DiaSorin SpA

MIL:DIA

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the DiaSorin First Quarter 2018 Results Conference Call. [Operator Instructions]

At this time I would like to turn the conference over to Mr. Carlo Rosa, CEO of DiaSorin. Please go ahead, sir.

[Carlo Rosa, executive]

Thank you, operator. Ladies and gentlemen, good afternoon, and welcome to our quarter 1 2018 conference call. As usual, I will give you some top-level comments on revenues and geographies and main events and programs for the company. And then I will turn the microphone to our CFO, Mr. Pedron, who will take you through the financials.

Let me start as a general comment saying that this has been a good quarter for the company certainly as it seems we are exposed in different geographies to currency that has been a very strong impact due to exchange rate and mainly against the U.S. dollar and the Chinese currency. So I will make all my comments on revenues based on constant exchange rate. So at constant exchange rate, the company in Q1 grew by 11%, which is in line with company expectations.

And I would like then to divide my comments, as usual, in our immunoassay franchise, and then I'll talk about molecular diagnostic drugs. As far as the immunoassay, we had very strong growth in CLIA ex-Vitamin D revenues. This set of products grew worldwide by almost 14%. And as usual, growth has been led by product mix; launch of some of new products, which happened in the previous years; and success in certain geographies, mainly Europe and Asia Pacific.

As far as Vitamin D is concerned, as said, our company expectation with Vitamin D is that this franchise should decline between 1% and 5% per year. Last year, it was a little bit better. This year, in quarter 1, the Vitamin D is down by 2.6% at constant exchange rate. Certainly, this is a combination of still growth in certain geographies for Vitamin D and decline in other geographies like the U.S., where the company is particularly exposed with this product. And we certainly do suffer from increased competition, and the price now of Vitamin D is really becoming a commodity price. But overall, I think it's well balanced, and again, minus 2.6% is on the low end of the decline that the company is expecting.

As far as the different geographies, I would start from Europe. And when it comes to Europe, which today, thanks to the acquisition of the Siemens franchise for the ELISA business, it does represent roughly 50% to our business, notwithstanding the fact that the different countries in Europe are declining as a consequence -- markets are declining as a consequence of consolidation in price and certainly price decline.

For us, Europe overall is performing very well. If we do not account for the Siemens contribution, so we maintain the same perimeter as last year, the growth of our European business is between 6% and 7%, which is extremely, extremely strong.

And again -- and this is actually happening in all the different -- all the main countries, including Italy, which continues -- after some difficult year in 2016, continues its recovery. So certainly for us, Italy is a very important geography. It does represent, worldwide, a little bit over 10% of our revenues. And so a good contribution by this country certainly helped the performance of Europe.

When we discuss about Europe, I think it's very important then to discuss update on the Siemens acquisition of the ELISA product line. I think that the business is developing as we have expected. The ELISA franchise per se is relatively flat year-on-year. However, we have initiated a conversion program for the European customers. Today, we have actively converted 18 accounts and the funnel for the next quarter include 60 accounts. And conversion is going well. On average, we get strong, solid contribution coming from additional business that we get to these accounts when we phase our LIAISON XL systems to replace the ELISA.

So the program is going as expected, the collaboration with Siemens, [ and the ] business has been extremely good in the interest of the customers, which will continue to be in Siemens accounts for all the other products that Siemens will offer. So, so far, so good. It has been very satisfactory.

When it comes to -- now let's move to a different geography. Let's move to the U.S. In the U.S., as I said, we need to distinguish between the Vitamin D and the non-Vitamin D business. The non-Vitamin D business continues to show strong growth, close to 20% year-on-year, mainly driven by the Infectious Disease franchise and fundamentally a strategy in the U.S., which is the conversion between a still existing [indiscernible] ELISA business to the DiaSorin Infectious Disease specialty assays.

Certainly, this program also does benefit from the fact that we've been very successful in locking up the 2 largest labs in the United States when it comes to the full Infectious Disease menu. And that certainly helps in promoting our brand into the hospital market and smaller laboratories, which is what the company is going after these days. So overall, our U.S. business grew 5% year-on-year, which we consider on target to what we expect to generate from this very rich, very competitive market.

