DiaSorin S.p.A.

Good afternoon, this is the course call conference operator. Welcome and thank you for joining the second quarter 2024 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 DSRN. Please go ahead, sir.

Thank you, operator. Good morning, good afternoon to everybody. Welcome to the quarter to 2024 results. I'm going to make some introductory comments first at the constant exchange rate, and then I'm going to leave Mr. Pedron, the CFO of the company, to go through the numbers in more detail. So let's start from the top line. It was a strong quarter. The company ex-COVID grew 7%, and there is an acceleration in quarter two compared to quarter one. When it comes to the COVID business, 5 million in the quarter, so far in line with our full year guidance of 30 million. It's sad. is a very strong quarter, and it's a combination of immunoassay that is growing 11% with CLIA, which is the major component of this business, growing 13% in a quarter. And this is due to the fact that the US and Europe, as we will see later, continue to provide strong results. China is not still impacted by VVP. even if in the second quarter we had no growth. Molecular, plus 5%. It would have been, as we did comment before, we lost a contract last year that has been impacting first half. Without the effect of this contract, our molecular franchise would have grown 8%, and there is no impact of Plex yet, but I'm going to comment on Plex later. LTG. In the quarter, minus 7% deceleration, although I think we need to be more analytical about this result. We see growth in consumables. We see growth in royalties, and we continue to see a strong decline in instrumentation as a result of the fact that in the life science sector, our buyers are decreasing. placing systems. So the performance of this business, I remind everybody, is fundamentally reflecting what the major biotech and medical companies that are distributing our products are doing globally. Now let's dive in into the different segments. So let's start from immunodiagnostic. As said, immunodiagnostic XCOVID plus 11%. There is a very strong positive trend on Clea, so on the liaison, also in this quarter, which is the result of the performance of two main geographies, Europe and the U.S. When it comes to the U.S., As we have seen in the last few quarters, the hospital strategy is working well. We keep expanding our presence in the U.S. hospitals, and this is very relevant also for our molecular business, and I will comment on this later. We are well on track to deliver our 2027 plan with 600 hospitals. So far, we are over 300 with in each one, we close 15 new accounts. I remind everybody that the target for 2024 was 100 hospitals and we are on track to deliver also the growth this year. Clearly, this has been possible as I did comment before on the increased commercial footprint. thanks to the Luminex acquisition and to our menu, which is a combination of specialty products that well fit this segment of the market. When it comes to Europe, very strong performance is around plus 12% in the quarter, in spite of some headwind with some legacy products like vitamin D. When it comes to Europe, the performance is supported by the fact that we continue to see growth in testing volumes in all the main European geographies and we see no headwind in front of us when it comes to this volume contribution. If we now move to China, if you remember quarter one, we had a positive result, but they won the market that was because of an easy comparable to Q1 2023 when there was still low testing volume because of COVID. In quarter two, we in China experienced a high single digit decrease that makes The H1 almost fled. We don't see the VBP effect yet, but we continue to see headwinds when it comes to the strong competition due to local suppliers and the fact that there is today, I would call it more persuasion coming from the government to buy more and more Chinese-made products. I remind everybody that China does represent today less than 3% of the overall business, so there is not a significant impact on the company results. However, we continue to stay in China and work into the transformation of the business from a Me Too product catalog, which is what we sell today to a specialty company. business, which is what is going to be coming with the registration of the quantiferium product and the stool product that today are not distributed in China yet. When it comes to other geographies, we are delivering very good results in all the geographies where we are working directly. Australia, notwithstanding we have a very high penetration, is growing almost 15% in the quarter and high single-digit growth in more established markets, Mexico and Brazil, where we have a solid business. The only area where we are suffering is the Middle East and specifically in Iran because we had a We're a strong business, and because of the current situation, we have not been able to ship products in H1 of 2024. So overall, Immune Diagnostics is doing