DiaSorin S.p.A.

Thank you, Operator. Ladies and gentlemen, good afternoon, and welcome to the Quarter 3 DSO Conference Call. As usual, I will make some qualitative and quantitative comments on the quarter, and then I will turn to our CFO, Mr. Pedron, for the comments on the financial results. Let me start with some general notes on the two main businesses that we have, immunodiagnostic and molecular diagnostic. With immunodiagnostic, the strategy continues, also in Q3, as we have been discussing now for a few quarters, and I would say in the last two years. So we have a development strategy in the U.S., as we know, enlarging our footprint in hospitals, and as it happened last year, we foresee from the result that we have seen in the first nine months, including Q3, that we will hit our target of roughly 90 new hospitals, and we confirm that. our ambition to reach 600 new hospitals by 2027. Meanwhile, we continue to develop content on the Liaison platform. We have developed a new version of the Quantiferon assay for TB. It's called high throughput that we are ready to launch in Europe, and we have submitted to the FDA for approval, and this is to continue to offer better and improved solution to high-volume accounts around the globe, again, together with our partner, QIAGEN. We have launched a new assay, a specialty assay, which is the TSH receptor assay, and this is in continuation with our strategy of continuing to enrich the catalog of the liaison Excel. with new and specialty products. MIMED, there has been new evidence which has been presented at the ACID meeting in 2025 and so we continue to, or MIMED continues to deliver on its promise to fund clinical study that prove the clinical use of their algorithm for differential diagnosis between bacterial and viral infection. And so we continue to believe in this program, and we continue to support MIMED deployment in the U.S. and key markets using the Eliason XL and also the key system of MIMED that we have in distribution in the key markets. From cost perspective, Point of view, we have announced that we're going to consolidate our manufacturing in Europe. Closing our German plant and consolidating all our volumes into the Italian and UK plant and the project is ongoing as expected and will be concluded as expected. If we now turn into molecular diagnostic, where we have three platforms, and I will comment more on the cell result of the three platforms, although when it comes to menu activities and major achievement, for the liaison MDX, as you have seen in the press release, we got finally approval of our FluA, DRSV, and COVID assay, which we were missing from our arsenal, and this should give us the opportunity to stabilize our MDX respiratory franchise that has been suffering, and we will see later, both from increased competition with the fourplex, but also clearly decreasing volume due to the very late start of the respiratory season. On the EliaZone MDX, we continue to develop strategically new assays, and the Candida auris, which has been very successfully launched in the U.S., now has also been made available in Europe through CE marking. If you move to the EliaZone Plex, we have launched the blood panel, GranPos, GranMeg, and ISC. We have been completed the clinical study for GI that we plan to submit by the end of this month, assuming that the FDA will open up because today the FDA is working on current applications but not on new filings. So as soon as they reopen, We are ready to file the gastroenteric, and we expect clearance by H1 next year, and this will complete the fundamental stream of products needed to be competitive on Plex. On the liaison Plex, as we are pressing this, we signed a major agreement with Quest. Quest is a very trustworthy partner of the assorting, and we have initiated deployment of Plex for the RSP panel in all the Quest Labs. This is going to be completed and validated by rent, and we will start to generate revenue starting from Q1 of next year. We have launched a fully customized base panel as part of our flexing strategy in the U.S., and I will comment later on the success of Plex But we see adoption of the FLEX algorithm in half of the installations that we achieved in the U.S. Now, when it comes to LiaisonNet, which is our third strategic platform, we submitted in July for the four-plex respiratory panel. The interaction with the agency is continuing without hiccup or anything unexpected, and we expect to get clearance by year end of early 2026. So let me just now move to discussing the quarterly revenue, as usual, at constant exchange rate. So in quarter three, our business ex-COVID grew by 3%, driven primarily by immuno, which delivered a 6% growth, with molecular diagnostic, where the overall molecular diagnostic franchise declined by 1% and LTG declined by 6%. I'm going to comment later on each of these elements. This means that nine months into the year, Ex-COVID, the assortment grew 6% with immuno leading at 7% and molecular at 3% and LTG at 4%. To fully understand the quarter three result, we will provide more data and deeper segmentation across the three business lines. So I'm going to talk about immuno, molecular, and LTG. So let's start from immuno. In immuno, let me remind you that