Now if we move to South America. South America was flat, but it was actually a combination of 2 different dynamics. Brazil continues to grow in a very healthy way, 7% year-on-year, with a business that, as we have discussed a few times, was actually moved to more private hospitals, private commercial labs and leaving to decide the public, which is extremely complicated. And that resulted in healthy growth, very good profitability and DSO which is fully under control. So we're very satisfied from our Brazilian business.

Conversely, and I believe this is mainly a problem of timing, we had a decline in the quarter of our export business. Export means all the other countries that we cover through distributors. But we expect by year-end this portion of the business to become positive, so to turn into growth. And therefore, I see this in Q1 simply as a phasing effect also related to the fact that there are certain tenders of a certain size that we expect to get in the following quarters.

Now let's move to Asia Pacific. Overall, Asia Pacific provided very good results, roughly 15% growth year-on-year, but is -- I think what we need to help the financial community to interpret is the result in China. In China, our company, the growth was very low in quarter 1. But the truth of the matter is that our reagent revenues, so the LIAISON revenues, grew by almost 17%, whereas in quarter 1, instrument sales declined by 25%. And this is a result of something that we have actually already discussed in quarter 4 last year, which is the fact that we expect in the first 2 quarters growth in revenues coming from reagent due to the fact that in certain segments where we have invested in the previous years, we continue to see growth mainly in our installed base in the Class 2.

So by the same token, we are redirecting our distribution network of the distributors away from Class 3 to the Class 2. That means that we need to enroll new distributors. And that is the reason why in quarter 1 and quarter 2, we expect to sell less instrument than last year and then to start again selling systems to distribution -- to the distributors in Q3 and Q4 when all the new distributors are going to be lined up. So overall, flat China doesn't really mean flat China. It means strong double-digit growth in reagent and just momentarily a slowdown in the instrument sales.

Now I would like then to move last before we get to molecular to discuss the QuantiFERON program. As you know, with QIAGEN, we have announced the strategic relationship around the QuantiFERON technology. As we speak, we are finalizing validations of the manufacturing launch for the QuantiFERON product. And we expect the launch to happen on time in September and subsequently filing with the FDA for the U.S. approval. We've already agreed upon with the FDA agency a clinical study, which is necessary to be conducted, and we're organizing [indiscernible] in the site. So overall, the QuantiFERON program is going well, and we expect to start to commercialize this product again starting from September of this year.

Now let's briefly move to molecular before turning the microphone to Piergiorgio. As far as molecular is concerned, from a strategic point of view, we have increased our commercial sales force in the U.S. by 50%. So we made an investment to enlarge the commercial reach of the company. All positions have been filled. Territory have been reassigned, and we did that because we really believe that the opportunity provided by molecular in the U.S. is far behind what was done under the previous owner.

By the same token, as other players in this industry, we have enjoyed a very good winter season even if for us, it does not have the same weight as it carries in other operators. Notwithstanding that, it certainly was a good season.

Our molecular effort outside the U.S. continues in placing -- in organizing our commercial subsidiaries. We've hired now molecular specialists in all the different European countries, and we have proceeded with the commercialization. Overall, the franchise provided a 20% growth year-on-year with very satisfactory profitability.

You've noticed that notwithstanding the addition of this technology, our EBITDA margins have certainly not been diluted. And that tells you that this is a very good business. And to the contrary of other companies I've seen, where the molecular technology per se requires a lot of investment at the beginning, it does not carry the same result as a more mature technology as amino acid does, well in this particular case, with this franchise and this positioning, we are getting from the get go positive contribution to our lower margin.

So extremely satisfied vis-à-vis the way the molecular effort is going. And by the same token, we are in-sourcing manufacturing on certain -- of certain component of this technology that previously was done by 3M suppliers. And that will lead us to have a full control over this technology by the end of 2018.

So now I'm going to turn the microphone to Piergiorgio, who's going to take you through the numbers, and then we're going to open up the session for questions and answers.

[Piergiorgio Pedron, executive]

Thank you, Carlo. Good afternoon, everybody. In the next few minutes, I'm going to walk you through the financial performance of DiaSorin during the first quarter of 2018. Before we start, let me please remind you once again that we began reporting the Siemens ELISA business from Q4 '17, and so the perimeter of consolidation is different from the one of last year.