great. When it comes to new products, I wanted to discuss MIMET and LIME. LIME is in line with the plan we received. Remember, we have submitted to the FDA our products. clinical results, and we have received from the agency comments, and we are collecting data for a final resubmission in September, so we are on track to get our product approved by 2025 as per plan. We are also finishing up discussions with a large lab in the U.S. that is going to help us to educate the market because as everybody understands, we need to make sure that we move the market from current testing to the adoption of the T-cell component. MIMED, the Jupiter study, is confirmed to be completed in quarter one of next year, and in quarter three, quarter four, there is going to be an initial set of data that are going to be made public. By MIMED, it continues to be a door opener for us for discussions with hospitals in the U.S., And then we continue the educational campaign to pump up the event of this test. So all of our new diagnostic franchise is doing fantastic in all different geographies, and we are very comfortable with the sustainability of this business mid-long term. Now let's move to molecular diagnostics. As I said, ex-COVID plus 5% in the quarter without the effect of the lost business last year is 8% growth. And again, there is no contribution whatsoever of Plex that we just launched two months ago. The legacy, the assorting molecular business, what we call the targeted business on multiplexing is growing double-digit. The Virgin business is holding pretty well, and I'm going to comment on the customer base of Virgin shortly. We have sunset at the Ares as per plan, and we are transitioning the Ares business to our MDX platform, and it is moving forward as expected. We continue to see growth in the respiratory. Also, high single-digit growth in quarter two. this has nothing to do with the respiratory season that, as you know, will start late in Q3, Q4. But it's more to do with the fact that we do have a presence in this business and we have other infections happening outside the season that are making this business strong. And overall, we have a very good performance both in Europe and in North America. Now, let me make a couple of comments on Plex and this. When it comes to ladies on Plex, we have a very good start with a strong interest for the Plex concept. I remind everybody that, as we discussed previously, the adoption of Plex testing in the A regular customer in the U.S. would grant savings in the range of 30-35% compared to what they are spending today. And certainly in the current environment in the U.S., this is very well appreciated. We have a customer base in the U.S. of over 800 customers that we have access to. These are existing customers. The Asorin customers, 300 are virgin users, and then over 300 are hospitals that we serve with our immuno business and are not buying from the Asorin molecule, and they represent a relevant base to market the new platform. Today is an important day. We are here in Chicago in our manufacturing site, and we are hosting an event for investors and analysts to review the strategy and explain the technology And we are extremely positive about the launch of this platform. We have collected and almost wrapped up a preclinical study in Australia with the new assay, the flu, RSV, and COVID. So the complex assay that we have developed on the platform. We are very happy with the results. We have tested the platform in a clear, waved environment, and we are ready to start clinicals in October, as we have discussed. So when it comes to molecular, very excited, and very excited because we have a strong business. And we have two very nice platforms, very innovative, that are hitting the market now and within the next couple of quarters. Now, let's move to LTG. LTG, I remind everybody, our LTG franchise is a combination of diagnostic partners and life science partners. Diagnostic partners are doing very well. reflecting the fact that the diagnostic market worldwide is experiencing strong growth. In the life science technology, we have partners that today are experiencing, as we all know from public information, single to double-digit decline. The net result is that we see an increase in consumables, we see an increasing royalties, which are the relevant part of this business. And clearly, we see a strong decline in instrument placements. And because the market fundamentally is frozen due to the fact that there is capex restriction in the R&D in university environment. So we continue to monitor the market. We, I believe, some of the partners are highlighting the fact that they expect the life science component to bounce back in the second half. But as far as margin are concerned, clearly the fact that consumable and royalties continue to increase is actually posing for this. So it's positive. for the company. Now I'm going to pass the mic to Mr. Pedro who is going to go through the numbers and then we're going to have a Q&A session.