in H125, so in the first six months, the franchise grew 8%. If you look at this growth, taking out for one second China and the outbreaks event, which we did comment before, growth has been 11% in H1. With the North America growing 16%, the rest of the world, including Europe, ex-China, growing by 9%, and China declining by almost 20%. What happened in quarter three? In quarter three, total immunosuppressants grew by 6%. If you look at the total immunosuppressants without China, the outbreak effect in quarter three has been very minimalistic. The base business without China grew 9%, so strong growth. If we now look at the major geographies, U.S. continues to grow very strongly at 14% in the quarter. The rest of the world, including Europe, meet single-digit growth 6%, and there is a very specific element that did impact Europe, and I'm going to comment later, and China. because of the implementation of the BB2 that now is covering all the oncology products, took a hit, very severe hit in the quarter, minus 30%. Now let's look at what happened in the main geographies. Not discuss North America because North America continue to deliver hospitals are in line with the expectation and growth in the quarter has been 14%. So let's take that off the table. When it comes to Europe, we see immunodiagnostic testing volumes decelerated in quarter three versus H1. And this specifically has been reported in two main markets for the Azorean. One is Germany and one is Italy. So, again, we saw a deceleration of testing volumes in these two markets. This is explainable by the fact that there has been a new reform that has been implemented and now we feel is taking effect in Germany where the denial rate in commercial labs as a result of the recent health care reform is increasing. What does it mean? It means that the government is controlling diagnostic volume growth rates in two ways. One, which is historical, providing to general doctors, general practitioners, a budget for diagnostic. But now, assigning also to the hospital and the laboratory the responsibility over the budget, which fundamentally means that over a certain budget, private labs and hospital are denied by the government, by the different states, of the reimbursement. And this is, again, to control a volume growth that has been explosive in Germany in the post-COVID time. Italy is not subject to any specific reform, but we saw the Italian volume becoming seasonal again. What does it mean? Historically, pre-COVID, we always have experienced that volumes were growing each one and seasonally declining in H2. That didn't happen in the last five years, and this has to do with the fact that there was a continued testing volume increase that has been interpreted like a post-COVID catch-up. We saw that 2025 is going back to historical seasonality, which in my opinion means that in Italy we are going back. There has been a complete catch-up. in testing, and we're going back to what it used to be. So you expect to be more front-loaded in H1 than in the second part of the year. China, we did comment, so it's minus 25% in the quarter, but it's due to the effect of VBP2. We expect that starting from next quarter, this effect in China will start to smooth out. Now let's talk about molecular. And I'm going to comment on molecular looking at the three different platforms that today the assortment is serving to the market. The MDX, the multiplex franchise, and then I'm going to make some specific comments on the NAS. When it comes to the MDX franchise, Let me remind everybody that the MDX is the platform that we sell to hospitals, and we provide, it does have a limited multiplexing capability up to four, and it is the DeSorin platform for specialty products. The revenue, total annualized revenue of the MDX franchise is roughly 100 million euros. and it is split in three segments. We have 15% of these revenues, so roughly 15 million, which are respiratory. So it's extremely seasonal, and it is actually a market that the assortment has not been able to hold post-COVID because of the fact that we were lacking as a combination of two things. The market was actually shifted by CFA to a fourplex market, And we didn't have the fourplex. We had the triplex. The fourplex was just approved last week. The second thing is that this platform was never intended to be a platform for respiratory. It's always been, again, intended, even at the beginning, as a platform for specialty. So now we have the respiratory, which is, again, as I said, roughly 15% of total revenue for the MDX. That has been declining severely. in the last quarter and in the current quarter. Second cluster of products is the targeted, and this is where this platform becomes strategic for the Osorin, is roughly 40% of total MDX franchise, so roughly 40 million euro. And on this franchise, we've been experiencing in Q1, Q2, and Q3, growth of 35% to 40% per quarter. This is driven by all the specialty, the congenital CMV, the C-auris, and the HSV testing for meningitis, which continue to be very successful and drive placement in the U.S. market of this platform. So this is the future of the franchise. And this is actually the reason why the SORIN has developed also the follow-up platform, which is going