71 million euro FX tailwind, mainly driven by the USD appreciation. Considering Q421 USD-euro exchange rate and the current FX trend, I think it is fair to expect that a similar positive tailwind will continue for the remainder of the year. and we will end up with a positive FXF sector, full 22 over 21, just short of €100 million on the top line. September year-to-date adjusted gross profit at €672 million grew by 16% compared to last year, closing the first nine months with a ratio of a revenue of 66% compared to 68% of the same period of 2021. The full year contribution of Luminex and the different product mix are the main drivers of these variants. Q3 22 adjusted gross margin at 68% is better than last year by 2 percentage points. The overage, in spite of lower quarterly revenues, is driven by a different product and geographic mix and some one-off positive elements that we had in the quarter. I believe, though, it is important to underline that in spite of the inflationary pressure we discussed about, we have been able to put in place cost containment measures and initiatives that have allowed us to preserve our margins. September year-to-date adjusted operating expenses at €345 million grew by 42% compared to the same period of 2021, with a ratio of revenues of 34% vis-à-vis 28% of last year. This increase, once again in line with our expectation, is mainly driven by the different perimeter of consolidation and the much higher COVID sales in 2021 that generated back then a very material operating leverage. A negative FX effect and higher travel costs mainly drive Q3 2022 adjusted operating expenses increase towards last year. of €13 million or 12%. I believe it is important to underline that net of the FX effect and these additional travel expenses, we would have actually added the case in OPEX in spite of the inflationary pressure we just discussed about. Year-to-date other operating expenses are substantially in line with last year, and as a result of what I just described, September year-to-date adjusted EBIT at €319 million has decreased compared to 2021 by 3% of €11 million. September adjusted interest expenses at €4 million are lower than last year by 30% of €2 million, mainly because of better yield on our cash investments. whereas the adjusted tax rate at 23% is in line with 2021. The adjusted net result at €244 million, or 24% of revenues, is lower than the previous year by €4 million. Lastly, the year-to-date adjusted EBITDA at €391 million, or 39% of revenues, is higher than last year by 2% or €8 million. The variance at constant exchange rate is negative by 5%, with a ratio of revenues of 39%. Let me now move to the free cash flow and the net debt position. In the first nine months of 2022, as just said, Gessorin generated €252 million free cash flow, so €28 million better than last year. At the end of September 2022, the net debt of Gessorin was negative for €1,000. €12 million, vis-à-vis negative €986 million at the end of 2021. The difference is the result of very strong cash generation, which has been more than offset by the following items. The share buyback program for €160 million, €90 million of negative translation FX effect, and €56 million dividend to shareholders. Lastly, let's now move to the updated 2022 full-year guidance, as usual, at previous year constant exchange rate. The guidance has been increased as follows. Total revenue to grow between 2% and 3%, with the next COVID business growth at about 22%, and COVID sales at around €225 million. And the adjusted EBITDA margin between 38% and 39%. The increase in the guidance for the top line is mainly driven to better COVID sales, whereas the weak performance of the Chinese market is the core driver of the revision of the ex-COVID sales. 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. 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 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Aisha Noor of Morgan Stanley. Please go ahead.

Great. Thank you for taking my question. I have two, please. The first one is on the shipment delays that you highlighted in the licensed technology business. Could I confirm that your revenues would have been 5 to 7 million higher if not for the delays that you observed? And then related to that, how much visibility do you have in resolving this issue by Q4 and that that situation is not going to impact your existing orders to be delivered in Q4 itself? And then the second is on multiplex on Luminex. Are you able to provide an installed base for the Luminex multiplex platform as of today, and could you provide some colors to whether you were able to expand the installed base this quarter? Thank you.