Good morning, good afternoon everybody. Thank you for joining DSR in H124 earnings call and for the interest you're showing in our company. In the next few minutes, I'm going to walk you through the financial performance of TSR during the first half, and I will then turn the line to the operator for the usual Q&A session. H124 total revenues at €589 million are above last year by 2% of €13 million, despite the expected decrease in COVID sales, down by €21 million. and the different perimeter of consolidation coming from the cut-out of the flow cytometry business in Q1-23. Business XCOVID is growing in H1 at constant exchange rate by 6%, 7% excluding the flow business, therefore in line with a higher range of the full year guidance. H1 COVID sales in the quarter accounted for 14 million euro, vis-a-vis 35 million in 2023. confirming our 2024 outlook, which is calling for nearly 30 million. The FX impact in the quarter is not material at all. Q2 revenues, as covered by the constant exchange rate, grew vis-a-vis 2023 by north of 7% of 20 million euros, thus recording an acceleration toward Q1, which grew 5%. This variance, as we just heard, has been driven by a better performance of both the immune and the molecular franchises, partially offset by the LTG business because of the generalized softness of the life science market, and in particular, touring instrument sales. H1 gross profit at €390 million, or 66% of revenues, is better than last year by €11 million, or 3%. Q2 gross margin ratio at 66% of revenues as well is slightly better than last year, which closed at 65%. All the initiatives aimed at improving operation processes and containing costs, alongside a more structured approach to pricing, which we discussed in the past, allowed us to preserve margins. Despite the inflationary pressure experienced in the last 18 months, now muted, and the manufacturing costs we are incurring into to set up our new plant in Shanghai, which has not started production yet. I believe this to be a remarkable indicator of the success of the relentless efforts we put in place to safeguard our profitability. H124 adjusted operating expenses at €229 million are basically in line with 2023. with a ratio of revenues of 39% vis-a-vis 40% of last year. The fact that operating expenses have not increased despite the investment to support the MIMED Acceleration Program in the U.S. and the physiological yearly labor cost rise is a clear demonstration of our discipline in managing the cost base and the result of the synergies delivered after Luminex acquisition. and marks a clear path to increasing profitability in line with the plan presented during the last capital market day. Adjusted H1 other operating expenses are higher than last year by 4 million euros. This increase is driven by many moving parts. amongst which I'd like to mention a new tax introduced in 2024 by the Italian Governmental Medical Devices Companies, equal to 0.75% of sales made to laboratories covered under the Italian National Health System. The yearly impact of this new levy should be around 1 million euros. Please be aware that this is different and on top of the Italian payback mechanism we have discussed many times in the past and that I will cover in a few minutes because there are some news there. As a result of what just described, the H-124 adjusted EBIT at 153 million euros, 26% of revenues, is higher than last year by 9 million or 6%. whereas the increase in Q2 is 14%, or €10 million. Half-year adjusted interest income at €2 million is in line with last year, and the same is true for the adjusted tax rate, which closed the first six months of the year at 23%. Moving now to the year-to-date adjusted net result, we see €120 million, or 20% of revenues, which is better than 23 by 7 million, or 6%, whereas the increase in Q2 is 12%. Lastly, H124 adjusted EBITDA, just short of 200 million euro, or 34% of revenues, is better than 23 by 8 million, or 4%, whereas the increase in the second quarter accelerated to 10%, with a profitability of 34%, vis-a-vis 32%, of Q2 23. Let me now move to the net financial position. We closed June 24 with a net debt of 781 million euro, basically in line with the end of 2023. The free cash flow generated in H1 has been offset by the payment of dividends to our shareholders, some share buyback to support the equity compensation plan for the certain employees, plus some minor moving parts. Before discussing 2024 guidance and opening the Q&A session, let me update you on the so-called Italian payback, which, as I think you will remember, is a request for companies to pay back part of the regional budget overspending on medical devices covered by the Italian National Health Service. A few days ago, and precisely on July the 22nd, the Italian Constitutional Court ruled in favor of the legitimacy of the law that introduced this mechanism back in 2015. At the same time, though, stating the possibility for each company to settle the amounts due for the period 2015-2018 by paying 48% of the original ask. Nevertheless, the payment is currently suspended and only upon a new request made by the regions that must recalculate what originally due at the light of the ruling imposing the reduction to 48%, the amount should become payable. On top of these, to make things even more complicated, the trial will continue before the administrative regional court in Rome that will judge on the other objection. besides the constitutionality issue raised by the claimants last year. To confuse this saga even further, some operators are considering bringing this case before the European Court of Justice for the alleged violation of EU rules. Now, let's move to what this means for us, for Gasolin. As you might remember, we have built over the last few years in our balance sheet a provision against this risk. Therefore, the latest legal developments are not going to have any impact to our P&L. Whereas in the settlement scenario, we would have a net cash out of about 7 million euros. We are assessing with our legal team and with the association of the Italian diagnostic companies how to move forward, meaning if to settle or keep on litigating, since many things are not clear and determined yet. And as usual, we will provide you with an update as things progress. Let me now finish my remarks moving to the outlook. Considering the strong start of the year, we are increasing the 2024 guidance, aligning with the higher range of what previously reported, both for revenues and profitability. To be more specific, the new outlook is calling a previous year exchange rate for revenues excluded to go between 6% and 7%, with COVID sales at about €30 million. That is not going to change. and an adjusted EBITDA margin at about 33%. With that said, let me please turn the line to the operator to open the Q&A session. Thank you.