to be the MDX Plus that will actually continue to give life to this strategy. And then we have the third bucket, which again is roughly 40 million euros that runs on the MDX and is the ASR. The ASR business is a very profitable business that the Asurion has inherited with the focus acquisition from Quest. It's clearly a business that does not provide strong growth because it has to do with the fact that certain hospitals in the U.S. market are developing NTDs on this platform for certain applications. Let me say the more difficult application, those that companies don't take through the FDA. And typically you would expect from this franchise to provide low single-digit growth, which in fact this has been doing every quarter in the last few years. Again, this is not a strategic portion of our portfolio, but a very profitable portfolio and is one that we continue to keep and nurture with the development of LTD And this also is giving us the opportunity sometimes to launch certain products, see the uptake, and then decide to move them from an LDT to a fully validated 510K product as it happened with the C hours. So the total franchise for MDX in H1 grew 9%. In Quarter 3, it grew 4%. primarily driven by the seasonality effect of influenza. And in the nine months, it grew by 7%. Now let's now move to the multiplexing franchise. Our multiplexing franchise, we look at this business in two buckets. What we call the non-automated multiplexing. which is an old technology that fits very well certain markets actually. It's adopted more in Europe than in the U.S. It's a franchise that continues to decline, clearly, because labs have been moving to more automated solutions. It is still relevant for the assortment, around $35 million, annually extremely profitable, so we continue to keep it. We use it opportunistically in Europe in certain markets, but certainly it cannot be a strategic franchise for the company. Although it does represent roughly 35% of the total multiplexing franchise. So the total multiplexing franchise... It's around 110 million euros for the company. Of these assets, around 35 would be non-automated. The rest is a combination of Virgin One and Deliazone Plex. I'm going to comment specifically on the on the Virgin One and the liaison plaque. So it's very clear that the Virgin One represents a very interesting install base sitting roughly on 200-300 customers in the U.S. of different size between commercial labs and hospitals. It does have... Part of this business, of every virgin one, is still respiratory, although a good chunk of this business actually is more blood and sepsis because this is how this technology was launched by Luminex at the time. It does offer for the soaring also clearly an opportunity strategically to replace this Virgin 1 with the liaison plex. We have not announced and we don't have any intention to announce in the near future that we are going to stop making the Virgin 1, but certainly we make an effort to transition some of these accounts to the liaison plex. You will see later that every time we transition these accounts from one technology to the other, that drives a price increase in the range of 20% to 25%. Let's talk now on the liaison Plex. First, let me remind everybody that we launched the liaison Plex just in the U.S. Second, we have... today closed approximately 100 customers in the U.S. Split by, if you look at this 100 users, 80% of these customers are hospitals and 20% are commercial labs. Although if we look at the RSP revenue contribution, and again, I will not comment on blood because blood has been just launched, so it's not relevant when it comes to the quarter results. So if we look at the revenue contribution of this base of Plex, 65% of revenues are coming from commercial labs and roughly 35% are coming from hospital labs. What does it mean? It means by definition that the majority of the respiratory revenue that we get on the Plex are outpatients by definition and not inpatient. And this is exposing our Plex business more than other competitors to seasonality, right? Because we don't have the inpatient component that it gives more stability across season to this business. And again, this explains why, since the season is late, we are particularly hit on our multiplexing revenues, again, because of this dependency. If now we look at the usage of these accounts between flex and fixed, so between offering the total panel versus using mini panels or credits, 60% of the customers adopted flex as a combination of mini panels and or credits, and 40% adopted the fix, right? So it's almost 50-50, although if we look at – Hospitals versus commercial labs, we clearly see more adoption of flex into hospitals than the commercial labs. What does it mean? It means that these 100 customers, if we look at the contracted yearly business, so annualized business, clearly on an average season, right, because it's a lot of respiratory, is above $30 million. With half is brand new business, half is conversion from Virgin One to Plex with an average price increase of, as I said before, 20% to 25%. So if I look at the overall Plex launch, I believe it has been very successful. I believe that more than what we discussed before and by some of the competitors, the