Nisha, thanks for your questions. Question number one, yes, I confirm that, as said, had we been able to fulfill all the orders, revenues would be higher. by 5 to 7 million. In terms of visibility in Q4, I don't think we have visibility these days because the supply chain is very weak, and we have deliveries of parts which are scheduled in the next few weeks, but the real problem today is that they can call you two days before and simply delay the shipment. This is the current situation, I think, generally speaking, in the medical sector. If I may give a little bit of color to it because this is counterintuitive compared to what we see in the consumer goods. I have a feeling that the supply chain made a strenuous effort to work with consumer goods, although the designated victim has been our sector because our sector is typically low volume, high value. although what some of the suppliers that we enlisted are telling us is that in order to fulfill consumer goals, you have to cut somewhere else. And I think this is the price we as an industry are paying. And actually, if you notice, made some of the comments. I want to pick up on the comment that Stratex made specifically because it's a diasporan supplier. The only thing I want to make sure everybody understands is that when it comes to Stratec, fortunately, the backorder is not really on the diastolic systems. So liaison XL, liaison XS, and the MDX, no problem of supply, although they cited supply chain issues with other systems. Second question about multiplex, no, we don't provide install dates because we believe it's... It's proprietary information, although my comment is that especially with the liaison NDX system, yes, we expanded the install base. Clearly there the problem is that the revenue per box are strongly declining compared to last year because of COVID volume. So you have revenue per system declining, although the install base continues to increase.

Thank you.

Thank you very much. The next question is from Peter Welford of Jefferies.

Please go ahead.

Oh, hi. Thanks for taking my questions. I've just got a few. First of all, just coming back to the underlying growth, I think largely immuno, I wonder if it was possible for you to sort of quantify the gap you mentioned of between sort of 2% to 3% versus 6%, I think you said, in the quarter, excluding the headwinds. Could you possibly try and give us an order of magnitude of the effects of China lockdowns versus the Middle East, Iran delays and versus Russia, just to try and give us some color as to the relative magnitude, I guess, of those three to account for that sort of 400 basis point delta in the third quarter growth? Secondly, then, just on the COVID trend, the outlook seems to imply less than 25 million euros or roughly 25 in the fourth quarter of COVID sales. I guess, given your comment that you've yet to see differential diagnosis pick up for the flu season in 4Q, 1Q, I guess, why do you assume that COVID declines another 50% quarter on quarter in the fourth quarter apart from, I mean, I appreciate none of us know at this point, But I wonder if you could at least talk us through the mechanics of your thinking around that and why we shouldn't be assuming COVID at the very least is potentially flat on the third quarter, given the season is just picking up. And then just finally, just with regards to the MIMED recommendation from CMS, at this point now, what's the sort of strategy and procedure forward now? Is this now a case that you can begin rolling out and educating and marketing to the U.S.? Or how should we think about the strategy and the limiting gating factors from now for this to be rolled out in the U.S. market? Thank you.

I'll take the last two questions, and I think PJ will take the first question. As far as COVID, I don't understand the math. I think that if you take year-to-date versus expected, we're talking about around 35 million delta, and that is 13 per month, which is today what we see without the effect of the differential diagnosis. So we always stated that it's really complicated to predict increasing the effect of differential diagnosis because it's going to happen at the end and in the season and we don't know what the medical guidance is going to be. The COVID number and the logic of the COVID number is what we see today, what we experience today as our monthly current trend.

I believe, Carlos, I may add a comment on COVID. The misunderstanding can come from the FX effect, which is pretty material in the quarter. So the guidance we gave for COVID is $225 million at constant exchange rates, right? So you cannot compare the 225 to the 201 that you have at current exchange rate. I believe that is where your 25 million is coming from. What Carlos said is what we see is the 13 or so million at constant exchange rate per month that is moving you from the 190 or so, 189 at constant that we have year-to-date to the full year, if that makes sense to you.

When it comes to your question on MIMET and the strategy, as you well know, to sell in the U.S., there are two elements which are needed. One is the approval, and the second one is the reimbursement. So the approval we got now months ago, and now we are very close to getting also the second element. We, meaning us and MIMET, because MIMET has the responsibility for that, to now get the second strategic element for the effective launch of the system. So what we are doing today, we are targeting a set of roughly 100 hospitals where the SORIN system is already installed, and we are going through an education program whereby we clearly explain the value of of this product within the diagnostic algorithm that today is in use with hospitals. I think as we discussed last time, the strategy calls for an initial effort directed toward the education in the children's hospital because today, talking to the physicians in the emergency room, what they see as a primary objective or application for this product is actually an immediate diagnosis for kids showing up with unknown fever. And just, I think we discussed it last time, in terms of numbers in the U.S., there are 4.5 million hospital admissions, of children with unknown fever. And what is very interesting is that the European number is pretty much the same. It's around 4 million. Okay, so there is today a total available market, market of roughly 8, 9 million admissions that MIMIT and the Soaring are going after with this new product. Certainly, as we have discussed, it requires a reward financially. As you can see from the reimbursement, it's very high. The effort of education also is very high because adoption requires education, capillary education, which is what today NIMIT and the assortment are focused on primarily in the U.S. Question number one?