Thank you. This is the Costco conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to pick up your phone when asking questions. Anyone who has a question may press star and one at this time. The first question is from Kavya Sashpande with UBS. Please go ahead.

Hi, Carla. Hi, PG. Thanks for taking my questions. I've got two, please. The first is just on the US hospital strategy. So I know in the past you flagged that there was only very little overlap between your hospital customers and Luminex's when you acquired it. And I was just curious if the new accounts that you've been adding, have those mainly been from the Luminex pool that you're now bringing over to the immunoassay franchise or are there brand new accounts here as well that you're gaining traction with? And then my second question was around Electra. So you called out MDX as one of the drivers about performance here. Was that mainly the respiratory portfolio in MDX, or was it more balanced between that and the specialty non-resp tests as well? Thank you.

Hi, Kavya. When it comes to the first question about the U.S. hospitals, I would say that the vast majority of accounts are new accounts, and this is because the size of the... hospitals served by Luminex was more mid-small. And therefore, when it comes to our current strategy on the liaison Excel, we are going to meet high-volume accounts, which actually see the effect on the revenue of the U.S. Clear business is actually growing almost 20%. So long story short, today we are really focusing on new accounts, completing new accounts, and as I did comment before, we see MIMET for the time being not as a strong contributor to revenues, but as a very relevant asset to initiate discussions of these hospitals. Secondly, MDX, what we call the targeted, is a combination of two businesses. As you remember, there is an ASR business, which continues to thrive as a combination of the fact that we keep launching new products in that segment. And in the last few years, there are really few players left in the space. And we actually inherited this business when we bought Focus from Quest because it was the outfit that Quest was using to develop the full LDT business. So it's a very, very nice business and is growing double-digit for us. The rest of the catalog on the MDX, you know, we have been focusing most of this business in the specialty. And actually, this is paying off, clearly, because we don't have competition in that space. And we are really... We are extremely excited for the counted hours because it's been a de novo, it's a de novo 510K. It's been a long clinical study. We are the only one in the U.S. market to get this product approved is a raising concern. And so long story short, we really believe that turning the MDX into a specialty program strategically was a good decision and continue to support the growth of this business.

Thank you very much. The next question is from Marianne Boulor with Bank of America.

Please go ahead. Thank you very much, and thank you for taking my questions. I have two as well. So the first one is we've seen, obviously, a very strong performance in North America driven by the hospital strategy. And so I was wondering if you could give maybe a little bit more colors in terms of profitability impacts on this strategy especially. And the second question is more on your guidance and the phasing into this year. Obviously, you had a strong H1 at 34%, which is above the upgraded range of 33%. So if you could give a little bit of color on the phasing for the rest of the year and if there is anything that could be a slowdown into H2. Thank you.

Hey, Marianne. This is PG speaking. Thanks for your questions. I will start with the guidance one. You know, if you go back and look at the performance of our business over the last few years, what you would see is that typically in H2, OPEX, so H2 over H1 of every single year, OPEX are kind of increasing for two reasons that we see happening year over year. The first one is that we have our salary merit increase kicking off in July, right? And as you might remember, 60%, 65% of our OPEX is in a reality labor cost, right? And we expect that this impact to be give or take 5 million additional euro costs in H2 compared to H1. On top of that, if you look at the phasing of some discretionary spending, we have some of those projects which are gaining some speed of traction in H2. And my estimation is that from that, we will have an additional $5 million, give or take, of additional focuses I was telling you. And it's interesting. If you go back and look at 2023 and you do the same exercise, once you would take out the fact that in H1 2023, we had a deep flow cytometry business, you would see a similar increase. So, long story short, so if you wish, what we see in H2 is slightly more than 32% EBITDA margin with a similar gross margin and one point, let me say, give or take of profitability. invested in OPEX, if you can use this word. So we feel very comfortable with the 33%, as usually, you know, we like to deliver on what we commit. And this is, I believe, the story about guidance and the guidance for 2024. In terms of profitability of the hospital business, we don't like and we don't disclose profitability by customer segments, right? As you know, the Nuno business is one of the businesses which, for us, carry one of the highest margins, so to say, definitely higher than the molecular one. So you have, obviously, some kind of positive impact coming from that. But also, if you look at the margins of H1, we have a positive impact coming from the fact that we had lower, as Carlo was commenting, lower instrument sales in the LPG business than and the lower export sales, which usually come with a lower margin. So, once again, many moving parts, but, you know, the general statement is that immuno-business carry very good margins, and hospitals pricing in the U.S. allow us to, let me say, have margin-rich sales.

Okay. Thank you very much.

The next question is from Odisseas Maneziotis with Berenberg. Please go ahead.

Hello, thanks for taking my question. Sorry, the line is breaking a bit. It's not right here, but one on MIMED, please. Regarding the use of MIMED in some U.S. hospital guidelines, could you please talk about how exactly MIMED is included in the guidelines? As in, is there a first-line test for pediatric patients with erectile dysfunction? I just want to get, you know, how this is included there. And the Secondly, could you give us, that might be, I might have not heard that because the line is not great, but could you give us a bit more color on the strength of Immunata as in the particular test that did well in the second quarter? And may I squeeze in one last one? So on the margin, you have previously said that you're going after the molecular market for growth, not margin. So... Also, taking into account BBB and BRJ becoming more of a problem each year by 2025, is it fair to assume that the 2017 margin target should be very back-end, as in not seeing much expansion next year? That's it, basically.

Hi, Odysseus. So the first question on MIMED was on guideline. not guidance, right? Guideline meaning clinical guidance?

No, it was included in clinical guidelines of hospitals. As in for the ones that you have actually doing that already, how is it in the first-line test or for pediatric patients? Yeah, yeah, yeah.