So that said, as usual, I would like to start with what I believe are the main highlights of the period. The strengthening of the euro against all the currencies in which we operate has generated some notable FX headwinds during the first quarter of the year. In order to gauge the impact of these fluctuations in our financials, let me please remind you that for every USD 0.01 movement of the U.S. dollar against the euro, DiaSorin revenues moved by about EUR 2 million on a yearly basis. Considering the USD trend in 2017 and where we are now, I think it is fair to say that we will likely experience some more FX headwind also in Q2 even though at the lower extent than Q1, whereas the FX should materially decrease in Q3 and Q4.

Moving to the second point. We closed the quarter with an increase in revenues at constant exchange rate of 11.2% or almost EUR 18 million, with a solid contribution of the like-for-like business, which grew by about 6% to 7%. Quarter 1 EBITDA at EUR 63.3 million or 38.5% of revenues grew compared to last year at constant exchange rate by almost 9.5% with a ratio of revenues of 39%. This confirms the ability of DiaSorin to deliver consistently strong EBITDA margins quarter after quarter.

Lastly, the group generated about EUR 28 million free cash flow in the period and closed March '18 with a positive net financial position of almost EUR 170 million, thus reaffirming the strong cash generation and the very, very healthy balance sheet.

Let's now go through the main items of the P&L. Q1 revenues at EUR 164.5 million grew by 4.4% or EUR 7 million compared to last year. As we said, constant exchange rate, the growth is 11.2%, including the contribution of the Siemens ELISA franchise.

Gross profit at EUR 111.2 million grew by 3% or EUR 3.3 million compared to last year, closing the first quarter with a ratio of revenues of 67.6%. The difference with 2017, which closed at 68.5% of revenues, is mainly driven by the contribution of the Siemens ELISA business, which, as expected and as discussed in the previous calls, is dilutive at gross margin level but not -- again, not at EBITDA level, which is exactly the opposite, it's accretive at EBITDA level, and by some price pressure on CLIA Me too products and mainly Vitamin D, as just discussed by Carlo.

Total operating expenses is at EUR 58.5 million or 35.5% of revenues have increased by 4.4% compared to last year. Please remember that about EUR 3.6 million of Q1 OpEx has been by driven by the depreciation of intangible assets, mainly new [ Ireland ] customer list coming from the Siemens ELISA and [ the focused business acquisitions. ] Net of these elements, Q1 OpEx ratio on revenues at constant exchange rate would have been 32.9% against 33.5% of 2017.

I think it is also useful to remember that Q1 2017 was particularly soft in terms of OpEx, as discussed during last year's call, since some expenses slipped in 2017 from Q1 to the following quarters. Q1 other operating expenses at EUR 2 million are substantially in line with last year. As said, during 2017 calls, the quarter has been affected by some expenses related to a legal action in the U.S. concerning the future introduction of certain products into this market. Beside, the impact of the Irish side divestiture has not been particularly material and is in line with our expectation, which is EUR 2 million for the whole 2018.

As a result of what I just described, Q1 '18 EBIT at EUR 50.7 million or 30.9% of revenues has increased compared to 2017 by 1.5% or almost EUR 1 million. The growth at constant exchange rate is positive for about 10%.

The tax rate at 23% is 9 percentage points better than 2017, which closed at 32% and is in line with what we anticipated and discussed during Q4 2017 call. This variance is mainly driven by the positive impact of the Italian Patent Box and the U.S. tax reform, this latter effective starting from 2018.

Net result at EUR 38.3 million or 23.3% of revenues is higher than previous year by EUR 5.5 million or 16.7%. The growth at constant exchange rate would have been just short of 30%.

Lastly, quarter 1 EBITDA of EUR 63.3 million is better than last year by about EUR 1 million or 1.3%. The variance at constant exchange rate is positive for 9.3%. Q1 '18 EBITDA ratio on revenues is 38.5% at current exchange rate and 39% at constant exchange rate, thus confirming the strong profitability recorded in the last quarters and in line with the guidance. Moreover, when comparing Q1 '18 with Q1 '17, I believe it is useful to remind, as I just said, that last year, we did particularly good also because of some favorable phasing in OpEx, which moved during the following quarters. During Q1 '17 call, I quantified that this positive effect is about EUR 2 million.