Yes. So I don't believe we're going to provide an exact breakdown of the – well, we're short in terms of China and the export business. As a ballpark number, year-to-date, China is accounting for, give or take, 50% of it year-to-date. And the remainder is the export business.

But, PJ, I think during one of the initial, I think it was Q1 or Q2 calls, I believe that an analyst was asking how big is your Russia business and we quantified the Russian business around 8 million, a combination between Luminex and the Diasorium business. So the total amount of business at stake is around 8 million. Keep also in mind that part of this business was COVID-related, not COVID molecular, but COVID serology, because last year there was a very large adoption in Russia of of the serology assays in absence of large availability of molecular. So but just to give you an idea of the Russian damage versus last year is around 8 million.

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

Yeah, hi. I have also several questions. I'll take them one by one. Carla, starting with Mimet, if you look at the CMS recommendation with regards to reimbursement, does that change? Is that significantly different from what you were anticipating? Does that change the targeted price that you will sell at and therefore also the potential target for 2025?

So, Maya, do you want to ask all the questions together or one by one?

No, I think I'll take it one by one. Then, you know, it's easier. Then it won't get forgotten. Okay.

Yes. Look, we had an expectation, and we had a range, and this is certainly on the high end of the range. If you look at the reimbursement, I don't recall, honestly, an immunoassay ever reimbursed. at this level. And to me, it's nothing to do with the assortment because this effort is clearly attributable to MIMET. I think that what they were able to do was to explain that this should not be reimbursed as a technology. So it's not an immunoassay, but the value is the medical information. Otherwise, you know, typically, you know, I think the U.S. is reimbursed anything between $16 to $25. That's it. Okay. So, but certainly, just a short answer, a high range of what we expected.

Does that change the way you're thinking about your 2025 contribution from MIMET to your sales target?

You know, in Italian we say piano piano.

Okay, fine. Good, got it. You got it? Yeah, I got it. Then a second question. I'm an apologist if I've missed that, but you talk about molecular ex-COVID growth in the quarter of around 7%. And it didn't seem like there were any extraordinary changes impacts affecting molecular as it was in immunoassay. In your 2025 strategy plan, you have the molecular franchise growing very strongly on a CAGR base above 20%. And I know that there are several product launches coming. So my question is, can you help us? How shall we think about the growth cadence or growth acceleration cadence over the next three years? Is 2023 going to be you know, a low teens year and then, you know, going above? Or how shall we model that? How shall we think about that?

Look, Maya, yes. The growth that... If you can imagine the dynamic here of growth and acceleration has to do with the fact that we're going to be introducing to the market two systems, right? One, which is brand new, where we need to build... We need to build the business, and that's the India Zone, and for decentralization, that's one piece. So there we start from zero. It's all a critical business. The other one is the India Zone Plex, which when we discussed, I believe, the strategy of that, we have an existing install base of several hundred customers, especially in the U.S., that today are using the current platform with a dead business, was traditionally built by Luminex primarily on the blood culture assay because the Verdean system was the first system introduced to the market with the blood culture panel, and there is where they built. And this, by the way, explains why, if you look at our mix of revenues in multiplexing versus the biofire revenues, BioFire is 70% dependent, I think, on respiratory, whereas for us the respiratory component is relatively small. So the plan there is clearly to go to the existing install base, upgrade the install base to the Plex, and then build to add to the blood culture the gastro and the respiratory. Okay, but certainly the competitive part of this, in my opinion, is the gastro, which is the true differentiating. The respiratory panel is certainly very important and very sexy these days, but it's also a very crowded space, as you can imagine. So, long story short, the growth that you see later has to do with the full addition of these two product lines to our arsenal. When it comes to the performance of the businesses we speak, I think 7% growth. Let's understand the portfolio we're talking about. We're talking about the liaison MDX, so singleplex. The Ares is an older technology that today is pretty much COVID business. And as you can imagine, it's not a growth element. It's a drag element to the top line. Then the MDX continues to grow, and that is where we are expanding the base. And we do have, first, waiting for approval of the congenital CMV assay for the U.S. It goes into the children's hospital segment. And then the Candida auris that has been launched as an ASR, and then the next plan is going to be the next assay to come on the MDX. So it's an MDX strategy. The rest of the portfolio, which is what we inherited for Luminex on the multiplexing, you have a very genuine one that is holding up and grows not necessarily by placement. It grows depending on two elements. One is how the respiratory part goes, even if it is more listed there. The other one is volume growth because we are not, I think the multiplex business is not at the glory days where the volume was growing 25%, but still you have volume growth. So if you hold on to the base, you see volume growth. To the contrary of the multiplexing portfolio, which I think you need to keep in consideration, so there is a first-generation technology which is very manual, which we call non-automated assets, that is actually manufactured in Toronto, is extremely profitable with anything in this business that you do manually, but by the same token is the older piece of the technology, which is certainly declining. So if you consider these bags that you have, 7% growth without the new systems is a fairly decent growth. By the way, profitable. And, you know, these days in molecular, to be profitable without COVID, I think is not simple.