market is veering toward flexing as a combination of mini panel adoption where, again, the difference between our positioning and competitor position of mini panel is that we allow the customer to fully customize their mini-panels, whereas competitors offer fixed mini-panels. And we believe that there is a competitive advantage in offering full flexibility versus fixed mini-panels. Now, let me just conclude with the liaison NES. As said before, we submitted clear the liaison NES is intended to serve hospitals and POL So at launch, we will offer this platform in hospitals and POS in the U.S. Submission is gone as expected, and as said, we expect clearance by year-end or beginning of 2026. As far as commercial readiness is concerned, we are hiring, as we speak, a dedicated commercial team that will be in place by Q1 2026, assuring readiness for a successful U.S. launch. And we are also working on the selection of a distributor or a couple of distributors which will complement our direct self-force. and we expect this distribution network to be in place by H1-2026. Let me now comment briefly on our LTG. If you remember, in H1, LTG provided a growth which was double-digit. We clearly explained that we could not expect due to the situation with the life science market, we could not expect that growth certainly to continue. And we were driving the market to low single digit ERN growth. And in fact, in quarter three, and this is because of the seasonality of this business, you know, we actually supply and our end user customers are actually the major life science companies and then package our reagent and instrument into their own offering. So if you look at quarter three results, minus 6% is very much expected in order to drive year-end results, again, at around low single-digit growth. Although, if you remember, this business is actually a business that is by half of it, roughly, is directed toward companies that use the technology to develop diagnostic tests. And half of it is actually we are supplying companies that develop products for research, academia, and biopharma. And it's very interesting that if now we look at how these businesses perform, right, and, again, we need to look at the seasonalization here is driven – not necessarily by an inducer seasonalization, but again by how their supply chain is scheduling, ordering, and inventory. We continue to see, even in quarter three, that the diagnostic business continues to grow low single digit, although life science, we continue to see a steep decline. So minus 15% of the life science business in the quarter, indicating that This life science market stabilization is not in sight yet. If we look inside this decline or this instability of life science, what we really see is that the instrument component of this is almost completely frozen, whereas the reagent side continues a modest growth or a low single-digit decline. indicating that the issue today in this segment of the market is that academia and researchers clearly do not have capex availability to buy instruments, but they continue to buy reagents to feed the current installed base of systems that they have. Now, before turning to the CFO to comment, one on PAMA and the result tax, We continue to get questions from analysts and investors about PAMA and how this will affect the business. And just to summarize where we are, the Congress now is pushing the adoption for PAMA, but the timing is very uncertain. And today the government, is trying to understand through a better survey than the one that was originally done in 2015, better understand what is today the differential in reimbursement or price reimbursement actually between what private prepayers reimburse for certain tests versus what the Medicare does. And the reason is a result of a discussion between the different stakeholders. The Results Act has been issued, and now the CMS is collecting new data to really understand, to define the differential between private payers and Medicare. So long story short, there is an effort ongoing. We believe that PAMA will eventually be able to hit the diagnostic players. It's very difficult for anybody to predict when and to which extent. So this is what, at best, this is what we can tell, but certainly it's not at 2025, and we are not sure if it's going to be at 2026. but I believe all the players are going to keep the investors updated on what's happening. Last comment I want to make is on tariff. Mr. Pedro is going to comment on tariff better, but from a business perspective, I believe the majority of the industry has decided that in the U.S., for the time being, tariffs are not going to be pushed through the channel to the customers. And so everybody has been keeping tariffs in their balance sheet for a series of different reasons. And same thing has happened for the assortment. So today we anticipate when it comes to 2025 roughly a $5 million increase negative contribution on tariff debt on a full year basis will impact our profitability by roughly $11 million. So nothing astronomical, but to the contrary of what we were thinking before, we don't believe that in 2025 or 2026 we will be able to push this to our customers. So now, Mr. Pedron is going to drive you through the numbers.