Yeah, I think we did comment this before, and I don't think that we have any specific update on that. And again, in short summary, the customers that we have up and running between us and MIMET, these are all customers that have taken the time to implement the testing of MIMET of the algorithm. B versus B, in a certain patient population that, as we discussed in the past, really depends from hospital to hospital. Some do decide to start with children. Others do open it up to different age groups. And what we see is a variability in the way that different hospitals are actually approaching the problem. But I believe that two things. are very relevant. The Jupiter study is important because it will remove potential issue of reimbursement, although today the essays are reimbursed by the insurance policies, insurance companies using generic codes. We don't believe that this is sustainable long-term, but today we don't see necessarily denials in that area, including the fact that, as we discussed a few times, maybe it's covered under DRG, right? So it's part of the lump sum that hospitals do get for outpatients. So we're going to give as we have discussed, more color on MIMET by year-end because we will have one-year experience in the U.S. and Italy, and I think it's going to be a very interesting discussion. What's noteworthy is that also by the end of the year, MIMET is going to release a subset of data to the Jupiter study, and so the market will have an indication of how things are actually doing clinically with that study. The strength of the immunoassay, which I think was your second question, it goes back again to our specialty strategy, and it's stool. the quantiferon that certainly are the number one, number two products these days in terms of door openers, but also the rest of the menu of infectious disease we are experiencing as a result. We do have infectious disease in most of the European countries. We have market shares of 30%, 40%, and we are experiencing increased intestine volume So now we see the whole portfolio of products really kicking in. And as we discussed a few times, China is, at this point, is minor damage in its damage control. And so it does not really influence our clear. Okay. There was one on margin. One on margin that I think that it is going to take.

Hey, what is this? Good to talk to you. You know, I believe what we said during the Capital Market Day is that our increase in EBITDA margin is mainly an operating leverage. And I believe you can see it very clearly in Q2, whereby revenues increased by 5% and OPEX didn't increase at all. This means that we already have a setup, when I think about our OPEX setup, which will allow to sustain the growth coming from all the new platforms, which are going to hit the market. We asked ourselves after Luminex acquisition, you know, what are we going to do? Do we want to keep on investing in a commercial organization, waiting for the new products to come? Do we want to pause? And eventually we said it was more wise, you know, to keep on investing in our commercial footprint, especially in the U.S., waiting for the products to come. Now the products are coming. The Plex hit the market. As Carlos said, NS is doing just great. And so as soon as we will have those products in the market, you will see that, let me say, operating leverage play hitting our P&L. So I would say that is a fair, obviously, you know, there are many moving parts. The usual story, right? My disclaimer, allow me some flexibility, but this is the story, which is also true if you wish. If you look at the guidance for the year, right? You know, we started with the guidance, which was 32 to 33%. And after the result of the first half, we felt comfortable enough to raise the guidance. I believe this is what I can, you know, comment and share about margins and margins development.

Thank you.

The next question is from Subtanji Gupta with HSBC. Please go ahead.

Hi. Thanks for taking my question. So I have one on Plex, please. So can you update the growth momentum in Plex? What is the feedback from customers? And how does it compare to the other instruments in syndromic testing that already exist?

Okay. So the audio was not great. So I think you're asking for Plex. And how does it compare with other existing systems? Is it correct?

Yeah, yeah.