Let me now move to the net financial position and the free cash flow. We closed the period with a net financial position just short of EUR 170 million and about EUR 193 million in cash. The group generated almost $28 million free cash flow in the first 3 months of the year. The difference vis-à-vis last year is mainly driven by 2 elements. On one side, Q1 '17, which closed at EUR 44 million, was a kind of outlier and by far the best quarter of 2017. On the other side, the Q1 '18 has been affected by some favorable phasing in working capital, particularly driven by the collection of some accounts receivables, which were due at the end of March and slipped to April.

Let me please remind you that the positive cash impact of the Patent Box and the U.S. tax reform will start to kick in from Q2 '18.

Lastly, in view of the group's operating performance, the management confirms the 2018 guidance for both revenues and EBITDA with growth at constant exchange rate of around 11% and 15%, respectively.

Now let me please turn the line to the operator to open the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question is from Maja Pataki of Kepler Cheuvreux.

[Maja Pataki, analyst]

I have actually a couple of clarifications because the line was really bad and then a couple of questions with regards to your results. First of all, can I just quickly confirm, did you say that the conversion of the ELISA franchise, that you've already converted 18 accounts or 80? And is that 60 or 16 are our remaining? I couldn't get that. The second one relates to the organic growth for the group in Q1. Did I get it correctly that you said it's somewhere between 6% and 7%. Then if we look at the number for Q1 growth, I guess that Q1, it should have been a really strong quarter for you given the flu season. But probably it was negatively impacted by China and that this was kind of moderating everything. Can you tell us how well your visibility is on instrument sales for China in H2? And then my last question will be, and I'm sorry for all the questions, can you please decompose again your full year guidance? How is the -- how are the top line growth -- or the 11% local currency growth that you're guiding for, how is it breaking up between organic and Siemens' impact?

[Carlo Rosa, executive]

Maja, I will take first 3 the questions and then Piergiorgio will take the last one. Yes, conversion from Siemens ELISA, we said 18 done. 60 are the ones that were already -- the offer is in front of the customer and we expect to convert in the next quarters. Let me remind you that the original plan counted for an overall number of 300 accounts that will have to be converted from ELISA to LIAISON as a combination of LIAISON XL and LIAISON XS, and this should happen within 3 years. So I think that we are well on plan vis-à-vis conversion. As far as the growth in Europe, yes, the growth in Europe without Siemens is between 6% and 7%, which we consider solid growth in this geography considering that most of the market are flat, if not declining. Now flu season, yes, you're right. We did benefit from flu season. But as I said before, our franchise -- molecular franchise, the one that was actually acquired by -- from Quest, was not so heavily skewed toward flu. So flu does not represent a majority of these revenues. This, as you can imagine, was more central laboratory business, was heavily driven by the fact that Quest was a customer. And certainly, flu is not tested within the Quest facilities, is more decentralized. So yes, we did benefit from flu. I agree with you. But by the same token, the growth that you see is an organic growth throughout the different products that were either there or they have been developed and launched under the DiaSorin ownership. Now last, the number of systems that you said. Look, on average, as a combination of LIAISON and LIAISON XL, China was representing for us between 150 to 200 systems per year that we were selling or placing in the country. Again, that's the range, 150 to 200. I expect that since we are missing some of the opportunities as previous years in this quarter and probably in quarter 2, I believe that we may end year-end around 120, 150 systems. But again, this is just a guestimate I can give you. We will confirm later on. Once we will have better visibility on the new network of distributors that we are lining up, again, as we have discussed a few times, to transition between 70% of the business today, which is in the hands of -- which is in Class 3 hospitals, into more Class 2.

[Piergiorgio Pedron, executive]

Yes, I would take the one regarding the guidance. Maja, this is Piergiorgio speaking. We never gave a breakdown of the guidance of 11% between the like-for-like and the Siemens ELISA contribution but to give you some numbers. So we are expecting, as Carlo said, Vitamin D to go down around 3% to 5%; CLIA XP to grow between 12% and 14%, which means that that the overall CLIA franchise, plus 8%, 9-ish percent year-on-year. ELISA is a different story because you have the contribution of the Siemens business again. And for the molecular reagents, what we expect is between 15% and 20%. And that will made up together with the instruments, and that are the 11% the guidance that we gave and we are reaffirming in this quarter.