Okay, perfect. And my last question, PG, you talk about the business ex-COVID growth at 29% CR for the nine months. Could you give us a number for the third quarter? Because I remember that there seems to be a bit of a difference of the FX impact on the base business and COVID revenues.

Yeah, for the third quarter, you mean, I guess, without COVID, it's 2%. 2% is a combination of the immuno, you know, all of those elements we discussed about, immuno, molecular, and life science, such as technology.

Okay, great. Thank you very much. Thank you. The next question is from Hugo Solveig of ExanBNP Paribas. Please go ahead.

Hi, thanks for asking the question. First on COVID, have you seen any positive impacts from stocking on your COVID sales number in Q3? And then for Carlo, you mentioned on the Q2 call that you were losing some customers on the very Gen 1, given the the strength of your Luminex business in Q3. That's something that you have managed to stabilize in Q3. And lastly, on liaison access, can you give us indications on where you are on the rollout here and the contribution for the growth in the immunodiagnostic segment?

Thank you.

It was quite difficult to hear you, but let's understand it.

I'll try to answer to what I understood and correct me if I'm wrong. So when it comes to stocking, I know that specifically one competitor in their quarterly report, they announced that Q3 was very strong because of stocking, but we didn't see any stocking in fact. because in the geographies that we serve, and, you know, we guarantee supply, and we do not notice or alert customers of any stocking needed. Okay, so no stocking effect in Q3. The second question, if I understood correctly, has to do with verigine, but I believe that when I explain verigine, The business to Maya, just two minutes ago, I think I gave good color on the Virgin One business that we have. As I said, the Virgin One business, just to summarize three characteristics, is North America business, so we don't have a noticeable store base outside the U.S., primarily gastro and blood, you know, and respiratory is only 30%. It enjoys volume growth that is not double-digit as it used to be, but, you know, multiplexing adoption and usage is still increasing, loss of the digit, and certainly is a profitable business for DSR. The third question, if I understood correctly, is the ozone excess Is that the question? Yes. Okay. The rollout of the liaison access, if you remember, the liaison access program was primarily directed toward two geographies. One is China, and that, as you can imagine, is frozen. Second one is the U.S., and actually the rollout is starting in the U.S. because we got approval of the quantifier on the liaison access. Okay, so now we have the full menu for the liaison access program. Today, we were able to serve the hospital segment in the U.S. with the liaison Excel because of the quantifier on and stool volume that was big enough to justify placement of liaison Excel. Liaison Excel is clearly part of the next three years plan in the U.S. that, as I said, is focused on continuing the expansion on the hospital segment, which is working very well for us. And now we are moving from the large institutions to the mid-sized institutions, and there is where the reactionary access plays a role. But now we have the full menu approved, and then the program is starting.

Thank you.

The next question is from Odysseas Manesiotis of Barenburg. Please go ahead.

Hi there. Thanks for taking my questions. Firstly, on the Munase manufacturing operating efficiencies that you mentioned, are these largely taking through now, or is there more runway for efficiency gains here in 2023? Secondly, on the back of this, could you also update us on any progress in price increases? I understand that you're still working on this, but what would be a realistic timeline to think that you'll take through these price increases, let's say, next year? And last one, a follow-up on your U.S. hospital strategy. You said you're now at just below 20%, I think around 200 hospitals, and that you have some decent runway to grow further. What is, in your view, a realistic target for, let's say, a steady-state market share here over the next three, four years, if you could provide that? Thank you very much.