Okay. As we, I think, have discussed a few times in the past, And we're going to be covering today. Again, as I said, we are here in Chicago. We're very excited. We have a lot of analysts participating and a lot of US investors. So when it comes to Plex, the fundamental difference between us and competition has to do with ease of use in comparison with with the BioFire, because understandably so, the BioFire has been a very successful platform, but the technology is a little old, and so there is a lot of end-of-time that more modern systems don't have. But fundamentally, the distinctive offering of the soaring is with the Flexx. So the ability to flex the panel, optimizing, let me say, the panel with the population, the season, tested by a lab. And I'm giving you a very simple example. During the respiratory season, if you look at the prevalence of the viruses with first The majority of the infections are virus-related and not bacteria-related. And the second, if you look at the prevalence, you take the top seven viruses, which may vary depending on the population tested. So there is a certain prevalence on kids that you don't see in adults. But with just seven out of potential 19 targets, you cover 90% of the infections. Okay, and this is giving you the power of flexing. And if you apply these algorithms that every hospital will be set free to decide because we offer a basic seven targets panel that can be, and those targets are pretty much decided by each individual customer. If you just do the math, and you look at the prevalence, and you look at what customers are paying today for the full panel of 19 versus Flex, you're talking about saving a significant amount of money, 30%, 35%, 40% to what you're paying today. And the second data point, which I think is Very interesting is that if you look at the respiratory market, just the respiratory market in the U.S. that does represent 70% of the total syndromic business, and you look at what an average hospital system is actually spending in respiratory syndromic, you're talking about $350,000 to $400,000. So you understand that savings are significant. You're not talking about $10,000. You're talking about $100,000, $150,000, which certainly is attracting the interest of many stakeholders in the hospital system. If you now go behind respiratory and you go to blood, for example, because there is another concept which I think is very important for everybody to understand. Flexing is not only relevant for respiratory. Flexing is relevant for all different applications. If you look at blood, which is going to be the second panel that we are going to launch, we just got the East approved and we are on track to file by September the other two blood panel for approval in the U.S. Right there, you can actually use the panels according to the current guidelines without forcing customers to use a full panel on a gram-neg or gram-positive patient, which is what they are forced to do today. And if you go now to GI, which is the last bucket, that is even more relevant because when it comes to GI infection, you have seasons, you have geographical differences, you have people that are actually traveling in exotic locations are coming back, and therefore you're not forced to do all and everything that is on Mother Earth. But you can tailor-made these panels depending on the geographies. So it's a very powerful positioning for the company. And we just launched it two months ago. We have a respiratory, as we speak. We have a lot of traction coming from customers because of what we discussed. So there is a financial incentive, certainly, to look into this technology. We have closed the first account, so we have real-time users of the technology. And we have a good funnel. And the last element, which I think I did provide during my opening remark, we have in the U.S., where we launched the system, by the way, everybody understands that we just did a U.S. launch for the time being. We have an installed base of roughly 800 customers that are DSR customers, either immuno or verigine or molecular, doing molecular and not doing multiplexing that we can address and present this new technology. The vast majority of this would be certainly hospitals, which are either hospitals managed by the very large labs or independent hospitals. And as you know, when it comes to hospitals managed by the very large labs, we do have a relationship with the last lab that is allowing us to discuss overarching contracts. Last but not least, the opportunity in this space for the assortment clearly is in the conversion. As I said, we have a sizable, very good business. Certainly, we will have to convert, but every time there is a conversion, there is a price increase because of the positioning of the Virgin One. So, all in all, clearly, the jury is out. The system is on the market, and I think we're going to provide more colors coming the next few quarters.

Thank you. Just a quick follow-up.

Do you have the number on the InstraBase for Virgin? Yes, we do, but as you can appreciate, we don't disclose. What we have said is that roughly in the U.S., we have 300 customers using the Virgin One panels, blood, respiratory, and GI. The majority of these customers are non-respiratory customers. And simply because the respiratory business, which makes the lion's share of the market, requires the handling of volumes. And clearly, the Virgin one that is more on hands-on technology did not fit that market. And therefore, our Virgin customer base is primarily GI and blood.

Thank you. The next question is from Aisha Noor with Morgan Stanley. Please go ahead.

Hi, good afternoon, or I guess good morning to both of you. Thanks for taking my question. My first one is on the immuno growth. I mean, you've had a few quarters of very strong growth already. And I think, you know, you mentioned in the press release it's 22% growth in the North America immuno business, which is pretty strong. How sustainable do you think this is as you look out into the second half of the year and even 2025? And if you could disclose what the pricing levels are in this business, in the immuno business relative to historical levels, that would be super helpful. And then the second question is on the liaison Plex. What do you think is the, well, actually you mentioned at the beginning of the launch, you were hoping to replace or upgrade as much as possible your installed base of Verigine 1. How far along are you in that replacement phase now and where are you hoping to be by the flu season in Q4?

I don't remember saying that we want to replace the existing install base. I said that we're going to be balancing new customers with the existing install base. And clearly I'm not going to provide any data in what we are doing today when it comes to the mix between the very general accounts and what we do with the Plex. On the immuno assay, to be honest with you, I don't understand the question because you're asking if I think this is sustainable long-term. I think that we provided the answer in the past few times because we said that we have 2,200 customers that have been mapped and they constitute a base that we can work on, primarily U.S. hospitals. And today we are really at the beginning of the runway, so I believe that this strategy is clearly sound. Now, we have been pushing in this segment for almost three years, and we continue to see the strong success. Pricing, as you can imagine, I'm not going to comment on pricing. It is very well known that because of the size of the accounts, the hospital market is a richer market than the traditional commercial segment.

The next question is from Hugo Solveig with BNP Paribas. Please go ahead.