[Maja Pataki, analyst]

Okay. Just to double-check, did you say also that organic grew for the group as a total was 6% to 7% in the quarter?

[Piergiorgio Pedron, executive]

Yes.

[Maja Pataki, analyst]

Okay. And I'm just trying to understand. I understand that you don't want to give us a clear breakdown of organic or -- and acquisition impact of the 11%. What I'm trying to understand is whether we're actually seeing some sort of acceleration of your underlying organic growth based on all the acquisitions you've done in the past. That's what I'm trying to understand. Is there an acceleration from the typical 6% to 7% that DiaSorin was reporting? Or is that also the number that would be -- that's what the base business is growing?

[Carlo Rosa, executive]

Look, Maja, I think that in this environment 6%, 7% over the basic business -- the base business is a decent, if not top, growth in the immunoassay -- of immunoassay franchise, which today is starting to become significant in size even compared to some of the much, much larger competitors. I think, to be honest with you, that this company, through all these -- the acquisition that we did, conversion access to new customers, has a good chance to maintain this growth. And this is notwithstanding the fact, let me remind you, that around 15%, 16% of our overall business is Vitamin D, and that's declining. So you also need to look at the 6%, 7% as a combination of a chunk of your business declining and the CLIA actually growing, as I said, around 14%. I strongly believe that there is -- that these, let me say, dynamics can be positively affected by a successful collaboration with QIAGEN and the QuantiFERON because, as you know, from the QIAGEN numbers, QuantiFERON is a significant sizable opportunity and the franchise per se is growing by 20%. And so this is my midterm view about this immunoassay business. But I consider 6%, 7% as a combination of positive and negative elements like Vitamin D., a good solid growth even for the foreseeable future.

[Operator]

The next question is from Peter Welford of Jefferies.

[Peter Welford, analyst]

First, just wondering if you could just remind us the FX impact on EBITDA. I think you alluded to the impact on the revenue line. Would you be able to just give us the EBITDA impact again? And then just on the phasing of costs, in first quarter clearly, a lot of the costs were perhaps lighter than we envisaged. I appreciate some of this was phasing. But just on the sales and marketing now that you've, I guess, got the transition that you're doing in Europe underway, you've also obviously got the changes that are going on in China, the Siemens acquisition now has been bedded down, can you give us sort of an idea on where you see the sales and marketing trending in the future and what areas you perhaps could look to put more investment in, in the future? And then just on the revenue line, I just wanted to come back to the flu testing. I appreciate it's not a significant impact on the positive. I guess could you talk about -- with the positive and negative side, I guess, if you're not seeing any benefit from flu insofar as you don't think you're [ sort of ] to exposed to the flu testing part, conversely, do you think there was any adverse impact from potentially missed appointments and missed things due to the flu season that was relatively severe this year?

[Carlo Rosa, executive]

Okay. I will let P.G. take the ForEx later, but let me just comment on sales and marketing cost, which I think is your question, and then the molecular. When it comes to sales and marketing, look, we do have -- today, just to give you a rough number for the Siemens acquisition and to take ownership of that business, we had in plan to hire around 30 people, mainly in Germany and Austria and Switzerland. So those geographies they really helped the bulk of the business. And 2/3s of the hires are already done and are in -- they are in the current cost structure. When it comes to the U.S. molecular team, we have hired all the reps that we needed and we have the marketing people that we need. So on that side as well, the current running rate you see that the sales and marketing cost is actually there. So what you read in Q1 on a cost baseline, I think, is fairly representative. However, I have to say that this is a very competitive market, as you know, and especially in certain geographies like the U.S., Germany, where today there is full employment. So the level of attrition that this business has is becoming certainly more important than previous years. So yes, we do -- we have hired what we needed in sales and marketing. By the same token, we have a level of vacancies in certain positions or other areas of the company, which is still heavy in quarter 1, okay. So certainly, we will continue to hire and replace. It will be mainly replacement, but the attrition level is becoming very, very relevant again, especially in U.S. and Germany.