Okay, on the immunosufficiencies, I think that what we have today is a European footprint which is in very good shape. We have consolidated everything where it was needed. And so I don't expect more efficiencies in Europe. I believe that today the plan is to focus on our U.S. footprint, where the next year the Minnesota plant is going to be the one where we will start to see fruition from all the programs we set in place. And in parallel, today we did not focus necessarily on footprint of Luminex because we just bought the business. Today, when it comes to Luminex, the primary objective was actually to invest in one of the facilities where we're going to be investing close to $20 million in We are investing $20 million to set it up for the manufacturing of the Plex. All the investments for Ness were already done by Diasorum before the acquisition of Cypress, so that building is ready to go. So there is no more need. Certainly now we need to bring a little bit more discipline to the molecular production The molecular team. And when I call discipline, it's that I think I made this comment before. Coming from literally a two-cent business, which is the universal business, two-cent business meaning that you must make your money with a relatively low price business, right? Yes. When you get to the molecular space, what we found amazing is that the molecular companies tend to assemble stuff that they buy rather than making stuff that they buy, which is exactly the contrary of what we have in Munich. So we started already at Diasorin before the Luminex acquisition, an effort to insource manufacturing raw material, which was very successful. Now that we have a much bigger footprint, that effort has to continue and we are actually, we are coming to the end of a period of time where we looked at the benefits of the insourcing and rationalizing some of the stuff and I believe that in the next two to three years that is going to be the effort, right? And I think that's the benefit we have seen when we looked at Luminex from a diasporic perspective. Now, more discipline, which we now call synergy, but more discipline in manufacturing equals an opportunity of margin expansion. And if you look at what Luminex was, and again, referring to public numbers, in 2019, Luminex was actually the last pre-pandemic year. I think they reported a 7% EBITDA margin increase. Today, we don't disclose the Luminex EBITDA margin, but if you look at the overall company, the Asorin margin, which is 38%, you understand that a little bit of discipline really gave us great results. Long story short, I believe that the next two years are going to be a strong effort in the North American manufacturing platform to get the same efficiencies we got in Europe today. Second thing, price increase. We have raised prices for our LPG business, right, as a consequence of the fact that contracts allow to do so. And so we did raise price in its coming effect in January 1st, 2023. So by the same token, our partners have increased price through their channel to the customers, okay, which are the research partners And pharmaceutical institutions that, you know, to the contrary of the IVD business, that business, the price elasticity is far bigger. Now we're engaged with a consultant to look at our IVD business and understand how much of that business is subject to contractual terms and they cannot be taxed. and how much of the business certainly can enjoy in an inflectionary environment a price increase. And I cannot quantify it right now because we're in the middle of the process. It's a very long one because you have to take all contracts. But I believe that there will be an effect also on the AVD. I cannot quantify it right now. When it comes to the hospital strategy, as I said, if you look at the, you know, in the U.S. overall, U.S. 5,000 hospitals, if you count all of them, we believe that only a certain number of hospitals is actually a good subset of hospitals where we can sell our platform because of menu and size of the systems and throughput. So today we serve as a diasorium after the last effort, roughly 250 hospitals. I'm sorry if I still refer to diasorium luminex, but that's still unfortunately the way we look at the business. So all the diasorium, through its effort, came to serve diasorium. 250 hospitals out of the total available market, which we estimated around 1,200. Luminex, to the contrary, because of their implementation, was actually serving roughly 500 hospitals in the U.S. A good chunk of this are actually smaller institutions that we would not be able actually to approach or leverage on with our own platforms. But we estimate that 20% of these hospitals which we don't serve are actually an opportunity of what we call top-line synergy, right? That would be considered. So they're basically to cross-sell across the two customer groups. As you know, starting from right after the acquisition, one of the first efforts was to redesign the U.S. commercial footprint, which we did. So now we do have in place all the reps and everything that is needed to go after the business. So just to understand each other, we are saying that today we still have – we do have an opportunity of – 1,200, 1,300 overall institutions in the U.S., of which we serve 250. And then we have 100 that we're serving with some products and we're not serving with others. That's why I'm saying the runway is still big for us.

Very clear. Thank you.

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

Thank you, Operator. Bye-bye.