Thank you, Carlo. Good day, everyone. Thank you for attending the Assuring Q3 2025 earnings call. During the next few minutes, I will provide an overview of the Assuring financial performance for the first nine months of the year. Following my remarks, as usual, we will proceed with the Q&A session. So, year-to-date revenues for 2025 reached €900 million, reflecting a 3% increase of €23 million growth compared to the same period last year. This performance was achieved notwithstanding an €11 million reduction in COVID sales and a €19 million negative impact from foreign exchange, primarily due to the depreciation of the US dollar against the euro exchange. as previously discussed during our last earnings call. To this note, let me please remind you that on a full year basis, each one cent movement in the U.S. euro-dollar exchange rate usually affects the Australian revenues by about 6 to 8 million euros and adjusts the EBITDA by 2 to 3 million euros. Considering that the average USD, Euro exchange rate in Q4 of last year was around 1.07, we anticipate a continued foreign exchange headwind into the latter part of 2025. Excluding COVID impacts and the constant exchange rate, our core business has achieved a 6% year-to-date growth. Carlo has already covered all the different elements. In the third quarter, revenues at current exchange rate declined by 2%, representing a reduction of €7 million compared to 2024. In contrast, the performance excluding COVID effects and the constant exchange rate, as we just showed, was plus 3%, with a negative effect in the quarter of €12 million. So out of the €19-20 million I was discussing about for the full nine months of the year, €12 million were in Q3. Gross profit for the first nine months of 2025 totaled €587 million, accounting for 65% of revenues. broadly consistent with the 2024. This represents an increase of $9 million, or 2%, compared to the same period in the previous year, but withstanding a tariff impact of about $2 million, as we just discussed. For the third quarter, the gross profit margin remained stable at 65% of revenues, aligning with Q3 2024 and continuing the trend we saw over the past year. previous quarters, despite the negative tariffs effect that we've just mentioned. Year-to-date adjusted operating expenses at €346 million represented a 1% increase compared to the prior year, or about a 3% constant exchange rate. Adjusted OPEX as a percentage of revenues declined to 38%, down from 39% in 2024. The increase in absolute value in operating expenses relative to 2024 was mainly driven by higher labor costs from the annual salary review cycle, as well as an increased depreciation related to the recent product and platform launches previously in development phase, such as the liaison place. Excluding the impact of this increased depreciation, I think it's interesting to notice that adjusted operating expenses at constant exchange rate would have risen by only 1%, indicating a very disciplined management of our cost base. Adjusted operating expenses for the first nine months of 2025 were negative by €8 million, €1 million better than the same period in 2024. As a result of the dynamics we just described, September year-to-date adjusted EBIT reached €233 million, representing 26% of revenues, confirming the profitability we had in 2024. Adjusted interest expenses for the first three quarters were just under €1 million, compared to an income of €3 million in the same period of 2024. The primary factor behind this variance was a reduction in our cash balance and investment yields, reflecting the reduction of our debt and the decline in interest rates. The adjusted tax rate increased from 23% to 25%, mainly due to the termination of the patent box regime for our Italian legal entity, as we discussed in H1. Year-to-date adjusted net income amounted to €174 million, accounting for 19% of revenues. In the first nine months of the year, adjusted EBITDA reached €302 million, marking an increase of 10 million, or 3%, over the same period the last year at current exchange rate and 7% at constant exchange rate. The EBITDA margin was 34%, both at current and constant exchange rate, an improvement from the 33% we had in 2024. At constant exchange rate, Q3 EBITDA margin stood at 32%, remaining broadly consistent with the same period in 2024. Turning now to our net financial position, we closed Q3 2025 with a net debt amounting to €670 million, in line with the position at the end of 2024. This reflects a solid free cash flow of €161 million, compensated by cash outflows including €97 million in payments to shareholders, exercising withdrawal rights after the recent implementation of the enhanced voting rights mechanism, as well as $63 million distributed as dividends to our shareholders. Let me now close with our revised outlook for the full year 2025. Taking into account the factors mentioned by Carlo that are affecting our overall top line, Our guidance has been revised as follows. Revenue ex-COVID to grow by about 5%, with COVID-related revenues projected at around €10 million, adjusted EBITDA margin at about 33%. As always, these figures are at constant exchange rate, assuming a USD-EUR rate of 1.08, which was 2024 as a reference. I would like to emphasize that despite the headwind affecting our revenue and impact of tariffs, we have managed to review the adjusted EBITDA margin by only 100 basis points. I believe this outcome reflects, as I was saying before, the very disciplined approach we have applied to managing our core space. With that, I will now turn the line over to the operator to begin the Q&A session. Thank you.

Thank you. This is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the 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. First question is from Anca Verma, JP Morgan.