Hi, hello. Thanks for taking my questions. I have a few, please. First, on LiaisonPlex, you guys had the approval of a blood panel last month. Just want to clarify the commercial rollout for blood panels here. Will you be gradually rolling out this one or wait for the two next ones to be approved before to maximize the commercial opportunity? Just to follow up on that, maybe with six months into the year, seven now actually, you can help us understand what's baked into the guidance in terms of liaison-plex sales as you have some strong links now that you've started to engage with US customers. And lastly, Pierre-Georges, you mentioned some operating leverage with new platform. Just a quick clarification, would you expect that as soon as you launch the new platforms? Or will you need to reach scale for operating leverage to be triggered? Thank you.

I will take the first question. Clearly, we need the full panel. was the first product that we went through. It did have a strategic value for us because we have negotiated with the FEA how to present the data. And actually, this panel went through, as you notice, very smoothly. So now we have a framework for GRAM-POS, GRAM-NEG. But certainly we are not, as we speak, we are focusing on respiratory and we are not working on blood because we need the completion of the panel. Then I'll leave the other two questions to PG.

Yeah, I will start with the operating leverage. I believe what I was trying to convey is that, you know, basically in our projection, the top line is going to go faster, much faster than operating expenses. And you already saw it in Q2, and this is what is going to drive an increase in our EBITDA margins. And when I talked about the launch of new platforms, what I meant is that since we will expand our offerings, thanks to the fact that Plex just reached the market. We're going to expand the menu. We're going to launch the product. The nest is going to come. Lime, Mimed, you know, all of those programs that we discussed about during our Capital Market Day are going to be very nice contributors to our already existing solid top-line growth as a combination of those, you know, new product platforms here in the market, building on the... existing revenue growth and on a management, tight management of our costs, that is what is going to deliver increase in margins. In terms of, if I got your second question right, you know, I believe you asked guidance on Plexase. You know, we are not going to give any guidance on Plex sales. I mean, obviously, this is a sensitive topic from a competition perspective. You will see our Plex sales, you know, reported in our total molecular sales. We will give some color. We will try to explain to you guys, you know, how the things are going. But don't expect from us a very specific number. Thank you.

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

Hi, good afternoon. Thanks for taking my questions. I would have three, please. Carlo, you have been commenting on strong European volume growth now for a couple of quarters. Can you maybe provide a bit more insight what you think is driving the increased volume growth in Europe and how long is that sustainable from a market perspective? My second question relates to your commentary around the seven pathogens covering 90% of all reasons for the infection. Is it any seven pathogens that are covering 90%? And are you basically defining the first seven pathogens that need to be tested? Or how do I think about that? And then lastly, just to confirm, the flexibility is not only going to be on respi and gastro, but it's also going to be on blood culture and later on on the meningitis encephalitis. Thank you.

Hi, Maya. Look, when it comes to the European growth, it's very difficult for me to dissect this number. Because first, we play fundamentally in infectious disease, right? We are not in oncology, thyroid, the more mainstream. So I really don't know first if this is an overall volume increase. or not. I assume looking at, for example, I saw Russia reporting and they play in that segment and they had an outstanding result in the immune franchise. So I assume that you also see a volume increase overall in this more me too balance. When it comes to infectious disease is across the line and across the board. So you see prenatal, you see hepatitis, you see all these essays going up. And when we talk to customers, and these are across geographies, by the way, so it's not just one, it's pretty much everywhere, including countries where, like Germany, where typically it's, you know, testing is very well controlled from reimbursement point of view. And customers are saying that as a result of the COVID pandemic, There is a resurgence or more attention to overall infectious disease testing. Okay, this is as much as I can tell you. Is this sustainable? I don't know. I think that we are talking about, just to put in perspective, we are talking about a volume growth of probably 3%, 4%. versus what traditionally was more into the 1% because you always see volume increase, but not to this level. By the same token, I believe that PG made a good point. We do have now a process in place to control pricing much better than before. And we were able, we now see also the effect of this price increase that we negotiated across different geographies with customers because everybody is recognizing that there is an inflationary effect on the market. Now, if I move to Flex, yes, Flex is going to be across the different panels. And I'm going to make a comment about it later. But when it comes to the seven targets, I'm not deciding the seven targets. The customer is deciding the seven targets. And what we are presenting today here in Chicago is the fact that the seven targets, which are primarily viral targets, really depends on the mix of population and the seasons. Okay, for example, in the RSV season, it makes sense to include RSV in the non-RSV season, or, you know, RSV is particularly widespread between kids and elderlies. And so if you test someone that is more my age, I don't consider myself an old guy yet, it would not make sense to run RSV, for example, if I show up with symptoms, at least as a primary screener. So, but again, just to make it clear, we are not deciding which are the targets. We are just say pick seven and the hospitals clearly have the ability to do what they want. One last comment on flexibility. I believe flexibility is very relevant for the existing the existing panels, but is super relevant also for the future panels, because if you think, for example, the tick, tick-borne is an area where we are present, we are very strong, we are present with Lyme. Today, we dominate the market, we are investing with Cangene in this area, and certainly there is a need of a molecular component, not to Lyme specifically, but to all the other tick-borns where we are present with our ASR. And in that case, again, tick-borne, you have tick diffusion in different geographies, so it would not make sense to have a fixed panel for that. But customers should be able to adopt, depending on season, depending on geography, and depending where actually the patient is coming from. So to me, flexibility in this environment, I believe that not offering flexibility is a nonsense. It's a medical nonsense. And I think financially also is a great incentive for customers. This is the feedback I'm getting so far from the launch of Plex.