[Piergiorgio Pedron, executive]

Yes, yes, yes. The impact of the foreign exchange on EBITDA, about EUR 5 million. EUR 5 million is the negative impact of FX on our EBITDA line. So usually, I said that -- as a rule of thumb, I said $0.01, EUR 2 million in terms of sales. Again, rule of the thumb is more or less EUR 1 million [ to ] EBITDA.

[Operator]

The next question is from Luigi De Bellis of Equita SIM.

[Luigi De Bellis, analyst]

Two quick questions for me. The first one, could you quantify the contribution in CLIA ex-Vitamin D business of Siemens acquisition in Q1, if any, and the expected contribution for the full year in this division? Second question, just a clarification on the free cash flow. Do you confirm the target to achieve a higher free cash flow in 2018 compared to 2017 despite the Q1?

[Piergiorgio Pedron, executive]

Luigi, I will just start with the free cash flow. Yes, I do confirm that the free cash flow, the estimate -- even though it's not part of the formal guidance, I do confirm that my projection for the free cash flow of 2018 is going to be higher, materially higher than 2017. If I will remember, in 2017, we closed with EUR 130 million of free cash flow. I believe that we will make, in 2018, around EUR 150 million of free cash flow. And I'm expecting a stronger Q2, a very strong Q2 also because we will not pay taxes in Italy basically because of the Patent Box tax regime that we just got. Regarding the contribution of Siemens' conversion to CLIA business, I believe that Carlo gave enough information, telling you guys the number of customers that we switch and we're going to switch. You know the revenue per customer that we usually make, so you should be able to work out your math very easily.

[Operator]

The next question is from Scott Bardo of Berenberg.

[Scott Bardo, analyst]

Yes, first question, please. I wonder if -- there's been a lot of talk about QuantiFERON-TB, and I can understand why this is something you're excited about. But can you give us a feeling actually for the commercial sensitivity of this product for DiaSorin? Does this have the potential to be as big as Vitamin D for you? Or just some sort of sense as to the magnitude of this opportunity. Following on from that question, it seems that there has been some quite fruitful collaborations from DiaSorin, both the QIAGEN and the Roche collaboration and others, but it's my understanding that all of those collaborators have approached DiaSorin rather than the other way around. So I just wonder, has there been any learnings or any change in structure such that you can better target those opportunities for the future? Perhaps you can talk a little bit about that. And lastly, I think this is the first quarter that you have under the full implementation of PAMA in the U.S. It doesn't appear to have affected your group organic growth this quarter, but North America was a little bit soft, and you're talking about price pressure in Vitamin D. So can we just have some feeling actually as to how the reality of PAMA is impacting or not your business?

[Carlo Rosa, executive]