Okay. Thank you very much.

The next question is from Anna Bain with Barclays. Please go ahead.

Hi there. Thanks. Congrats, guys. Yeah, on the line on behalf of Gaurav Jain here, just a quick one from me on Plex. You mentioned sort of, I think, over 300 US Muno customers as a potential sort of cross-sell target market for Plex. Just wanted to clarify, do you feel like these customers are existing molecular customers who are with a competitor, or is this Blue Ocean strategy addressing, you know, new targets for the molecular market that can be tapped into as a result of your lower price point? Related to that, just a question on your sales and marketing. You know, I'm keen to understand, you know, the extent to which there's cross-selling within, you know, immuno to molecular. And I guess sort of, you know, based on that as well, I guess a couple of months into the launch of Plex, do you remain comfortable that your sort of existing level of sales force is sufficient for the rollout of Plex in line with your guidance? Thanks, guys.

When it comes to the 300 existing hospitals, and it's over 300, by the way, these are hospitals that do all of them clearly do the molecule testing because they are in mid-large institutions, hospital systems. And so we see, and today, remember, when we go and with our immunoassay platform, fundamentally, The menu is an infectious disease menu because you have quantiferon, you have stool testing, which is also infectious disease, and then we have the traditional panels for all the prenatal infections. So we are an infectious disease company, and this is why molecular fits very well with our existing customer base in the U.S. and in Europe. Unfortunately, in Europe, we feel that the market for multiplexing is not so developed for many different reasons, and we want to focus today just on the U.S. market. Sales and marketing, today, if I look at the funnel, I'm moving forward for Plex initial funnel we just started, but there is already cross-selling happening. So 10% of the funnel today are hospitals doing immuno and not doing molecular. Okay, so I see, this is why I was referring during the call to a potential installed base of 800 hospitals and commercial labs in the U.S. that we can reach with our Plex, either because they are very general accounts or they are infectious disease people, labs. They do know us, and we can access with Plex.

The next question is from Giorgio Tavolini with Inter Montesim. Please go ahead.

Hi. Good evening or good morning, everyone. Regarding your revenue guidance, is it correct to assume that the improvement is essentially linked to the growth of molecular diagnostic since after the 4% growth in H1 and 5% in the second quarter? I was wondering if the original target of a flattish molecular revenue growth should be now understood as flat to low single digit. I don't know. And the second question is on the Quantiferon platform. We have seen the new U.S. guidance recommending the use of the latent TB test in pediatric population. So I was wondering if you are seeing any acceleration in the adoption of this test, and if you see any new developments from competition on the latent TB test. Thank you.

Look, the new guideline just hit the street when it comes to TB. And therefore, certainly there is an increase awareness of TB testing in the US. I think QIAGEN has been doing a fantastic job in educating this market and we continue to see an uptake in volumes for this product line. Okay. And I'm leaving to then PG to answer to your first question.

Ciao, Giorgio. On the guidance, you're right. I mean, I think you are looking at the capital market day data where we said that, you know, in 2024, we would have expected a flattish molecular growth. In reality, what is happening is that both for the molecular franchise and the immunofranchise, we are seeing better numbers than what we originally budgeted for. And for molecular, I believe Carlos said very clearly that, you know, we are enjoying a very nice growth on the, not only on the legacy, the assuring business, if you wish, the specialty business with ASRs and, you know, the products such as the HSV, the VZV, all of those high specialty products, high price. But also, you know, the legacy, if you wish, Luminex business, so the Verigine and what we call non-automated assays is doing slightly better than what we originally expected. And that has been able to more than offset the softness that we are seeing on the LTG business, right? Because we are not expecting the life science business to be in the LTG business. I mean, eventually capable of offsetting the increase we saw in the diagnostic part of the business. So long story short, the answer is molecular. both Legacy and Legacy Luminance and Legacy Diasorium, and ImmunoBusiness, which grew to such an extent to more than offset the shortness we are seeing on the L2G business.

Many thanks, Carlo and Pier Giorgio.

Thank you, Giorgio. See you.

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