Yes, Scott, okay. Let's go one by one. Let me start from the last one, PAMA. As I think I mentioned a few times before, I think that when it comes to the DiaSorin business and the way -- and the products that we sell in the U.S., I think that PAMA -- I don't expect, honestly, PAMA to be a significant contributor to the development of our revenues in the U.S. I think that Vitamin D, which is the one most exposed to PAMA, if you think about it, it is one that was singled out in terms of number of tests run and reimbursed in the U.S., is the one that actually got very nice -- used to have a -- well, that's a very nice reimbursement, $42. I remind you that will become 30 some within the next 4 years. The truth of the matter is that, that single assay, the value of that assay was actually significantly decreased and I would say destroyed not by PAMA but by our own industry because it was not properly valued by our competitors. And therefore, competition more than PAMA did what it did to Vitamin D pricing. So long story short, to say Vitamin D is already at rock bottom and continuing to decline in a manageable way. But certainly, it continues to decline. You said soft quarter for Vitamin D, if I understood correctly. I say minus 2.6% is exactly where we expect this overall franchise to be. Actually, it's on the positive side because we've said expectation is to decline more on the 5%. So PAMA, doesn't really worry me for the time being. What worries me more was what sometimes some of the large competitors can do to ourselves when it comes to destroying value for specialty assays. The second question was, if I can translate it, you look pretty and people come and talk to you, can you go and talk to other people? And yes, we could. But by the same token, as you understand, we have a lot of things to do and many, many programs that we are managing today. And I think that to keep the size of this organization at reasonable cost under control, we have a lot, a lot of strategic partnerships that we are managing today. Let me remind you that we have the Siemens conversions, which was actually just concluded in October last year. We have the QuantiFERON and strategic relationship with QIAGEN, which I will comment about. We do have the alliance with Beckman in preparing ourselves for the launch of a full menu of hepatitis A, B, C and HIV in the United States, which implies for DiaSorin the establishment of a brand-new manufacturing site in England, which we just completed. And we are filing the first 6 products to the FDA in -- by July of this year. So not to mention Roche, not to mention then the regular cost of business. So all said and done, we look pretty and I'm very thankful that people come and talk to us for the time being. I think we have enough to do strategically with the current programs. Last but not least is the QuantiFERON. Look, it's very difficult for me to tell you if the QuantiFERON will be the next Vitamin D for DiaSorin. I can just comment to the fact that QIAGEN did a phenomenal job in taking this neglected assay because all of us have been tested with a skin test Mantoux for decades and turning it into a phenomenal franchise. And QIAGEN continues to do, I think, a phenomenal job in promoting the conversion of this assay from skin to blood. And I think that certainly -- and we discussed this and I know Pier did comment in this a few times, certainly, certainly true that to move to the next step of usage, you -- because of this very successful franchise, they had to move away from manual tubes analyzer into full automation. So to make a long story short, we have -- we, collectively with QIAGEN, see this as a tremendous opportunity. We see this QuantiFERON technology as a technology that could develop certainly into technology use for more than just one product. And I have to say and have to report that the relationship between the 2 companies has been fantastic on this. We had many collaborations with very large companies, but on this specific one, I think that it's going very well. And as said, we are launching on time and we are filing on time in the U.S. This can only happen if things with QIAGEN goes well. So stay tuned. You are going to see the results of these. We have -- but certainly, we do have great expectations from this franchise.

[Scott Bardo, analyst]

Perhaps one follow-up. If I understand correctly, you're coming close to the European launch of LIAISON XS, I think, targeted for the end of this year and then into North America in 2019. When will you likely communicate to the capital markets your commercialization strategy for LIAISON XS in North America? Will you require a distributor, a partner? Or will you invest greenfield to maximize the opportunity? What can we expect with respect to the North American launch infrastructure?

[Carlo Rosa, executive]

Scott, look, to me, this is the more a -- let me say I'd like to open up this question differently, if you don't mind. I believe that today, the capital market was exposed to a plan which ends in 2019. And it was very clear that all the good stories, good story meaning prospective, strategic elements of growth do happen after 2019. You mentioned the LIAISON XS. We need to add to this the QuantiFERON. We need to add the launch of hepatitis in the U.S. So it's very clear to me that what we owe to the market is, as soon as possible, a plan which now covers a period of time behind 2019, which will take all these terms for the strategy of the company, and this, we expect to do early next year. Okay, we are debating when. But certainly between Q1 and Q2, we're going to come back to the market explaining how do we see this. Just to make a remark on distribution, today we have -- we are working with a very large consulting firm in order to map in the U.S. the strategy because in my opinion, the strategy in the U.S. is not only the launch of the XS when it comes to this market but actually a portfolio of products that can really be grouped together and go to this new -- growing segment in the U.S., which is a combination of molecular, which we have, immunoassay, which we have. But we feel also that we should also package other products that will really make this offering extremely interesting for this business. So we are working with this consultant to understand what the package should be, and I expect that when we will have the full disclosure of the following 3 years, we will clearly tell you -- indicate to the market what the strategy is and which products we're going to line up to distribute to this segment.

[Scott Bardo, analyst]

Just a quick clarification, Carlo, sorry. Did you say that in H1 2019, we're likely to get some sort of midterm plan update or extension on your existing time frame? Sorry, just to clarify that point.

[Carlo Rosa, executive]

Yes. The clarification is that, yes, by half, the first half of 2019, it is our intention to go back to the market with vision -- providing a vision of the following 3 years.

[Operator]

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

[Carlo Rosa, executive]

Thank you, operator. Take care.